Standardization of Generator Interconnection Agreements and Procedures, 265-284 [05-15]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 70, Number 2 (Tuesday, January 4, 2005)]
[Rules and Regulations]
[Pages 265-284]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-15]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM02-1-005; Order No. 2003-B]


Standardization of Generator Interconnection Agreements and 
Procedures

December 20, 2004.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Order on rehearing and directing compliance.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) affirms, 
with certain clarifications, the fundamental determinations in Order 
No. 2003-A.

Effective Date: January 19, 2005.

FOR FURTHER INFORMATION CONTACT: 
    Patrick Rooney (Technical Information), Office of Markets, Tariffs 
and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6205;
    Roland Wentworth (Technical Information), Office of Markets, 
Tariffs and Rates, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426, (202) 502-8262;
    P. Kumar Agarwal (Technical Information), Office of Markets, 
Tariffs and Rates, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426, (202) 502-8923;
    Michael G. Henry (Legal Information), Office of the General 
Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8532.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction and Summary
II. Background
III. Discussion
    A. Jurisdiction
    B. Pricing and Cost Recovery Provisions
    1. Transmission Credits
    2. Credits Under Change in Ownership
    3. Protecting Native Load and Other Existing Transmission 
Customers
    4. Interconnection Products and Services
    5. Generator Balancing Service Arrangements
    C. Independent Transmission Provider Obligations
    D. Issues Related to the Large Generator Interconnection 
Agreement
    1. Stand Alone Network Upgrades
    2. Permits and Licensing Requirements
    3. Tax Issues
    a. Security Requirements
    b. Elimination of the Interconnection Customer's Right to 
Contest or Appeal Taxes

[[Page 266]]

    c. Transmission Credits for Tax Payments
    4. Applicable Reliability Council Operating Requirements
    5. Power Factor Design Criteria
    6. Payment for Reactive Power
    7. Security
    8. Assignment
    9. Disclosure of Confidential Information
    E. Issues Related to the Large Generator Interconnection 
Procedures
    1. Scoping Meeting and OASIS Posting
    F. Ministerial Changes to the Pro Forma LGIP and LGIA
    G. Compliance
IV. Information Collection Statement
V. Regulatory Flexibility Act Certification
VI. Document Availability
VII. Effective Date
Appendix A--Petitioner Acronyms
Appendix B--Changes to the Pro Forma LGIP and LGIA

    Before Commissioners: Pat Wood, III, Chairman, Nora Mead Brownell, 
Joseph T. Kelliher, and Suedeen G. Kelly.

Order on Rehearing and Directing Compliance

I. Introduction and Summary

    1. In this order, we affirm, with certain clarifications, the 
fundamental determinations made in Order Nos. 2003\1\ and 2003-A.\2\ 
Adopting the pro forma Large Generator Interconnection Procedures 
(LGIP) and Large Generator Interconnection Agreement (LGIA) will help 
prevent undue discrimination, preserve the reliability of the nation's 
transmission system, and lower prices for customers by increasing the 
number and variety of generation resources competing in wholesale 
electricity markets. At its core, the Commission's interconnection 
policy enunciated in this series of orders ensures that all Generating 
Facilities are offered Interconnection Service on comparable terms.
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    \1\ Standardization of Generator Interconnection Agreements and 
Procedures, Order No. 2003, Final Rule, 68 FR 49845 (Aug. 19, 2003), 
FERC Stats. & Regs. ] 31,146 (2003.)
    \2\ Standardization of Generator Interconnection Agreements and 
Procedures, Order No. 2003-A, Order on Rehearing, 69 FR 15932 (Mar. 
26, 2004), FERC Stats. & Regs. ] 31,160 (2004).
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    2. This order reaffirms that an important objective of the 
Commission's pricing policy is the protection of the Transmission 
Provider's existing Transmission Customers, including native load, from 
subsidizing Network Upgrades required to interconnect merchant 
generators. This order also reaffirms the Order No. 2003-A crediting 
policy for Network Upgrades. Order No. 2003-A gave the Transmission 
Provider the option, after five years from the Commercial Operation 
Date of the Interconnection Customer's Generating Facility, of either 
fully reimbursing the Interconnection Customer for its upfront payment 
for Network Upgrades or continuing to make dollar-for-dollar credits 
against charges for Transmission Service. Order No. 2003-A provided no 
date certain for full reimbursement of the upfront payment.
    3. On rehearing, petitioners \3\ argue that a date certain is 
needed for a variety of reasons. In particular, they state that a date 
certain is needed to make the crediting policy consistent with the 
notion that the upfront payment is primarily a mechanism for financing 
Network Upgrades. This order addresses their concerns by clarifying 
that if the Transmission Provider chooses not to fully reimburse the 
Interconnection Customer after five years, it must continue to provide 
dollar-for-dollar credits to the Interconnection Customer, or develop 
an alternative schedule that is mutually agreeable and provides for the 
return of all amounts advanced for Network Upgrades not previously 
repaid. However, full reimbursement shall not extend beyond twenty (20) 
years from the Commercial Operation Date.
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    \3\ Thirteen petitioners filed requests for rehearing of Order 
No. 2003-A. See Appendix A.
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    4. This order takes effect 30 days after issuance by the 
Commission. As with the Order No. 2003 compliance process, the 
Commission will deem the open access transmission tariff (OATT) of each 
non-independent Transmission Provider to be amended to adopt the 
revisions to the pro forma LGIP and LGIA contained herein on the 
effective date of this order. Unlike the Order No. 2003 compliance 
process, however, each non-independent Transmission Provider will be 
required to amend its OATT to include the LGIP and LGIA revisions 
contained herein within 60 days after issuance of this order by the 
Commission. Also, within 60 days after issuance of this order, each 
independent Transmission Provider must submit revised tariff sheets 
incorporating its revisions to its OATT or an explanation under the 
independent entity variation standard as to why it is not proposing to 
adopt each change described in this order.

