Docket Nos. ER23-407-000, ER23-408-000
I dissent on today’s order which approves PacifiCorp’s proposed generator replacement process that will allow owners of an existing generation facility to retain the interconnection rights associated with that facility even after retiring it and replacing it with a new facility. While the proposal is substantially similar to the proposals approved in Dominion, PSCo, and Duke,[1] I agree with protestors that PacifiCorp did not demonstrate that the proposal is consistent with or superior to the Commission’s pro forma Open Access Transmission Tariff[2] and thus will yield just and reasonable and not unduly discriminatory or preferential rates for the PacifiCorp transmission system. In particular, protestors make compelling arguments, not present in those previous generator replacement rights proceedings, highlighting the potential for anti-competitive outcomes under PacifiCorp’s proposal. Based on the record before us, I cannot conclude that the benefits of this proposal outweigh the potential significant negative impacts on open access and competition in the PacifiCorp region.
I emphasize the view I shared in my separate statement in Duke—the Commission should closely examine whether there is a risk of undue preference for owners of existing generation facilities in interconnection rights relative to new market entrants, especially where the grid operator owns such generation facilities.[3] PacifiCorp’s primary argument is that its proposal is substantially identical to proposals approved for other transmission providers. PacifiCorp also argues that new and existing generators are not similarly situated. However, these arguments fail to answer the question of whether the proposal gives PacifiCorp an undue preference by allowing it to retain interconnection rights for capacity—perhaps 5,000 MW of it[4]—in perpetuity without any opportunity for new generation to gain access to that interconnection capacity, which belongs to the network.[5] In fact, the D.C. Circuit recently affirmed the Commission’s rejection of similar rules for another generation-owning utility on concerns of anti-competitive effects and potential undue discrimination.[6] Here, the Commission might unintentionally endorse an anti-competitive outcome by blindly accepting PacifiCorp’s proposal without a comprehensive evaluation of the impact on new entrants’ access to PacifiCorp’s transmission system. Unless and until the Commission undertakes a generic evaluation of the benefits and drawbacks of generator replacement rules, such an evaluation must take place on a case-by-case basis. Today’s order does not evince a fulsome evaluation sufficient to conclude that rates in PacifiCorp will remain just and reasonable and that access to the transmission system will remain free of undue discrimination.[7]
I restate my opinion that the Commission should comprehensively evaluate the legal and policy consequences of generator replacement proposals, as well as factors that may warrant regional variation or a more uniform approach to them. Make no mistake—generator replacement processes represent a substantial departure from the interconnection policy reflected in the Commission’s pro forma Open Access Transmission Tariff, pursuant to which interconnection capacity is returned to the system when a generation facility retires.[8] That policy promotes competition by making the capacity available to all new generation on equal footing. By contrast, generator replacement rules allow existing generation owners to retain that capacity in perpetuity despite retiring the generation project to which it was granted. As I stated previously, I worry that by continuing to approve these rules one region at a time, we are sleepwalking into a fundamental reshaping of interconnection policy without the careful scrutiny that such a shift demands.
For these reasons, I respectfully dissent.
[1] Dominion Energy S.C., Inc., 173 FERC ¶ 61,171 (2020) (Dominion); Pub. Serv. Co. of Colo., 175 FERC ¶ 61,100 (2021) (PSCo II); Duke Energy Carolinas, LLC, 180 FERC ¶ 61,156 (2022) (Duke).
[2] Standardization of Generator Interconnection Agreements & Procs., Order
No. 2003, 104 FERC ¶ 61,103, at PP 825-26 (2003) (explaining the Commission’s use of the “consistent with or superior to” standard when reviewing proposed deviations from the pro forma submitted by non-independent transmission providers). The U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) has observed that “[t]he Commission has explained that the test is ‘difficult to meet,’ and an applicant’s burden under the standard is ‘significant,’” Xcel Energy Servs. Inc. v. FERC, 41 F.4th 548, 557 (D.C. Cir. 2022), and that “[t]he Commission has repeatedly applied that test to reject changes to vertically integrated utilities’ interconnection procedures that the Commission believes would structurally favor the operator’s own generation and could disadvantage new generators.” Id. at 558.
[3] 180 FERC ¶ 61,156 (Clements, Comm’r, concurring).
[4] The Energy Information Administration expects PacifiCorp to retire over 5,000 MW of coal and natural gas-fired capacity by 2044. Electric Power Monthly - U.S. Energy Information Administration: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_6_06.
