UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION. PJM Interconnection, L.L.C. : Docket No. ER

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1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION PJM Interconnection, L.L.C. : Docket No. ER MOTION FOR LEAVE TO ANSWER AND ANSWER OF PJM INTERCONNECTION, L.L.C. TO PROTEST OF INTERCONNECTION PROTESTORS Pursuant to Rule 212 and 213 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission ( Commission ), 1 PJM Interconnection, L.L.C. ( PJM ) hereby moves for leave to answer and answer to the joint protest filed by EDF Renewables, Inc. and Renewable Energy Systems Americas Inc. (collectively referred to herein as Protesters ) 2 in response to PJM s proposal to revise the Open Access Transmission Tariff, 3 section to: (i) establish a revised timeline for determining incremental capacity transfer rights ( ICTRs ) that may result from customer-funded upgrades; (ii) require customers to specify no more than three Locational Deliverability Areas ( LDAs ) to be studied to determine ICTRs; and (iii) permit Transmission Interconnection Customers submitting an Upgrade Request 4 to ask PJM to determine ICTRs during the System Impact Study stage. As described below and in PJM s initial transmittal letter submitted in this docket, these Tariff revisions were overwhelmingly 1 18 C.F.R and.213 (2018). 2 PJM Interconnection, L.L.C., Protest of Interconnection Protestors, Docket No. ER (Feb. 25, 2019) ( Protest ). 3 Capitalized terms not otherwise defined herein have the meaning specified in, as applicable, the Tariff, Amended and Restated Operating Agreement of PJM Interconnection, L.L.C. ( Operating Agreement ), or Reliability Assurance Agreement Among Load Serving Entities in the PJM Region ( RAA ). 4 Unlike a generator interconnection customer who enters the new services queue for the purpose of interconnecting its generation facility to sell the generation unit s output, Transmission Interconnection Customers submitting an Upgrade Request enter the PJM new services queue for the purpose of funding transmission upgrades in return for rights, such as Incremental Capacity Transfer Rights ( ICTRs ).

2 supported by the PJM membership, are just and reasonable, and should be accepted effective February 5, I. ANSWER TO PROTEST A. The Determination of ICTRs at the System Impact Study Stage Is too Speculative to Help Generator Interconnection Customers Make an Informed Decision Whether to Move Forward to the Facilities Study Phase Two protesters in their Protest object to PJM s proposal to move the determination of ICTRs for generator interconnection customers from the System Impact Study phase to after the customer executes a Facilities Study Agreement but before issuance of an Interconnection Service Agreement because, in their opinion, such a change would deprive generator interconnection customers of all possible information to make an informed decision whether to move forward to the next study phase, i.e., the Facilities Study. As PJM explained in its February 4 Filing, until the required customer-funded upgrades are identified by PJM during the System Impact Study, PJM cannot determine any ICTRs associated with those upgrades. 6 Moreover, because the System Impact Study and later Facility Study are part of a series of studies that refine the number, scope and estimated costs of customer-funded upgrades, such upgrades are simply preliminary estimates of what the interconnection customer will be responsible to fund in order to accommodate its generator project. Such high-level estimates will be further refined during the Facilities Study phase. Consequently, such estimates identified at the System Impact Study phase are at risk of changing 5 PJM seeks leave to answer the protest to its February 4, 2019 filing in this docket to assist the Commission s decision-making process and clarify the issues. The Commission regularly allows answers in such cases. See, e.g., PJM Interconnection, L.L.C., 139 FERC 61,165, at P 24 (2012) (accepting answers to a protest because they have provided information that assisted [the Commission] in [its] decision-making process ); PJM Interconnection, L.L.C., 104 FERC 61,031, at P 10 (2003) (accepting answer because it will not delay the proceeding, will assist the Commission in understanding the issues raised, and will [e]nsure a complete record upon which the Commission may act ); Ne. Utils. Serv. Co., 86 FERC 61,161, at 61,568 (1999) (accepting an answer to a pleading that sought affirmative relief and because the response aided in the Commission s analysis and disposition). 6 PJM Interconnection, L.L.C., Revisions to PJM Tariff, Section 234.2, Docket No. ER at 3 (Feb. 4, 2019) ( February 4 Filing ). 2