II. Background

    5. Order No. 2003 required all public utilities that own, control, 
or operate facilities used for transmitting electric energy in 
interstate commerce to have on file standard procedures and a standard 
agreement for interconnecting Generating Facilities capable of 
producing more than 20 megawatts of power (Large Generators) to their 
Transmission Systems.\4\ Order No. 2003 also required that all such 
public utilities modify their OATTs to include the pro forma LGIP and 
LGIA.
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    \4\ Provisions of the LGIP are referred to as ``sections,'' 
whereas provisions of the LGIA are referred to as ``articles.'' 
Capitalized terms used in this order have the meanings specified in 
section 1 of the pro forma LGIP and article 1 of the LGIA, as 
amended herein, or the OATT. Generating Facility means the device 
for which the Interconnection Customer has requested 
interconnection. The owner of the Generating Facility is the 
Interconnection Customer. The entity with which the Generating 
Facility is interconnecting is the Transmission Provider. A Large 
Generator is any energy resource having a capacity of more than 20 
megawatts, or the owner of such a resource.
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    6. Order No. 2003 stated that interconnection plays a crucial role 
in bringing generation into national energy markets to meet the growing 
needs of customers and to obtain for customers the benefits of 
increased competition. It noted that the then-existing interconnection 
process was fraught with delays and lack of standardization that 
discouraged merchant generators from entering the energy marketplace, 
in turn stifling the growth of competitive energy markets. It concluded 
that the delays and lack of standardization inherent in the then-
current system undermined the ability of generators to compete in the 
market and provided an unfair advantage to utilities that own both 
transmission and generation facilities. As a result, the Commission 
concluded that there was a pressing need for a single, uniformly 
applicable set of procedures and agreements to govern the process of 
interconnecting a Large Generator to a Transmission Provider's 
Transmission System.\5\
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    \5\ In another rulemaking, the Commission proposed a separate 
set of procedures and an agreement applicable to Small Generators 
(defined as any energy resource having a capacity of no larger than 
20 MW, or the owner of such a resource) that seek to interconnect 
with facilities of jurisdictional Transmission Providers that are 
already subject to an OATT. See Standardization of Small Generator 
Interconnection Agreements and Procedures, Notice of Proposed 
Rulemaking, 60 FR 49974 (Aug. 19, 2003), FERC Stats. & Regs. ] 
32,572 (2003).
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    7. Order No. 2003-A affirmed the legal and policy conclusions on 
which Order No. 2003 was based. It held that Order No. 2003 did not 
expand the Commission's jurisdiction beyond that asserted in Order No. 
888 and upheld in court.\6\ For example, it reaffirmed that

[[Page 267]]

Order No. 2003 applies only to an interconnection with a public 
utility's Transmission System that, at the time the interconnection is 
requested, is used either to transmit electric energy in interstate 
commerce or to deliver electric energy sold at wholesale in interstate 
commerce under a Commission-filed OATT. It also reaffirmed that dual 
use facilities (those used both for wholesale and retail transactions) 
are subject to Order No. 2003 (1) if the facilities are subject to an 
OATT on file with the Commission when the Interconnection Request is 
submitted and (2) the interconnection will facilitate a wholesale sale.
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    \6\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. & Regs. ] 
31,036 (1996), order on reh'g, Order No. 888-A, 62 FR 12274 (Mar. 
14, 1997) FERC Stats. & Regs. ] 31,048 (1997), order on reh'g, Order 
No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 888-C, 
82 FERC ] 61,046 (1998), aff'd in relevant part sub nom. 
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C. 
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002) (TAPS 
v. FERC).
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    8. Order No. 2003-A also generally affirmed the pricing policy 
adopted in Order No. 2003 for the recovery of the costs of Network 
Upgrades associated with an interconnection.\7\ That is, the 
Commission's existing pricing policy continues to apply to a non-
independent Transmission Provider, but an independent Transmission 
Provider such as a Regional Transmission Organization (RTO) or an 
Independent System Operator (ISO) has greater flexibility to propose a 
customized pricing policy to fit its circumstances. It also reaffirmed 
that all Distribution Upgrades (upgrades to the Transmission Provider's 
``distribution'' or lower voltage facilities that are subject to an 
OATT) are to be paid for by the Interconnection Customer without 
reimbursement (direct assignment).
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    \7\ Network Upgrades reside on the Transmission Provider's side 
of the Point of Interconnection with the Transmission Provider's 
Transmission System.
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    9. In addition, Order No. 2003-A clarified that, consistent with 
the Commission's transmission ratemaking policy, a non-independent 
Transmission Provider continues to have the option to charge the 
Interconnection Customer a transmission rate that is the ``higher of'' 
an average embedded cost (rolled-in) rate or an incremental cost rate 
for the Network Upgrades needed for the interconnection. It also 
explained that incremental pricing is not the same as direct 
assignment.
    10. Order No. 2003-A reiterated that, unless the Transmission 
Provider and the Interconnection Customer agree otherwise, the 
Interconnection Customer must initially fund the cost of any Network 
Upgrades used to interconnect its Generating Facility with a non-
independent Transmission Provider's Transmission System. The 
Transmission Provider must then reimburse the Interconnection Customer 
on a dollar-for-dollar basis, with interest. This reimbursement is in 
the form of credits against the rates the Interconnection Customer pays 
for the delivery component of Transmission Service. In Order No. 2003-
A, however, the Commission granted rehearing on two aspects of the 
mechanics of crediting. First, Order No. 2003-A required the 
Transmission Provider to provide credits to the Interconnection 
Customer only against transmission delivery service taken from the 
interconnecting Generating Facility, as opposed to Transmission Service 
taken elsewhere on the Transmission System. Second, it eliminated the 
requirement that transmission credits be refunded at the end of five 
years from the Commercial Operation Date of the Generating Facility and 
instead gave the Transmission Provider the option of either (1) 
reimbursing the Interconnection Customer for the remaining balance of 
the upfront payment, plus accrued interest, five years from the 
Commercial Operation Date of the Generating Facility or (2) continuing 
to provide credits until the upfront payment has been repaid, with 
accrued interest. Order No. 2003-A also eliminated the requirement that 
any Affected System Operator refund the Interconnection Customer's 
upfront payments for Network Upgrades built on the Affected System as a 
consequence of the interconnection of the Generating Facility, and 
instead required the Affected System to provide credits toward the 
Interconnection Customer's upfront payment only when Transmission 
Service is taken by the Interconnection Customer on the Affected 
System.
    11. Order No. 2003-A also clarified that neither Energy Resource 
Interconnection Service (ERIS) nor Network Resource Interconnection 
Service (NRIS) guarantees delivery service. It explained that while 
both services give the Interconnection Customer the capability to 
deliver the output of its Generating Facility into the Transmission 
System at the Point of Interconnection, neither allows the 
Interconnection Customer the right to withdraw power at any particular 
Point of Delivery. It also clarified that when an Interconnection 
Customer wants to deliver the output of its Generating Facility to a 
particular load (or set of loads), regardless of whether it has chosen 
ERIS or NRIS, it may simultaneously request Network Interconnection 
Transmission Service or Point-to-Point Transmission Service under the 
OATT. Order No. 2003-A also clarified that NRIS is not the same as or a 
substitute for Network Integration Transmission Service under the OATT.

