FERC Proposes New Policy Restricting Third-Party Use of Interconnection Facilities

May.30.2014

On May 15, 2014, the Federal Energy Regulatory Commission (FERC) proposed new rules and policies that would make it easier for the developers of non-utility transmission lines that connect their power projects to the grid to avoid having to offer unused capacity on those lines to third parties, and instead to reserve that capacity for their own future use. When non-utility generators build new power plants, they ordinarily construct and own new interconnecting power lines – called “gen-tie lines” and related equipment, such as substations, collectively referred to as “Interconnection Customer’s Interconnection Facilities” (ICIFs) in FERC parlence. In many instances, these gen-tie lines are a few hundred feet, but for solar, wind and geothermal plants, which are often located in less populated areas, they can extend dozens or even hundreds of miles.

FERC’s “open access” policies, which are designed to ensure that traditional utilities cannot use their monopoly over the transmission grid to stifle competition, require owners of transmission lines – including ICIFs – to function as common carriers, by making unused capacity available to third parties any time such service is requested.  For developers of power projects that include ICIFs, who have borne the risk of developing and financing these lines, these open access policies have been problematic, imposing costs and regulatory burdens, and limiting their incentive to undertake the risk of development only to have a competitor benefit equally from the line if it is successfully completed.

In order to restore a more appropriate balance between its open access policies, and to reduce the burdens on project developers, FERC proposes to amend its regulations to: (i) provide a blanket waiver to eligible ICIF owners, and (ii) establish a five year “safe harbor,” from the date that ICIFs are energized, during which third parties are not permitted to obtain interconnection service over the ICIF.

Click here to read the full article.

Click here for a copy of FERC's proposed rulemaking.