April 26, 2018Client Alert

Final Rules on Regional Market Transparency and Large Generator Interconnections

On April 19, 2018, the Federal Energy Regulatory Commission (FERC) issued two final rules aimed at improving transparency in regional transmission organization (RTO) and independent system operator (ISO) markets, and making the generator interconnection process more efficient.

Transparency Final Rule

The first final rule (RM17-2-000, Order No. 844) addresses transparency regarding uplift payments, operator-initiated commitments, and transmission constraint penalty factors. The rule requires regional market operators to report monthly the total uplift payments for each transmission zone, total uplift payments to each resource, and the size, zone, reason, and start time of each operator-initiated commitment. The rule also requires regional market operators to include in their tariffs the transmission constraint penalty factors used in their market software, the circumstances under which those factors can set locational marginal prices, and any processes by which they can be changed.

This rule marks FERC’s final action concerning broader price-formation issues in an inquiry it launched in 2014. The Commission found that the RTO and ISOs' reporting of uplift payments and operator-initiated commitments, and RTO/ISO tariff provisions regarding transmission constraint penalty factors were insufficiently transparent, resulting in unjust and unreasonable rates. FERC issued the final rule to ensure system needs are transparent to stakeholders, providing the ability for those market participants to:

  • Plan for and respond to system needs in a cost effective manner;
  • Evaluate the need for and value of investment in transmission and generation;
  • Engage in informed stakeholder discussions that support capacity and transmission planning for increased reliability and resiliency; and
  • Gain more understanding of how energy prices are formed to better respond to market signals and hedge transactions.

Due to several protests raising concerns about applicability and implementation, the Commission removed from the final rule a proposal requiring each RTO/ISO that allocates real-time uplift costs to deviations, to allocate those costs only to market participants whose transactions are reasonably expected to have caused the costs.

The final rule becomes effective 75 days after its publication in the Federal Register, and directs each RTO/ISO to submit compliance filings to the Commission within 60 days of such publication.

Generator Interconnection Procedures and Agreements Final Rule

The second final rule (RM17-8-000, Order No. 845) revises FERC’s pro forma Large Generator Interconnection Agreement and Large Generator Interconnection Procedures to improve certainty for interconnection customers, promote informed interconnection decisions, and enhance the interconnection process. To improve certainty for interconnection customers, the final rule removes the limitations on an interconnection customer’s ability to construct interconnection facilities and stand-alone network upgrades, and requires that all transmission providers establish more accessible dispute resolution procedures. To promote informed interconnection decisions, the final rule requires transmission providers to increase transparency around specific studies, processes, assumptions, and definitions. Finally, to enhance the interconnection process, the final rule increases flexibility in interconnection requests with respect to surplus interconnection service, interconnection service lower than generation capacity, limited operation of generator facilities during the interconnection process, and interconnection studies that do not affect the interconnection customer’s queue position.  

The final rule responds to various issues raised by both interconnection customers and transmission providers, including delays and lack of transparency in the study process, as well as, difficulty managing the study process for new generation facilities that fail to reach commercial operation.

FERC’s final rule becomes effective 75 days after its publication in the Federal Register, and directs transmission providers to submit compliance filings to the Commission within 90 days of such publication.

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