CAISO Interconnection Process Enhancements Proposal Faces Protest at FERC

Overview

CAISO’s Interconnection Process Enhancements proposal faces protest at FERC from independent power producers, clean energy organizations, and renewable energy developers.  Challengers claim that CAISO’s scoring criteria provide load serving entities undue influence and may violate principles of open access. 

Background

On August  22, 2024, parties filed comments and protests in response to the California Independent System Operator’s (CAISO) application seeking Federal Energy Regulatory Commission (FERC or Commission) approval of tariff revisions to implement its Track 2 Interconnection Process Enhancements (IPE) reforms.[1] CAISO asserts that the IPE reforms will compliment CAISO’s Order No. 2023 reforms, which were filed at FERC on May 16, 2024, and are still pending as of the date of this article.[2] CAISO’s IPE reforms are intended to address the backlogged CAISO interconnection queue, which contains more than three times the capacity expected to be needed to achieve California’s public policy objective of 100% clean energy by the end of 2045. CAISO’s IPE reforms seek to identify the most viable and needed projects to advance through the CAISO interconnection study process in zones where transmission capacity will be available. 

The proposed IPE reforms adopt a zonal approach that prioritizes project interconnection in areas with existing or planned transmission capacity, cap the number of projects permitted to proceed into the study process at 150% of the available and planned transmission capacity in specific zones, and establish scoring criteria that will be used to assess project eligibility and prioritization in the interconnection study process.

CAISO’s Proposal Faces Protest

CAISO has developed heightened requirements to advance through the interconnection process, including specific criteria to score and prioritize interconnection requests.  The scoring criteria consist of three categories: commercial interest, project viability, and system need. Similar to comments provided during CAISO’s stakeholder process, the most significant point of disagreement regarding CAISO’s application is the scoring criteria, and in particular the demonstration of commercial interest through load serving entities’ (LSE) allocation of points to specific projects.[3]  Several parties argue that CAISO’s LSE allocation methodology is unduly discriminatory, gives LSEs excessive influence and discretion, and violates FERC’s long-standing principles of open access.

Protestors express concern that CAISO’s proposal will allow LSEs to control up to 30% of the available points in the scoring methodology, which could result in unduly discriminatory outcomes.  For instance, some argue the reforms provide LSEs broad discretion to determine which interconnection requests receive access to interconnection service through the ability to allocate points with little oversight or guidance.  Some parties point out that the other two scoring criteria categories (project viability and system need) provide little opportunity for projects to differentiate, and that the commercial interest determination will likely be the controlling category.  Protestors claim that the proposal provides LSEs preferential access to interconnection service for their own projects or may enable LSEs to enact barriers to entry for competing projects. CAISO’s proposal limits the ability of an LSE to allocate points to its affiliates to 25% of total awardable points, but some doubt that this is sufficient to remedy the risk of undue influence. 

Protestors further reiterate that a key tenet of FERC’s long-standing open access policy is to limit opportunities for transmission providers to favor their own generation.  For instance, the Clean Energy Associations state, “[p]recedent makes clear that all generation should compete on a level playing field free from undue discrimination when proceeding through the interconnection queue. By allowing LSEs to control the determination of points, the CAISO’s proposal violates open access principles. These principles form the bedrock upon which the Commission established competitive wholesale power markets.”

CAISO’s filing proposes the commercial interest scoring criteria as severable from the rest of the IPE reforms. CAISO states in its application that it can implement the remainder of the IPE reforms without the commercial interest element or with modifications to this aspect of its proposal. However, parties disagree over whether the proposal can be implemented effectively without the commercial interest criteria. Several parties urge the Commission to narrowly reject or modify the commercial interest criteria, while others recommend that the Commission reject the filing in its entirety and order CAISO to evaluate and study the current Cluster 15 with its pro forma Order No. 2023 interconnection procedures.

Timing and Implementation of Proposed Reforms

CAISO requests that the Commission accept the tariff revisions proposed in its application effective October 1, 2024 so that it may resume implementation of the most recent and currently suspended interconnection queue Cluster 15.[4]  CAISO proposed to apply the tariff revisions to Cluster 15 and beyond, but with special rules for Cluster 15. CAISO proposes to allow Cluster 15 a one-time interconnection request modification window from October 1, 2024 to December 1, 2024 to change the point of interconnection after a project has been designated a transmission zone pursuant to the IPE reforms, and a December 23, 2024 deadline for LSEs to submit commercial interest points for Cluster 15 projects.  NextEra opposed application of the IPE reforms to Cluster 15 arguing that such action would constitute retroactive ratemaking in violation of the filed-rate doctrine. NextEra contends that Cluster 15 projects made financial, permitting, and commercial decisions based on the existing tariff and CAISO’s Order No. 2023 compliance filing.

Pursuant to Federal Power Act section 205, FERC has a 60-day statutory deadline of September 30, 2024, to accept, reject, or suspend and set for hearing CAISO’s application.

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[1] For a summary of CAISO’s Interconnection Process Enhancements Final Proposal please see: CAISO Releases Interconnection Process Enhancements Final Proposal | Renewable + Law (lawofrenewableenergy.com) and CAISO Releases Addendum to Interconnection Process Enhancements Final Proposal Ahead of Board of Governors Meeting | Renewable + Law (lawofrenewableenergy.com). We have also provided a detailed analysis of CAISO’s proposed scoring criteria: Stakeholders Express Concern That CAISO’s Interconnection Scoring Criteria May Prioritize Load-Serving Entity Selection | Renewable + Law (lawofrenewableenergy.com).

[2] CAISO submitted its Order No. 2023 compliance filing in Docket No. ER24-2042 on May 16, 2024. The tariff revisions proposed in the IPE filing include the changes proposed in the Order No. 2023 compliance filing as baseline tariff language.

[3] Protestors included: the Clean Energy Associations (collectively, American Clean Power Association, the California Energy Storage Alliance, the Large-Scale Solar Association, and the Solar Energy Industries Association), the Electric Power Supply Association, Vistra Corp. and Dynegy Marketing and Trade, Shell Energy North America, NextEra Energy Resources, and the Joint Interconnection Customers (collectively, GridStor, MN8 Energy, Terra-Gen, and ENGIE North America). Unless otherwise indicated, no position described herein is specifically attributed to a particular party.

[4] FERC previously approved CAISO’s request to pause Cluster 15 to allow it to process other pending interconnection requests in the queue. CAISO has not yet assigned Cluster 15 projects queue numbers; however, the Cluster 15 window is closed, and CAISO will not take additional applications until Cluster 16.