III. Discussion

A. Jurisdiction

Rehearing Requests
    12. SoCal Edison claims that in Order No. 2003-A the Commission 
rejected its argument that all interconnections of generators intending 
to sell power to ``wholesale entities,'' except interconnections of 
Qualifying Facilities that will sell all of their output to host 
utilities under the Public Utilities Regulatory Policy Act of 1978,\8\ 
should be subject to Commission jurisdiction. In particular, SoCal 
Edison objects to the Commission's explanation that states have 
jurisdiction over an interconnection when the facility with which the 
Generating Facility is being interconnected is not subject to a 
Commission-approved OATT at the time the Interconnection Request is 
submitted, even if the Interconnection Customer intends to make a 
jurisdictional wholesale sale.\9\ This conclusion is legally erroneous 
and a significant departure from established policy and precedent.
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    \8\ 16 U.S.C. 2601 et seq. (2000).
    \9\ Order No. 2003-A at P 735.
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    13. SoCal Edison further argues that Order No. 888 states that 
wholesale transmission is within the Commission's exclusive 
jurisdiction. It cites to TAPS v. FERC, where the Supreme Court 
affirmed Order No. 888.\10\ Because interconnection is a form of 
Transmission Service, it should not matter whether an interconnection 
is with a facility that is subject to an OATT or already in use by a 
wholesale customer. Furthermore, SoCal Edison claims that it ``can cite 
to myriad orders involving its distribution system alone where [the 
Commission] accepted jurisdiction under Section 205 over the 
interconnection of generation to distribution facilities used at the 
time by no other wholesale customers but the interconnecting 
generator.''
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    \10\ See also Detroit Edison Co. v. FERC, 334 F. 3d 48, 51 (D.C. 
Cir. 2003).
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Commission Conclusion
    14. The passage in Order No. 2003-A that SoCal Edison objects to 
states as follows: ``States will retain jurisdiction over 
interconnection to dual use facilities when * * * the facility is not 
subject to a Commission-approved OATT at the time the Interconnection 
Request is made, even if the Interconnection Customer intends to make a 
jurisdictional wholesale sale.''\11\

[[Page 268]]

This statement was in error. We grant rehearing to clarify that this 
statement was based on the false premise that a dual use facility may 
not be subject to an OATT at the time the Interconnection Request is 
made. In fact, a facility may be considered dual use only if it serves 
both state- and Commission-jurisdictional functions at the time the 
Interconnection Request is submitted. As a result, a dual use facility 
must be subject to an OATT. And if an Interconnection Customer seeks to 
interconnect with a dual use facility to make a wholesale sale, that 
interconnection will be subject to Order No. 2003. This is consistent 
with Order No. 2003 and other statements in Order No. 2003-A, where the 
Commission stated that an interconnection with dual use 
``distribution'' facilities \12\ that already serve a Commission-
jurisdictional transmission function (and are subject to an OATT) for 
the purpose of facilitating a jurisdictional wholesale sale of 
electricity is subject to Order No. 2003.\13\ In conclusion, Order No. 
2003-A incorrectly suggested that a state regulatory agency would have 
jurisdiction over an interconnection with a dual use facility when the 
Interconnection Customer intends to make a jurisdictional wholesale 
sale. Because this is the only statement on which SoCal Edison's 
request for rehearing is based, there is no need to address its other 
arguments.
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    \11\ Order No. 2003-A at P 735.
    \12\ As explained in Order No. 2003 at P 803, the term 
``distribution'' is usually used to refer to lower voltage lines 
that are not networked and that carry power in one direction. The 
term ``local distribution'' is a legal term, and under Section 
201(b)(1) of the FPA, the Commission lacks jurisdiction over ``local 
distribution'' facilities. The court in Detroit Edison Co. v. FERC, 
334 F.3d 48 (D.C. Cir. 2003) (Detroit Edison), used the terms 
``distribution'' and ``local distribution'' interchangeably. The 
court recognized that certain ``distribution'' and ``local 
distribution'' interchangeably. The court recognized that certain 
``distribution'' facilities serve a dual use function (i.e., they 
are used for both wholesale and retail sales) and that there could 
be Commission-jurisdictional uses of ``local distribution'' 
facilities; in such cse, the court viewed the Commission's 
jurisdiction as extending only tot he use of the facilities for 
purposes of the wholesale transaction. Detroit Edison, 334 F.3d at 
51. Consistent with Detroit Edison, the Final Rule applies to a dual 
use facility only if the facility is already part of a Commission-
filed OATT and the interconnection is for the purpose of making a 
jurisdictional sale of electric energy for resale in interstate 
commerce.
    We note that some facilities labeled by a utility as 
``distribution'' may actually carry out a transmission rather than a 
local distribution function and thus would be subject to Commission 
jurisdiction for accommodating wholesale as well as unbundled retail 
transactions. In this circumstance, we do not view the label as 
controlling.
    \13\ Order No. 2003 at P 804; Order No. 2003-A at P 730, 736.
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B. Pricing and Cost Recovery Provisions

