Energy Law Alert: MISO's Revised Interconnection Queue Procedures Now Effective
Earlier this week, the Federal Energy Regulatory Commission (the "Commission") confirmed that the deadline for interconnection customers to comply with the new Midwest Independent System Operator ("MISO") generator interconnection queue procedures was Thursday, June 28, 2012. For many project developers, compliance with the new procedures means paying the new cash-at-risk M2 milestone (the "M2 Milestone") or losing their queue priority positions. The Commission made this confirmation in its June 27, 2012 order conditionally approving MISO's April 30, 2012 compliance filing and largely denying various requests for rehearing and clarification of the Commission's March 30, 2012 decision to approve MISO's interconnection queue reform proposal (FERC Docket No. ER12-309-000).
The new M2 Milestone is a large payment in the form of cash or an irrevocable letter of credit that is potentially non-refundable if an interconnection customer withdraws from the queue. The milestone is meant to serve as a demonstration of a project's readiness to proceed toward commercial operation and to discourage the late-stage withdrawals that MISO believes have been the cause of serious queue backlogs. The amount of the M2 Milestone payment is based on a formula and must be at least $2,000 per gross MW addition and no more than $10,000 per gross MW addition. The M2 Milestone payment is required for interconnection customers to maintain or obtain a prioritized queue position in the Definitive Planning Phase of MISO's Generator Interconnection Procedures. Projects unable or unwilling to meet the M2 Milestone now will be sent back to the earlier System Planning and Analysis phase and lose their queue priority.
In the June 27 order, the Commission also confirmed that M2 Milestone payments are refundable to withdrawing customers only to the extent that they exceed costs shifted to other equally or later-queued customers by the withdrawal, including network upgrade costs. Further, the Commission clarified that once an M2 Milestone payment is made, the amount of the payment will not be re-calculated. However, the Initial Payment—a new, preliminary payment toward the cost of network upgrades that is due shortly after Generator Interconnection Agreement ("GIA") execution—may change when restudy is required due to one of the contingencies listed in GIA and the interconnection customer's responsibility for network upgrade costs changes as a result.
The deadline for complying with the new M2 Milestone was merely a day after the Commission's order addressing the various issues above, which has left MISO and developers scrambling to confirm M2 Milestone payment amounts and make payments. Many developers with outstanding MISO interconnection requests are subject to the new M2 Milestone requirement, and MISO is working to either confirm or deny the M2 Milestone's application to each customer. For those customers who learn that their generation project is subject to restudy and that the M2 Milestone will apply, MISO has granted a 30-day grace period to satisfy the milestone requirement.
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