Commissioner Richard Glick Statement
September 17, 2020
Docket No. EL15-68-005
Order: E-3
I dissent from today’s order on compliance and rehearing because the Commission continues to allow transmission owners and affected system operators[1] in the Midcontinent Independent System Operator, Inc. (MISO) to unilaterally self-fund network upgrades constructed on behalf of generator interconnection customers, without meaningfully addressing concerns about undue discrimination. Today’s order also doubles down on the unwise decision to permit the reopening of numerous previously-negotiated interconnection agreements, despite considerable evidence that allowing transmission owners and affected system operators to retroactively elect to self-fund the network upgrades associated with those agreements will result in substantial harm to interconnection customers and could lead to project terminations.[2] Those decisions are arbitrary and capricious and not the result of reasoned decisionmaking.
A brief history of this proceeding is helpful here. In 2015, in response to a complaint, the Commission found that it was unjust and unreasonable for an affected system operator under MISO’s pro forma Facilities Construction Agreement (FCA) or pro forma Multi-Party Facilities Construction Agreement (MPFCA) to not have the same initial funding options for network upgrades as directly-connected transmission owners under MISO’s pro forma Generator Interconnection Agreement (GIA).[3] Simultaneously, acting pursuant to its own motion under section 206 of the Federal Power Act, the Commission found that it may be unjust, unreasonable, unduly discriminatory, or preferential to allow transmission owners the unilateral right to elect to fund network upgrades.[4] The Commission explained that giving a transmission owner the discretion to choose whether to fund a required network upgrade or to permit the interconnecting generator to finance the upgrade itself could result in discriminatory treatment of different interconnection customers by the transmission owner. Further, the Commission found that allowing a transmission owner to unilaterally elect to fund the upgrade could deprive the interconnection customer of the opportunity to finance network upgrades with more favorable rates and terms, such that the interconnection customer could face unjust and unreasonable increased costs, with no corresponding increase in service.[5] For these reasons, the Commission concluded that MISO’s pro forma interconnection agreements may not give transmission owners the unilateral discretion to elect to fund network upgrades.[6]
In Ameren Services Co. v. FERC, the U.S Court of Appeals for the District of Columbia (D.C. Circuit) vacated and remanded the Commission’s orders.[7] While the court acknowledged that vertically-integrated transmission owners that own integrated generation facilities would have an economic incentive to discriminate, it noted that only one of the petitioning transmission owners fell into that category.[8] The court was likewise unconvinced by the Commission’s argument that transmission owner funding imposes increased costs on interconnection customers with no corresponding increase in service.[9] Further, the court found that the Commission failed to respond to the transmission owners’ argument that they cannot be forced to construct and operate generator-funded network upgrades without the opportunity to earn a return.[10] Nevertheless, the court declined to reach the merits of the transmission owners’ complaint,[11] explaining that, “[it] should not do so until the Commission has developed a record by considering that question itself.”[12]
On remand, instead of further developing the record, the Commission simply reversed its prior determination in the vacated orders that transmission owners and affected system operators should not be allowed to unilaterally elect to provide initial funding for network upgrades.[13] In addition to directing MISO to restore the transmission owners’ right to unilaterally elect initial funding in the pro forma GIA, the Commission went a step further and, without any additional analysis or meaningful response to arguments raised by protestors, directed MISO to include that same right in the pro forma FCA and pro forma MPFCA.[14]
As I explained in my prior dissent, the Commission erred on remand by not ordering additional briefing to better develop the record, as the court in Ameren required.[15] Rather than engaging in essential record development and meaningfully addressing the questions posed by the court, the Commission simply reversed the vacated orders with nothing more than conclusory statements that relied on effectively the same record the court dismissed.