3 several times over until completion of a Facilities Study and execution of an Interconnection Service Agreement - in part due to restudies resulting from higher queued projects dropping out of the queue. Without knowing which upgrades will continue to be included in the Facilities Study and the Interconnection Service Agreement, determination of ICTRs at the System Impact Study phase is highly speculative and secondary to the generator project. Additionally, any potential financial rights, such as ICTRs, cannot be valued at the System Impact Study phase. 7 Given these factors, any information related to ICTRs at the System Impact Study phase, should not change the generator project s cost benefit analysis. 8 Consequently, until the estimated scope, number and costs of the upgrades identified in the System Impact Study (upon which any financial rights are determined) are nailed down after all restudies (that account for changes due to higher queued projects dropping out between receiving a System Impact Study report and executing a Facilities Study Agreement) are performed, it does not make sense for PJM to spend time conducting two additional analyses to evaluate increases in Capacity Emergency Transfer Limits ( CETL ) into a given LDA at the System Impact Study phase. Thus, in reevaluating the ICTR process, PJM determined that due to the uncertainty of the customer-funded upgrades identified at the System Impact Study phase upon which a determination of ICTRs is based and the volume of work associated with the determination of ICTRs, providing information regarding ICTRs is more appropriately requested at the Facilities 7 The value of an ICTR is not known until a commitment is made through a Base Residual Auction ( BRA ) and the LDA(s) associated with the upgrade separates. 8 Because the primary focus of the System Impact Study results for most generator customers is whether the costs of the project (coupled with the estimated scope, number and costs of the upgrades required) will outweigh the project s projected revenue, many generator customers drop out of the queue after receiving their System Impact Study report. As noted in the February 4 Filing, of the 1,195 projects receiving a System Impact Study and executable Facilities Study Agreement, almost 40 percent of those projects did not execute the Facilities Study Agreement and did not move forward to the next study phase. See February 4 Filing, Attachment C (Affidavit of Susan McGill) at 2. 3

4 Study stage when other financial rights such as Incremental Auction Revenue Rights ( IARRs ) 9 and Incremental Available Transfer Capability Revenue Rights ( IATCRRs ) 10 may be requested by the interconnection customer. This is particularly appropriate if providing that information would delay the interconnection queue study process and create more work that will yield little to no value to anyone. Given the Commission s interest in timely completion of interconnection studies and concerns regarding interconnection queue delays as expressed in Docket No. RM , 11 Order No. 845 required generator interconnection reforms that promote greater transparency. Accordingly, under Order No. 845 transmission providers are required to post interconnection study metrics relative to completion timeframes of interconnection studies. 12 Recognizing the Commission s concerns, PJM s proposal is intended to move the study of ICTRs to a point in the interconnection study process when upgrades associated with the ICTRs are more certain and likely to be included in an Interconnection Service Agreement. It makes no sense to require PJM to engage in two additional analyses steps for each upgrade identified during the System Impact Study in order to determine ICTRs that are highly speculative and may not be relevant after all restudies are performed and the required upgrades are nailed down during the Facilities Study phase. 9 Tariff, section Id., section Reform of Generator Interconnection Procedures and Agreements, 157 FERC 61,212 at P 146 (Dec. 15, 2016) ( NOPR ). 12 Reform of Generator Interconnection Procedures and Agreements, 163 FERC 61,043 at P 305 (Apr. 19, 2018) ( Order No. 845 ). 4

5 B. Despite Protesters Concerns, PJM Found in its Reevaluation of the ICTR Process that such Information is More Useful to the Interconnection Customer at the Facilities Study Phase PJM further found in reevaluating its ICTR process that providing information regarding ICTRs during the Facilities Study phase when customer-funded upgrades are better defined and more certain (and the next step in the process is locking down the required upgrades in an Interconnection Service Agreement) is more useful to the interconnection customer in making informed decisions regarding its generator interconnection project. The Facilities Study is an engineering study conducted by PJM in coordination with the affected Transmission Owners. It refines those upgrades identified during the System Impact Study by including changes due to other projects dropping out of the queue after the System Impact Study, as well as system changes identified through a more detailed, extensive analysis of the facilities conditions. The results of the Facilities Study determine the required modifications to the PJM system, including the cost and scheduled completion date that will be required to interconnect the generator project. It is not uncommon at the Facilities Study phase that the generator interconnection customer may no longer be responsible for upgrades identified in its System Impact Study. Thus, if the generator interconnection customer were to rely on the ICTRs identified in a System Impact Study, the customer may make business decisions or assume market risks that could jeopardize its primary business model, i.e., the generator interconnection project. Consequently, it is such factors specific to generator interconnection projects that led PJM to propose the revised timeline for the determination of ICTRs to assist the generator interconnection customer in making more informed decisions about its generator interconnection project at a point in time when the customer-funded upgrades are better defined and less speculative. 5

