Utility Integration

MISO proposes to reform the generator interconnection queue (again!)

MISO proposes to reform the generator interconnection queue (again!)

Close on the heels of the PJM queue reform package, MISO is proposing a major overhaul of generator interconnection queue regulations. This reform package includes a three-fold increase in milestone payments and stringent site control requirements from the interconnection site to the Point of Interconnection, penalties for withdrawals from the queue, and a cap on the size and number of applications per developer.

MISO proposes to file this reform with the Federal Energy Regulatory Commission in the fall. Until then, MISO is not accepting 2023 applications. Unfortunately, MISO is not proposing reforms addressing the current queue backlog. This reform package does not apply to the generator replacement process.

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Key Element 1 – Three-fold increase in milestone payments and site control requirements from the site to the Point Of Interconnection (POI)

The sticker shock is MISO’s initial proposal to increase a milestone payment called M2 from $4,000 per MW to $12,000 per MW, claiming that SPP has $8,000 per MW. If an Interconnection Customer (IC) withdraws before the Definitive Planning Phase (DPP) I kickoff starts, then 100% of M2 is returned.

MISO is also increasing the corresponding M3 and M4 milestone payments paid by ICs after DPP 1 and DPP 2 are concluded. M3 is 10% of the Network Upgrade minus the M2 payment. MISO proposes to change this to a greater of (20% of Network Upgrade minus the M2 payment or $1,000 per MW). Similarly, MISO proposes changing M4 from 20% of Network Upgrade minus the M3 payment minus the M2 payment to greater of (30% of Network Upgrade minus the M2 payment or $1,000 per MW).

MISO had engaged Charles River Associates to help with this queue reform package, and their presentation posted as supplementary to MISO’s presentation suggests an increase in milestone payments is justified due to potential harm caused by ICs dropping out of the queue.

MISO is also increasing site control from the site to the POI in this proposed reform package. ICs should have 50% site control from the generator site to the POI upon application, 50% site control and 50% of the IC switchyard before Phase 2, and 100% site control before the Generator Interconnection Agreement (GIA) negotiations. MISO claimed these site control requirements are not new compared to SPP and PJM.

Key Element 2 – Automatic penalties for withdrawal from the queue

The most controversial part of the latest MISO queue reform package is MISO’s proposal to levy penalties on ICs who withdraw in addition to the increase in milestone payments. MISO will increase the withdrawal penalty percentage as the study phases increase to deter speculative projects and developers who are not convinced about commercial viability. MISO’s proposal makes withdrawing ICs pay for network upgrade costs for those remaining in the queue.

MISO’s specific proposal is that if an IC withdraws before the start of DPP – they pay 10% of M2, which is $12,000 per MW in this reform package. If an IC withdraws at DPP 1, they pay 25% of M2. And if an IC withdraws at DPP 2, they pay 50% of M2. If an IC withdraws at DPP 3, they pay 75% of M2. Finally, if an IC withdraws during the GIA negotiations and beyond, they pay 100% of M2. So, a 100 MW solar project developer will pay $1.2 Million upfront as an M2 payment and another $1.2 Million if they withdraw during the GIA negotiation phase.

Key Element 3 – A 7,300 MW cap per region and a cap on the number of applications per developer

MISO says it can better manage the queue if it limits the volume of queue requests based on the 2022 queue cycle experience, where MISO received 956 applications with a total of 171 GW of capacity. The number of applications dropped to 902, and the total capacity dropped to 167 GW in the last 9 months since the 2022 queue cycle closed in September 2022.

MISO staff made multiple references to MISO’s peak load is only 120 GW, but it has a queue with 167 GW size. So, MISO proposes limiting the MW size of the projects per region based on the peak load of the region. MISO proposes a pro-rate per region based on a 60% cap, translating into 73 GW per queue cycle. So, MISO would only accept projects up to 73 GW, not the 171 GW it accepted in the 2022 cycle.

In addition to the MW size cap, MISO proposes limiting the number of applications per developer. MISO says the top 5 developers have submitted one-third of the queue applications in the last cycle. Hence it wants to put a limit per developer, and the initial proposal is 10% of the size cap. So, developers will only apply up to 7,300 MW. And to deter multiple LLCs under the same parent company game the queue, it wants developers to attest that their project is not owned by anyone else in the queue. MISO proposes to accept developers on a first-come, first-served basis until they hit the cap. If MISO doesn’t hit the cap, then developers can exceed the cap on a pro-rata basis. MISO agreed that this part of the reform package would be administratively burdensome.

Next Steps

MISO is seeking stakeholder comments at the Planning Advisory Committee (PAC). Over 400 stakeholders listened to MISO’s initial proposal at the July 19 PAC meeting. MISO proposes to file this reform package at FERC in the fall by closing the stakeholder comment process by Aug 30, but MISO won’t accept new applications in the 2023 cycle until it receives FERC’s approval. Stakeholders did not hear from MISO about what steps MISO is taking to clear the current queue backlog. MISO said it doesn’t want to hinder the growth of renewables in the energy transition, but that is what MISO might end up doing by increasing payments and withdrawal penalties.