[Federal Register Volume 84, Number 44 (Wednesday, March 6, 2019)]
[Rules and Regulations]
[Pages 8156-8185]
[FR Doc No: 2019-03402]

Vol. 84

Wednesday,

No. 44

March 6, 2019

Part II

Department of Energy

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Federal Energy Regulatory Commission

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18 CFR Part 37

Reform of Generator Interconnection Procedures and Agreements; Final
Rule

Federal Register / Vol. 84 , No. 44 / Wednesday, March 6, 2019 /
Rules and Regulations

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 37

[Docket No. RM17-8-001; Order No. 845-A]

Reform of Generator Interconnection Procedures and Agreements

AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Order on rehearing and clarification.

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SUMMARY: The Federal Energy Regulatory Commission is granting in part
and denying in part the requests for rehearing and clarification of its
determinations in Order No. 845, which amended the Commission's pro
forma Large Generator Interconnection Procedures and pro forma Large
Generator Interconnection Agreement to improve certainty, promote more
informed interconnection decisions, and enhance interconnection
processes.

DATES: This order on rehearing and clarification is effective May 20,
2019.

FOR FURTHER INFORMATION CONTACT:
Tony Dobbins (Technical Information), Office of Energy Policy and
Innovation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Kathleen Ratcliff (Technical Information), Office of Energy Market
Regulation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Adam Pan (Legal Information), Office of the General Counsel, Federal
Energy Regulatory Commission, 888 First Street NE, Washington, DC
20426,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

                                                         Paragraph No.

I. Introduction and Background.......................                  1
II. Discussion.......................................                  6
    A. Interconnection Customer's Option To Build....                  6
        1. Ameren Decision...........................                  7
        2. Justification for the Option To Build                      22
         Requirements................................
        3. FPA Section 203 Blanket Authorization for                  34
         Transfer of Facilities From Interconnection
         Customer to Transmission Provider...........
        4. Requirements Related to Reliability, CIP                   38
         Standards, Liability, Security, and Posting
         of Standards and Specifications.............
        5. Affected Systems..........................                 59
        6. Cluster Studies...........................                 62
        7. Stand Alone Network Upgrades..............                 65
        8. Cost Estimates............................                 69
        9. Oversight Costs...........................                 72
    B. Identification and Definition of Contingent                    76
     Facilities......................................
        1. Requests for Rehearing and Clarification..                 77
        2. Determination.............................                 78
    C. Transparency Regarding Study Models and                        79
     Assumptions.....................................
        1. Protection of Network Model Information...                 80
        2. Requirement to Post Network Model                          86
         Information.................................
    D. Congestion and Curtailment Information........                 89
        1. Request for Rehearing.....................                 90
        2. Determination.............................                 92
    E. Definition of Generating Facility in the Pro                   93
     Forma LGIP and Pro Forma LGIA...................
        1. Requests for Rehearing and Clarification..                 94
        2. Determination.............................                 95
    F. Interconnection Study Deadlines...............                 97
        1. Adoption of Order No. 845 Interconnection                  99
         Study Metric Reporting Requirements.........
        2. Interconnection Study Data Posting                        104
         Requirements................................
    G. Requesting Interconnection Service Below                      108
     Generating Facility Capacity....................
        1. Requests for Rehearing and Clarification..                111
        2. Determination.............................                114
    H. Utilization of Surplus Interconnection Service                119
        1. Original Interconnection Customer's                       122
         Ability To Utilize or Transfer Surplus
         Interconnection Service.....................
        2. Effect of Expedited Surplus                               130
         Interconnection Service Process on the Queue
         and on Transmission Planning................
        3. Impact of Differences in Electrical                       136
         Characteristics between the Surplus and
         Original Interconnection Customers..........
        4. Independent Entity Variations.............                139
        5. Additional Requests for Clarification                     142
         Regarding Surplus Interconnection Service...
    I. Material Modification Definition and                          148
     Incorporation of Advanced Technology............
        1. Requests for Rehearing and Clarification..                149
        2. Determination.............................                152
    J. Process Concerns..............................                156
        1. Compliance and Effective Dates............                156
    K. Interconnection Request Withdrawals...........                167
        1. Requests for Rehearing and Clarification..                168
        2. Determination.............................                169
    L. Wholesale Distribution Tariffs................                170
        1. Requests for Rehearing and Clarification..                170
        2. Determination.............................                172
III. Information Collection Statement................                173
IV. Regulatory Flexibility Act Certification.........                177
V. Document Availability.............................                178
VI. Effective Date...................................                181

Appendix A: List of Short Names of Entities that       .................
 Filed Requests for Rehearing or Clarification.......
Appendix B: Compilation of Final Rule Changes to the   .................
 Pro Forma LGIP Made by Order No. 845 and Order No.
 845-A...............................................
Appendix C: Compilation of Final Rule Changes to the   .................
 Pro Forma LGIA Made by Order No. 845 and Order No.
 845-A...............................................

I. Introduction and Background

    1. On April 19, 2018, the Federal Energy Regulatory Commission
(Commission) issued Order No. 845.\1\ Order No. 845 revised the
Commission's pro forma Large Generator Interconnection Procedures
(LGIP) and pro forma Large Generator Interconnection Agreement (LGIA)
to improve certainty for interconnection customers, promote more
informed interconnection decisions, and enhance the interconnection
process.\2\ The Commission expected these reforms to provide
interconnection customers with better information and more options for
obtaining interconnection service and that, as a result, there would
likely be fewer interconnection requests overall and fewer
interconnection requests that do not reach commercial operation. The
Commission also anticipated that, as a result of these reforms,
transmission providers would be able to focus on those interconnection
requests that are most likely to reach commercial operation.\3\
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    \1\ Reform of Generator Interconnection Procedures and
Agreements, Order No. 845, 83 FR 21,342 (May 9, 2018), 163 FERC ]
61,043 (2018).
    \2\ Id. P 2. The pro forma LGIP and pro forma LGIA establish the
terms and conditions under which public utilities that own, control,
or operate facilities for transmitting energy in interstate commerce
must provide interconnection service to large generating facilities.
Id. P 6. A large generating facility is ``a Generating Facility
having a Generating Facility Capacity of more than 20 [megawatts
(MW)].'' See, e.g., pro forma LGIA Art. 1 (Definitions).
    \3\ Order No. 845, 163 FERC ] 61,043 at P 2.
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    2. In Order No. 845, the Commission adopted ten different reforms
in three general categories. First, in order to improve certainty for
interconnection customers, Order No. 845: (1) Removed the limitation
that interconnection customers may only exercise the option to build a
transmission provider's interconnection facilities \4\ and stand alone
network upgrades \5\ in instances when the transmission provider cannot
meet the dates proposed by the interconnection customer; and (2)
required that transmission providers establish interconnection dispute
resolution procedures that allow a disputing party to unilaterally seek
non-binding dispute resolution. Second, to promote more informed
interconnection decisions, Order No. 845: (1) Required transmission
providers to outline and make public a method for determining
contingent facilities; (2) required transmission providers to list the
specific study processes and assumptions for forming the network models
used for interconnection studies; (3) revised the definition of
``Generating Facility'' to explicitly include electric storage
resources; and (4) established reporting requirements for aggregate
interconnection study performance. Third, Order No. 845 aimed to
enhance the interconnection process by: (1) Allowing an interconnection
customer to request a level of interconnection service that is lower
than its generating facility capacity; (2) requiring transmission
providers to allow for provisional interconnection agreements that
provide for limited operation of a generating facility prior to
completion of the full interconnection process; (3) requiring
transmission providers to create a process for interconnection
customers to use surplus interconnection service at existing points of
interconnection; and (4) requiring transmission providers to set forth
a procedure to allow transmission providers to assess and, if
necessary, study an interconnection customer's technology changes
without affecting the interconnection customer's queued position. In
Order No. 845, the Commission made ``no changes to the variations
allowed by Order No. 2003'' and further explained that ``on compliance,
transmission providers may argue that they qualify for . . . variations
from the requirements of [Order No. 845].'' \6\
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    \4\ According to the pro forma LGIA:
    Transmission Provider's Interconnection Facilities shall mean
all facilities and equipment owned, controlled or operated by the
Transmission Provider from the Point of Change of Ownership to the
Point of Interconnection as identified in Appendix A to the Standard
Large Generator Interconnection Agreement, including any
modifications, additions or upgrades to such facilities and
equipment. Transmission Provider's Interconnection Facilities are
sole use facilities and shall not include Distribution Upgrades,
Stand Alone Network Upgrades or Network Upgrades.
    Pro forma LGIA Art. 1 (Definitions).
    \5\ Stand alone network upgrades:
    Shall mean Network Upgrades that an Interconnection Customer may
construct without affecting day-to-day operations of the
Transmission System during their construction. Both the Transmission
Provider and the Interconnection Customer must agree as to what
constitutes Stand Alone Network Upgrades and identify them in
Appendix A to the Standard Large Generator Interconnection
Agreement.
    Id.
    \6\ Order No. 845, 163 FERC ] 61,043 at P 43 (citing
Standardization of Generator Interconnection Agreements and
Procedures, Order No. 2003, 68 FR 49,845 (Aug. 19, 2003), 104 FERC ]
61,103, at P 826 (2003), order on reh'g, Order No. 2003-A, 69 FR
15,932 (Mar. 26, 2004), 106 FERC ] 61,220 (2004), order on reh'g,
Order No. 2003-B, 70 FR 265 (Jan. 4, 2005), 109 FERC ] 61,287
(2004), order on reh'g, Order No. 2003-C, 70 FR 37,661 (Nov. 30,
2005), 111 FERC ] 61,401 (2005), aff'd sub nom. Nat'l Ass'n of
Regulatory Util. Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007),
cert. denied, 552 U.S. 1230 (2008)).
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    3. The Commission received twelve requests for rehearing and/or
clarification of Order No. 845.\7\ The rehearing and clarification
requests raise issues related to all but one of the reforms adopted
therein.\8\ E.ON Climate & Renewables North America, LLC, EDF
Renewables, Inc., EDP Renewables North America LLC, and Enel Green
Power North America, Inc. (collectively, Generation Developers) also
request rehearing of the Commission's decision not to adopt a reform
pertaining to congestion and curtailment information as the Commission
proposed in the Notice of Proposed Rulemaking (NOPR).\9\ Some requests
for rehearing and clarification also raised general or process
concerns.\10\ For the reasons discussed below, we grant in part and
deny in part the requests for rehearing and clarification.\11\
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    \7\ Appendix A provides the short names of the entities that
filed requests for rehearing or clarification.
    \8\ No entity requested clarification or rehearing regarding the
dispute resolution reform adopted in Order No. 845.
    \9\ Reform of Generator Interconnection Procedures and
Agreements, 82 FR 4,464 (Jan. 13, 2017), 157 FERC ] 61,212 (2016).
    \10\ ISO New England Inc. (ISO-NE) filed an answer to AWEA's
request for clarification. Rule 713(d) of the Commission's Rules of
Practice and Procedure, 18 CFR 385.713(d) (2018), prohibits answers
to requests for rehearing. Although AWEA has styled its pleading as
a request for clarification, we consider it to be a request for
rehearing and, on that basis, reject ISO-NE's answer. As a result,
we also dismiss AWEA's answer to ISO-NE's answer, as well as Ameren
and MISO TOs' answer to AWEA's answer.
    \11\ In Appendices B and C of this order, we provide all the
revisions to, and additions of, provisions in the pro forma LGIP and
the pro forma LGIA that the Commission made in Order No. 845 and
this order on rehearing and clarification, Order No. 845-A. The
underline and strikethrough in these appendices respectively reflect
additions to, and deletions from, the pro forma LGIP and the pro
forma LGIA made in Order Nos. 845 and Order No. 845-A. Additionally,
these Appendices reflect several non-substantive corrections in
these appendices to address stylistic inconsistencies in some of the
new and revised pro forma LGIP and pro forma LGIA provisions. For
example, in pro forma section 3.8, we have replaced the term ``GIA''
with ``Large Generator Interconnection Agreement'' and have
capitalized some terms that are defined in the pro forma LGIP and/or
the pro forma LGIA.

