Commissioner James Danly Statement
June 16, 2022
Docket No. RM22-14-000
I welcome improvements to existing generator interconnection procedures. I would prefer that Regional Transmission Organizations (RTOs) and other interested public utilities simply file their own proposals under section 205 of the Federal Power Act (FPA).[1] They are fully capable of proposing rate changes and reforms on their own.[2]
If this sounds familiar, it is because I wrote the same thing in response to the Commission’s recent Notice of Proposed Rulemaking (NOPR) on transmission planning.[3] There, however, I dissented from the NOPR because I think it highly unlikely that the Commission can make the required section 206 finding that existing transmission planning regimes across the United States—in RTO and non-RTO regions alike—are so comprehensively unjust and unreasonable as to justify scrapping them, and I likewise strongly doubt that the Commission can justify the pervasive, micro-managing “reforms” we propose to make mandatory.[4] That entire exercise appears to be primarily an effort to socialize the massive costs of the transmission network build-out required to rush the development of renewable generation.[5] We await the record evidence in that proceeding and we shall see what the record supports.
In contrast to the transmission planning NOPR, I concur with the issuance of this NOPR[6] because I think it is far more likely that the record evidence will support a section 206[7] step-one finding that at least some aspects of current interconnection rules are unjust and unreasonable. The hallmarks of the current regime are easy access and lengthy, unmanageable queues—particularly in RTOs. Meanwhile, the Commission regularly grants unlawful retroactive waivers when favored resources miss binding tariff deadlines. This undermines the RTOs’ ability to manage their queues. Reforms (and greater Commission self-discipline) are desperately needed.
I would prefer RTOs and transmission providers come up with their own reforms through section 205 filings, rather than have the Commission issue omnibus proposals covering lists of every little thing commissioners would like to see done differently. Proposals have a propensity to turn into rules. The FPA, however, only allows the Commission to impose its own rates when the requisite section 206 showings have been made: that each existing interconnection tariff subject to revision in this NOPR is unjust and unreasonable, and that each aspect of the proposed replacement rate is just and reasonable. I am suspicious whether the record will support such showings in every region of the country, including in non-RTO regions, particularly when it comes to imposing the extremely broad replacement rates contemplated by this NOPR. I welcome detailed evidence on these points from all parties: identify the aspects of the existing rates that are unjust and unreasonable, or not, with supporting, or opposing, legal argument and factual evidence, and identify the aspects of the proposed replacement rates that are unjust and unreasonable, or not, with supporting, or opposing, legal argument and factual evidence. In each case, the more specific the arguments and evidence submitted, the better. In the transmission planning NOPR, I detailed the types of specific arguments and evidence that I wished to see, and I solicit the same here.[8] This information is crucial to determine whether the Commission’s exercise of its remedial rate making authority under section 206 is warranted.
My preliminary view is that while some elements of the proposed replacement rates could be justified, others very likely might not. I suspect we might be able to require first-ready, first-served clustering, more robust milestone deposits and showings (site control and commercial readiness), more binding RTO and transmission provider deadlines, and elimination of the Commission’s routine practice of granting unlawful retroactive waivers to every favored resource that misses a deadline. If we did this, we could be well on our way to solving existing interconnection problems. This NOPR includes what I think are likely reasonable proposals in many of these areas, subject to the actual evidence submitted in the record.
In other areas, I think the NOPR goes too far. Like the transmission expansion planning NOPR, many of the ideas floated in this NOPR seem intended to further prop up renewable resources and may be unduly discriminatory. I specifically seek comment on the following aspects of the proposal:
First, does the “shared network upgrade” cost proposal, where subsequent interconnecting resources pay a share of earlier interconnecting resources’ previously allocated network upgrade costs, eliminate a true “barrier to entry” for all types of resources or only for favored, small, renewable resources?[9] Is it effective to reduce existing incentives to submit multiple speculative requests?[10]
Second, does the proposed “resource solicitation study” process, which grants state-favored resources a “dedicated studies” process, give renewable resources undue preference in the development or queue process?[11] Would it be less unduly discriminatory if it were resource neutral, meaning that it would apply if a state adopts any portfolio standard, regardless of the type of resource supported?
Third, the NOPR blurs the lines between generation and transmission facilities, proposing to require study of several “alternative transmission technologies,” and “seek[ing] comment on whether storage that performs a transmission function, synchronous condensers, and voltage source converters should be included in the list.”[12] The FPA, however, distinguishes between “Federal regulation of matters relating to generation” and “that part of such [utility] business which consists of the transmission of electric energy in interstate commerce.”[13] As I have previously explained with respect to storage that performs a transmission function, I disagree that the Commission can mix and mingle the two different types of facilities, and the different regulatory regimes associated with each, according to the most favorable treatment for a preferred resource, because the FPA does not contemplate such treatment and it likely is unduly discriminatory.[14]
Other than storage that can serve a transmission function, what equipment on our list also blurs the lines?[15] Is a traditional “generation” resource unduly discriminated against when it is denied full cost-of-service treatment if it can also perform a “transmission” function? I seek legal argument regarding these statutory distinctions, and factual evidence on when a facility is “generation,” or “transmission,” and how to (and whether we must) distinguish between the two.
Fourth, which of the interconnection and queue problems described in this NOPR, if any, apply to small generator interconnection procedures?[16] Are any of the proposed reforms outlined in the NOPR for large generator interconnection procedures required to ensure just and reasonable rates for small generators? I think the answer likely is no.
I look forward to reviewing the record evidence.
For these reasons, I respectfully concur.
[1] 16 U.S.C. § 824d.
[2] See, e.g., PJM Interconnection, L.L.C., Filing, Docket No. ER22-2110 (filed June 14, 2022).
[3] See Building for the Future Through Elec. Reg’l Transmission Planning & Cost Allocation & Generator Interconnection, 179 FERC ¶ 61,028 (2022) (Danly, Comm’r, dissenting).
[4] See id. (Danly, Comm’r, dissenting).
[5] Id. (Danly, Comm’r, dissenting at P 3).
[6] Improvements to Generator Interconnection Procedures & Agreements, 179 FERC ¶ 61,194 (2022).
[7] 16 U.S.C. § 824e.
[8] See Building for the Future Through Elec. Reg’l Transmission Planning & Cost Allocation & Generator Interconnection, 179 FERC ¶ 61,028 (Danly, Comm’r, dissenting at PP 22-26).
[9] Improvements to Generator Interconnection Procedures & Agreements, 179 FERC ¶ 61,194 at PP 90, 97.
[10] See id. P 88.
[11] Id. P 221.
[12] Id. P 300.
[13] 16 U.S.C. § 824(a).
[14] See Midcontinent Indep. Sys. Operator, Inc., 172 FERC ¶ 61,132 (2020) (Danly, Comm’r, dissenting) (outlining jurisdictional arguments against treating storage as transmission).
[15] See Improvements to Generator Interconnection Procedures & Agreements, 179 FERC ¶ 61,194 at P 298.
[16] See id. P 5.