1. Transmission Credits
    15. In Order No. 2003-A, the Commission noted that requiring the 
Transmission Provider to provide the Interconnection Customer with 
credits against transmission service unrelated to the Generating 
Facility, and to fully reimburse the Interconnection Customer after 
only five years, tends to shift risk from the entity in control of the 
investment (i.e., the Interconnection Customer) to native load and 
other Transmission Customers. The Commission stated that this shifting 
of risk may result in inefficient siting decisions, and may require 
native load or other Transmission Customers to bear the cost of the 
Network Upgrades when the Interconnection Customer takes little 
additional transmission service with the new Generating Facility as the 
source, or where the Interconnection Customer elects to retire the 
Generating Facility early. Therefore, to place an appropriate level of 
risk on the Interconnection Customer, the Commission in Order No. 2003-
A revised the Final Rule policy (1) to make credits available only for 
transmission service that has the Generating Facility as the source of 
the power transmitted, and (2) to eliminate the guarantee of full 
reimbursement of the upfront payment in five years.
Rehearing Requests
    16. Several petitioners object to the revisions made in Order No. 
2003-A.\14\ Specifically, they argue that the Commission (1) should not 
have limited the applicability of credits to transmission service that 
has the Generating Facility as the source, (2) should not have given 
the Transmission Provider the option to fully reimburse the 
Interconnection Customer's upfront payment, plus interest, after five 
years, or to continue to provide credits to the Interconnection 
Customer until the total of all credits equals the Interconnection 
Customer's initial payment for the Network Upgrades plus interest, and 
(3) should not have excused an Affected System from having to provide 
credits except when transmission service is taken on the Affected 
System and has the Generating Facility as the source.
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    \14\ See, e.g., Calpine, EPSA, Integen, PSEG, and Reliant.
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    17. Calpine states that in Order No. 2003-A, the Commission has 
destroyed the balance and fairness of the Order No. 2003 policies.\15\ 
It argues that the Commission is now obligating the Interconnection 
Customer to finance Network Upgrades under terms that virtually 
guarantee that the Interconnection Customer will not be made whole for 
its upfront funding.
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    \15\ Calpine also states that, as a member of EPSA, it endorses 
and supports EPSA's request for rehearing of Order No. 2003-A.
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    18. Reliant, PSEG, and Intergen state that, contrary to the 
Commission's stated rationale, the revised crediting rules will not 
cause the Interconnection Customer to make more efficient siting 
decisions, and they are not needed to protect native load or other 
Transmission Customers from bearing the costs of Network Upgrades if 
the Generating Facility is retired early. Intergen objects to the new 
policies for a number of reasons. First, Network Upgrade costs cannot 
influence siting decisions because the costs are typically unknown when 
siting decisions are made. Second, the Interconnection Customer must 
take multiple factors into consideration when making siting decisions. 
For example, the Interconnection Customer must consider the ability to 
access particular markets, fuel and water supply access, air quality 
issues, tax issues, and zoning issues, among other things. Third, 
because a Generating Facility is a multi-hundred million dollar 
investment, the Interconnection Customer has tremendous risk exposure, 
and adding a few million dollars in Network Upgrade costs will not 
shift the risk of commercial infeasibility or poor siting decisions to 
others. Fourth, oversight by state regulatory authorities is an 
important constraint on where the Interconnection Customer chooses to 
site its facility. Fifth, the amount of Network Upgrades needed is 
directly tied to the condition in which the Transmission Provider keeps 
its Transmission System. If the Transmission Provider has been properly 
upgrading and expanding its facilities, then fewer Network Upgrades are 
likely to be needed. Also, Reliant claims that continuing to require 
that the Interconnection Customer fund the Network Upgrade costs 
upfront mitigates any lack of incentive that the Interconnection 
Customer may otherwise have to make efficient siting decisions.
    19. With regard to the need to protect native load and other 
transmission customers, Intergen states that an Interconnection 
Customer has strong incentives to maximize its use of the Transmission 
System, since it makes money only when it sells the output of its 
Generating Facility. Even under a worst case scenario, in which all 
Network Upgrade costs are assigned to existing customers, they would 
not suffer a significant rate increase. Intergen argues that concerns 
about

[[Page 269]]

native load customers being harmed by early retirements are overblown 
and do not recognize the significant benefits of increased competition 
in the generation market.
    20. PSEG states that, by allowing the full reimbursement of upfront 
payments to be delayed beyond the five-year period, the Commission is 
discouraging development of RTOs. What will happen, for example, to an 
Interconnection Customer's transmission credits when the non-
independent Transmission Provider to which it is interconnected joins 
an RTO? PSEG argues that permitting generators to ``cash out'' their 
credits on a date certain would alleviate these complexities and 
engender a smoother transition to an RTO system in which the 
interconnecting generator receives well-defined property rights rather 
than credits. Also, Intergen states that allowing the time for 
repayment to be extended indefinitely is inconsistent with the 
Commission's underlying ``financing'' policy for Network Upgrades and 
forces the Interconnection Customer to bear the full costs of a below-
market interest rate.
    21. Calpine points out that there are also Transmission Systems 
where the Interconnection Customer does not directly pay for 
transmission service. As a result, the Interconnection Customer does 
not receive a bill for transmission services to which credits can be 
applied. This is the situation, for example, in the California ISO, 
where load pays for transmission service. However, under Order No. 
2003-A, the dollar-for-dollar offset against transmission service 
payments is the only way explicitly provided to receive transmission 
credits, and this might allow someone to argue that credits need not be 
paid in areas such as California. Under the Order No. 2003 language in 
article 11.4.1 of the pro forma LGIA, this argument could not have been 
made because that provision required that all upfront payments for 
Network Upgrades had to be refunded within five years, and the Parties 
had to agree on a mechanism to do so. Because Order No. 2003-A dropped 
the mandatory five-year repayment provision, there is no explicit 
provision as to how an Interconnection Customer that does not pay 
directly for transmission service is to receive its credits. Therefore, 
Calpine proposes adding the following sentence to article 11.4.1 of the 
LGIA:

    In the event there is not a direct payment to Transmission 
Provider or Affected System Operator for transmission service to 
deliver power from the Large Generating Facility against which a 
repayment credit may be used, Transmission Provider, Affected System 
Operator and Interconnection Customer shall agree on a repayment 
schedule that would be comparable to one where transmission service 
was directly paid for, or such other mutually agreeable schedule.