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    4. In particular, we grant rehearing with regard to the option to
build reform to: (1) Require that transmission providers explain why
they do not consider a specific network upgrade to be a stand alone
network upgrade; and (2) allow transmission providers to recover
oversight costs related to the interconnection customer's option to
build. We also grant rehearing with regard to the surplus
interconnection service reform to explain that the Commission does not
intend to limit the ability of RTOs/ISOs to argue that an independent
entity variation from the Commission's surplus interconnection service
requirements is appropriate. We also grant rehearing in part and find
that, with regard to the reform for requesting interconnection service
below generating facility capacity, an interconnection customer may
propose control technologies at any time in the interconnection process
that it is permitted to request interconnection service below
generating facility capacity.
    5. Additionally, we grant clarification with regard to the option
to build by finding that: (1) The Order No. 845 option to build
provisions apply to all public utility transmission providers,
including those that reimburse the interconnection customer for network
upgrades; and (2) the option to build does not apply to stand alone
network upgrades on affected systems. We also grant clarification with
regard to transparency regarding study models and assumptions to find
that: (1) Transmission providers may use the Commission's critical
energy/electric infrastructure information (CEII) regulations as a
model for evaluating entities that request network model information
and assumptions; and (2) the phrase ``current system conditions'' does
not require transmission providers to maintain network models that
reflect current real-time operating conditions of the transmission
provider's system. With regard to the interconnection study deadlines
reform, we grant clarification that the date for measuring study
performance metrics and the reporting requirements do not require
transmission providers to post 2017 interconnection study metrics. With
regard to requesting interconnection service below generating facility
capacity, we grant clarification that a transmission provider must
provide a detailed explanation of its determination to perform
additional studies at the full generating facility capacity for an
interconnection customer that has requested service below its full
generating facility capacity. Finally, in this order, we deny all other
requests for rehearing and clarification.

II. Discussion

A. Interconnection Customer's Option To Build

    6. In Order No. 845, the Commission adopted a reform revising
articles 5.1, 5.1.3, and 5.1.4 of the pro forma LGIA to allow
interconnection customers to unilaterally select the option to build
for stand alone network upgrades and transmission provider's
interconnection facilities regardless of whether the transmission
provider can complete construction of such facilities by the
interconnection customer's proposed in-service date, initial
synchronization date, or commercial operation date.\12\ Prior to Order
No. 845, this option to build was available to an interconnection
customer only if the transmission provider did not agree to the
interconnection customer's preferred construction timeline. The
Commission stated that the revisions adopted in Order No. 845 would
``benefit the interconnection process by providing interconnection
customers more control and certainty during the design and construction
phases of the interconnection process.'' \13\
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    \12\ Order No. 845, 163 FERC ] 61,043 at PP 73-74.
    \13\ Id. P 85.
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1. Ameren Decision
    7. On January 26, 2018, less than three months prior to Order No.
845's issuance, the United States Court of Appeals for the District of
Columbia Circuit (D.C. Circuit) decided Ameren Services Co. v.
FERC,\14\ a decision that vacated and remanded prior Commission
decisions affecting the Midcontinent Independent System Operator, Inc.
(MISO).\15\ Several requests for rehearing of Order No. 845 refer to
the Ameren decision. To explain the context of these arguments, we
provide some background regarding the Order No. 2003 interconnection
pricing policy \16\ and network upgrade cost responsibility in MISO. We
also provide a short summary of Ameren.
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    \14\ 880 F.3d 571 (D.C. Cir. 2018) (Ameren).
    \15\ In Ameren, the D.C. Circuit referred to the NOPR in this
proceeding but only as it pertained to the Commission's original
proposal to require agreement between a transmission owner and an
interconnection customer before the transmission owner could elect
to initially fund network upgrades. See Order No. 845, 163 FERC ]
61,043 at P 122 (citing Ameren, 880 F.3d at 585). The Commission
opted to not move forward with that particular proposal in ``light
of the [Ameren] decision.'' Id.
    \16\ We use this term, consistent with its use in Order No.
2003, to refer to Order No. 2003's policy of distinguishing
interconnection facilities and network upgrades for the purpose of
assigning ultimate cost responsibility. See, e.g., Order No. 2003,
104 FERC ] 61,103 at PP 675-76.
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    8. In Order No. 2003, the Commission drew a distinction between
interconnection facilities, which are ``found between the
Interconnection Customer's Generating Facility and the Transmission
Provider's Transmission System,'' \17\ and network upgrades, which
``include only facilities at or beyond the point where the
Interconnection Customer's Generating Facility interconnects to the
Transmission Provider's Transmission System.'' \18\ Under Order No.
2003, this classification determines which party has ultimate cost
responsibility. Interconnection facilities ``[are] paid for solely by
the Interconnection Customer'' and network upgrades ``[are] funded
initially by the Interconnection Customer (unless the Transmission
Provider elects to fund them).'' \19\
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    \17\ Id. P 21.
    \18\ Id.
    \19\ Id. P 22 (emphasis added).
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    9. While the Order No. 2003 interconnection pricing policy requires
interconnection customers to initially fund network upgrades (unless
the transmission provider elects to fund them), Order No. 2003
established a crediting policy to reimburse interconnection customers
for these costs.\20\ In particular, if the network upgrades necessary
for an interconnection are ``funded initially by the Interconnection
Customer,'' the interconnection customer ``would then be entitled to a
cash equivalent refund . . . equal to the total amount paid for the
Network Upgrades.'' \21\ Under this policy, the transmission provider
must pay the total amount that the interconnection customer paid for
network upgrades as ``credits against the Interconnection Customer's
payments for transmission services.'' \22\ Order No. 2003-B states that
``the period for reimbursement may not be longer than the period that
would be required if the Interconnection Customer paid for transmission
service directly and received credits on a dollar-for-dollar basis, or
20 years [from the generating

facility's commercial operation date], whichever is less.'' \23\
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    \20\ In Order No. 2003, the Commission refers to this policy of
reimbursing interconnection customers for the cost of network
upgrades as its ``crediting policy.'' See, e.g., id. P 683. In this
order, we refer to this mechanism as the Order No. 2003 crediting
policy.
    \21\ Id. P 22.
    \22\ Id.
    \23\ Order No. 2003-B, 109 FERC ] 61,287 at PP 3 & 36.
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    10. MISO sought, and the Commission granted, an independent entity
variation for MISO to depart from the Order No. 2003 crediting
policy.\24\ Instead, MISO directly assigns to interconnection customers
90 percent of the costs for network upgrades rated 345 kV and above
(with the remaining 10 percent recovered on a system-wide basis) and
100 percent of the costs for network upgrades rated below 345 kV.\25\
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    \24\ Midwest Indep. Transmission Sys. Operator, Inc., 129 FERC ]
61,060, at P 59 (2009), order denying reh'g, 154 FERC ] 61,073
(2016).
    \25\ Id. P 8.
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    11. In addition, under the interconnection pricing policy that MISO
proposed and the Commission accepted, MISO's tariff provides MISO
transmission owners two options for recovering network upgrade capital
costs from interconnection customers. Under the first option, which we
refer to in this order as MISO's interconnection customer initial
funding option, the interconnection customer would fund the network
upgrades prior to construction, and the MISO transmission owner would
not refund the non-reimbursable portion of this capital (the 90 or 100
percent) to the interconnection customer, and would neither include the
capital in its rate base nor charge the interconnection customer a
return on this capital.\26\ Under the second option, the MISO
transmission owner would pay for the construction of the network
upgrades and then recover the interconnection customer's portion of the
cost burden over time through periodic network upgrade charges \27\
that include a return on the capital investment.\28\ In this order, we
refer to this option as MISO's transmission owner initial funding
option.
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    \26\ See Midcontinent Indep. Sys. Operator, Inc., 151 FERC ]
61,220, at P 5 (2015).
    \27\ As noted by the D.C. Circuit, this network upgrade charge
``paid from the incoming generator . . . includes both a return of
capital . . . and a return on capital'' and is, according to the
D.C. Circuit, ``thus economically equivalent to inclusion in the
rate base, with the exception that they are charged specifically to
the incoming generator rather than to all of the transmission
owner's customers.'' Ameren, 880 F.3d at 576 (emphasis in original).
    \28\ See Midcontinent Indep. Sys. Operator, Inc., 151 FERC ]
61,220 at P 8.
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    12. On June 18, 2015, in response to a complaint relating to these
network upgrade initial funding options, the Commission instituted a
proceeding under FPA section 206 to examine MISO's pro forma GIA, the
pro forma Facilities Construction Agreement, and pro forma Multi-Party
Facilities Construction Agreement.\29\ To support this decision, the
Commission stated that allowing MISO transmission owners to
unilaterally ``select transmission owner [initial] funding may be
unjust, unreasonable, unduly discriminatory'' \30\ and ``may increase
costs of interconnection service . . . with no corresponding increase
in service.'' \31\
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    \29\ Id. P 2.
    \30\ Id. P 53.
    \31\ Id. P 48.
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    13. On December 29, 2015, the Commission denied rehearing on the
June 2015 order. In particular, it stated that ``because there is the
possibility for an increase in costs presented by a transmission
owner's unilateral election [of transmission owner initial funding] as
compared with [interconnection customer initial funding], and yet there
is no increase in interconnection service provided, such unilateral
election is unjust and unreasonable.'' \32\ For this reason, it
directed MISO to revise its tariff ``to remove the ability of a
transmission owner to unilaterally elect to initially fund network
upgrades.'' \33\ In response to a request for rehearing on that order,
the Commission again denied rehearing, finding that the December 29,
2015 order did not deprive MISO transmission owners of the opportunity
to earn a return ``to which they are entitled'' because pursuant to the
interconnection customer initial funding option, ``the [MISO]
transmission owner makes no investment of which, or on which, it is
entitled to a return.'' \34\
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    \32\ Otter Tail Power Co. v. Midcontinent Indep. Sys. Operator,
Inc., 153 FERC ] 61,352, at P 32 (2015).
    \33\ Id. P 65.
    \34\ Otter Tail Power Co. v. Midcontinent Indep. Sys. Operator,
Inc., 156 FERC ] 61,099, at P 12 (2016). The Commission also stated
that its ``task is to allow a public utility the opportunity to
offer its investors a return commensurate with the risk associated
with their investment, as represented by the utility's business and
financial risks'' and that, under the interconnection owner initial
funding option, ``the transmission owner does not bear that risk.''
Id. P 13.
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    14. The petitioners in Ameren challenged these three decisions
regarding MISO's options for transmission owners to recover network
upgrade capital costs from interconnection customers.\35\ The D.C.
Circuit vacated and remanded the orders, finding that the Commission
had not adequately responded to MISO transmission owner concerns that
MISO's interconnection customer initial funding option ``compels
[transmission owners] to construct, own, and operate facilities without
compensatory network upgrade charges--thus forcing them to accept
additional risk without corresponding return as essentially non-profit
managers of [network] upgrade facilities.'' \36\ Regarding these risks,
the D.C. Circuit stated that MISO transmission owners would have to
``assume certain costs that are never compensated'' such as ``liability
for insurance deductibles and all sorts of litigation, including
environmental and reliability claims.'' \37\ Moreover, the D.C. Circuit
stated that the MISO orders at issue suggest that the Commission does
not believe that MISO transmission owners are entitled ``to earn a
return on capital'' for network upgrades funded through MISO's
interconnection customer initial funding despite transmission owners'
assumption of such costs.\38\ For these reasons, the D.C. Circuit
stated that the Commission ``must explain how investors could be
expected to underwrite the prospect of potentially large non-profit
appendages with no compensatory incremental return.'' \39\
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    \35\ Ameren, 880 F.3d at 573.
    \36\ Id.
    \37\ Id. at 580.
    \38\ Id. at 581.
    \39\ Id.
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a. Requests for Rehearing and Clarification
    15. MISO Transmission Owners (MISO TOs),\40\ Ameren Services
Company (Ameren), and Edison Electric Institute (EEI) argue that Order
No. 845's option to build revisions are contrary to (1) the regulatory
compact (under which utilities construct facilities, have an obligation
to serve, and receive a level

