FERC rejects waiver request re capacity and interconnection

Federal electricity regulators have denied a distributed energy resource aggregator's request for a waiver of market rules to allow fourteen distributed energy resource projects to participate in New England's upcoming fourteenth Forward Capacity Auction. The case highlights tensions between state efforts to encourage distributed energy resources and limits on state jurisdiction over interconnection.

At issue was a request by Genbright LLC for a a one-time, limited waiver of Market Rule 1 of ISO New England Inc.’s Transmission, Markets and Services Tariff to allow fourteen projects to participate in FCA 14. According to the petitioner, seven of the projects are solar photovoltaic generating facilities; the other seven are energy storage facilities.

Under ISO-NE's Market Rule 1, each new resource seeking to participate in a forward capacity auction must undergo a qualification evaluation and must have a valid interconnection request under the Tariff by the deadline to submit a "Show of Interest." According to Genbright, it submitted timely Shows of Interest indicating that each project had submitted an Interconnection Request pursuant to a Massachusetts-administered, state-jurisdictional interconnection process. However, the petition claims that ISO-NE issued each project a Qualification Determination Notification denying eligiblity to participate in FCA 14, claiming that "because the point of interconnection for the Projects is under the Commission’s jurisdiction as a facility subject to the Tariff, the Projects should have filed Interconnection Requests in accordance with Schedule 23.9" instead of under a state-administered interconnection process.

Genbright countered that its projects and their interconnections are not jurisdictional to the Federal Energy Regulatory Commission, claiming that the seven solar projects are Qualifying Facilities selling 100 percent of their output to local host utility Eversource, and that at least three of the storage facilities' interconnection requests were erroneously classified by Eversource as FERC-jurisdictional "because there is a pre-existing QF on the distribution line that sells all of its output to Eversource, which Eversource had registered with ISO-NE as a settlement-only generator." Genbright further claimed that neither Eversource nor ISO-NE informed any of the projects that they had filed incorrect interconnection requests, despite the utility's knowledge that the projects intended to participate in the ISO-NE market. For these reasons, Genbright requested waiver of Tariff provisions to allow the projects to participate in FCA 14.

Eversource asked the Commission to deny the waiver request, as did ISO-NE. Eversource argued "that Genbright’s request is not about whether a tariff provision should be waived due to a one-time error, but rather an attempt to seek a substantive ruling related to disagreements over the law as to what causes a distribution-level interconnection to fall under Commission jurisdiction. Eversource states that such issues would be more appropriate in the context of a declaratory order or rulemaking." Eversource noted that Genbright's issues were not limited in scope, but of broader applicability. In an answer, Genbright claimed that Eversource knows, but ignores, ISO-NE’s applicable rules and stated practices.

In the end, the Commission denied the waiver request, finding that Genbright had failed to demonstrate that it was limited in scope. The Commission noted that granting "Genbright’s requested waiver would allow the Projects to avoid ISO-NE’s complex interconnection study process, including the system impact study, which is ISO-NE’s comprehensive reliability evaluation." This result differed from that of a separate order issued in 2019, granting a similar waiver with respect to four facilities where ISO-NE and Eversource both agreed that the interconnection requests had been erroneously misclassified as subject to federal jurisdiction.

The order highlights the growing tension between state programs encouraging or requiring the development of distributed energy resources and federal jurisdiction. The ISO-NE interconnection study process is indeed complex, and typically requires an applicant to wait through a lengthy queue of other study requests before their own study may begin, a process which can take months or longer. State-jurisdictional interconnection procedures can move more swiftly, but are limited to those circumstances where federal jurisdiction does not apply.

Some state programs seeking to encourage or require the development of distributed energy resources run into jurisdictional boundaries on issues other than interconnection. For example, the Genbright order follows a 2019 Commission order ruling that federal law preempts a New Hampshire statute requiring utility procurement of the output of biomass facilities at above-market rates. Developers, advocates for solar and other distributed resources, and policymakers would be wise to understand the boundaries between state and federal jurisdiction over interconnection and wholesale electricity markets.