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News Analysis

IPPs and other stakeholders long have called for standards, but this time, the FERC just might oblige.
Fortnightly Magazine - October 1 2001

seen firsthand that oftentimes they just haven't had much experience interconnecting independent generators, a reality that conceivably can draw out the process. Hayden calls this issue "education," and, sympathy or no, he still finds it frustrating. "We walk in [to the process] and ... we would be the first project that they've had to deal with," he says. And for a power producer as big as Dynegy is, that scenario could play out countless times as it meets up with different providers across the country to set up shop.

But don't think the transmission providers don't have their own beefs about current FERC policy. In a recent case at the FERC (), transmission provider Consumers Energy Co. and generator Kinder Morgan Michigan LLC have been haggling over one of the biggest issues within interconnection policy: Who pays for the upgrades? And secondly, who gets compensated for them?

The Consumers Energy-Kinder Morgan case, in fact, has drawn the attention of companies like Dynegy Power Corp., Duke Energy North America LLC, American Electric Power Service Corp., Dominion Virginia Power, Commonwealth Edison Co. and Tenaska Inc.-all of whom filed motions to intervene. When Duke, for example, filed its motion, it maintained that the decision would affect generators developing projects nationwide.

The commission's verdict on the dispute? Once again, it relied on previous cases, plus a little fine-tuning and clarifying along the way. The May 17 order, citing a previous American Electric Power Service Corp. decision (clarified on rehearing, Feb. 21, 2001, 94 FERC ¶61,166) ) confirms its stance on the issue. "The Commission's policy regarding credits for network upgrades associated with the interconnection of a generating facility has been, and continues to be, that all network upgrade costs (the cost of all facilities from the point where the generator connects to the grid), including those necessary to remedy short-circuit and stability problems, should be credited back to the customer that funded the upgrades once delivery service begins," the order states.

Consumers Energy has a problem with that stance. Bill Lange, assistant general counsel for Consumers Energy, explains his company's position with a scenario: It costs a total of $20 million in various facilities upgrades to queue up, and the generator is responsible for funding that entire amount. $10 million of that might go for general upgrades to the transmission system, and so since the generator fronted the cash for those upgrades, that amount would be credited back to the power producer once it started generating megawatts. That would seem to make sense: If a party fronts the money for the general good of the system, he should get it back somehow. But then you start getting into the gray areas.

"Let's say $10 million [of the $20 million total]-and this was the issue in Kinder Morgan-is for circuit stability and control, i.e., specifically, caused by that generator. In other words this big amount of power coming in and you've got to stabilize your system. It's caused solely by [the generator]; it doesn't benefit anybody else. We thought that was non-creditable. But FERC came back in