of earnings in return) and (2) the D.C. Circuit decision in Ameren.\41\
EEI argues that Order No. 845 fails to consider that transmission
owners should receive compensation for the risk of owning and operating
facilities. Additionally, MISO TOs, EEI, and Ameren argue that the
Commission should grant rehearing and return to the pre-Order No. 845
option to build provisions.\42\
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    \40\ The MISO transmission owners that participated in MISO TOs'
Rehearing Request consist of: Ameren Services Company, as agent for
Ameren Missouri, Ameren Illinois, and Ameren Transmission Company of
Illinois; American Transmission Company LLC; Big Rivers Electric
Corporation; Central Minnesota Municipal Power Agency; City Water,
Light & Power (Springfield, IL); Cleco Power LLC; Cooperative
Energy; Dairyland Power Cooperative; Duke Energy Business Services,
LLC for Duke Energy Indiana, LLC; East Texas Electric Cooperative;
Entergy Arkansas, Inc.; Entergy Louisiana, LLC; Entergy Mississippi,
Inc.; Entergy New Orleans, LLC; Entergy Texas, Inc.; Great River
Energy; Hoosier Energy Rural Electric Cooperative, Inc.; Indiana
Municipal Power Agency; Indianapolis Power & Light Company; ITC
Transmission; ITC Midwest LLC; Michigan Electric Transmission
Company, LLC; MidAmerican Energy Company; Minnesota Power (and its
subsidiary Superior Water, L&P); Missouri River Energy Services;
Montana-Dakota Utilities Co.; Northern Indiana Public Service
Company LLC; Northern States Power Company, a Minnesota corporation,
and Northern States Power Company, a Wisconsin corporation,
subsidiaries of Xcel Energy Inc.; Northwestern Wisconsin Electric
Company; Otter Tail Power Company; Prairie Power Inc.; Southern
Illinois Power Cooperative; Vectren Energy Delivery of Indiana;
Southern Minnesota Municipal Power Agency; Wabash Valley Power
Association, Inc.; and Wolverine Power Supply Cooperative, Inc.
    \41\ MISO TOs Rehearing Request at 11-12 (citing Ameren, 880
F.3d at 581); Ameren Rehearing Request at 3-5; EEI Rehearing Request
at 3-4.
    \42\ MISO TOs Rehearing Request at 14; Ameren Rehearing Request
at 14; EEI Rehearing Request at 6.
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    16. MISO TOs argue that the revised option to build ``could impact
the transmission provider's ability to construct, fund, and earn a
return on stand alone network upgrades and transmission provider
interconnection facilities'' because the ``the transmission provider
could not place them into its rate base or otherwise earn a return on
those upgrades and facilities.'' \43\ In support of their concerns,
MISO TOs further state that ``compulsory generator-funded upgrades and
facilities raise serious statutory and constitutional concerns''
similar to those addressed in Ameren, where the D.C. Circuit determined
that, ``the Commission failed to explain why transmission owners should
be forced to add `non-profit appendages' to their transmission
system[s].'' \44\
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    \43\ MISO TOs Rehearing Request at 12-13.
    \44\ Id. at 13 (citing Ameren, 880 F.3d at 584).
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    17. If the Commission does not grant rehearing, MISO TOs and Ameren
ask the Commission to clarify that the transmission owner may pay
interconnection customers for construction costs incurred for the
option to build facilities when the interconnection customer transfers
them pursuant to article 5.2(9) of the pro forma LGIA and then charge
the customer a return pursuant to a Facility Service Agreement.\45\
They argue that, without this clarification, the option to build would
be contrary to the transmission owner's right to earn a return on
facilities that are part of its transmission system.\46\
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    \45\ Id. at 14-15; Ameren Rehearing Request at 12-13.
    \46\ Ameren Rehearing Request at 13.
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b. Determination
    18. We deny MISO TOs', EEI's, and Ameren's requests for rehearing.
We find that the concerns identified in Ameren pertain solely to unique
features of MISO's tariff and precedent that applies in MISO. As such,
the Ameren decision does not implicate the Commission's revisions to
the pro forma LGIP and the pro forma LGIA as outlined in Order No. 845.
Specifically, the D.C. Circuit recognized in Ameren that, under MISO's
transmission owner initial funding option, a MISO transmission owner
can levy a network upgrade charge on interconnection customers after
the transmission owner initially finances a network upgrade. The D.C.
Circuit recognized that this network charge, which is memorialized in a
Facilities Services Agreement, is ``paid [by] the incoming generator''
and ``includes both a return of capital . . . and a return on capital''
and ``is thus economically equivalent to inclusion in the rate base.''
\47\ We note that the network upgrade charge and Facilities Services
Agreement are unique features of MISO's policy for recovering the cost
of network upgrades, and the D.C. Circuit's primary concern was with
the Commission's requirement that there be mutual agreement between the
MISO transmission owner and the interconnection customer before the
MISO transmission owner can elect MISO's transmission owner initial
funding option. The D.C. Circuit found that, if the MISO transmission
owner must obtain the interconnection customer's agreement to initially
fund network upgrades, then the interconnection customer could
effectively prevent the MISO transmission owner from assessing a
network upgrade charge and receiving a return on its investment.\48\
---------------------------------------------------------------------------

    \47\ Ameren, 880 F.3d at 576.
    \48\ Id. at 580-81 (stating, among other things, that ``FERC
must explain how investors could be expected to underwrite the
prospect of potentially large non-profits appendages with no
incremental return'' and that ``the answer FERC offered--to cajole
consent from the generators [ ]--is a non sequitur'').
---------------------------------------------------------------------------

    19. Order No. 845 creates no such concerns. In reaching this
conclusion, we first note that the Commission adopted the option to
build in Order No. 2003 as part of the pro forma LGIA and that it did
so in conjunction with the establishment of the Order No. 2003
crediting policy. Viewing the option to build in this context, we find
that Order No. 845 does not deprive transmission providers of the
ability to earn a return of, and on, network upgrades, including stand
alone network upgrades constructed pursuant to the option to build as
outlined in the pro forma LGIA. On the contrary, Order No. 2003
established the Order No. 2003 crediting policy, a mechanism that
explicitly allows transmission providers to earn a return of, and on,
the costs of network upgrades. To this end, under the Commission's
policy as outlined in Order No. 2003, a transmission provider has the
ability to earn a return of capital expenditure for network upgrades to
the extent that it has reimbursed an interconnection customer with
transmission credits.\49\ Additionally, when the transmission provider
includes in its rate base the cost of a network upgrade, the
transmission provider earns a return on the costs of this facility.
---------------------------------------------------------------------------

    \49\ Order No. 2003-A, 106 FERC ] 61,220 at P 657 (finding that
a transmission provider ``cannot include the cost of the
[interconnection customer-funded] Network Upgrades in its
transmission rates until it has provided credits to the
Interconnection Customer, and as long as any part of the Network
Upgrades remains the responsibility of the Interconnection Customer,
that part of the cost cannot be recovered in transmission rates'').
This is true for all network upgrades, including stand alone network
upgrades.
---------------------------------------------------------------------------

    20. In contrast to the option to build set forth in the pro forma
LGIA, the concerns the D.C. Circuit identified in Ameren are present
only in MISO because MISO's interconnection pricing policy is a unique
variation from the Order No. 2003 crediting policy under which MISO
directly assigns 90 or 100 percent of the network upgrade cost
responsibility to interconnection customers. Commission precedent makes
clear that, for variations from the Commission's pro forma provisions,
it is the transmission provider that has the burden to demonstrate that
it qualifies for the variation.\50\ Thus, we find that the Commission's
Order No. 845 option to build revisions, which do not alter the Order
No. 2003 crediting policy, do not conflict with the Ameren decision
because they do not deprive transmission owners of the ability to earn
a return on, and of, stand alone network upgrade costs.\51\
---------------------------------------------------------------------------

    \50\ See S. Cal. Edison Co., 141 FERC ] 61,100, at P 23 (2012)
(``A transmission provider seeking a case-specific deviation from a
pro forma interconnection agreement bears the burden of justifying
and explaining what makes the interconnection unique and what
operational concerns or other reasons necessitate the
variations.''); see also PJM Interconnection, L.L.C., 111 FERC ]
61,098, at P 9 (2005).
    \51\ Only the transmission provider's interconnection facilities
and stand alone network upgrades, as opposed to all network
upgrades, are relevant in the option to build discussion.
---------------------------------------------------------------------------

    21. Finally, we deny MISO's and Ameren's requests for clarification
that the transmission owner may pay the interconnection customer for
its option to build construction costs when the interconnection
customer transfers the facilities to the transmission owner, and then
charge the interconnection customer a return pursuant to a Facilities
Services Agreement.\52\ We deny these requests because they are
essentially requests for the Commission

to allow MISO to deviate from the requirements outlined in Order No.
845 based on MISO's interconnection pricing policy, which is itself a
deviation from Order No 2003. If MISO wishes to make such a request, it
should do so when it submits its Order No. 845 compliance filing, and
the Commission will consider it then.\53\
---------------------------------------------------------------------------

    \52\ MISO TOs Rehearing Request at 14-15; Ameren Rehearing
Request at 12-13.
    \53\ We note that, in response to a similar request from MISO
about how the requirements of Order No. 845 apply to MISO's specific
interconnection process, the Commission stated that it will evaluate
each transmission provider's tariff provisions at the time that it
submits its compliance filing. Order No. 845, 163 FERC ] 61,043 at P
204.
---------------------------------------------------------------------------

2. Justification for the Option To Build Requirements
    22. In Order No. 845, the Commission stated that the revisions it
adopted to the option to build ``will benefit the interconnection
process by providing interconnection customers more control and
certainty during the design and construction phases of the
interconnection process.'' \54\ The Commission also found that
``limiting exercise of the option to build to circumstances where the
transmission provider cannot meet the interconnection customer's
requested dates is not just and reasonable.'' \55\ In support of this
conclusion, the Commission stated that this limitation ``restrict[ed]
an interconnection customer's ability to efficiently build the
transmission provider's interconnection facilities and stand alone
network upgrades in a cost-effective manner, which could result in
higher costs for interconnection customers.'' \56\ Furthermore, the
Commission stated that ``in circumstances where an interconnection
customer cannot exercise the option to build, it may pay more and/or
wait longer for the construction of the transmission provider's
interconnection facilities and stand alone network upgrades.'' \57\
---------------------------------------------------------------------------

    \54\ Id. P 85.
    \55\ Id.
    \56\ Id.
    \57\ Id. P 86.
---------------------------------------------------------------------------

a. Requests for Rehearing and Clarification
    23. Multiple entities argue that the Order No. 845 revisions to the
option to build fail to satisfy the legal requirements of Federal Power
Act (FPA) section 206.\58\ Ameren and MISO TOs argue that the
Commission failed to make a showing of undue discrimination or harm
arising from the current pro forma LGIA or the option to build
provisions under MISO's tariff.\59\ MISO TOs further argue that this
lack of undue discrimination is especially ``true in [regional
transmission operators or independent system operators (RTOs/ISOs)]
where the interconnection process is administered by an independent
entity.'' \60\
---------------------------------------------------------------------------

    \58\ 16 U.S.C. 824e (2012).
    \59\ Ameren Rehearing Request at 7; MISO TOs Rehearing Request
at 7.
    \60\ MISO TOs Rehearing Request at 7-8.
---------------------------------------------------------------------------

    24. Additionally, MISO TOs state that interconnection customers in
non-RTOs/ISOs generally receive transmission credits to reimburse them
for any network upgrades they fund upfront \61\ and that, in a RTO/ISO,
an interconnection customer receives transmission rights or other
rights in connection with the upgrades they fund.\62\ MISO TOs argue
that these factors provide ``a level of cost protection to
interconnection customers, and may leave them ultimately indifferent as
to costs.'' \63\ Southern California Edison Company (SoCal Edison)
argues that, without oversight for costs incurred, interconnection
customers have no incentive to prevent over-spending to accelerate
construction.\64\
---------------------------------------------------------------------------

    \61\ Id. at 9.
    \62\ Id.
    \63\ Id.
    \64\ SoCal Edison Request for Clarification at 3. Under the
California Independent System Operator Corporation (CAISO) tariff,
there is a limit on refunds of $60,000/MW for the cost of
Reliability Network Upgrades, but below that threshold, SoCal Edison
does not see any cost containment incentive or mechanism to review
costs. CAISO Tariff, Appendix DD, Section <IP_ADDRESS>(1); see also
Southern Rehearing Request at 7.
---------------------------------------------------------------------------

    25. Ameren and EEI argue that the Commission failed to demonstrate
that the existing option to build provisions are not just and
reasonable.\65\ EEI contends that simply because an interconnection
customer may build more cheaply and quickly does not mean that charges
associated with facilities built by the transmission provider are
unjust and unreasonable.\66\
---------------------------------------------------------------------------