    22. Reliant and others state that the Commission departed from the 
balanced approach of Order No. 2003 by deciding that transmission 
credits must be given by the Transmission Provider only for 
transmission service that has the Generating Facility as the source of 
the power transmitted. Reliant argues that certain Generating 
Facilities, such as peakers, require transmission service on a very 
limited schedule and, as a result, owners of such facilities may find 
it difficult to recover the sums advanced to the Transmission Provider 
under Order No. 2003-A. Reliant claims that the new policy creates a 
barrier to entry for exactly the type of facility needed during tight 
supply conditions.
    23. Reliant and Intergen argue that the Commission's new policy on 
credits effectively takes away a fundamental right that Order No. 888 
provided to the Transmission Customer. That is, the use of credits for 
any service taken on a Transmission Provider's system must be equated 
to the right of a Transmission Customer to change its Point of Receipt 
or Point of Delivery under Point-to-Point Transmission Service. If the 
Transmission Provider can provide service from the new points, it 
grants the service with no additional charge to the Transmission 
Customer. Petitioners argue that, similarly, the Transmission Customer 
should be allowed to use its credits at alternate points of receipt or 
delivery without paying an additional charge to the Transmission 
Provider.
    24. Intergen states that Order No. 2003 mitigated adverse cost 
impacts by giving the Interconnection Customer flexibility in 
determining how best to use the credits it received for the costs of 
Network Upgrades. The ability to transfer credits to other entities for 
which the Generating Facility is not the source of the power 
transmitted may be crucial for an Interconnection Customer that must 
meet its debt obligations, but has limited ability to acquire 
transmission service or sell its output. Also, because the interest 
accruing on the credits does not fully compensate the Interconnection 
Customer for its upfront payment, an Interconnection Customer has a 
strong incentive to transfer the credits to another entity that can use 
the credits immediately.
    25. TAPS states that a problem would arise if a Transmission 
Provider were to seek to restrict credits to a Network Customer by 
basing the credits on the energy output, rather than the capacity, of a 
Generating Facility used as a Network Resource. TAPS asks the 
Commission to revise or clarify Order No. 2003-A to provide that a 
Network Customer that designates an interconnecting Generating Facility 
as a Network Resource will receive credits based on the full capacity 
of the Network Resource (or the amount reserved by the Network Customer 
if it is less), not just the energy delivered from the resource.
    26. EPSA states that if the Commission retains the policy of 
limiting credits to transmission service that has the Generating 
Facility as the source, there are several issues that must be 
clarified. First, the Commission should clarify that credits will be 
applied to the total reservation payment for any service obtained to 
support the delivery of the generator, whether or not energy is 
scheduled in any particular hour of the reservation period and whether 
or not the power customers take advantage of the options to use 
alternative receipt or delivery points provided under the pro forma 
OATT to all point-to-point customers. Second, the Commission should 
clarify that credits will be applied to network services whenever a 
Network Customer designates the Generating Facility as a Network 
Resource or substitute resource, regardless of whether the Generating 
Facility produces energy during each hour of the designation. Finally, 
EPSA asks the Commission to clarify that credits must be provided by 
the Transmission Provider when it designates the Generating Facility as 
a Network Resource or substitute resource for meeting its native load 
requirements, whether or not the Transmission Provider actually enters 
into a service agreement under the OATT.
    27. TAPS states that changes described in P 675 of Order No. 2003-A 
suggest that only credits equal to the OATT's embedded cost rates must 
be provided, even if the Transmission Provider charges an incremental 
transmission rate.\16\ The Rule should be revised or clarified to 
address this discrepancy. A Transmission Provider that seeks 
transmission charges based on the incremental cost of Network Upgrades 
should be required to provide the Interconnection Customer that paid 
for those upgrades upfront with credits

[[Page 270]]

applied against the full amount of the incremental transmission 
charges, until the Interconnection Customer's upfront payment, plus 
interest, has been completely reimbursed.
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    \16\ Paragraph 675 stated that credits are to be applied in full 
to reservation charges set forth in OATT schedule 7--Long-Term Firm 
and Short-Term Firm Point-to-Point Transmission Service, schedule 
8--Non-Firm Point-to-Point Transmission Service, and to the basic 
transmission charges based on Attachment H-Annual Transmission 
Revenue Requirement for Network Integration Transmission Service.
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    28. PSEG states that under Order No. 2003-A, a non-independent 
Transmission Provider may have an incentive to ``tack on'' unnecessary 
Network Upgrade requirements (for which ultimate compensation to the 
generator has now been made considerably less certain) or not to build 
Network Upgrades that would allow transmission service to be taken from 
the Generating Facility (for which credits would have to be given). 
PSEG claims that this will discourage the construction of new 
generation and create incentives for preferential treatment of 
affiliated generation.
    29. Intergen states that unlike merchant units, the Transmission 
Provider's generating facilities never had to pay the upfront costs of 
their Network Upgrades. Thus, Transmission Provider facilities never 
had to assume any of the risks associated with Network Upgrades that 
the merchant generators do. To mitigate these competitive 
disadvantages, Intergen asserts that the Commission should allow the 
Interconnection Customer to receive credits for service sourcing at 
points other than the Generating Facility.
    30. PSEG argues that Network Upgrades benefit the entire 
Transmission System, and this common benefit is what distinguishes 
Network Upgrades from sole use facilities. The Interconnection 
Customer's financing of investment in the network of a non-independent 
Affected System benefits all Network Customers and all network 
transactions. It is unduly discriminatory to limit the Interconnection 
Customer's recovery of the funds it advances for Network Upgrades on an 
Affected System simply because the Interconnection Customer is unable 
to make direct use of them.
    31. EPSA urges the Commission to reverse its decision to modify the 
crediting policy with respect to Network Upgrades funded by an 
Interconnection Customer on an Affected System. A Generating Facility 
will be less likely to use transmission service on an Affected System 
than on the Transmission System to which it is interconnected, and this 
will unreasonably delay repayment. This is especially true in the West, 
where network facilities affected by an interconnection are often 
jointly owned by a number of Transmission Providers. These Transmission 
Providers are often far removed from the Transmission Provider to which 
the Generation Facility is interconnected. According to EPSA, an 
Interconnection Customer is unlikely to take transmission service on 
the Transmission System of a Transmission Provider that jointly owns 
these affected facilities. Therefore, the Interconnection Customer will 
have little ability to use the credits to which it is entitled.
Commission Conclusion
    32. In Order No. 2003-A, the Commission revised the rules governing 
transmission credits to place the Interconnection Customer at greater 
risk for the cost of Network Upgrades occasioned by the Interconnection 
Request. The Commission was concerned that to do otherwise would not 
lead to efficient siting decisions and would not adequately protect 
native load and other Transmission Customers from having to bear 
Network Upgrade costs if the Generating Facility were to retire early. 
In their arguments opposing the modifications, Intergen and others 
state that the cost of Network Upgrades is typically small compared to 
the cost of the Generating Facility and that the Interconnection 
Customer will often embark on a project even though Network Upgrade 
costs are unknown. This suggests that placing the risk for the cost of 
Network Upgrades on the Interconnection Customer does not place a 
significant burden on the Interconnection Customer and thus is 
completely appropriate. Also, Intergen states that the Interconnection 
Customer has a strong incentive to maximize its use of the Transmission 
System because it only makes money if it is selling output from its 
Generating Facility. The crediting policy, however, reinforces that 
incentive by linking transmission credits directly to the output of the 
Generating Facility.
    33. We strongly encourage policies that promote efficient 
investment decisions and protect native load and other Transmission 
Customers from having to bear the burden of the Interconnection 
Customer's Network Upgrade costs. Given these concerns, we continue to 
find that the Order No. 2003-A crediting policy provides a reasonable 
balance between the objectives of promoting competition and 
infrastructure development, protecting the interests of Interconnection 
Customers, and protecting native load and other Transmission Customers.
    34. Intergen states that extending the reimbursement timeframe 
indefinitely is inconsistent with the Commission's determination that 
the upfront payment is merely a mechanism for financing the cost of the 
Network Upgrades. In addition, PSEG states that the indefinite 
timeframe will make the transition to RTO development more complex, and 
Calpine claims that an uncertain timeframe for reimbursement will 
create problems in areas such as California where the Interconnection 
Customer does not receive directly a bill for transmission service to 
which credits can be applied.
    35. These petitioners make valid points. To address the 
Interconnection Customer's need for a date certain for reimbursement of 
its upfront payment, we are specifying what the Transmission Provider 
must do if it elects not to return to the Interconnection Customer any 
portion of its upfront payment that remains due at the end of five 
years. Specifically, in order to provide a definite end date for 
reimbursement that is not to be exceeded, we are revising pro forma 
LGIA article 11.4.1 to state that full reimbursement shall not extend 
beyond twenty (20) years from the Commercial Operation Date. The 
portion of this article that describes the Transmission Provider's 
second repayment option now reads as follows:

