New FERC Order Highlights Interconnection Customer Risks for Increased Transmission Upgrade Costs

The Federal Energy Regulatory Commission’s (FERC) Dec. 16, 2021 decision in Tenaska Clear Creek Wind, LLC (Tenaska) v. Southwest Power Pool, Inc. (SPP) (Tenaska Order) highlights serious concerns interconnection customers face, particularly renewables, regarding their transmission upgrade cost responsibilities. All interconnection customers should be aware of the guidance it provides.

The Facts

In May 2017, Tenaska submitted an interconnection request to Associated Electric Cooperative, Inc. (AECI) for a 242 MW wind project. AECI identified SPP as a potentially affected system, and in August 2018, Tenaska asked SPP to conduct an affected system study. Tenaska executed its Generator Interconnection Agreement (GIA) with AECI in December 2018. SPP completed its affected system study process in April 2019, identifying approximately $33.5 million in network upgrades. In November 2019, SPP decided to restudy Tenaska’s system impact because at least one higher-queued project from the MISO queue that impacted SPP dropped out of the queue. After performing several revisions, SPP completed the restudy process in March 2021, identifying network upgrades costing approximately $99 million. Stung by both the size (three times the original amount) and the timing of the change (including 10 months after the project commenced commercial operations), Tenaska filed a complaint with FERC against SPP.

FERC Repeatedly Rules Against the Interconnection Customer

On Dec. 16, 2021, FERC acted on Tenaska’s complaint, rejecting most of Tenaska’s claims, including those that arguably raise the most significant issues for interconnection customers. For instance:

• FERC upheld SPP’s decision to invoke the restudy process five months after Tenaska executed its GIA, indicating that a regional transmission organization or independent system operator (RTO) may perform a restudy whenever triggered by its tariff, potentially no matter how late in the interconnection process.
• FERC allowed SPP to take substantially longer than the tariff-imposed 60 day restudy deadline because SPP engaged in Reasonable Efforts and satisfied Good Utility Practice, even though FERC was “deeply concerned about SPP’s errors and the extended amount of time SPP took in conducting the restudies.”
• FERC upheld SPP’s decision to include 4.5 GW of higher-queued generation in the restudy that SPP failed to include in the initial affected system study, finding the correction “necessary … to accurately reflect the system conditions when Tenaska joined the interconnection queue, ensure accurate study results, and maintain the reliability of the transmission system.”
• FERC reiterated that an RTO is “not bound” to use the same base model for a restudy when updated models are available, even when doing so fails to preserve the benefit of that customer’s specific queue position.

FERC Sides with Interconnection Customer on Narrower Issues

FERC sided with Tenaska on two narrow issues.

• FERC held that it was unduly discriminatory for SPP to apply an updated model to Tenaska’s restudy when it used the original models for other customers’ restudies. FERC ordered SPP to restudy Tenaska’s project with the older model.
• FERC questioned SPP’s determination to assign the full cost responsibility for the upgrade associated with the overrated Maryville-Midway facility already overloaded in the updated model, as an interconnection customer is only responsible for its “but for” costs.

Final Thoughts

Although FERC granted in part Tenaska’s complaint, this win may prove pyrrhic, as the restudy parameters FERC ordered might not reduce the interconnection customer’s upgrade costs. Meanwhile, the Tenaska Order’s precedential effect could harm interconnection customers, as FERC expressed little reservation in allowing an RTO – after an extreme combination of errors, delays, and updates – to dramatically change a customer’s upgrade cost expectations. Even more troubling, the Tenaska Order justified its determination by relying on earlier decisions (involving the Crane Creek and Settlers Trail wind farms in MISO), even though FERC originally limited those decisions to their unique and “limited circumstances.” The Tenaska Order arguably ignored FERC’s pronouncement in the Settlers Trail proceeding that allowing an RTO to correct study errors, no matter how late in the process, “does not establish a broad policy that will create uncertainty for future interconnection customers.” Instead, FERC used the Tenaska Order to “caution SPP to more carefully conduct its interconnection studies.” Voicing this sentiment may do little to protect future interconnection customers.

If you have questions about the content of this alert, or if you want to schedule a one-on-one meeting with a member of Clark Hill’s Energy and Renewables Group, please contact Dan Simon or Omar Bustami.

The views and opinions expressed in this article represent the view of the author and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is intended to be a substitute for professional legal advice.