[5] Northwest & Intermountain Power Producers Coalition (NIPPC) argues that once the costs of any required network upgrades have been paid for and credited back to the generation owner, the interconnection capacity enabled by those network upgrades should be considered a network element, not a continuing entitlement of the generation owner. NIPPC December 30, 2022 Answer at 11-12. This appears to cut directly against the notion that an existing generation owner continues to be dissimilarly situated from new entrants with respect to specific interconnection rights after the point at which the existing generation owner retires its generation facility and its interconnection agreement terminates. NewSun Energy LLC (NewSun) similarly argues that under the Commission’s crediting policy, pursuant to which a retiring generator has been reimbursed for any network upgrades cost it was initially allocated, there is no reason why the benefit of that retiring generator’s earlier interconnection—i.e., interconnection rights—should automatically be retained for an entirely new facility. NewSun December 30, 2022 Answer at 26.
[6] Xcel Energy Servs Inc. v. FERC, 41 F.4th 548. The court stated the following: “[W]hile the Commission agreed that new and existing generators can be differently situated, it also recognized that, when an integrated operator owns most of the generation on its grid, a rule favoring existing generators necessarily favors the operator’s own power plants. That is, the efficiency that a rule favoring existing generators generally promotes can end up undermining competition when adopted by a vertically integrated operator.” Id. at 559. The court also noted that “[d]ecades of precedent support the Commission’s decision to prevent undue discrimination and promote competition,” Id. at 558, and found that “[t]he Commission’s rejection here of a tariff amendment that would make it harder for the competitors of a vertically integrated transmission operator to enter the market, while helping to lock in the operator’s own market position, certainly helps to accomplish that mission.” Id. at 559. The majority asserts that the concerns animating the Commission’s prior rejection of generator replacement rules in PSCo (i.e., in the orders the D.C. Circuit affirmed in Xcel Energy Servs. Inc. v. FERC) were fully addressed by the introduction of an independent generator replacement coordinator, as PacifiCorp proposes here. See PacifiCorp, 182 FERC 61,003, at P 61 (2023). I believe a close reading of those orders suggests otherwise. In them the Commission found that “[PSCO’s] proposed generator replacement process could give PSCo an undue preference by allowing its new replacement generation to circumvent the full interconnection process, whereas new generation seeking to compete would be required to go through the full interconnection process.” Pub. Serv. Co. of Colo., 171 FERC ¶ 61,115, at P 36 (2020) (PSCo I). I read the Commission’s concern as going beyond merely PSCo’s potential administration of the generator replacement process. And I am apparently not the only commissioner to think so. In his concurring statement in Dominion, Commissioner Danly stated: “The Commission’s attempt to distinguish its decision here from [PSCo I] by pointing to the [independent generator replacement coordinator] is not persuasive. We did not even hint in [PSCo I] that we were concerned about the potential for discriminatory implementation of the generation replacement process.” 173 FERC ¶ 61,171 (Danly, Chairman, concurring at P 5). Commissioner Danly and I appear to agree on this point, even if we may disagree on its implication for whether generator replacement processes satisfy the “consistent with or superior to” standard.
[7] I note several arguments advanced by protestors that appear to have merit but are not fully addressed in today’s order: NIPPC asserts that accepting this proposal will disincentivize PacifiCorp to pursue effective solutions to managing its “already jammed interconnection process” because it, as the dominant owner of existing generation in the region, will now be able to largely avoid that process by instead using the expedited replacement process. NIPPC argues this will hinder efforts to address the current delays in PacifiCorp’s interconnection process and that PacifiCorp may prioritize replacement generator studies over the cluster studies on which new entrants will continue to rely to access the grid. NIPPC December 30, 2022 Answer at 12-14. NIPPC and NewSun argue the proposal will likely harm the competitiveness of PacifiCorp’s competitive procurement processes overseen by the states. NIPPC December 30, 2022 Answer at 15-16; NewSun December 30, 2022 Answer at 19-22. Protestors similarly argue that the use of a generator replacement coordinator will do nothing to limit the structural advantage PacifiCorp will enjoy under the new rules by virtue of its dominant ownership of the existing generation that can avail itself of those rules. NewSun December 1, 2022 Protest at 6; NewSun December 30, 2022 Answer at 13-15; Utah Associated Municipal Power Systems (UAMPS) December 1, 2022 Protest at 8. NewSun and NIPPC argue that the location and characteristics of PacifiCorp’s transmission system yield specific concerns with implementation of generator replacement rules that were not present in regions for which the Commission previously accepted such rules, and that those characteristics should compel a more probing inquiry by the Commission. NewSun December 30, 2022 Answer at 9-10, 15-17; NIPPC December 30, 2022 Answer at 2-3, 15-17; UAMPS December 1, 2022 Protest at 6-7.
[8] The D.C. Circuit agreed, stating that a replacement generator’s retention of its predecessor’s contractual interconnection rights “stands in sharp contrast to the Commission’s pro forma rule” that “limit[s] the ability of existing generators’ owners to hold on indefinitely to transmission capacity.” Xcel Energy Servs Inc. v. FERC, 41 F.4th 561.