    (2) declare in writing that Transmission Provider or Affected 
System Operator will continue to provide payments to Interconnection 
Customer on a dollar-for-dollar basis for the non-usage sensitive 
portion of transmission charges, or develop an alternative schedule 
that is mutually agreeable and provides for the return of all 
amounts advanced for Network Upgrades not previously repaid; 
however, full reimbursement shall not extend beyond twenty (20) 
years from the Commercial Operation Date.

    36. All other crediting rules remain the same. This change 
addresses Intergen's concern that Order No. 2003-A's removal of a date 
certain for the repayment of Network Upgrade costs was inconsistent 
with the notion that the upfront payment is, in essence, a loan to the 
Transmission Provider designed to facilitate construction of the 
Network Upgrades. The change also addresses PSEG's concern that the 
lack of a date certain might create an obstacle to the development of 
an RTO, which may require the Interconnection Customer's upfront 
payment to be converted into financial transmission rights. Finally, 
the change addresses Calpine's concern that, in the absence of a date 
certain for repayment of Network Upgrade costs, a Transmission Provider 
could conclude that credits need not be repaid in areas where the 
Interconnection Customer does not pay directly for transmission 
service. We further clarify that the Interconnection Customer is 
entitled to full reimbursement for its upfront payment and the period 
for reimbursement may

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not be longer than the period that would be required if the 
Interconnection Customer paid for transmission service directly and 
received credits on a dollar-for-dollar basis, or 20 years, whichever 
is less. In short, the imposition of a 20-year date certain does not 
mean that the Commission is switching from reimbursing through credits 
to reimbursing over 20 years. Rather, if credits have not fully 
reimbursed the upfront payment within 20 years, there will be a balloon 
payment at the end of year 20.
    37. Reliant argues that the owner of a Generating Facility, such as 
a peaker, that requires transmission service on a limited schedule may 
find it difficult or impossible to recover its upfront payment under 
the Commission's rules as revised by Order No. 2003-A. We disagree. Any 
Interconnection Customer whose Generating Facility is used as intended, 
whether or not it is a peaker, normally will be required to take Firm 
Point-to-Point Transmission Service or Network Integration Transmission 
Service and therefore will have ample opportunity to use its 
transmission credits to obtain reimbursement of its upfront payment. 
Furthermore, reimbursement of any upfront payment must occur no later 
than 20 years after the Commercial Operation Date.
    38. Reliant and Intergen argue that limiting credits to 
transmission service taken with the Generating Facility as the source 
takes away the Transmission Customer's fundamental right under Order 
No. 888 to change its Point of Receipt or Point of Delivery under 
Point-to-Point Transmission Service without additional charge if the 
Transmission Provider is able to grant the service at the alternate 
points. Also, Intergen argues that the ability to transfer credits may 
be crucial for an Interconnection Customer that must meet debt 
obligations but is constrained in its ability to acquire transmission 
service. The new policy does not revoke any rights provided by Order 
No. 888. If the Interconnection Customer or other Transmission Customer 
is taking firm Point-to-Point Transmission Service under the OATT with 
the Generating Facility as the source of the power transmitted, the 
customer continues to have all of the rights given under the OATT to 
change temporarily Points of Receipt or Delivery, if capacity is 
available, and is entitled to continue to receive credits toward the 
cost of the transmission service while doing so.
    39. TAPS and EPSA ask the Commission to revise or clarify Order No. 
2003-A to provide that a Network Customer that designates a Generating 
Facility as a Network Resource will receive credits based on the full 
capacity of the Network Resource (or the amount reserved by the Network 
Customer if it is less), not just the energy delivered from the 
resource. We clarify that when a Generating Facility is designated as a 
Network Resource or a substitute resource, the Interconnection Customer 
is entitled to credits for the full amount of the reserved capacity of 
the Generating Facility regardless of the amount of energy that is 
scheduled for delivery in any particular hour. Also, TAPS states that 
changes to the Final Rule described in P 675 of Order No. 2003-A 
suggest that only credits equal to the Tariff's embedded cost rates 
would be provided, even if the Transmission Provider chooses to charge 
an incremental cost rate. We clarify that, if the Transmission Provider 
chooses to charge an incremental cost rate, the Interconnection 
Customer is entitled to receive credits, on a dollar-for-dollar basis, 
at the incremental rate.
    40. PSEG states that the new rules may provide a non-independent 
Transmission Provider with an incentive to ``tack on'' unnecessary 
Network Upgrades or omit necessary Network Upgrades. Also, Intergen 
claims that, unlike a merchant developer, the Transmission Provider 
never had to assume for its Generating Facilities any of the risks 
associated with Network Upgrades, and this places the merchant 
developer at a competitive disadvantage. We disagree. The Commission's 
crediting policy assigns risk and cost responsibility in a reasonable 
manner and applies to Interconnection Requests by entities affiliated 
with the Transmission Provider and to Interconnection Requests by 
unaffiliated merchant generators. We reiterate that the Transmission 
Provider has an obligation to apply our interconnection policy in a 
non-discriminatory manner to all new Interconnection Requests, whether 
the Generating Facility is owned by the Transmission Provider, its 
Affiliate, or a merchant developer.
    41. EPSA and PSEG are concerned that the Interconnection Customer 
may be unable to recoup upfront payments for Network Upgrades that are 
constructed on an Affected System. We note that taking transmission 
service on an Affected System is entirely at the option of the 
Interconnection Customer. Whether or not the Interconnection Customer 
exercises its option, the Network Upgrades on the Affected System 
benefit the Interconnection Customer by making the minimum transmission 
additions necessary for it to interconnect safely and reliably, as well 
as by facilitating access to customers and markets that are outside the 
Transmission Provider's electric system. Furthermore, if the 
Interconnection Customer were to be reimbursed by the Affected System 
Operator for the cost of the Network Upgrades without ever taking 
service on the Affected System, other Transmission Customers on the 
Affected System would have to bear the cost instead. This would create 
a disincentive for the Affected System to construct the Network 
Upgrades necessary for the Interconnection Customer to interconnect, a 
problem that would be particularly difficult to address if the Affected 
System were not a public utility.
    42. In addition, EPSA states that when an Affected System is 
jointly owned, an Interconnection Customer is unlikely to take 
transmission service on the Transmission System of a Transmission 
Provider that is far removed from the Affected System on which Network 
Upgrades had to be constructed. We clarify that the Affected System 
Operator must provide the Interconnection Customer with credits for 
transmission service taken on the Affected System until the 
Interconnection Customer's entire upfront payment has been reimbursed. 
In the case of an Affected System that is jointly owned, it is the 
responsibility of the Affected System Operator to provide the credits 
and to seek reimbursement for any amounts that it believes it is owed 
by the other owners. We note that this problem is not unique to an 
Affected System. If a Transmission Provider provides transmission 
service on a Transmission System that is jointly owned, that 
Transmission Provider must follow a similar procedure.
2. Credits Under Change in Ownership
Rehearing Requests
    43. Cinergy requests clarification of LGIA article 11.4.1, which 
states that if the Generating Facility fails to achieve commercial 
operation, but it or another Generating Facility is later constructed 
and uses the Network Upgrades, the Transmission Provider and the 
Affected System Operator shall at that time reimburse the 
Interconnection Customer for the amounts advanced for Network Upgrades. 
Specifically, where a Generating Facility fails to achieve commercial 
operation, Cinergy argues that it would be difficult for a Transmission 
Provider to determine who would be entitled to any eventual credit for 
the costs of Network Upgrades. This is significant because, given the 
uncertain state of the energy

