Foley & Lardner LLP: FERC Issues Proposal to Ease Regulation of Gen-Tie Lines

By Kurt R. Rempe

FERC has issued a Notice of Proposed Rulemaking (NOPR) that would substantially reduce the regulatory burdens placed on energy project developers that construct generator lead lines (gen-tie lines) to interconnect their projects to the grid.

Currently, developers that own, operate or control a gen-tie line (referred to in the NOPR as “Interconnection Customer’s Interconnection Facilities” (ICIFs)) are subject to regulation by FERC as a public utility. Under the rules, absent an express waiver, owners of gen-tie lines are treated as common carriers that must file an Open Access Transmission Tariff (OATT) to provide access to third parties that wish to interconnect. However, even if FERC grants an OATT waiver, if a third party later requests service, the gen-tie owner must then file an OATT within 60-days, which subjects them to ongoing regulatory compliance obligations. If the gen-tie owner wishes to exclude the third party from interconnecting and maintain its priority interest on the line, it must affirmatively demonstrate its planned use of the line as well as establish and meet milestones for the construction of new generation to warrant reserving the additional capacity on the line. This is an onerous and often costly process which requires that the gen-tie owner perform interconnection feasibility studies to evaluate the third party’s interconnection. FERC’s policy to favor transmission access on a first-come first-serve basis sends the wrong signal to project developers that bear the risk of financing and constructing gen-tie lines only to have a portion of their line’s capacity potentially used by a competitor.  

To reduce this burden, FERC proposes creating an initial five-year “safe harbor” period after the gen-tie line is energized in which there is a rebuttable presumption the gen-tie owner has definitive plans to use the excess capacity on the line for its own purposes as well as providing a blanket waiver from filing an OATT. These changes are intended to reduce the burdens on developers during the early years of their projects as gen-tie owners routinely preemptively file waiver requests to reserve capacity on their own lines for their future phased-in projects absent any specific third party interconnection request. The proposed rule also reduces the administrative burden on FERC to process waiver requests as interconnection requests are extremely rare. Further, the proposed rule shifts the burden to the third party to show that the developer does not intend to use the excess capacity on their line. OATTs already on file with FERC will not be impacted by the proposed rule, but FERC will consider requests to withdraw OATTs on a case-by-case basis provided no third party is currently taking service under the OATT.

Comments are due within 60 days after the NOPR is published in the Federal Register and should be submitted in FERC Docket No. RM14-11-000.

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