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Federal Interconnection Standards: Putting DG in a Box

Is FERC overstepping its jurisdiction and attempting to force a standard into a one-size-fits-all category?
Fortnightly Magazine - April 1 2003

of judging how and when DG interconnection will negatively impact utility grids. The DG coalition argued that FERC and state PUCs typically "assume the worst" when evaluating DG, leaving open the possibility of long application reviews or onerous interconnection requirements, including utility system upgrades that would dwarf the thin profit margins offered by smaller DG facilities. DG providers have pressed for fast-track approvals of smaller DG facilities using straightforward screening mechanisms, which utilities appear to support. The devil is in the details as to what constitutes reasonable application timeframes and screening criterion. Jim Watts, director of marketing for Ingersoll-Rand Energy Systems and a veteran of interconnection standard development, says, "We did have success and achieved consensus on some of the fundamental assumptions, for example certification and the use of screens. We basically just ran out of time to complete issues like network interconnection, applications, and agreements and didn't reach consensus on many issues concerning secondary network interconnection."

Utilities bristle at the notion that DG might be given favorable treatment over its own customers, and they suggest suppliers have overstated the problem as prior interconnection requests have gone smoothly-a point that some DG supporters concede. Utilities worry that if they encounter many competing DG interconnection applications, they don't want to be bound by unachievable tight deadlines mandated by interconnection agreements. In addition, utilities loathe the idea of cross-subsidies or cost shifting caused by DG integration and are therefore cautious not to overlook less obvious system impacts. In its comments to the FERC ANOPR, the Edison Electric Institute recommends the commission should "reject ratepayer or shareholder subsidies to small generators." It further states, "In obtaining interconnection, small generators must pay the full cost of studying the interconnection, and must make the same contribution for upgrades as generators would. Otherwise the utilities' other customers or shareholders will be unfairly and inappropriately subsidizing small generators. Moreover, this will not allow price signals for locating generation at the most efficient and economic place, as indicated by locational marginal prices."

Although many of the differences in the consensus agreement appear trivial-such as number of days to process an application-the large number of areas of disagreement suggests that a quick resolution of these issues is overly optimistic. Some participants lamented that far too many stakeholders, often without expertise in DG or power systems, doomed the process from the start. Now FERC has the unenviable task of weighing the divergent views rendered by the joint coalition into a standard without alienating ANOPR participants and DG stakeholders. As Commissioner Pat Wood stated at a Department of Energy event in January, "We got a different result and level of consensus than we had hoped for. Our staff is working on the rule, but it is not easy. This falls right in the middle of jurisdictional issues."

Are State Interconnection Standards the Answer?

FERC's dilemma underscores the difficulty in having so many parties with divergent interests develop prescriptive interconnection standards on a national basis. Indeed, NARUC's Model DG Interconnection Procedures and Agreement issued in July 2002 offers a broad template of terms and