[[Page 272]]

industry, the original entity constructing the Generating Facility 
could have been either purchased in whole or in part by another 
company, bankrupt, or simply no longer be in existence. Cinergy argues 
that the obligation to keep track of who should receive such 
reimbursement, if any, should not lie with the Transmission Provider 
but rather with the Interconnection Customer or its successors.
    44. In addition, Cinergy states that article 11.4.1 is not clear as 
to whether interest accrues on the upfront payment made by an 
Interconnection Customer whose Generating Facility fails to achieve 
commercial operation. Cinergy argues that interest should not accrue 
during what could possibly be an extended period of time where the 
upgrades remain idle, unused by either another Generating Facility or 
the Transmission Provider. Cinergy asks the Commission to clarify 
article 11.4.1 accordingly.
Commission Conclusion
    45. We agree with Cinergy that, when a Generating Facility does not 
achieve commercial operation, the responsibility for keeping track of 
the entity that is entitled to receive any transmission credits that 
may be due should lie with the Interconnection Customer, or with any 
successor entity that may later construct a Generating Facility that 
makes use of the Network Upgrades. Therefore, we are adding the 
following sentence to the final paragraph of LGIA article 11.4.1: 
``Before any such reimbursement can occur, the Interconnection 
Customer, or the entity that ultimately constructs the Generating 
Facility, if different, is responsible for identifying the entity to 
which reimbursement must be made.''
    46. With regard to the accrual of interest on upfront payments in 
cases where the Generating Facility fails to achieve commercial 
operation, we clarify that interest continues to accrue provided the 
interconnection agreement remains in effect. Interest does not accrue 
after an interconnection agreement has been terminated by either Party 
or during any period in which no interconnection agreement is in 
effect.
3. Protecting Native Load and Other Existing Transmission Customers
Rehearing Requests
    47. SWTransco and Southern Company argue that the Commission's 
interconnection pricing policy, in certain circumstances, would not 
protect native load and other customers from bearing the cost of 
Network Upgrades required for interconnection.\17\ Moreover, these 
petitioners argue that a policy of allowing the Transmission Provider 
to charge the higher of an incremental rate or an embedded cost rate 
does not always protect other customers from subsidizing the 
Interconnection Customer.
---------------------------------------------------------------------------

    \17\ Southern Company states that its request for rehearing does 
not specifically address all of the requirements and issues in Order 
No. 2003-A that it addressed in its Request for Rehearing filed in 
response to Order No. 2003. Therefore, instead of restating all of 
the arguments made in the request for rehearing, Southern Company 
incorporates them by reference. Because the FPA requires that 
applications for rehearing ``set forth specifically the ground or 
grounds upon which such application is based, ``set forth 
specifically the ground or grounds upon which such application is 
based, ``16 U.S.C. Sec.  8251 (2000), Southern Company's arguments 
from its request for rehearing of Order No. 2003 have been 
considered in this order only to the extent the arguments were 
specifically presented in its request for rehearing of Order No. 
2003-A.
---------------------------------------------------------------------------

    48. SWTransco states that to leave the other Transmission Customers 
no worse off in certain situations, it is necessary to charge the 
Interconnection Customer not only the Network Upgrade costs, but also 
the share of the rolled-in costs attributable to any Generating 
Facility that is displaced by the new Generating Facility. Also, 
Southern Company states that charging the Interconnection Customer only 
an incremental rate would not cover the Generating Facility's use of 
the rest of the Transmission System.
    49. Southern Company states that to truly prevent subsidies, the 
Commission must either (1) allow the direct assignment of 
Interconnection Facilities and NRIS facilities (because they do not 
provide a system benefit) and require the generator (or its customer) 
to pay the embedded transmission rate for delivery service or (2) allow 
all Transmission Providers to implement participant funding. Southern 
Company agrees that any disputes regarding participant funding 
determinations may need to be resolved by an independent entity, but 
asserts that, in the absence of an RTO or other independent entity, the 
Commission is well equipped (and, indeed, charged under sections 205 
and 206 of the Federal Power Act) to resolve such disputes.
    50. Southern Company states that the subsidization issue is 
generally not a concern if the Generating Facility is designated a 
Network Resource of the Transmission Provider, or of its Network 
Customers, contemporaneously with the execution of its interconnection 
agreement. Southern Company argues that the subsidization issue arises 
mainly when a merchant generator has no long-term reservations for 
transmission delivery service from its plant contemporaneously with the 
execution of the interconnection agreement, or when the Interconnection 
Customer and the Transmission Customer are different entities.
    51. On a related matter, some petitioners ask for guidance 
regarding the implementation of incremental pricing in the context of 
generator interconnections. For example, NRECA seeks answers to the 
following questions. Over what period of time should the incremental 
costs be presumed to be amortized? If the Interconnection Customer has 
only a short-term contract for the output of the Generating Facility, 
should the costs be amortized over that short period? If the 
Interconnection Customer has only a short-term contract for the output 
of the Generating Facility, but the Transmission Customer that requests 
delivery of the Generating Facility's power is taking service under a 
long-term transmission contract, should the cost of the Network 
Upgrades be amortized over the length of the transmission contract? 
Should the cost of Network Upgrades be amortized over their useful 
life?
    52. SWTransco claims that the interconnection procedures and 
agreement in Order No. 2003-A do not appear to contain mechanics 
sufficient to allow the pricing concept to be implemented. Southern 
Company argues that the Transmission Provider will not be able to 
calculate an incremental rate with any certainty because it often has 
no reasonable idea regarding the amount of the delivery service that 
might ultimately be taken from the facility (or which entities will 
actually be requesting any such delivery service) or the duration of 
any such service. This is because, in Southern Company's experience, 
merchant generators normally do not seek interconnection and 
transmission delivery services at the same time. At a minimum, the 
Commission must clarify how the incremental pricing calculation could 
be performed for a merchant generator that does not make a request for 
transmission delivery service at the time of the execution of the 
interconnection agreement or when the Interconnection Customer and the 
Transmission Customer are separate entities.
    53. TAPS states that it is unclear from Order No. 2003-A whether or 
how the Commission intends that incremental pricing would be applied to 
network Transmission Customers, given the load ratio share pricing 
required by the OATT.

