By Amanda Durish Cook

CARMEL, Ind. — MISO is still assessing the impact of FERC’s recent order reinstating transmission owners’ rights to self-fund network upgrades while renewable proponents express worry the decision could significantly increase the cost of new generation.

The RTO is currently sorting through generator interconnection agreements struck over a three-year period to determine which need to be revised to allow TOs the opportunity to fund network upgrades, MISO counsel Mike Blackwell told stakeholders at a Jan. 14 Interconnection Process Working Group (IPWG) meeting.

MISO previously reinstated TOs’ right to self-fund starting Aug. 31, 2018, anticipating FERC’s final December order on the matter. (See Ruling Reinstates MISO TO Funding of Upgrades.) That leaves contracts signed between June 24, 2015, and Aug. 31, 2018, open to alterations.

“We are working to determine which of those interconnection agreements would need amendments,” Blackwell said.

He said MISO would also create “companion facility service agreements” to work out refunds to interconnection customers on network upgrades that are already being constructed.

Those agreements would vary based on how far along construction is, Blackwell said. “We are working to determine the full breadth of filings that will need to be made.”

MISO’s renewable generation proponents remain unhappy with FERC’s decision, with some arguing that the ability of TOs’ to both bill for the cost of upgrades and charge rates to use them stands to increase costs for interconnection customers, as TOs will essentially issue them loans with interest for the network upgrades. Some fear that the prospect of accruing interest could add millions to the cost of new generation, making agreement amendments attractive to TOs.

Clean Grid Alliance’s Rhonda Peters asked how MISO would guarantee its responsibility under its Tariff to provide the least-cost solution to solving transmission constraints.

“There may be multiple approaches to solving a constraint,” Peters warned at the IPWG, suggesting that MISO may need to supervise TOs’ construction decisions.

Repeat Protests Under Facilities Service Agreement

The RTO also continues work on developing a standardized pro forma facilities service agreement (FSA) to reflect the self-fund option, recently the subject of a deficiency notice at FERC.

MISO filed separately in November to standardize the TO self-fund option with a new pro forma FSA that establishes interconnection customers’ terms of repayment (ER20-359). In late December, the commission said the agreement needed more specifics on, among other things, how MISO would calculate tax benefits TOs receive on network upgrades, whether TOs would use projected or actual formula rates in their monthly revenue requirement for the network upgrade, and why the RTO included expanded liability provisions not included in its generator interconnection agreement.

The American Wind Energy Association, CGA and the Solar Council — an ad hoc group of companies that are members of AWEA’s RTO Advisory Council — used the issue to again register displeasure with the reinstatement of TO self-funding, arguing that interconnection customers bear a lopsided amount of risk in funding network upgrades versus TOs.

“Under MISO’s proposal, the [interconnection customer] must take on 100% of the risk, in addition to paying the full cost and rate of return for any network upgrade. If a TO elects to self-fund the upgrade, and seeks to earn a rate of return on its investment, then it is appropriate that the TO should also bear the risks and costs associated with the upgrade. However, under MISO’s proposal, the TO bears no risk whatsoever,” the three groups wrote in a December protest of the new FSA.

“In contrast, the [interconnection customer] is required to post security that is reduced over the payment term of the network upgrade charge, effectively requiring the [interconnection customer] to tie up its own capital for upgrades that will ultimately belong to the TO, and which the TO receives a rate of return on.”

MISO officials maintain the protests are misplaced under the FSA proceeding. FERC has already made its decision, they said, and it likely won’t permit relitigating under a filing that merely serves to streamline a process for what’s already been decided.

“They should not be considered by the commission,” Blackwell said of arguments in an interview with RTO Insider. He added that MISO is drafting a response to the deficiency letter.

Moreover, Blackwell emphasized, TOs’ option to self-fund has been a reality in MISO since Aug. 31, 2018. Based on TOs’ current rates of exercising the self-fund option, he said he anticipates only a “small fraction” of the 2015-2018 agreements will need revisions.

Blackwell said he realized TOs’ scant participation in self-funding seems counterintuitive considering the prospect of earning a rate of return.

“You would think everyone would elect to self-fund,” but they don’t, he said.

MISO officials declined to speculate further on how many interconnection agreements might need amendments.

AWEA, CGA and the Solar Council have also protested the FSA’s proposed term of 20 years’ repayment for self-funded network upgrades, arguing that MISO also provide interconnection customers the options of upfront repayment and the more standard 10-year repayment term.

Deadline to Declare TO Self-fund

MISO is simultaneously considering imposing deadlines on TOs’ decisions to self-fund upgrades, possibly requiring them to definitively elect to self-fund “at some point in time” in the definitive planning phase process of the interconnection queue, Blackwell said. The proposal is the RTO’s own and not a result of a FERC directive.

The RTO is so far considering a requirement that TOs make a “general indication” of their intent to self-fund network upgrades, Blackwell said. However, that commitment would be “nonbinding and subject to change,” he added.

MISO is also contemplating making TOs declare their intention to self-fund before it publishes the results of its system impact studies.

Some stakeholders urged MISO to make sure it has an answer from TOs on self-funding before it begins system impact studies.

“I feel very concerned about the looseness of this proposal,” CGA’s Peters said.

Stakeholders also asked if creating deadlines might be discriminatory to TOs.

Blackwell said he didn’t think deadlines would impede a TO’s ability to decide to self-fund, pointing out that it could elect to fund one network upgrade and decline to fund another. He reiterated that the proposal was merely a first draft.

“We will definitely work to find a balance,” he told stakeholders. “We invite feedback from all stakeholders on the design … and how the deadline should be structured.”

He said MISO would likely file this year to implement a self-fund deadline.