I remain concerned with the Commission’s failure to wrestle with the record evidence that the Commission’s determination on remand will provide an opportunity for transmission owners to favor their own generation and create an environment where similarly-situated interconnection customers pay higher network upgrade costs—exactly the type of behavior the Commission sought to eliminate in Order No. 2003.[16] In extending the unilateral right to elect to fund network upgrades to affected system operators under the pro forma FCA and pro forma MPFCA, the Commission relied solely on its conclusion that interconnection customers of an affected system operator under MISO’s pro forma FCA or pro forma MPFCA are similarly situated to those of a directly-connected transmission owner under the pro forma GIA. The Commission failed to meaningfully respond to arguments that it is unduly discriminatory to give affected system operators the unilateral discretion to choose to fund any network upgrades,[17] thereby sidestepping the most significant issue presented in this proceeding: Transmission owners in MISO have the incentive to favor their own generation over others seeking to interconnect to the transmission system, and giving them discretion to pick and choose when to self-fund network upgrades vests them with the opportunity to do so.[18]
I also continue to be frustrated with the Commission’s decision to allow transmission owners and affected system operators to reopen GIAs, FCAs, and MPFCAs that became effective between June 24, 2015 and August 31, 2018 (the Interim Period), without engaging in meaningful balancing of the specific facts and equities.[19] When given the opportunity, the transmission owners failed to produce evidence that they will experience actual harm if the Commission leaves these interconnection agreements in place, while on the other hand interconnection customers demonstrated with empirical evidence that they will experience substantial harm if the existing agreements are revised.[20]
Today the Commission compounds these errors and doubles down on its unsupported and unreasoned findings. Again, rather than directly address AWEA’s arguments concerning potential undue discrimination that would result from allowing transmission owners to unilaterally elect to upfront fund network upgrades for some interconnection customers but not others,[21] the Commission simply reiterates its prior finding that parties to FCAs and MPFCAs should be treated the same as parties to GIAs with respect to network upgrades.[22] Notwithstanding this fact, the Commission must still grapple with the challenge that allowing transmission owners—in their sole discretion— to go back and reopen some interconnection agreements and not others, when those customers may be similarly situated, is unduly discriminatory. I continue to believe that the Commission should grant rehearing and develop a record sufficient to evaluate the threat of undue discrimination presented both as to those contracts entered into during the Interim Period and those interconnection agreements that will be executed going forward under the new rules.
In addition to failing to adequately address AWEA’s arguments about undue discrimination, the Commission continues to gloss over the extensive evidence AWEA presents regarding the significant adverse impacts of allowing transmission owners to retroactively, in their sole discretion, reopen interconnection agreements entered into during the Interim Period.[23] I agree with AWEA that the Commission failed to adequately support its decision to allow reopening of those contracts. It continues to do so in today’s order. Rather than evaluate and weigh the evidence already presented, or open up the record for further investigation of this important issue, the Commission instead refers back to the court’s skepticism in Ameren that “a transmission owner need not earn a profit on all parts of its business,” and the Commission’s prior determination in the Remand Rehearing Order that AWEA had not demonstrated that transmission owners would not face uncompensated risks if generators were allowed to upfront fund network upgrades.[24] The Commission states that this demonstrates that it “appropriately considered the relevant evidence and factors, in light of the Ameren decision” and that it was “reasonable for the Commission to find, on balance, that harm to interconnection customers caused by transmission owners having the unilateral right to elect [to fund network upgrades] did not outweigh the harm to transmission owners from not having that right.”[25]
This reasoning doesn’t hold up. While the court in Ameren expressed skepticism about the merits of allowing generators to fund network upgrades and how that would impact transmission owners, the court explicitly did not reach a determination on the merits of this question.[26] Instead, the court remanded with instructions that the Commission should further develop the record and consider this question itself.[27] The Commission failed to do that. Further, the evidence the Commission does have regarding potential harms “weighs heavily in favor of preserving the existing GIAs, FCAs, and MPFCAs.”[28] The Commission has a duty to weigh the facts and equities in coming to a decision.[29] It has not done so here. While the Commission may use the term “on balance” in describing its determination to reopen the interconnection agreements as “reasonable,” there is no indication in today’s order, or the Commission’s prior orders in this proceeding, that the Commission actually took the time to engage in reasoned balancing of the specific facts and equities presented, including the benefits and harms to the parties involved, to the MISO market, and to the industry as a whole.
I would grant rehearing and order briefing to develop the record. In acting under section 206 of the Federal Power Act, the Commission bears the burden of establishing the just and reasonable replacement rate. Without a thorough record, the Commission can neither meet its burden to show that the revisions it requires to the pro forma GIA, FCA, and MPFCA are just and reasonable nor justify its decision to permit the reopening of certain GIAs, FCA, and MPFCAs. Today’s order is, therefore, arbitrary and capricious and not the product of reasoned decisionmaking. Unfortunately, I think the likely result of today’s order is another remand by the court, which will only further delay resolution of this proceeding, which already spans more than five years.
For these reasons, I respectfully dissent.
[1] “Affected system operator” is the term used by MISO to refer to a transmission owner of an electric system to which an interconnection customer will not directly interconnect, but which may require network upgrades.
[2] American Wind Energy Association (AWEA) Request for Rehearing at 15; see AWEA Initial Brief, Docket Nos. EL15-68-003 et al., at 8-17 (filed Oct. 1, 2018).
[3] Midcontinent Indep. Sys. Operator, Inc., 151 FERC ¶ 61,220, at P 47 (2015) (June 2015 Order), order denying reh’g, 153 FERC ¶ 61,352 (2015) (December 2015 Rehearing Order), order denying reh’g, 156 FERC ¶ 61,099 (2016) (August 2016 Rehearing Order).