[[Page 273]]

Commission Conclusion
    54. Order No. 2003-A clarified that the Commission was not 
abandoning any of the fundamental principles that have long guided its 
transmission pricing policy. The Commission's interconnection pricing 
policy continues to allow the Transmission Provider to charge the 
Interconnection Customer a transmission rate that is the higher of the 
incremental cost rate for Network Upgrades required to interconnect the 
Generating Facility or an embedded cost rate for the entire 
Transmission System (including the cost of the Network Upgrades). Order 
No. 2003-A emphasized that this ``higher of'' policy ensures that other 
Transmission Customers, including the Transmission Provider's native 
load, will not subsidize Network Upgrades required to interconnect 
merchant generation.
    55. On rehearing, petitioners raise concerns regarding the 
implementation of this policy and whether other customers are protected 
from having to bear the costs of Network Upgrades under all 
circumstances. Petitioners argue that they can devise certain 
hypothetical cases in which the Transmission Provider must either 
impose some new transmission costs on existing customers or violate the 
Commission's prohibition against ``and'' pricing.
    56. In response to these petitioners, we first reaffirm that an 
important objective of our interconnection pricing policy continues to 
be the protection of existing Transmission Customers, including the 
Transmission Provider's native load, from adverse rate implications 
associated with Interconnection Facilities and Network Upgrades 
required to interconnect a new Generating Facility. Despite the 
unsupported hypothetical generalizations of some petitioners, we have 
not been presented with any evidence that native load and other 
Transmission Customers cannot be held harmless under our existing 
pricing policy. If a Transmission Provider (or an existing Transmission 
Customer) believes that, for an actual interconnection, it faces 
circumstances where native load and other customers are not held 
harmless, it should make that demonstration in an actual transmission 
rate filing. The Transmission Provider must explain the facts of the 
case and the assumptions on which its calculation is based and provide 
evidentiary support. While we cannot envision any circumstances where 
our existing pricing policy will not fully protect native load and 
other Transmission Customers, we are willing to consider alternative 
pricing proposals under the facts of a specific case. We emphasize that 
the Transmission Provider bears the full burden of showing that any 
such proposal is just and reasonable and not unduly discriminatory or 
preferential, and is appropriate under the circumstances.
    57. Similarly, with regard to the calculation of incremental rates, 
we are not prescribing generic rules at this time. Rather, we invite 
the Transmission Provider, in the context of an actual interconnection 
agreement or transmission rate filing, to propose a calculation method 
that assigns appropriate cost responsibility to the Interconnection 
Customer and is consistent with applicable Commission policy and 
precedent.
4. Interconnection Products and Services
Rehearing Requests
    58. Some petitioners seek clarification of the provisions of Order 
No. 2003-A governing NRIS and ERIS.
    59. NRECA requests that the Commission clarify that, consistent 
with the OATT (1) only Interconnection Customers that are load serving 
entities may request Network Integration Transmission Service under a 
Transmission Provider's OATT, and (2) only Network Customers can 
designate Network Resources.
    60. TAPS asserts that, as clarified in Order No. 2003-A, the unique 
feature of NRIS has nothing to do with being a ``Network Resource,'' 
which is defined by the OATT as a resource designated by a Network 
Customer under Network Integration Transmission Service. Rather, NRIS 
provides assurance that even absent any transmission service, ``the 
Generating Facility, as well as other generating facilities in the same 
electrical area, can be operated at peak load,'' and that the output of 
the Generating Facility will not be ``bottled up'' under such 
conditions. The name ``Network Resource Interconnection Service,'' 
therefore, is misleading. TAPS recommends an alternative name, such as 
``Enhanced Interconnection Service,'' that more accurately describes 
this Interconnection Service.
    61. Also, TAPS states that the references to ``other Network 
Resources'' in LGIA articles 4.1.2.1 and 4.1.2.2 and LGIP section 3 are 
particularly confusing, because as noted above, ``Network Resource'' is 
defined as a resource designated under Network Integration Transmission 
Service. In other words, the references to ``other'' Network Resources 
assume something that has not necessarily happened in the case of 
resources taking NRIS.
    62. TAPS states that article 4.1.2.2 suggests that generators 
taking NRIS are different from generators taking ERIS with respect to 
their ability to be designated as Network Resources. Specifically, the 
introductory sentences of article 4.1.1.2, especially if read in 
conjunction with LGIA article 4.1.2.2, suggest that NRIS is the 
preferred route to obtaining a Network Resource designation under the 
OATT. Although the preamble of Order No. 2003-A otherwise makes clear 
that a resource with ERIS may be designated as a Network Resource, it 
confusingly states elsewhere that ``Network Resource Interconnection 
Service makes it possible for the Generating Facility to be designated 
as a Network Resource.''
    63. Similarly, TAPS states that LGIA article 4.1.1.1 and LGIP 
section 3.2.2.1 continue to describe ERIS as providing ``as available'' 
access, without restricting application of that limit, i.e., without 
adding language such as ``unless combined with Network Integration 
Transmission Service or Firm Point-to-Point Transmission Service,'' 
which would be consistent with the preamble of Order No. 2003-A. TAPS 
is concerned that LGIP section 3 lacks any reference to the ability of 
an ERIS customer to obtain anything other than ``as available'' 
transmission service. The Commission should modify LGIP section 3 and 
LGIA articles 4.1.1.1, 4.1.1.2, and 4.1.2.2 to eliminate any co