    \65\ Ameren Rehearing Request at 7; EEI Rehearing Request at 3.
    \66\ EEI Rehearing Request at 5 & 7.
---------------------------------------------------------------------------

    26. EEI further argues that the prior option to build provisions
``ensure that the Transmission Provider would be responsive to the
Interconnection Customer's requested dates and provided an option . . .
if the Transmission Provider was not responsive.'' \67\ EEI goes on to
argue that Order No. 845 is unjust and unreasonable because, as more
interconnection customers exercise the option the build, the
transmission provider's ability to make decisions about its own assets
or the location of the assets will ``progressively decline.'' \68\
---------------------------------------------------------------------------

    \67\ Id. at 7.
    \68\ Id.
---------------------------------------------------------------------------

    27. EEI, MISO TOs, and Ameren also assert that Order No. 845 only
cites one example where cost and time savings have occurred.\69\ MISO
TOs contend that the Commission failed to explain why this example
justifies the ``across-the-board determination that all existing option
to build provisions are not just and reasonable.'' \70\ Southern
Company Services, Inc. (Southern) argues that ``merely suggesting that
changes can occur'' does not provide ``substantial evidence'' of the
need for the new Order No. 845 option to build requirements.\71\
---------------------------------------------------------------------------

    \69\ MISO TOs Rehearing Request at 9 (citing Order No. 845, 163
FERC ] 61,043 at P 86); Ameren Rehearing Request at 8.
    \70\ MISO TOs Rehearing Request at 9.
    \71\ Southern Rehearing Request at 7 (citing Nat. Fuel Gas
Supply Corp. v. Fed. Energy Reg. Comm'n, 468 F.3d 831, 839 (D.C.
Cir. 2006); Motor Vehicle Mfrs. Assoc. of the U.S. v. State Farm
Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983) (Motor Vehicle Mfrs.);
Allentown Mack Sales & Serv., Inc. v. Nat. Labor Relations Bd., 522
U.S. 359, 374 (1998)).
---------------------------------------------------------------------------

    28. SoCal Edison seeks clarification regarding the Order No. 845
option to build revisions.\72\ Specifically, it argues that the
Commission fails to address the cost risk to California ratepayers
under the CAISO tariff, which requires that transmission customers, not
third party builders or interconnection customers, ultimately bear
network upgrade costs.\73\ SoCal Edison states that, under the CAISO
tariff, the transmission provider would reimburse the interconnection
customer over five years for the amount the interconnection customer
spent on the stand alone network upgrades.\74\ SoCal Edison states,
however, that the LGIA does not include a mechanism for ratepayers to
challenge the justness and reasonableness of the construction costs
that the interconnection customer incurred.\75\ For these reasons,
SoCal Edison requests that the Commission clarify whether it intended
these new rules to apply in instances when the interconnecting customer
does not ultimately bear the costs of its construction for network
upgrades.\76\ Further, SoCal Edison requests that the Commission
clarify that it would not prohibit the transmission provider from
simply putting the interconnection customer's costs into rates per the
CAISO tariff.\77\
---------------------------------------------------------------------------

    \72\ SoCal Edison Request for Clarification at 2.
    \73\ Id. at 3.
    \74\ Id. (citing CAISO Tariff, Appendix U, Section 3.4.3).
    \75\ Id.
    \76\ Id. at 4.
    \77\ Id.

---------------------------------------------------------------------------

b. Determination
    29. We deny Ameren's, MISO TOs', SoCal Edison's, EEI's, and
Southern's rehearing requests. First, in response to Ameren's and MISO
TOs' claims that the Commission failed to make a showing of undue
discrimination, we note that the Commission did not argue that the
Order No. 845 option to build provisions are necessary to address undue
discrimination in the pre-Order No. 845 option to build process.
Rather, the Commission justified changes to the option to build by
stating that the pre-Order No. 845 option to build provisions are not
just and reasonable because they restrict ``an interconnection
customer's ability to efficiently build the transmission provider's
interconnection facilities and stand alone network upgrades in a cost-
effective manner, which could result in higher costs for
interconnection customers.'' \78\ In addition, the Commission found
that the pre-Order No. 845 option to build provisions could prevent
interconnection customers from reducing construction times.\79\
---------------------------------------------------------------------------

    \78\ Order No. 845, 163 FERC ] 61,043 at P 85.
    \79\ See id. P 86 (finding that where ``an interconnection
customer cannot exercise the option to build, it may . . . wait
longer for the construction of transmission provider's
interconnection facilities and stand alone network upgrades'').
---------------------------------------------------------------------------

    30. We also disagree with MISO TOs' and SoCal Edison's assertions
that interconnection customers that receive transmission credits,
transmission rights, or other rights in connection with network
upgrades have no economic incentive to reduce network upgrade costs.
Although under Order No. 2003 interconnection customers that fund the
costs of network upgrades receive network upgrade cost reimbursement
through crediting of all their network upgrade costs, interconnection
customers still are generally responsible for financing all of their
construction costs up front and compete with other developers to meet
the substantial requirements to obtain such financing. The need to
obtain financing up front and the fact that interconnection customers
can wait for years for full reimbursement of their network upgrade
costs create an incentive for interconnection customers to keep overall
project costs low. Additionally, interconnection customers have
emphasized to the Commission that certainty and the ability to control
risks are necessary to successfully develop generation.\80\ The option
to build revisions increase certainty and the ability to control risks
by providing interconnection customers with greater control over their
up-front construction costs and schedule.
---------------------------------------------------------------------------

    \80\ See, e.g., 2015 AWEA Petition at 4 (``[t]he key reforms
requested in the [AWEA petition] relate to the certainty of . . .
the interconnection process'' and include reforms for ``creating
more certainty on network upgrade costs'') & 8 (``typically the part
of the project development process with the greatest uncertainty and
risk of delay for developers and the area in which developers often
have the fewest opportunities to manage and control . . . risks'')
(emphasis added).
---------------------------------------------------------------------------

    31. These facts support the Commission's conclusion that
interconnection customers have incentives to reduce network upgrade
costs. In addition, we believe that a transmission provider's
incentives to reduce network upgrade costs may not be as significant as
an interconnection customer's incentives to reduce such costs. In
support of this conclusion, we note that, under the Order No. 2003
crediting policy, where a transmission provider reimburses the
interconnection customer for the network upgrade costs, it does so over
time through credits rather than funding the costs up front. Moreover,
unlike an interconnection customer, a transmission owner is allowed to
recover the cost of a transmission credit in its rate base as it
reimburses the interconnection customer. By doing so, the transmission
provider, unlike the interconnection customer, will be able to earn a
return on its cost for providing the transmission credit. Furthermore,
although an interconnection customer receives a transmission credit
reimbursement for any stand alone network upgrades it pays for upfront,
interconnection customers do not receive any form of reimbursement for
the costs of the transmission provider's interconnection facilities.
Thus, an interconnection customer has an even greater incentive to
reduce costs for the transmission provider's interconnection
facilities.
    32. In response to Ameren's and EEI's contention that the
Commission provided insufficient evidence for concluding that the pre-
Order No. 845 option to build was unjust and unreasonable, we note the
Commission's reliance upon the reasonable economic proposition that
interconnection customers would have a significant economic incentive
to build the transmission provider's interconnection facilities and
stand alone network upgrades in a cost-effective manner.\81\ We
reiterate the finding that ``in circumstances where an interconnection
customer cannot exercise the option to build, it may pay more and/or
wait longer for the construction of the transmission provider's
interconnection facilities and stand alone network upgrades.'' \82\
Additionally, we continue to find that the pre-Order No. 845 option to
build provisions were unjust and unreasonable for creating a hurdle
that could prevent interconnection customers from reducing their costs
and shortening their construction timelines. For these reasons, we
disagree with EEI's, MISO TOs', and Ameren's claims that the Commission
relied solely on a single example of time and cost savings.
---------------------------------------------------------------------------

    \81\ See S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41, 65 (D.C.
Cir. 2014) (stating that to meet the FPA section 206 requirements,
the Commission must support its findings by ``substantial
evidence,'' not ``empirical evidence'' and that its findings need
only be based upon ``reasonable economic propositions''); see also
Pub. Serv. Co. of Colo., 163 FERC ] 61,204, at P 31 (2018) (finding
that applying this standard requires ``evidence that `a reasonable
mind might accept'' as ``adequate to support a conclusion'' and that
the Commission's findings may be based on ``reasonable economic
propositions'' and ``predictive judgments grounded in basic economic
principles'').
    \82\ Order No. 845, 163 FERC ] 61,043 at P 86.
---------------------------------------------------------------------------

    33. Finally, we grant SoCal Edison's request and clarify that the
Order No. 845 option to build provisions apply to all public utility
transmission providers, including those that reimburse the
interconnection customer for network upgrades. In Order No. 845, the
Commission's option to build revisions only eliminated the limitation
that prevents interconnection customers from exercising the option to
build transmission provider's interconnection facilities and stand
alone network upgrades unless the transmission provider informs the
interconnection customer that it cannot meet dates proposed by the
interconnection customer.\83\ Order No. 845 made no other modifications
relating to the treatment of stand alone network upgrades; nor did it
alter the Order No. 2003 crediting policy, which provides a mechanism
for an interconnection customer to receive transmission credits in
reimbursement for the total amount that the interconnection customer
pays for network upgrades, including stand alone network upgrades.
Thus, as noted above, pursuant to the Order No. 2003 crediting policy,
the transmission provider can recover the costs of such credits in
their transmission rate base after it provides the credits to the
interconnection customer.\84\ Moreover, as noted above, the Commission
relied on the reasonable economic proposition that interconnection
customers have a greater economic incentive than

transmission providers to reduce the cost of stand alone network
upgrades.
---------------------------------------------------------------------------

    \83\ Id. P 3.
    \84\ See Order No. 2003-A, 106 FERC ] 61,220 at P 657.
---------------------------------------------------------------------------

3. FPA Section 203 Blanket Authorization for Transfer of Facilities
From Interconnection Customer to Transmission Provider
    34. Article 5.2(9) of the pro forma LGIA, which Order No. 845 did
not modify, states that ``[u]nless Parties otherwise agree,
Interconnection Customer shall transfer ownership of Transmission
Provider's Interconnection Facilities and Stand Alone Network Upgrades
to Transmission Provider.'' Eversource Energy Service Company
(Eversource) submitted comments in response to the NOPR asking the
Commission to grant a blanket authorization under FPA section 203 \85\
for the transfer of transmission provider's interconnection facilities
and/or stand alone network upgrades constructed pursuant to the option
to build.\86\ Eversource argued, among other things, that where
electricity flows over transmission facilities in interstate commerce,
such ``facilities are considered to be [Commission-jurisdictional],
even if not otherwise in service'' and that the regulatory approval
required by FPA section 203 is ``an additional undertaking . . . that
would not occur but for the interconnection customer's construction of
the transmission owner's transmission facilities.'' \87\ In Order No.
845, the Commission did not address this request for a blanket
authorization.
---------------------------------------------------------------------------

    \85\ 16 U.S.C. 824b.
    \86\ Eversource 2017 Comments at 17-19 (citing 18 CFR 33.1).
    \87\ Id. at 18.
---------------------------------------------------------------------------

a. Requests for Rehearing and Clarification
    35. EEI and MISO TOs ask the Commission to grant the request
originally made in Eversource's NOPR comments for a FPA section 203
blanket authorization for facilities built pursuant to the option to
build if the Commission decides to retain the Order No. 845 revisions
to the option to build.\88\ In support, EEI states that the Commission
provided no reasoning for not granting such a blanket authorization and
that the required transfer, coupled with a ``likely increase'' in the
need for such transfers, weighs in favor of ``decreasing the regulatory
burden'' on transmission providers and interconnection customers.\89\
EEI argues that, like other FPA section 203 blanket authorizations,
such transactions would not raise concerns under the Commission's
traditional analysis.\90\ EEI further argues that failure to create
such a blanket authorization would require transmission owners to
either accept ownership prior to energization or face the task of
making an FPA section 203 filing prior to transfer.\91\ EEI argues that
such issues could delay the transfer of these facilities and cause
other complications in the operability of assets where generating
assets have obligations to come online on a certain timetable. EEI
argues that a blanket authorization would increase the likelihood of
timely transfer after the facilities are tested and determined to be
safe to operate as part of the transmission system.\92\ Finally, EEI
argues that granting such a blanket authorization is consistent with
the goal of reducing the regulatory burden of FPA sections 203 and 205.
---------------------------------------------------------------------------

