On March 21, 2024, the Federal Energy Regulatory Commission (FERC) issued Order No. 2023-A. Order 2023-A is an “order on rehearing and clarification” of Order 2023, which was issued on July 28, 2023. Order 2023 was FERC’s landmark decision to modernize the interconnection process for new generation facilities seeking to connect to the power grid. Order 2023-A clarifies Order 2023 to further FERC’s overall goal of reforming and streamlining grid interconnection processes. This explainer provides an overview of FERC’s rulings in Order No. 2023-A.
This explainer is organized into three sections:
This explainer offers a brief summary of changes and clarifications in Order No. 2023-A and should not be relied on as a legal document. The final regulatory texts that govern these reforms are available at: Order No. 2023 and Order No. 2023-A.
This Order No. 2023-A explainer assumes some familiarity with the original Order 2023. If you need a refresher, please see the language of the order at the link above or refer to our Order No. 2023 explainer. You may also want to refer to OPP’s rulemaking explainer for more guidance on FERC’s rulemaking process.
If you have questions regarding the final rule, or need assistance accessing the Commission’s administrative record in its e-Library or web resources, please contact OPP by e-mail at OPP@ferc.gov or by phone at 202-502-6595.
Spotlight on Administrative Process: Orders on Rehearing for Rulemakings
Once FERC issues a final rule, members of the public have an opportunity to seek rehearing of the rulemaking. Participants in the rulemaking can request rehearing (a change in the rule) or clarification (further explanation) within 30 days after issuance of the final rule. The rehearing process allows for further review and consideration of the rule. If a person or organization that sought rehearing disagrees with the outcome of FERC’s action on its request for rehearing, the person or organization can file an appeal in federal court.
A FERC order on rehearing serves several important purposes:
- Review and Correction: It allows FERC to review and potentially correct any errors in its final decision or order. This ensures that the decision is fair and legally sound. In the context of rulemaking, as here, a rehearing order might change the regulations from what had been written in the original order.
- Clarification: The rehearing process can provide clarification on specific points of the order, which can help the parties involved understand the decision better and how it applies to them.
- Legal Prerequisite: Filing for rehearing is often a necessary step before a party can seek judicial review in federal court. Without requesting a rehearing, parties typically cannot challenge the FERC decision in court.
Changes from Order No. 2023
Deadline for Determining Valid Interconnection Requests
What is the issue?
The interconnection of a new power plant or other power supply resource to the power grid is initially, and often extensively, a matter of conducting technical studies. Engineers and other experts working for or on behalf of the transmission provider engage in a multi-step evaluation process of the reliability impacts, system upgrades needed to mitigate those impacts, and related costs of those upgrades for each new interconnection to the transmission system. In Order No. 2023, FERC required that transmission providers study proposed generating facilities in groups or clusters, rather than studying each individually or serially. The goals of this approach include creating a more efficient study process and improving cost allocation among proposed facilities.
FERC also established the cluster study process as an organized process with timelines. The cluster request window is a specific period during which interconnection customers may submit their requests to connect new generation projects to the grid. During the cluster request window, customers must ensure their interconnection requests are complete and meet all necessary requirements. If an interconnection request is seen as deficient, the cure period allows interconnection customers to address deficiencies. Only validated requests proceed to the next step in the interconnection study process, the customer engagement window. During the customer engagement window, the transmission provider meets with the interconnection customers to discuss study costs and other issues before continuing in the process.
So, what’s the issue? Some commenters argued that FERC’s Order No. 2023 was unclear, as it seemed that the cure period to correct deficient applications might extend beyond the cluster request window and into the customer engagement window.
What did FERC decide?
FERC resolved the lack of clarity by generally limiting application corrections to within the cluster request window. In Order No. 2023-A, FERC clarified that an interconnection customer’s ability to cure flaws in its interconnection request ends at the close of the cluster request window. However, minor errors or incompletions in technical data may be fixed without a transmission provider deeming an interconnection request deficient, invalid, or withdrawn.
Acceptable Forms of Security
What is the issue?
Order No. 2023 sought to address concerns that interconnection practices have permitted an interconnection customer to proceed through the process without having to show sufficient financial evidence of ability to develop its project. This was clogging the interconnection queue with speculative projects without financing, which in turn often led to untimely withdrawals of applications. To remedy this issue, Order No. 2023 added financial security requirements, including that project developers pay deposits at various phases of the process. Some commenters sought that surety bonds be allowed as a means of meeting these financial security requirements.
What did FERC decide?
FERC modified the final rule to allow surety bonds or other reasonably acceptable forms of financial security—in addition to cash and irrevocable letters of credit—to serve as the commercial readiness deposit and study deposits. FERC approved these changes to help ensure that interconnection customers do not face unnecessary hurdles to the interconnection of new generation through limitations on the acceptable forms of financial security.
“Option to Build” for Interconnection Customers
What is the issue?
The “option to build” in generator interconnection policy allows interconnection customers to construct their own network upgrades and interconnection facilities, rather than have the transmission provider construct them. Such examples of upgrades and interconnection facilities include substations at the point of interconnection—known as “stand-alone network upgrades”—that support the customer’s interconnection. For example, interconnection customers with a very time-sensitive need for an upgrade might seek to build it themselves rather than paying for the transmission provider to build it.
