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Commission Watch

Feds seek plug-and-play for distributed generation, but utilities want the power to stay local.
Fortnightly Magazine - November 15 2003
  • go through a second interconnection process if they change status from a qualifying facility to a merchant plant, by losing their steam host or utility sales customer.
  • Feasibility Study Costs. Forcing transmission owners to pay costs of studies when they find no adverse impacts will create perverse incentives for the owners to avoid performing needed studies.
  • Liability Insurance. Require interconnecting generators to carry adequate insurance (though some small-scale generators question whether some small-scale interconnections, such as a roof-top solar installation, should require the developer to buy a comprehensive motor vehicle liability policy just for the project.)
  • Project Queues. Require a single queue (large and small projects) for each integrated geographic area (though some RTO/ISOs say that rule must admit to some regional flexibility to accommodate rules already in place, and some small-scale generators complain that a single queue will delay small projects by putting them on the smaller timeline that applies to larger plants.)

The Transmission Access Policy Study Group (TAPS), represented by lawyers Robert McDiarmid and Cynthia Bogorad of Spiegel & McDiarmid, and well-known as a defender of the rights of municipal utilities, urges reconsideration of FERC's final, large-unit interconnection rule in Order 2003. Presumably it would do the same for FERC's small-scale rule if that proposal should gain approval as drafted.

It attacks FERC's policy of allowing interconnecting generators to seek certification as a "network resource," a concept taken from the standard market design (SMD).

According to TAPS, FERC errs by using its interconnection policy to impose an SMD concept on an industry not committed to deregulation, but instead made up of utilities treated as load-serving entities (LSEs).

"The resulting framework [under FERC's interconnection rules] is tailored to an imaginary marketer/merchant-generator promised land in which LSEs purchase all their power from entities with sophisticated energy and FTR trading strategies, selling the output of power plants built 'on spec' to LMP markets."

In other words, the interconnection rules define a "network resource" without assuring deliverability, because the SMD assumes that market participants will use financial transmission rights (FTRs) or otherwise buy-through any intervening congestion, and will suffer the financial consequences of that. Meanwhile, by contrast, as TAPS explains, a traditional utility serving bundled retail load faces a duty to serve with resources dedicated to specific customer loads (not simply measured in aggregate terms), and that presumes a capacity to deliver without incurring congestion costs. Thus, if new merchants that interconnect gain network resource status, thereby affecting existing allocations of FTRs to resource owners, then utilities still facing a state-imposed duty to serve might lose access to FTRs and see their resource base degraded by uncompensated-for congestion costs.

"There will be no connection," says TAPS, "between an LSE's power supply planning and the transmission expansion planning process.

"The bottom line is the needless punishment of consumers."

The Alabama Public Service Commission attacks this problem in a different way, focusing on the small scale of DG units and the unique aspects of interconnection to lower-voltage lines. But it ends up at the same conclusion that TAPS reaches.

"Small generators," the PSC says, "simply