6 Of course, every interconnection customer in the queue is always at risk that PJM s transmission system may change or the number of projects higher in the interconnection queue will increase (or decrease). Such changes may affect the system upgrades and/or the allocated costs the customer is projected to be responsible for if it does move forward with its project. It is not until the generator interconnection customer executes an Interconnection Service Agreement that the upgrades for which an interconnection customer will bear cost responsibility are locked down; however, the risk decreases the further the study process progresses. Thus, it is not unreasonable to wait until the Facilities Study to determine the amount of ICTRs based on the upgrades identified during that study phase. In response to Protesters other arguments, PJM replies as follows: 1. The ICTRs Determined at the System Impact Study Phase Are More Speculative than the ICTRs Determined at the Facilities Study Phase The Protesters misconstrue the reasons for moving the determination of ICTRs to the Facility Study phase. While it is true that moving to the Facilities Study phase will require the customer to submit a study deposit, 13 assertions by Protesters that it is monopolistic extortion to require the generator interconnection customer to move to the Facilities Study and pay more to receive its ICTR information are unfounded. 14 Whether or not the interconnection customer determines to move to the Facilities Study phase should be dependent upon the cost of the upgrades required to safely interconnect the project to the system, not the ICTRs. As stated above, the determination of ICTRs at the System Impact Study phase is nothing more than an indication of the potential for ICTRs based on customer-funded upgrades that the generator interconnection customer may, in fact, no longer be responsible for at the Facilities 13 Tariff, section (The Facilities Study deposition is refundable and the customer is responsible only for actual costs incurred). 14 Protest at 3 and 4. 6

7 Study phase. In fact, PJM finds that such information may be misleading to the generator interconnection customer in making informed decisions. Consequently, PJM believes that this proposal to move the timeline for the determination of ICTRs to the Facilities Study phase will offer the customer more useful information upon which to base its decisions. 2. Allowing the Generator Interconnection Customer to Request ICTRs after Executing its Facilities Study Agreement but Prior to Issuance of an Interconnection Service Agreement is not an Open-ended, Undefined Timing Requirement 15 Contrary to Protesters arguments, this proposal would not afford PJM carte blanche to provide ICTR results whenever PJM wants. 16 Instead, this proposal extends the period during which the interconnection customer may request a determination of ICTRs from the System Impact Study phase to the Facilities Study phase. If the Interconnection Customer requests ICTRs after execution of the Facilities Study Agreement, the determination of ICTRs, as well as any other results of a Facilities Study, will be memorialized in the Facilities Study report. 17 PJM found in reevaluating this process that identifying ICTRs at the Facilities Study phase when the study results are more refined and further along will provide the generator interconnection customer a determination of ICTRs that is more certain and less risky should the generator interconnection customer choose to make a commitment in PJM s BRA consistent with the PJM market rules. Moreover, providing the ICTR information at the Facilities Study phase is consistent with when information relative to other Tariff Upgrade-Related Rights, such as IATCRRs 18 and IARRs, 19 is provided to generator interconnection customers. 15 Id., at Id. 17 Id. 18 Tariff, section Tariff, section