In Order No. 2023, FERC limited an interconnection customer’s option to build to only network upgrades needed by that single customer.
What did FERC decide?
In Order No. 2023-A, FERC clarified that a network upgrade that is required for multiple interconnection customers in a cluster may be considered a “stand-alone network upgrade” if all such interconnection customers mutually agree to exercise the option to build. This provides a greater opportunity for an interconnection customer to exercise this option.
Readiness Requirements for Early Adopters of Cluster Study Processes
What is the issue?
The interconnection process has specific readiness requirements that aim to ensure that projects are viable and reduce speculative applications. At the same time, FERC recognized that many regions have already implemented, or were in the process of implementing, cluster study processes even before the final rule was issued. Commenters raised questions about the impact of any new readiness requirements on interconnection customers currently in the queues of “early adopter” transmission providers.
What did FERC decide?
FERC added a new provision that affects interconnection customers in interconnection queues of a transmission provider that currently uses, or is transitioning to, a cluster study process. If the transmission provider proposes, in its compliance filing, to adopt new readiness requirements for its annual cluster study, the interconnection customer must comply with the transmission provider's new readiness requirements within 60 days of the Commission-approved effective date of the transmission provider's compliance filing.
Clarifications from Order No. 2023
Compliance
Entities affected by a final rule must submit a document to FERC detailing how they will comply with the new requirements and/or submit the required revisions to their tariff. This document is known as a compliance filing. A compliance filing shows that the actions taken align with the requirements laid out by FERC.
- Demonstration of Compliance – FERC affirmed that all transmission providers, including those with existing cluster study processes, must demonstrate compliance with Order No. 2023. The fact that some transmission providers have recently adopted similar reforms does not automatically mean that they meet all requirements of Order No. 2023.
- Deviations from Pro Forma Provisions – Affected entities may propose changes or exceptions that differ from the standard terms and conditions set forth by FERC in the final rule. FERC affirmed the requirement that transmission providers must explain on compliance and justify any deviations as being either consistent with or superior to the reforms adopted in Order No. 2023 for non-RTO transmission providers or merit an independent entity variation for RTOs/ISOs. An item-by-item justification must be offered for each variation from the pro forma provisions modified in Order No. 2023, including for entities that have already adopted reforms.
- Effective Dates – FERC clarified that it will consider on a case-by-case basis, and may grant, requests from transmission providers for an effective date that predates the Commission’s order on their compliance filing.
Allocation of Cluster Network Upgrade Costs
The allocation of costs stemming from the cluster study process determines which interconnection customers pay and how much they pay for certain transmission upgrades. These “network upgrades” are needed to accommodate new generation facilities being studied.
FERC clarified that the cost allocation of substation network upgrades is based on the number of interconnection facilities connecting to the substation located at the point of interconnection. Costs of substation network upgrades also are allocated to generating facilities at distinct voltage levels, reflecting that expansion costs can be determined for each voltage level.
Site Control
Demonstrating site control requires the interconnection customer to show that it has the right to develop the land or site where its generating facility will be built, such as a purchase or lease agreement.
In the final rule, FERC required that interconnection customers must provide evidence of 90% site control at the time of submission of the interconnection request, and 100% site control at the time of execution of the facilities study agreement. Interconnection customers are allowed to use a deposit instead of site control demonstrations only where regulatory limitations may prohibit customers from obtaining site control. Such customers must obtain site control within 180 days of completing the study process and executing an interconnection agreement.
FERC clarified that in the event a new regulatory limitation requires a change to the point of interconnection that cannot be accommodated and results in an interconnection request being withdrawn, any deposits submitted by the interconnection customer in lieu of site control must be refundable.
Limits on Withdrawal Penalties
Withdrawal penalties aim to incentivize early withdrawal of non-viable projects in order to mitigate potential harm to other interconnection customers.
FERC clarified that withdrawal penalties cannot exceed the dollar amount collected from interconnection customers. FERC also clarified that withdrawal penalties will not be assessed if the withdrawal does not have a material impact on any interconnection request in the same cluster.
Elimination of the Reasonable Efforts Standard
Previously, transmission providers were only required to make “reasonable efforts” to meet study deadlines, and there were little to no consequences if transmission providers missed deadlines. The final rule imposes firm deadlines and penalties if transmission providers fail to complete interconnection studies on time (with certain exceptions).
- FERC clarified that delay penalties must be distributed to interconnection customers on a pro rata basis proportionate to the final study costs paid by each interconnection customer in the relevant study.
- FERC clarified that that study delay penalties will not incur interest prior to distribution of the penalty funds and that the entity conducting the study (i.e., transmission provider or transmission owner) will have no obligation to pay interest on study delay penalties.
Affected Systems
FERC’s interconnection rules seek to manage any impacts on neighboring systems, called “affected systems.” This involves coordination and study where an interconnection to one transmission provider’s transmission system may trigger the need for upgrades on another. The final rule sets firm deadlines for the transmission provider to provide initial notice to the affected system and for the affected system to state its intention to conduct an affected system study.
FERC clarified deadlines for determining that an affected system study will be conducted, and related notifications. FERC stated that the affected system transmission provider is required to respond in writing within 20 business days of receipt of the initial notice from the host transmission provider that interconnection requests may impact the affected system.