    \88\ EEI Rehearing Request at 8; MISO TOs Rehearing Request at
15.
    \89\ EEI Rehearing Request at 8 & n.23.
    \90\ Id. at 8.
    \91\ Id. at 9.
    \92\ Id.
---------------------------------------------------------------------------

    36. MISO TOs argue that FPA section 203 approval is ``sometimes a
significant undertaking'' and that the Commission should therefore
grant this request for blanket authorization.\93\ MISO TOs argue that
Eversource raised this issue in comments on the NOPR and that failure
to respond to this argument would demonstrate that Order No. 845 is
arbitrary and capricious.
---------------------------------------------------------------------------

    \93\ MISO TOs Rehearing Request at 16.
---------------------------------------------------------------------------

b. Determination
    37. We deny MISO TOs' and EEI's requests for rehearing. The
Commission has established, in its regulations, a number of blanket
authorizations that apply to transactions for which specific approval
under FPA section 203 would otherwise be necessary. A transaction
covered by a blanket authorization is ``pre-approved'' pursuant to the
regulation itself rather than requiring an application and specific
finding under FPA section 203 that the transaction is consistent with
the public interest. Blanket authorizations ``under section 203 cannot
be granted lightly, particularly generic authorizations.'' \94\ Because
a blanket authorization is ``an ex ante determination as to the
appropriateness of a category of transactions under section 203 and a
counterparty is not yet identified, a blanket authorization can be
granted only when the Commission can be assured that the statutory
standards will be met, including ensuring that the interests of captive
customers are safeguarded and that public utility assets are protected
under all circumstances.'' \95\ The limited hypothetical facts MISO TOs
and EEI provide in their rehearing requests regarding facilities
constructed pursuant to the option to build do not provide the
assurance that such transactions will meet these statutory standards.
Thus, we deny rehearing.
---------------------------------------------------------------------------

    \94\ FPA Section 203 Supplemental Policy Statement, 120 FERC ]
61,060, at P 33. (2007), order on clarification and reconsideration,
122 FERC ] 61,157 (2008).
    \95\ Id.
---------------------------------------------------------------------------

4. Requirements Related to Reliability, CIP Standards, Liability,
Security, and Posting of Standards and Specifications
    38. Order No. 845 made no revisions to article 5.2 of the pro forma
LGIA, which lays out the general conditions for exercising the option
to build. Article 5.2 (1) of the pro forma LGIA provides that the
interconnection customer ``shall engineer, procure equipment, and
construct Transmission Provider's Interconnection Facilities and Stand
Alone Network Upgrades (or portions thereof) using Good Utility
Practice and using standards and specifications provided in advance by
Transmission Provider.'' Article 5.2(2) of the pro forma LGIA requires
that the interconnection customer's ``engineering, procurement and
construction . . . comply with all requirements of law to which
Transmission Provider would be subject.''
    39. Article 5.2(7) of the pro forma LGIA requires that the
interconnection customer ``indemnify Transmission Provider for claims
arising from Interconnection Customer's construction . . . under the
procedures applicable to Article 18.1 Indemnity.'' In response to
Edison Electric Institute's, National Grid's, and Xcel Energy Services,
Inc.'s comments on the NOPR taking issue with article 5.2(7) in light
of the changes made in Order No. 845, the Commission reiterated the
language in this provision and stated that this provision is
``sufficiently broad to address EEI's, Xcel's, and National Grid's
concerns.'' \96\
---------------------------------------------------------------------------

    \96\ Order No. 845, 163 FERC ] 61,043 at P 94.
---------------------------------------------------------------------------

a. Requests for Rehearing and Clarification
    40. EEI and MISO TOs argue that the Commission's Order No. 845
revisions to the option to build do not address how the changes will
impact transmission providers' ability to maintain system
reliability.\97\ MISO TOs state that the Commission's revisions to the
option to build may substantially increase the number of instances when

the option to build is elected in, for example, RTOs/ISOs with large
generation interconnection queues such as MISO.\98\
---------------------------------------------------------------------------

    \97\ EEI Rehearing Request at 3; MISO TOs Rehearing Request at
17.
    \98\ MISO TOs Rehearing Request at 17-18.
---------------------------------------------------------------------------

    41. Arizona Public Service Company (APS) argues that the option to
build, as revised by Order No. 845, conflicts with the Critical
Infrastructure Protection Reliability Standards (CIP standards). In
explanation, APS states that the existing CIP standards require that
transmission providers meet specific security and access requirements,
which increase as the impact classification increases (from low to
high). APS argues that the assets to which interconnection customers
would interconnect would be subject to at least one CIP standard and
that, while a transmission provider would have ``continued
responsibility to meet [its] compliance and security obligations . . .
under the . . . [r]eliability [s]tandards,'' an interconnection
customer ``may not be similarly obligated.'' \99\ APS draws this
conclusion because, it argues, although the pro forma LGIA requires
interconnection customers to comply with ``applicable Reliability
Standards for procurement, engineering, and construction'' under the
option to build, it addresses neither the reliability standards related
to security nor transmission provider obligations related to the
existing transmission assets within which the interconnection customer
would build.\100\ APS contends that requiring transmission providers to
manage CIP standard compliance for interconnection customers would
already be ``extremely challenging'' and ``[was] rendered impossible''
by the Commission's rejection of requests to require transmission
provider approval for the interconnection customers'
subcontractors.\101\ If the Commission does not grant rehearing, APS
asks the Commission to limit option to build construction activities so
that they do not include ``those facilities to which the [CIP
standards] are applicable, e.g., outside the substation perimeter.''
\102\
---------------------------------------------------------------------------

    \99\ APS Rehearing Request at 8-9.
    \100\ Id. at 9 (citing pro forma LGIA Art. 5.1).
    \101\ Id. (citing Order No. 845, 163 FERC ] 61,043 at P 110).
    \102\ Id. at 10.
---------------------------------------------------------------------------

    42. APS also states that the current pro forma LGIA liability and
indemnification provisions are insufficient to protect transmission
providers that may violate their regulatory requirements as a result of
the expanded option to build. In particular, APS states that pro forma
LGIA articles 5.1 and 18.1 do not explicitly address the need for
interconnection customers to cooperate with, and adhere to,
transmission provider processes to facilitate compliance with North
American Electric Reliability Corporation (NERC) reliability
standards.\103\ APS also contends that article 18.2 specifically
excludes either party from liability that results from ``any losses,
damages, costs or expenses for any special, indirect, incidental,
consequential, or punitive damages.'' \104\ APS contends, however, that
such damages are the types from which transmission providers need to
protect themselves to ensure that the appropriate party will be
responsible for penalties, required mitigation efforts, and other
costs. In light of its interpretation of article 18.2, APS questions
who would be liable for ``direct facility damage'' and ``increased
costs for the service of load and/or wholesale customers'' if ``during
the course of construction, a significant error is made by the
Interconnection Customer or its contractor, which . . . results in the
loss or destruction of a portion of the Transmission Provider's
facilities or equipment.'' \105\ For all these reasons, APS asserts
that the Commission should withdraw the option to build reform unless
it proposes additional revisions that reduce the administrative burden
on transmission providers.\106\
---------------------------------------------------------------------------

    \103\ Id. at 11.
    \104\ Id. at 11. Pro forma LGIA Article 18.2 states that:
    Other than the Liquidated Damages heretofore described, in no
event shall either Party be liable under any provision of this LGIA
for any losses, damages, costs or expenses for any special,
indirect, incidental, consequential, or punitive damages, including
but not limited to loss of profit or revenue, loss of the use of
equipment, cost of capital, cost of temporary equipment or services,
whether based in whole or in part in contract, in tort, including
negligence, strict liability, or any other theory of liability;
provided, however, that damages for which a Party may be liable to
the other Party under another agreement will not be considered to be
special, indirect, incidental, or consequential damages hereunder.
    \105\ Id. at 12.
    \106\ Id. at 12.
---------------------------------------------------------------------------

    43. EEI also asserts that the Commission erred in deciding that
interconnection customers exercising the option to build no longer need
to post security. EEI argues that the Commission's determination that
``there would be no need for the interconnection customer to provide
security . . . for facilities the transmission provider will not
construct'' fails to consider scenarios where the interconnection
customer is unable to complete the project and the transmission
provider must do so.\107\ For these reasons, EEI argues that
interconnection customers should have to post security for the project
at the transmission provider's cost estimate.\108\
---------------------------------------------------------------------------

    \107\ EEI Rehearing Request at 12-13.
    \108\ Id. at 13.
---------------------------------------------------------------------------

    44. Generation Developers request rehearing of the Commission's
decision not to require that transmission providers post the
``standards and specifications'' required by article 5.2 of the pro
forma LGIA for the transmission provider's interconnection facilities
and stand alone network upgrades on their websites.\109\ They reason
that interconnection customers cannot decide whether to exercise the
option to build without this information and that requiring the posting
of this information will fulfill the requirement to provide such
information ``in advance.'' \110\ Generation Developers also argue that
transmission providers already have these standards and specifications
``[s]o far as Generation Developers are aware.'' \111\ In addition,
Generation Developers argue that granting this request would enhance
transparency and certainty.
---------------------------------------------------------------------------

    \109\ Generation Developers Rehearing Request at 3.
    \110\ Id. at 4.
    \111\ Id.
---------------------------------------------------------------------------

    45. MISO TOs argue that ``[w]ith the potential increase in
elections of the option to build, coordination and balkanization are
real concerns.'' \112\ Even with the safeguards provided by article
5.2(1) of the pro forma LGIA, MISO TOs argue that transmission
providers will have the burdensome and costly responsibilities of
developing sufficiently detailed standards and the responsibility of
monitoring and policing the interconnection customer' equipment
procurement and construction activities. MISO TOs further state that
Order No. 845 does not address the need for coordination among multiple
interconnection customers, contractors, or other third parties.\113\
---------------------------------------------------------------------------

    \112\ MISO TOs Rehearing Request at 19.
    \113\ Id. at 20.
---------------------------------------------------------------------------

b. Determination
    46. We deny rehearing as to the arguments from EEI and MISO TOs
that the Commission did not adequately address concerns about
reliability related to the expanded option to build. In response to
similar arguments made in comments to the NOPR, in Order No. 845, the
Commission found that concerns that the option to build will compromise
system reliability are misplaced because they ignore the safeguards for
reliability already in place for the existing option to build.\114\ In
particular, the Commission stated

that such ``vague reliability concerns about the option to build are
misplaced and that articles 5.2.1, 5.2.3, 5.2.5, and 5.2.6 of the pro
forma LGIA are sufficient to guarantee the reliability of the
facilities in question.'' \115\ We again find that the safeguards
embodied in article 5.2 of the pro forma LGIA are adequate.
---------------------------------------------------------------------------

    \114\ Order No. 845, 163 FERC ] 61,043 at P 91.
    \115\ Id. (citing Order No. 2003-A, 106 FERC ] 61,220 at P 232).
---------------------------------------------------------------------------

    47. We deny APS's request for rehearing regarding the potential for
violations of CIP standards. Pro forma LGIA article 5.2(1) requires
that interconnection customers ``engineer, procure equipment, and
construct'' interconnection facilities and network upgrades using good
utility practice and using standards and specifications provided in
advance by the transmission provider. We clarify that such standards
and specifications under pro forma LGIA article 5.2(1) would apply to
any necessary contractor access to existing facilities while the
interconnection customer exercises the option to build. In addition,
Order No. 845 acknowledges that the transmission owner has the option
of maintaining a list of contractors available to interconnection
customers for the option to build.\116\ Accordingly, APS can, if it
elects, maintain and make available a list of contractors for the
interconnection customer to use for the option to build, thus ensuring
that contractors used by the interconnection customer can access
existing facilities in accordance with the relevant CIP standards.
Furthermore, article 5.2(5) gives transmission providers ``unrestricted
access to Transmission Provider's Interconnection Facilities and Stand
Alone Network Upgrades.'' We read these provisions in combination to
give transmission providers the security and access necessary to ensure
that interconnection customers exercise the option to build in
accordance with applicable CIP standards. Therefore, there is no
additional need to give transmission providers the ability to approve
subcontractors or to further limit the transmission provider's
interconnection facilities and stand alone network upgrades for which
the interconnection customer may exercise the option to build.
---------------------------------------------------------------------------

    \116\ Id. P 110.
---------------------------------------------------------------------------

