CAISO Proposes Improvements To Interconnection Process, And Coordination With FERC Interconnection Rulemaking

As California faces near and longer-term challenges in meeting demand for electricity during extreme weather conditions, the California Independent System Operator (CAISO) has issued a new set proposals in Phase 2 of the 2021 Interconnection Process Enhancements Initiative. The Phase 2 Draft Final Proposal issued July 26, 2022 recommends tariff changes to address identified obstacles that are contributing to delays in interconnecting needed resources through the CAISO’s Generator Interconnection and Deliverability Allocation Procedures (GIDAP).

The Draft Final Proposal incorporates stakeholder comments on proposals initially raised in 2021 issue papers, a straw proposal and the Revised Straw Proposal issued June 7, 2022.The Draft Final Proposal notes that the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking proposing Improvements to Generator Interconnection Procedures and Agreements at the federal level on June 16, 2022.The Draft Final Proposal integrates proposals in the new FERC Interconnection NOPR, and seeks comment on how to harmonize the Draft Final Proposal with recommendations in the NOPR.

In summary, the Draft Final Proposal addresses process improvements in three areas:

Moving resources through the interconnection queue more efficiently and potentially more quickly

  • Transparency enhancements. In order to make as much data available as possible to improve transparency and allow stakeholders to use data for procurement, resource planning, and efficiency in decision-making and tracking projects, CAISO recommends making the following project information public:

o Participating Transmission Owner (PTO) study area and sub-area by cluster;

o Transmission Plan Deliverability (TPD) allocation group and percentage/MW allocation for the project

o Resource IDs

o Status of suspension and parking

o Phase data: Generation and fuel type, MW, hybrid or co-located, synchronization date and COMX or COD date

  • Eligibility criteria for TPD allocation. Identifying a project’s having (or demonstrating likelihood of obtaining) a power purchase agreement (PPA) as “the foundational criteria for demonstrating project readiness” the Draft Final Proposal provides clarification that for the highest level of priority ranking in the TPD allocation process:

o Beginning with the 2023-24 TPD allocation cycle a PPA must procure the deliverable capacity for a minimum of 5 years. Sequential PPAs would qualify if the sum of the terms meets the minimum requirement. CAISO will safeguard against illegitimate PPAs by rejecting PPAs with affiliates and other arrangements viewed as shams or workarounds to obtain deliverability.

o Eligible projects with PPAs with entities with RA obligations will have priority, but if the PPA is with a non-load-serving entity (non-LSE) that does not have an RA obligation, the customer can qualify for allocation by demonstrating that RA attributes of the project are under contract with an entity with an RA obligation or by providing a deposit in lieu of contract. Further clarification is provided specific to requirements applicable to allocations in groups A, B and D.

Managing the overheated interconnection queue

In Phase 1, CAISO established new interconnection procedures to address the “supercluster” of projects applying for interconnection during the Cluster 14 open window. The Phase 1 package of changes was approved by the ISO Board on May 12, 2022 and submitted to FERC for approval on June 2, 2022, focused on near-term enhancements to the existing interconnection processes that can be applied to Customer 14 following the completion of the phase I interconnection studies in September.

Following on that, Phase 2 proposes additional measures for queue management in Cluster 15 and going forward:

  • Revise allocation of study costs: 90% pro-rata based on requested MW, 10% per-capita based on number of interconnection requests in cluster.
  • Single study deposit based on project MW size.
  • Commercial readiness demonstration (or additional deposit in lieu) will be required to enter Phase I and II cluster studies. Demonstration may by a binding executed term sheet (or comparable evidence) related to contract, or reasonable evidence that project has been selected in a resource plan or resource solicitation process by or for an LSE, is being developed by an LSE or for purposes of a sale to a large end-use customer.
  • Revised site exclusivity requirements, which will be determined in the future to align with any final rule FERC issues.
  • Withdrawal penalties applicable to customers that withdraw or otherwise fail to reach commercial operation, increasing as the customer moves through study process, with exceptions for post Phase II study cost increases 25% or “substantial error or omission.”

Other issues

  • CAISO will add capital costs of low voltage network upgrades driven by generation interconnections to a Participating TO’s LTRR, up to 15% threshold. Costs in excess of the threshold will be financed by customers without cash reimbursement. This follows on FERC’s rejection of a previous proposal for allocation of costs for network upgrades to local (<200kV) systems. CAISO will provide ongoing transparency on where each PTO is in relation to the 15% threshold so developers can understand how costs will fall.
  • CAISO will existing policy to reimburse costs for network upgrades on the ISO grid when the CAISO is an affected system.This is in response to recent experience of receiving notices from neighboring balancing authorities that a proposed interconnection may affect CAISO.
  • CAISO will be “more assertive” in implementing the BPM for Generation Management section, which requires projects requesting to remain in queue beyond established limits to clearly demonstrate that engineering, permitting, or construction will take longer, the delay is beyond the customer’s control, and the requested COD is achievable. Failure to comply with status reporting requirements may result in default of the interconnection agreement. These measures will only be employed “where appropriate, taking into account the project specific issues and circumstances.”

According to the current schedule CAISO will host a stakeholder conference call on the Draft Final Proposal on August 2, 2022.Stakeholder comments on the revised Draft Final Proposal are due August 16, 2022.CAISO will publish its final proposal and draft tariff language on September 13, 2022 and hold a stakeholder call on the final proposal and draft tariff language on September 20, 2022.Stakeholder comments on the final proposal and draft tariff language will be due October 4, 2022, and the Board of Governors will vote on the proposal at its October 26-27 2022 meeting.

Contact: Lynn Haug, Andy Brown, or Brian Biering