[co-author: Mack Ramsden]
Two FERC Commissioners are asking electric transmission providers to introduce “cure periods” into their interconnection procedures, hoping to reduce the likelihood that energy projects are thrown back to the start of the development process by minor interconnection rules infractions.
On February 2, 2024, FERC affirmed an earlier Order that denied a request for a limited waiver of PJM’s tariff by Scioto Farms Solar Project, LLC (“Scioto Farms”), the developer of a proposed solar generation facility in Wayne Township, Ohio. The backstory: as of June 2023, Scioto Farms had obtained an interconnection agreement with PJM, the regional grid operator, and AEP Ohio Transmission Co., the local transmission owner. But due to a clerical error by its guarantor bank, Scioto Farms’ letter of credit (which PJM requires to be filed within 120 days of signing an interconnection agreement) was delivered late—a single day past the deadline.
The delay cost the Scioto Farms project, which had been under development since at least 2018, dearly. According to PJM’s interconnection rules, interconnection agreements must be canceled if a security deposit is not timely provided. Citing the importance of enforcing compliance with deadlines under its new first-come, first-served approach to processing interconnection requests, PJM refused to make an exception for Scioto Farms. In July 2023, Scioto Farms applied in vain to FERC for a waiver of the pertinent PJM tariff provision. FERC denied the waiver, noting that the agency’s filed rate doctrine left it with no discretion to waive the rules retroactively.
In a concurrence to the February 2, 2024, Order, while acknowledging that FERC cannot grant the kind of retroactive equitable relief sought by Scioto Farms, Chairman Willie Phillips and Commissioner Allison Clements suggested that transmission providers introduce cure periods into their interconnection procedures to address and avoid unfortunate situations like this one. Phillips and Clements wrote that while the Order prescribes the legally correct outcome (a denial of Scioto Farms’ waiver request), transmission providers ought to change their interconnection procedures to soften the impact of minor rules infractions arising from unforeseen events or errors—or else, FERC may consider ordering them to do so.
Representing a two-thirds majority of the current Commission, Phillips and Clements expressed in their concurrence that the outcome in the Scioto Farms dispute is “neither equitable nor commercially reasonable,” and that if transmission providers do not voluntarily propose changes to their tariffs to prevent this sort of outcome from happening in the future, FERC may need to investigate whether their tariffs remain compliant with federal regulations. Is it possible that the Scioto Farms case and its resolution will stoke the appetite at FERC to scrutinize more closely interconnection rules that create unfavorable conditions for project developers? It could, especially as the Commission awaits transmission providers’ compliance filings for its new interconnection rule, Order No. 2023.