    47. We also deny APS's request for rehearing regarding its
liability and indemnity concerns, which appears to reflect a
misunderstanding of the relationship between the pro forma LGIA's
indemnification and consequential damages provisions. In Order No. 2003
and its progeny, the Commission explained its reasoning for adopting
these provisions and how they relate to one another. To improve
clarity, we further explain this reasoning below.
    48. In Order No. 2003, the Commission observed that indemnification
is defined as ``compensating another for a loss suffered due a third
party's act of Default.'' \117\ The Commission also stated that
``interconnection presents a greater risk of liability than exists for
the provision of transmission service.'' \118\ For this reason, article
18.1 (Indemnity) \119\ requires that ``the interconnecting generator
and the transmission provider each indemnifies the other from all
damages to third parties arising under the LGIA.'' \120\ Article 18.1
``provide[s] protection for acts of ordinary negligence, but not for
acts of gross negligence or intentional wrongdoing.'' \121\
---------------------------------------------------------------------------

    \117\ Order No. 2003, 104 FERC ] 61,103 at P 630 (citing Black's
Law Dictionary 772 (7th ed. 1999)).
    \118\ Id. P 636.
    \119\ Pro forma LGIA Art. 18.1 reads:
    Indemnity. The Parties shall at all times indemnify, defend, and
hold the other Party harmless from, any and all damages, losses,
claims, including claims and actions relating to injury to or death
of any person or damage to property, demand, suits, recoveries,
costs and expenses, court costs, attorney fees, and all other
obligations by or to third parties, arising out of or resulting from
the other Party's action or inactions of its obligations under this
LGIA on behalf of the Indemnifying Party, except in cases of gross
negligence or intentional wrongdoing by the indemnified Party.
    \120\ Ne. Utils. Serv. Co., 111 FERC ] 61,333, at P 28 (2005)
(emphasis supplied).
    \121\ Order No. 2003, 104 FERC ] 61,103 at P 636.
---------------------------------------------------------------------------

    49. Additionally, as noted in Order No. 845,\122\ Order No. 2003
created safeguards in pro forma LGIA article 5.2 to protect
transmission providers when an interconnection customer exercises the
option to build. One such safeguard, in pro forma LGIA article 5.2(7),
is a requirement that the interconnection customer indemnify the
transmission provider for specific aspects related to the option to
build.\123\ This provision ``applies to all work, regardless of the
side of the Point of Interconnection on which the work occurs.'' \124\
However, this provision (in contrast to the general language of pro
forma article 18.1) ``protect[s] the Transmission Provider from
liability arising out of the Interconnection Customer's exercising its
right to build.'' \125\ That is, while both article 18.1 and article
5.2(7) pertain to indemnification for third party claims, article
5.2(7) only indemnifies the transmission provider for third party
claims arising from the interconnection customer's construction under
the option to build.
---------------------------------------------------------------------------

    \122\ Order No. 845, 163 FERC ] 61,043 at PP 40 & 91.
    \123\ Pro forma LGIA Art. 5.2 (7) provides that:
``Interconnection Customer shall indemnify Transmission Provider for
claims arising from Interconnection Customer's construction of
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades under the terms and procedures applicable to
Article 18.1 Indemnity.'' While the Commission modified the pro
forma LGIA in Order No. 845 to allow interconnection customers to
exercise the option to build regardless of whether the transmission
provider can meet the interconnection customer's proposed in-service
date, initial synchronization date, or commercial operation date, it
made no other changes to the requirements that the interconnection
customer must abide by, include the indemnity provision pro forma
LGIA article 5.2 (7). See id. P 91 (``[i]n this Final Rule, we make
no changes to the requirements in article 5.2'').
    \124\ Order No. 2003, 104 FERC ] 61,103 at P 638.
    \125\ Order No. 2003, 104 FERC ] 61,103 at P 357 (emphasis
supplied).
---------------------------------------------------------------------------

    50. Order No. 2003 also adopted a no consequential damages
provision in pro forma LGIA article 18.2 (Consequential Damages).\126\
This provision ``protects either Party from liability for any special,
indirect, incidental, consequential, or punitive damages, including
profit or revenue.'' \127\ The interconnection customer and
transmission provider, however, ``remain liable for . . . any damages
for which a Party may be liable to the other Party under another
agreement.'' \128\
---------------------------------------------------------------------------

    \126\ Supra n. 103.
    \127\ Order. No. 2003, 104 FERC ] 61,103 at P 906.
    \128\ Id.
---------------------------------------------------------------------------

    51. In a request for rehearing of Order No. 2003, Central Maine
Power Company, New York State Electric & Gas Corporation, and Rochester
Gas and Electric Corporation sought clarity on the relationship between
article 18.2 and the pro forma LGIA's indemnification provisions. They
argued that, because article 18.2 ``does not exclude consequential
damages which arise as part of [an indemnification] claim,'' the
Commission should ``ensure the full implementation'' of the pro forma
LGIA indemnity protections by amending article 18.2 ``to exclude
consequential damages that arise in conjunction with indemnification.''
\129\
---------------------------------------------------------------------------

    \129\ Central Maine Aug. 25, 2003 Rehearing Request at 4-5
(Docket No. RM02-1-001).
---------------------------------------------------------------------------

    52. The Commission rejected this request in Order No. 2003-A and
stated that ``[t]he indemnification of one Party by another must be
comprehensive and must include any liability the indemnified Party
faces as a result of the indemnifying Party's misdeeds.'' \130\ It
continued, stating that ``[w]hile Article 18.2 prevents one Party from
seeking consequential damages against another

Party, the purpose of the indemnification provisions is different; it
protects the Party not at fault from liability to third parties (those
who are not Parties to the interconnection agreement).'' \131\ The
Commission stated that ``[r]equiring the indemnifying Party to
reimburse the indemnified Party only for, say compensatory damages and
not for punitive damages that may be assessed against the indemnified
Party would weaken the LGIA's protections and shield the indemnifying
Party from full liability.'' \132\ Thus, the limitations in article
18.2 (Consequential Damages) apply only to claims by one LGIA party
against the other directly, and are not applicable to third party
claims under article 18.1 and article 5.2(7) for indemnification for
claims.
---------------------------------------------------------------------------

    \130\ Order No. 2003-A, 106 FERC ] 61,220 at P 455.
    \131\ Id.
    \132\ Id.
---------------------------------------------------------------------------

    53. Thus, article 5.2(7) in combination with the pro forma LGIA
indemnification provisions provide sufficient protection from third
party claims against transmission providers for claims arising from the
interconnection customer's construction under the option to build.
Additionally, because pro forma LGIA articles 5.2(7) and 18.1 \133\
address an interconnection customer's liability to the transmission
provider only when there is a third-party claim against the
transmission provider, these articles do not preclude a transmission
provider from making a direct claim against an interconnection
customer. In particular, given the extensive safeguards in pro forma
LGIA article 5.2, the transmission provider may argue that the
interconnection customer has breached the interconnection agreement if
the interconnection customer fails to abide by any requirement that
results in the transmission provider accruing damages, e.g., through
harm to the transmission system.\134\
---------------------------------------------------------------------------

    \133\ We note, however, that, when indemnification is not
pursuant to the option to build indemnification in pro forma LGIA
article 5.2(7), article 18.1 requires that the interconnection
customer and the transmission provider indemnify each other. See Ne.
Utils. Serv. Co., 111 FERC ] 61,333 at P 28.
    \134\ If, however, harm to the transmission provider's
transmission system results in the transmission provider's liability
to a third party, such as an industrial customer, and such harm to
the transmission provider's transmission system arises from the
interconnection customer's construction pursuant to the option to
build, the transmission provider could invoke the indemnity
provisions of the pro forma LGIA.
---------------------------------------------------------------------------

    54. Regarding the Commission's statement in Order No. 845 that pro
forma LGIA article 5.2(7) is ``sufficiently broad to address'' \135\
the concerns expressed in NOPR comments, we reiterate that the
Commission made no changes to pro forma article 5.2, including the
indemnity provision related to the option to build in article
5.2(7).\136\ Additionally, the Commission did not interpret pro forma
LGIA article 5.2(7) to expand the terms of the indemnity provisions to
include indemnification by the interconnection customer for activities
other than the interconnection customer's option to build construction.
The Commission did not expand the applicability of this provision for
multiple reasons. First, pro forma LGIA article 5.2(7) related to the
option to build indemnifies the transmission provider for ``claims
arising from Interconnection Customer's construction,'' and this
language already provides indemnification for the transmission provider
for a significant number of third party claims arising from the
interconnection customer's option to build construction. Second, as
noted above, even if the indemnity provisions do not apply, the
transmission provider may pursue a claim for breach if the
interconnection customer's conduct pursuant to the option to build
breaches the interconnection agreement. Third, pro forma LGIA article
5.2 gives the transmission provider ``significant oversight authority''
over the option to build, which, if exercised properly, gives the
transmission provider a significant role in ensuring that the
interconnection customer's exercise of the option to build does not
expose the transmission provider to liability.\137\ For example, the
transmission provider has the ability to ``set[ ] the specifications
governing construction (Article 5.2.1), approve[ ] the Interconnection
[Customer's] construction plans (Article 5.2.3), . . . an unlimited
right of inspection (Article 5.2.3), and . . . the right to require the
Interconnection Customer to remedy any deficiencies (Article 5.2.6).''
\138\
---------------------------------------------------------------------------

    \135\ Order No. 845, 163 FERC ] 61,043 at P 94.
    \136\ See, e.g., id. P 91.
    \137\ Id. P 110.
    \138\ Order No. 2003-A, 106 FERC ] 61,220 at P 232.
---------------------------------------------------------------------------

    55. We also deny rehearing as to EEI's contention that the
Commission erred by removing the requirement for the interconnection
customer to provide security if the interconnection customer fails to
complete any option to build facilities. If such a situation arises and
the interconnection customer still wants to move forward with the
interconnection request, this situation would re-trigger article 11.5
of the pro forma LGIA for ``the applicable portion of Transmission
Provider's Interconnection Facilities [and] Network Upgrades,'' and the
interconnection customer would then have to provide security no later
than 30 days prior to the transmission provider recommencing
``procurement, installation, or construction of a discrete portion of a
Transmission Provider's Interconnection Facilities [or] . . . Network
Upgrades.'' \139\ Thus, there is no need to require other revisions to
the pro forma LGIA to account for EEI's suggested eventuality. In
addition, the occurrence of such a scenario may indicate that the
interconnection request is no longer viable, in which case, the
transmission provider's interconnection facility or stand alone network
upgrade would no longer be necessary.
---------------------------------------------------------------------------

    \139\ Pro forma LGIA Art. 11.5.
---------------------------------------------------------------------------

    56. We also deny Generation Developers' request for rehearing of
the decision not to require transmission providers to post on their
websites the ``standards and specifications'' for exercising the option
to build. Despite Generation Developers' assertions, there is nothing
in the record to suggest that the engineering, procurement, and
construction standards and specifications applicable to the
transmission provider's interconnection facilities and stand alone
network upgrades required for a particular interconnection request
would be available prior to the submission of a specific
interconnection request. In fact, it might be difficult or impossible
to provide such information on a website before an interconnection
customer submits its interconnection request and the required technical
data. Regardless, pursuant to article 5.2(1) of the pro forma LGIA, if
an interconnection customer has informed the transmission provider of
its decision to exercise the option to build, the transmission provider
must provide such standards and specifications ``in advance'' of the
interconnection customer ``engineer[ing], procur[ing] equipment, and
construct[ing] Transmission Provider's Interconnection Facilities and
Stand Alone Network Upgrades.'' \140\
---------------------------------------------------------------------------

    \140\ Pro forma LGIA Art. 5.2(1).
---------------------------------------------------------------------------

    57. In response to MISO TOs, we find that article 5.2(1) of the pro
forma LGIA equips the transmission provider with the ability to develop
``standards and specifications'' to avoid concerns about transmission
system ``balkanization.'' We also note that, as discussed more fully
below, the Commission is granting rehearing to allow transmission
providers to recover oversight costs as negotiated between the
interconnection customer and the transmission provider and memorialized
in the LGIA.