[4] Id. P 48.
[5] Id. PP 48-49, 52.
[6] Id. PP 53-54; December 2015 Rehearing Order, 153 FERC ¶ 61,352 at P 29.
[7] 880 F.3d 571, at 572, 585 (D.C. Cir. 2018) (Ameren). In Ameren, the D.C. Circuit vacated the following orders: June 2015 Order, 151 FERC ¶ 61,220, order denying reh’g, December 2015 Rehearing Order, 153 FERC ¶ 61,352, order denying reh’g, August 2016 Rehearing Order, 156 FERC ¶ 61,099; Midcontinent Indep. Sys. Operator, Inc., 156 FERC ¶ 61,098, order denying reh’g, 157 FERC ¶ 61,013 (2016).
[8] Ameren, 880 F.3d at 578.
[9] Id. at 579-80.
[10] Id. at 580-82.
[11] Id. at 582 (“At present . . . we have no need to reach the merits of those questions. Because the Commission failed even to respond to these concerns . . . it is sufficient now to require that it do so.”).
[12] Id. at 584.
[13] Midcontinent Indep. Sys. Operator, Inc., 164 FERC ¶ 61,158, at PP 1, 28, 33 (2018) (Remand Order), order on briefing, compliance & reh’g, 169 FERC ¶ 61,233 (2019) (Remand Rehearing Order).
[14] Id. PP 1, 34.
[15] Remand Rehearing Order, 169 FERC ¶ 61,233 (Glick, Comm’r, dissenting at PP 5, 12).
[16] Standardization of Generator Interconnection Agreements and Procedures, Order No. 2003, FERC Stats. & Regs. ¶ 31,146, at PP 11-13 (2003) (concluding that “[t]he delays and lack of standardization inherent in the current system undermine the ability of generators to compete in the market and provide an unfair advantage to utilities that own both transmission and generation facilities”), order on reh’g, Order No. 2003-A, FERC Stats. & Regs. ¶ 31,160, at P 2, order on reh’g, Order No. 2003-B, FERC Stats. & Regs. ¶ 31,171 (2004), order on reh’g, Order No. 2003-C, FERC Stats. & Regs. ¶ 31,190 (2005), aff'd sub nom. Nat’l Ass’n of Regul. Util. Comm’rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007).
[17] Remand Rehearing Order, 169 FERC ¶ 61,233 (Glick, Comm’r, dissenting at P 5).
[18] Id. (Glick, Comm’r, dissenting at P 5, n.9, n.18) (noting that the record shows that “the majority of investor-owned transmission owners in MISO—in fact—also own generation”).
[19] Id. (Glick, Comm’r, dissenting at PP 9-11) (citing Black Oak Energy, LLC, 167 FERC ¶ 61,250, at P 27 (2019)).
[20] Id. (Glick, Comm’r, dissenting at P 11) (citing AWEA Initial Brief at 8-17; Xcel Energy Services Inc. Initial Brief, Docket Nos. EL15-68-003 et al., at 9, 19-21 (filed Oct. 1, 2018); MISO Initial Brief, Docket Nos. EL15-68-003 et al., at 8-9 (filed Oct. 1, 2018)).
[21] See AWEA Request for Rehearing at 3, 7-9 (“All interconnection customers for the period 2005 through the end of the Interim Period, August 31, 2018, are similarly situated with respect to Transmission Owner Initial Funding. Treating similarly-situated customers differently in such a manner would be patently discriminatory in violation of the [Federal Power Act].”).
[22] Midcontinent Indep. Sys. Operator, Inc., 172 FERC ¶ 61,248, at P 26 (2020).
[23] AWEA Request for Rehearing at 12-16 (stating that the evidence shows that costs to interconnection customers will increase between 30-40% on a net present value basis if a transmission owner retroactively elects to fund, and explaining that interconnection customers have no means to recover these unexpected costs in regulated rates); id. at 15 (noting that there will also be collateral damage to third parties as a result of cost shifts under PPAs and APAs).
[24] Midcontinent Indep. Sys. Operator, Inc., 172 FERC ¶ 61,248 at P 27 (citing Remand Rehearing Order, 169 FERC ¶ 61,233 at P 39).
[25] Id.
[26] Ameren, 880 F.3d at 582, 584-85.
[27] Id.
[28] Remand Rehearing Order, 169 FERC ¶ 61,233 (Glick, Comm’r, dissenting at P 10).
[29] Black Oak Energy, LLC, 167 FERC ¶ 61,250 at P 27.