8 3. Requiring the Generator Interconnection Customer to ask PJM to Determine ICTRs is Reasonable Protesters further argue that the generator interconnection customer should not be required to ask PJM to undertake the determination of ICTRs, but rather PJM should be required to do so without the customer having to ask. In support of this objection, Protesters state that the Tariff currently requires PJM to undertake the determination of ICTRs without the customer asking PJM to do so. 20 Again, in its reevaluation of the ICTR process, PJM reviewed its processes associated with other Upgrade-Related Rights available to generator interconnection customers. To that point, this change is proposed because it is consistent with the determination of other Upgrade-Related Rights available to generator interconnection customers, such as IATCRRs and IARRs. Specifically, under the Tariff, it is the customer s responsibility to request PJM to provide a non-binding estimate in the Facilities Study of IATCRRs 21 or IARRs. 22 Protesters have not proffered any justification as to why ICTRs should be handled differently. 4. Given the Localized Nature of ICTRs, it is Reasonable to Limit the Customer s ICTR Request to No More Than Three LDAs As to Protesters objection to limiting the analysis of ICTRs to three LDAs, 23 PJM has found in its reevaluation of the ICTR process that allowing the customer to specify no more than three LDAs in which to determine ICTRs is reasonable because, based on its experience, the determination of ICTRs is premised on the increase of CETL resulting from the customer-funded upgrade and, as such, it is a localized solution. Thus, while it is possible that an upgrade may 20 Protest at Tariff, section (a generator interconnection customer may request PJM to provide a non-binding estimate in the Facilities Study of the IATCRs associated with the required facilities or upgrades for which the New Service Customer is responsible). 22 Id., section (a generator interconnection customer may request PJM to provide a non-binding estimate in the Facilities Study of the IARRs associated with the required facilities. 23 Protest at 7 and 8. 8

9 drive changes in CETL in three LDAs, PJM has found that it is not likely to change the CETL in more than three LDAs. Therefore, Protesters concern that all possible LDAs that might be impacted by the customer-funded upgrade should be studied has been factored into PJM s proposal based on its experience, which is why a customer may request three LDAs. Additionally, this change is somewhat consistent with the determination of IARRs, which provides that the customer may request a non-binding estimate of IARRs for up to three pairs of point-to-point combinations The Generator Interconnection Customer May Submit Three LDAs for Each Customer-Funded Upgrade Required Finally, the determination of ICTRs is specific to each upgrade the customer is required to fund. Therefore, if the generator interconnection customer is required to fund three upgrades, the customer may request three LDAs for each customer-funded upgrade. Thus, Protesters concern that the three LDA limit should not be imposed when numerous LDAs might benefit from the various upgrades is unwarranted All Customers May Request Determination of ICTRs, Including Generators Interconnecting to a Neighboring Region Funding a Network Upgrade in the PJM Region If a generator Interconnection Customer interconnecting to a neighboring region is responsible to fund a network upgrade on the PJM system, the generator interconnection customer after executing a Facilities Study Agreement but prior to issuance of an Interconnection Service Agreement under the PJM Tariff would be able to request a determination of ICTRs pursuant to the PJM Tariff, section In fact, because such interconnection customers are required to submit to a Facilities Study and not a System Impact Study, this proposal better 24 Tariff, section Protest at 8. 9

10 aligns with interconnection requests to a neighboring region s system. Thus, any concerns raised by Protesters relative to affected system upgrades are not warranted in this case. 7. How an ICTR is Offered into the BRA is Determined by the PJM Market Rules Protesters argue that the Commission should state exactly what BRA model PJM should use to determine ICTRs. 26 In support of this argument, Protesters rely on its Complaint in Docket No. EL where, according to Protesters, the argument has been effectively rebutted and is awaiting Commission resolution for the specific Complainant in that case. 27 While PJM has responded to such arguments raised in that docket, PJM will not repeat its response here as the issue is beyond the scope of this docket and should be disregarded. II. CONCLUSION For the foregoing reasons explained above, PJM requests that the Commission (i) accept PJM s proposed revisions to Tariff, section submitted in this docket to become effective as proposed on February 5, 2019; (ii) accept PJM s answer to the Protest filed in this proceeding; and (iii) deny the Protest. Respectfully submitted, By: Pauline Foley Associate General Counsel PJM Interconnection, L.L.C. Craig Glazer Vice President Federal Government Policy PJM Interconnection, L.L.C G Street, NW, Suite Monroe Blvd. Washington, DC Audubon, PA Ph: (202) Ph: (610) Fax: (202) Fax: (610) craig.glazer@pjm.com pauline.foley@pjm.com Dated: March 15, 2019 Counsel for PJM Interconnection, L.L.C. 26 Id., at Id. 10

11 CERTIFICATE OF SERVICE I hereby certify that I have this day directed the service of the foregoing document on those parties on the official Service List compiled by the Secretary in these proceedings. Dated at Audubon, Pennsylvania this 15 th day of March, Pauline Foley Associate General Counsel PJM Interconnection, L.L.C Monroe Blvd. Audubon, PA Ph: (610) pauline.foley@pjm.com 11