    58. As to MISO TOs' concerns regarding the lack of guidance about
coordination, we note that each interconnection request and each
transmission system is unique. The transmission provider and
interconnection customer will have an opportunity to work through the
relevant details regarding coordination during the negotiation phase of
the LGIA. Therefore, we decline to provide detailed instructions to
account for a multitude of dissimilar scenarios when transmission
providers and interconnection customers are capable of coordinating the
option to build process for multiple interconnection requests.
5. Affected Systems
    59. The pro forma LGIP and pro forma LGIA define affected systems
as ``electric system[s] other than the Transmission Provider's
Transmission System that may be affected by the proposed
interconnection.'' \141\ The interconnection system impact study
``evaluates the impact of the proposed interconnection on the safety
and reliability of the Transmission Provider's Transmission System,
and, if applicable, an Affected System.'' \142\ Impacts on affected
systems may require the construction of network upgrades to address the
impacts caused by a particular interconnection request.
---------------------------------------------------------------------------

    \141\ Pro forma LGIP Section 1 (Definitions); Pro forma LGIA
Art. 1 (Definitions).
    \142\ Pro forma LGIP Section 1 (Definitions); Pro forma LGIA
Art. 1 (Definitions).
---------------------------------------------------------------------------

a. Requests for Rehearing and Clarification
    60. MISO TOs state that the Commission did not address whether the
option to build extends to upgrades on affected systems. They also
state that the burden created by the option to build revisions will be
higher if affected systems must allow interconnection customers that do
not interconnect with them directly to construct on their systems.\143\
---------------------------------------------------------------------------

    \143\ MISO TOs Rehearing Request at 21.
---------------------------------------------------------------------------

b. Determination
    61. We grant MISO TOs' request for clarification and clarify that
the option to build does not apply to stand alone network upgrades on
affected systems. To make our intent clear, we revise the definition of
stand alone network upgrade to read (with additions in italics):

    Stand Alone Network Upgrades shall mean Network Upgrades that
are not part of an Affected System that an Interconnection Customer
may construct without affecting day-to-day operations of the
Transmission System during their construction. Both the Transmission
Provider and the Interconnection Customer must agree as to what
constitutes Stand Alone Network Upgrades and identify them in
Appendix A to the Standard Large Generator Interconnection
Agreement.\144\
---------------------------------------------------------------------------

    \144\ This revision is the first of two changes to the
definition of a stand alone network upgrade in the pro forma LGIP
and pro forma LGIA. The additional revision is described in the
option to build subsection on stand alone network upgrades (II.A.7).
---------------------------------------------------------------------------

6. Cluster Studies
    62. Clustering is ``the process whereby a group of Interconnection
Requests is studied together, instead of serially, for the purpose of
conducting the Interconnection System Impact Study.'' \145\
Transmission providers may ``allocate the cost of . . . common upgrades
for clustered Interconnection Requests without regard to Queue
Position.'' \146\ Transmission providers have the discretion to decide
whether to study interconnection requests serially or in clusters.\147\
---------------------------------------------------------------------------

    \145\ Pro forma LGIA Art. 1 (Definitions).
    \146\ Pro forma LGIP Section 4.1
    \147\ Pro forma LGIP Section 4.2.
---------------------------------------------------------------------------

a. Requests for Rehearing and Clarification
    63. APS argues that the expanded option to build provisions are
incompatible for transmission providers that conduct cluster
studies.\148\ Specifically, regarding a cluster study that identifies
stand alone network upgrades for which multiple interconnection
customers are responsible, APS questions which interconnection customer
may exercise the option to build. Further, if multiple interconnection
customers want to build a stand alone network upgrade, APS asks who
decides which interconnection customer has priority to exercise the
option to build.\149\
---------------------------------------------------------------------------

    \148\ APS Rehearing Request at 13.
    \149\ Id.
---------------------------------------------------------------------------

b. Determination
    64. We deny APS's rehearing request on this issue. We disagree that
the Order No. 845 option to build revisions are incompatible with a
cluster study approach. APS has not pointed to any specific provisions
in the pro forma LGIA that would preclude customers in a cluster study
from exercising the option to build. Moreover, APS has not provided any
evidence to indicate that stand alone network upgrades being required
by more than one interconnection customer in a cluster will be a common
enough occurrence to require pro forma LGIA revisions tailored to such
a scenario. Additionally, the scenario APS envisions is not tied to the
changes adopted in this proceeding because, to the extent that such a
circumstance occurs, multiple interconnection customers could have
sought to exercise the option to build for the same stand alone network
upgrade under the pre-Order No. 845 option to build. However, if a
transmission provider that studies interconnection requests in clusters
believes this is a concern, it should, on compliance, propose revisions
to address how it will process requests by multiple interconnection
customers to exercise the option to build for the same stand alone
network upgrade.
7. Stand Alone Network Upgrades
    65. Stand alone network upgrades are ``Network Upgrades that an
Interconnection Customer may construct without affecting day-to-day
operations of the Transmission System during their construction.''
\150\ Both the transmission provider and the interconnection customer
``must agree as to what constitutes Stand Alone Network Upgrades and
identify them in Appendix A'' to the LGIA.\151\
---------------------------------------------------------------------------

    \150\ Pro forma LGIP Section 1 (Definitions); Pro forma LGIA
Art. 1 (Definitions).
    \151\ Pro forma LGIP Section 1 (Definitions); Pro forma LGIA
Art. 1 (Definitions).
---------------------------------------------------------------------------

    66. In Order No. 845, the Commission denied Generation Developers'
request for a requirement that transmission providers explain why they
do not think a network upgrade is a stand alone network upgrade. The
Commission stated that ``it would be difficult for a transmission
provider'' to make this determination ``until it is presented with the
results of a system impact study.'' \152\
---------------------------------------------------------------------------

    \152\ Order No. 845, 163 FERC ] 61,043 at P 112.
---------------------------------------------------------------------------

a. Requests for Rehearing and Clarification
    67. Generation Developers claim that the Commission erred by not
requiring that transmission providers explain their reasoning when they
disagree with an interconnection customer about whether a network
upgrade is stand alone.\153\ They reason that not requiring such an
explanation undermines the interconnection customer's ability to
exercise the option to build and increases process opacity.\154\ They
also disagree with the Commission that providing such an explanation
would be difficult before the transmission provider has the system
impact study results, as these results will be available prior to the
LGIA stage of the

interconnection process, when the interconnection customer can first
express its desire to exercise the option to build.\155\ Furthermore,
Generation Developers argue that, if there is a disagreement, dispute
resolution or a complaint filed pursuant to FPA section 206 are not
viable options because these options involve costly delays.\156\
---------------------------------------------------------------------------

    \153\ Generation Developers Rehearing Request at 5-6.
    \154\ Id. at 6.
    \155\ Id. at 8.
    \156\ Id. at 6-7.
---------------------------------------------------------------------------

b. Determination
    68. We grant rehearing and find that the Commission erred by not
requiring a transmission provider to explain why it does not consider a
particular network upgrade to be a stand alone network upgrade. We
recognize that, because of the mutual agreement requirement in the
definition of stand alone network upgrade, disagreements may arise
regarding whether a network upgrade is a stand alone network
upgrade.\157\ The Commission, in Order No. 2003, was aware that
transmission providers had reliability concerns related to the option
to build when the Commission defined stand alone network upgrades to
include the mutual agreement requirement.\158\ Even though the
transmission provider has the ability to disagree when an
interconnection customer believes a network upgrade is a stand alone
network upgrade, the transmission provider may not unreasonably
withhold its agreement because such an outcome would be unjust and
unreasonable. That is, the transmission provider must explain why the
upgrade in question is not one that an interconnection customer may
construct without affecting the transmission system's day-to-day
operations during construction. Therefore, we require that, when there
is a disagreement, a transmission provider must provide the
interconnection customer a written explanation within fifteen days of
its determination that outlines the technical reasons why it does not
consider a network upgrade to be a stand alone network upgrade. We
consider this time period reasonable because it begins at the time of
the transmission provider's determination outlining its technical
reasons. To effectuate this revised requirement, we revise the
definition of stand alone network upgrades in the pro forma LGIP and
the pro forma LGIA to include the following new sentence at the end of
the definition (with additions in italics):
---------------------------------------------------------------------------

    \157\ See Duke Energy Florida, LLC, 163 FERC ] 61,174 (2018)
(setting for hearing an LGIA that was filed unexecuted because of
disagreement as to whether a network upgrade was stand alone).
    \158\ See Order No. 2003, 104 FERC ] 61,103 at PP 341, 356-57
(noting that the transmission provider must retain ``adequate
control of the engineering and construction of . . . Stand Alone
Network Upgrades because of its obligation to protect the safety of
the public and maintain the reliability of the Transmission
System'').

    Stand Alone Network Upgrades shall mean Network Upgrades that
are not part of an Affected System that an Interconnection Customer
may construct without affecting day-to-day operations of the
Transmission System during their construction. Both the Transmission
Provider and the Interconnection Customer must agree as to what
constitutes Stand Alone Network Upgrades and identify them in
Appendix A to the Standard Large Generator Interconnection
Agreement. If the Transmission Provider and Interconnection Customer
disagree about whether a particular Network Upgrade is a Stand Alone
Network Upgrade, the Transmission Provider must provide the
Interconnection Customer a written technical explanation outlining
why the Transmission Provider does not consider the Network Upgrade
to be a Stand Alone Network Upgrade within 15 days of its
determination.\159\
---------------------------------------------------------------------------

    \159\ As noted above in the affected systems section (II.A.5),
this is the second of two clarifying revisions that we are making to
the definition of stand alone network upgrades in the pro forma LGIP
and pro forma LGIA.
---------------------------------------------------------------------------

8. Cost Estimates
    69. Section 8.3 of the pro forma LGIP provides that transmission
providers shall: Use Reasonable Efforts to . . . issue a draft
Interconnection Facilities Study report to Interconnection Customer
within . . . ninety . . . Calendar Days, with no more than a +/-20
percent cost estimate contained in the report; or one hundred eighty .
. . Calendar Days if the Interconnection Customer requests a +/-10
percent cost estimate.
a. Requests for Rehearing and Clarification
    70. Southern asks the Commission to grant rehearing with regard to
Order No. 845's option to build changes, but, if it does not, it asks
the Commission to clarify that the requirement in section 8.3 of the
pro forma LGIP would apply to interconnection customers that construct
stand alone network upgrades.\160\ Specifically, it points to the
requirement that transmission providers must provide an estimated cost
that is ``plus or minus 10 or 20 percent, depending on the length of
the study'' to provide some certainty regarding cost exposure to the
interconnection customer.\161\ Southern argues that interconnection
customers exercising the option to build must do the same to provide
cost certainty to transmission providers and their native load
customers. In particular, Southern argues that the interconnection
customer should either be bound by the estimate in the transmission
provider's interconnection facilities study report or ``should be
required to provide an estimate that complies with the plus or minus
10/20 percent cost estimate.'' \162\
---------------------------------------------------------------------------

    \160\ Southern Rehearing Request at 9.
    \161\ Id.
    \162\ Id.
---------------------------------------------------------------------------

b. Determination
    71. We deny rehearing on this issue. Section 8.3 of the pro forma
LGIP only requires the transmission provider to make reasonable efforts
during the interconnection study process to estimate costs to construct
network upgrades, and the pro forma LGIP does not impose any
consequences on transmission providers that exceed the estimate or
accuracy margin.\163\ Southern's request would therefore require the
Commission to hold the interconnection customer to a higher standard
than it holds the transmission provider. We decline to do so.
---------------------------------------------------------------------------

    \163\ See Duke Energy Fla., LLC, 165 FERC ] 61,230, at P 22
(2018) (``[t]he Commission's precedent is clear that the costs in an
LGIA are simply estimates and that interconnection customers are
responsible for paying the actual costs of interconnection
facilities and network upgrades'').
---------------------------------------------------------------------------

9. Oversight Costs
    72. In Order No. 845, in response to arguments that
``interconnection customers should assume all additional costs that
result from exercise of the option to build,'' the Commission stated
that it was making ``no changes with regard to cost assignment for
transmission provider's interconnection facilities and stand alone
network upgrades.'' \164\ Additionally, in response to concerns that
transmission providers ``will have to expend significant resources to
perform oversight functions'' for the option to build, the Commission
stated that ``the Final Rule does not alter the role that the
transmission provider would play in overseeing the option to build
process.'' \165\
---------------------------------------------------------------------------

