The Nickel Report

On July 16, Senator Martin Heinrich (D-NM), Ranking Democrat on the Senate Energy and Natural Resources Committee, introduced legislation to provide for a streamlined, time-limited electric generation interconnection review process for generation projects that agree to limit their output to a level that will not require grid upgrades. This approach is modeled on the “connect and manage” framework used by the Electric Reliability Council of Texas (ERCOT) region.

Heinrich’s legislation, the “Grid Connection and Congestion Management Act,” would create a new Section 224 of the Federal Power Act to require all RTOs and ISOs – which operate electricity grids serving about two-thirds of electricity customers in the country – to file tariff revisions with the Federal Energy Regulatory Commission (FERC) within 180 days of enactment to establish a new category of transmission service called “basic access service for energy-only delivery,” or BASED. 

FERC would have a separate obligation to revise its pro forma transmission tariff within 18 months to incorporate the new BASED service option. The pro forma requirements would apply to transmission-owning utilities outside of RTO and ISO regions. The RTO and ISO tariff revisions filed after 180 days would be revisited to ensure that they were at least as effective as the later-developed pro forma standards. 

According to a Heinrich press statement, the purpose of the proposal is to speed up the process of interconnecting new electric generation to the grid to “help bring new, cheap energy online faster.”

Grid operators are responsible for planning and operation of the electric grid to maintain electric reliability. Interconnection of new generation requires careful engineering evaluation to determine effects on the grid, such as local and regional grid upgrades that would be necessary to accommodate the amount of power that new generation would add. These effects differ depending on a variety of factors, including where the generation is to be located.

While each RTO and ISO has a different process, generation developers have argued for many years that the processes required to interconnect new generation to the grid generally are too slow, cumbersome, and expensive. Generation projects often wait years in generation queues before review is completed. RTOs and ISOs counter that delays occur not only because grid security reviews to ensure maintenance of electric reliability are complicated, but also because interconnection queues are clogged with many projects that will not be built, especially if other generation projects in the queue are completed first.

The Grid Connection and Management Act seeks to address delays by creating the new BASED interconnection service category. Generation developers seeking this category of review would be able to propose to limit the electricity output of their facilities in order to make the review process simpler and faster, including by agreeing to curtail the facility’s generation output to a level identified by the RTO or ISO as not requiring additional transmission facilities or upgrades.  RTOs and ISOs would be required to complete reviews for BASED transmission service within one year.

Supporters of this “connect and manage” approach argued that ERCOT has used it successfully to add more generation to its grid more quickly than FERC-jurisdictional RTO and ISO regions. Others have warned that a connect and manage approach may not be as attractive in regions that have capacity market rules that require participating generators to be deliverable in order to sell capacity. A new resource taking BASED service would not be eligible for capacity revenues in such regions – which is not a concern in the energy-only ERCOT market. Resources taking BASED service also might not qualify to meet region-specific resource adequacy requirements in various RTOs or ISOs.    

Under the bill, RTO and ISO evaluations of requests for BASED transmission service must be limited to the set of analysis and studies provided for under FERC’s Open Access Transmission Tariff regulations “that are necessary to determine whether additional transmission facilities or upgrades to existing transmission facilities are need to reliably interconnect” the generating facility. The evaluations also must “reflect the expected operating characteristics of the generating facility, including any operating limits, curtailment provisions, or modifications to the generating facility” proposed by the generator. 

The RTO or ISO evaluation must “identify the maximum level of injection at the point of interconnection that can be accommodated without additional transmission facilities or upgrades,” as well as the “transmission facilities or upgrades to existing transmission facilities necessary to accommodate” higher levels of power output.

The bill would allow generators receiving BASED service to transition to another interconnection service, including network resource interconnection service (NRIS), which provides for the deliverability of the full output of a generation facility. The bill does not set any requirements for the process of transitioning from BASED service to NRIS or some other level of service; otherwise, the bill could create an inadvertent advantage to gain NRIS service more quickly by gaining BASED service first.

Finally, the FERC-jurisdictional RTOs and ISOs all have numerous “independent entity variations” from FERC’s current pro forma interconnection rules that reflect regional differences. The bill states that RTOs and ISOs could seek variations related to BASED service but also appears to limit the scope of such variations more than FERC has traditionally done. If the bill were enacted, it could thus raise complex implementation questions in certain RTOs and ISOs.