    \164\ Order No. 845, 163 FERC ] 61,043 at P 95.
    \165\ Id. P 103.
---------------------------------------------------------------------------

a. Requests for Rehearing and Clarification
    73. Southern argues that, as a result of Order No. 845,
transmission providers will increasingly incur costs to provide
additional coordination, oversight, and approval of stand alone network
upgrade ``design, equipment specifications, contractors, construction,
and commissioning.'' \166\ EEI asks the Commission to clarify whether
transmission providers can recover such

costs associated with overseeing an interconnection customer's
construction when the option to build is exercised.\167\ Specifically,
it asks the Commission to allow transmission providers to recover the
costs for ``providing the coordination, oversight, and approval
required for the Interconnection Customer's construction.'' \168\ As
background, EEI states that, in Order No. 2003-A, the Commission stated
that it would ``not require the Transmission Provider [to] be
reimbursed for construction oversight cost,'' as the interconnection
customer may only exercise the option to build ``as a last resort'' and
that the transmission provider ``can avoid the expense[s]'' of
oversight by meeting the milestones and avoiding the pre-Order No. 845
option to build trigger.\169\ EEI argues that, since this reasoning no
longer holds true, the Commission should amend article 5.2 of the pro
forma LGIA to add the following provision: ``(12) Transmission Provider
shall recover all reasonable costs associated with the review,
approval, testing, inspection and transfer of the Interconnection
Facilities and Stand Alone Network Upgrades constructed by the
Interconnection Customer in accordance with this Article 5.2.'' \170\
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    \166\ Southern Rehearing Request at 8.
    \167\ EEI Rehearing Request at 13; see also SoCal Edison
Rehearing Request at 4.
    \168\ EEI Rehearing Request at 10.
    \169\ Id. at 11-12 (citing Order No. 2003-A, 106 FERC ] 61,220
at PP 218-19).
    \170\ Id. at 13.
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    74. In response to the NOPR, SoCal Edison raised concerns regarding
the additional costs and oversight that will result from the exercise
of the option to build and sought Commission confirmation that the
interconnection customer should bear those costs.\171\ SoCal Edison
argues on rehearing that, despite the Commission's reliance on its
requirement that the interconnection customers and their contractors
must use good utility practice, the interconnection customers may have
little incentive to rigorously adhere to the transmission provider's
standards and specifications.\172\
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    \171\ SoCal Edison Request for Clarification at 4 (referencing
SoCal Edison April 13, 2017 Comments at 4-5).
    \172\ Id. (citing Order No. 845, 163 FERC ] 61,043 at P 111).
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b. Determination
    75. With regard to oversight costs related to the option to build
exercised by interconnection customers for the transmission provider's
interconnection facilities and stand alone network upgrades, we grant
rehearing. We agree with EEI that the rationale that the Commission
provided in Order No. 2003 for disallowing collection of oversight
costs (namely, that a transmission provider can avoid such costs by
agreeing to meet the interconnect customer's schedule) \173\ no longer
applies as a result of Order No. 845. For this reason, we revise
article 5.2 of the pro forma LGIA to include a placeholder for
transmission providers to recover the costs of executing the
responsibilities enumerated for transmission providers in that same
article. We expect the transmission provider and interconnection
customer to negotiate this amount and clearly state it in the LGIA. The
Commission will add the following language at the end of article 5.2 of
the pro forma LGIA (with new additions in italics):
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    \173\ Order No. 2003-A, 106 FERC ] 61,220 at P 218.

    (12) If Interconnection Customer exercises the Option to Build
pursuant to Article 5.1.3, Interconnection Customer shall pay
Transmission Provider the agreed upon amount of [$ PLACEHOLDER] for
Transmission Provider to execute the responsibilities enumerated to
Transmission Provider under Article 5.2. Transmission Provider shall
invoice Interconnection Customer for this total amount to be divided
on a monthly basis pursuant to Article 12.
B. Identification and Definition of Contingent Facilities
    76. In Order No. 845, the Commission added new section 3.8 to the
pro forma LGIP, which requires that transmission providers publish a
method for identifying contingent facilities \174\ and that they
provide a list of potential contingent facilities to interconnection
customers at the close of the system impact study phase. Order No. 845
further requires that transmission providers provide, upon the
interconnection customer's request, the estimated network upgrade costs
and estimated in-service completion date associated with each
identified contingent facility if the transmission provider determines
that this information is readily available and not commercially
sensitive.
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    \174\ Contingent facilities ``shall mean those unbuilt
interconnection facilities and network upgrades upon which the
interconnection request's costs, timing, and study findings are
dependent, and if delayed or not built, could cause the need for
restudies of the interconnection request or a reassessment of the
interconnection facilities and/or network upgrades and/or costs and
timing.'' Order No. 845, 163 FERC ] 61,043 at P 218.
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1. Requests for Rehearing and Clarification
    77. Generation Developers seek rehearing of the Commission's
decision not to exempt interconnection customers from financial
responsibility for late-identified contingent facilities.\175\
Specifically, Generation Developers state that the Commission did not
explain why it is just and reasonable for the interconnection customer
to bear unexpected costs in the circumstance where a transmission
provider identifies additional contingent facilities after the close of
the system impact study phase. Generation Developers add that Order No.
845 provides no incentive for the transmission provider to accurately
identify contingent facilities because it shifts all of the
consequences of a failure to timely identify all contingent facilities
onto the interconnection customer.\176\ Generation Developers ask the
Commission to state that the interconnection customer will not be
financially responsible if the transmission provider only identifies a
new contingent facility after the close of the system impact study
phase.\177\
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    \175\ Id. P 201.
    \176\ Generation Developers Rehearing Request at 11.
    \177\ Id. at 10.
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2. Determination
    78. We deny Generation Developers' rehearing request. To provide
increased transparency to interconnection customers regarding the
interconnection process, Order No. 845 requires that transmission
providers outline a method to identify contingent facilities by the
close of the system impact study phase. Thus, the interconnection
customer will have notice of any contingent facilities identified by
the transmission provider by the close of the system impact study
phase. This requirement to identify contingent facilities does not
change cost responsibilities. In denying this request, we note that it
would be inconsistent with the cost causation principle to exempt an
interconnection customer from interconnection facility and network
upgrade costs that would not be necessary but for that interconnection
request.\178\ The principle of cost causation generally requires that
costs ``are to be allocated to those [that] cause the costs to be
incurred and reap the resulting benefits.'' \179\ The Commission did
not revisit this principle in Order No. 845, and we decline to do so at
this time.
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    \178\ See Order No. 2003, 104 FERC ] 61,103 at P 694 (``it is
appropriate for the Interconnection Customer to pay the initial full
cost for Interconnection Facilities and Network Upgrades that would
not be needed but for the interconnection'').
    \179\ S.C. Pub. Serv. Auth. v. FERC, 762 F.3d at 87 (quoting
Nat'l Assoc. of Regulatory Util. Comm'rs v. FERC, 475 F.3d at 1285).

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C. Transparency Regarding Study Models and Assumptions
    79. In Order No. 845, the Commission revised section 2.3 of the pro
forma LGIP to require transmission providers to maintain network models
and underlying assumptions on either an Open Access Same-Time
Information System (OASIS) site or a password-protected website. These
revisions allow transmission providers to require interconnection
customers, OASIS site users, and password-protected website users to
sign a confidentiality agreement before the release of commercially
sensitive information or CEII. The revisions also require that the
network model information and underlying assumptions ``reasonably
represent those used during the most recent interconnection study and
be representative of current system conditions.'' \180\
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    \180\ Order No. 845, 163 FERC ] 61,043 at P 236.
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1. Protection of Network Model Information
a. Requests for Rehearing and Clarification
    80. American Public Power Association, Large Public Power Council,
and National Rural Electric Cooperative Association (collectively, Non-
Profit Utility Trade Associations) request that the Commission clarify
that its intention is to permit transmission providers ``to protect
data that would qualify for CEII treatment if [they] were submitted''
to the Commission.\181\ They note that, under the Commission's
regulations, an entity may submit information to the Commission and
request that it be treated as CEII, but this information will not
formally be designated as CEII until there is a request to access the
information and the Commission has granted CEII status. Non-Profit
Utility Trade Associations state that revised section 2.3 of the pro
forma LGIA implicates a large amount of modeling and assumption
information that meets the substantive definition of CEII but that the
Commission has not designated such information as CEII. Non-Profit
Utility Trade Associations contend that this technicality limits a
transmission provider's ability to protect sensitive data, and they ask
the Commission to clarify that information ``may be protected under
[pro forma] LGIP section 2.3 if the Transmission Provider determined
that it would meet the substantive criteria for CEII had it been
submitted to the Commission for that determination.'' \182\ According
to Non-Profit Utility Trade Associations, when there are questions
regarding the transmission provider's judgment, the Commission's
complaint procedures should be adequate to provide resolution.\183\
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    \181\ Non-Profit Utility Trade Associations Rehearing Request at
5.
    \182\ Id. at 6.
    \183\ Id. at 4-6.
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    81. Non-Profit Utility Trade Associations also allege that the
language of revised section 2.3 of the pro forma LGIP is broad enough
to allow any entity to obtain network models and underlying assumptions
for any reason. Non-Profit Utility Trade Associations further allege
that offering a confidentiality agreement to all OASIS site users
without further limitation could include unknown entities that pose a
security risk. For this reason, Non-Profit Utility Trade Associations
ask the Commission to clarify that the Commission intended to permit
transmission providers to apply reasonable standards to requests from
entities to enter into such confidentiality agreements. Non-Profit
Utility Trade Associations suggest that the Commission's CEII
regulations could provide a useful framework for standards because they
require that requesters provide a name, contact information, and a
statement of need. If the request is made on behalf of an organization,
the requester must state that it is authorized to make the request on
behalf of the organization and that all individuals in the organization
will be bound by executed non-disclosure agreements.\184\
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    \184\ Id. at 6-7.
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    82. Non-Profit Utility Trade Associations expect that transmission
providers would limit their review to ascertaining that the entity is a
recognized industry participant or has a legitimate commercial,
academic, or governmental interest in accessing the data. Further, Non-
Profit Utility Trade Associations contend that the potential for anti-
competitive behavior in this review seems limited and manageable
through the Commission's complaint procedures or enforcement
hotline.\185\
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    \185\ Id. at 7.
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    83. If the Commission does not grant these clarifications, Non-
Profit Utility Trade Associations request rehearing of Order No. 845's
revisions to section 2.3 of the pro forma LGIP, asserting that the
Commission erred in requiring transmission providers to post network
models and underlying assumptions without permitting the transmission
providers to adequately protect information that may be used to
threaten critical infrastructure.\186\
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    \186\ Id. at 7-8.
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b. Determination
    84. Order No. 845 did not revise the Commission's existing CEII
requirements.\187\ As Non-Profit Utility Trade Associations note,
information is not CEII unless the Commission has designated it as CEII
through its CEII designation process. Accordingly, we deny Non-Profit
Utility Trade Associations' request for clarification that transmission
providers may designate as CEII information that they believe should be
treated as such. We also reiterate that neither the Commission's CEII
regulations \188\ nor Order No. 845 precludes a transmission provider
from taking necessary steps to protect information within its custody
or control to ensure the safety and security of the electric grid.\189\
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    \187\ Under the Commission's CEII regulations, 18 CFR 388.113,
an entity may submit information to the Commission requesting that
it be treated as CEII. 18 CFR 388.113 (2018).
    \188\ Section 388.113 of the Commission's regulations does not
govern the transmission provider's handling, sharing, and
disseminating of information that the transmission provider
submitted for CEII designation, including how it disseminates that
information on its OASIS site or password-protected website. Id.
    \189\ Order No. 845, 163 FERC ] 61,043 at P 241.
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    85. We grant Non-Profit Utility Trade Associations' request for
clarification that transmission providers may apply reasonable
standards to requests to enter into confidentiality agreements before
information is released. Specifically, we grant clarification to the
extent that Non-Profit Utility Trade Associations would like to use the
Commission's CEII regulations as a model for evaluating entities that
request network model information and assumptions (prior to signing a
non-disclosure agreement), they may do so.\190\
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    \190\ See 18 CFR 388.113(g)(5)(i).
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2. Requirement To Post Network Model Information
a. Requests for Clarification
    86. APS asks the Commission to clarify that the requirement that
network models and underlying assumptions ``reasonably represent those
used during the most recent interconnection study and be representative
of current system conditions'' in revised section 2.3 of the pro forma
LGIP does not require transmission providers to modify the network
models and underlying assumptions utilized for evaluating