September 23, 2009

Interconnection Rulemaking 101: A conversation with Jason Keyes

Utah has recently opened its interconnection docket, based on half a dozen workshops conducted in 2007 and 2008. According to Jason Keyes of Keyes and Fox, IREC’s law firm for regulatory work, not only does the draft rule look pretty good, but the process was efficient. I wanted to know how it went, and where…

Utah has recently opened its interconnection docket, based on half a dozen workshops conducted in 2007 and 2008. According to Jason Keyes of Keyes and Fox, IREC’s law firm for regulatory work, not only does the draft rule look pretty good, but the process was efficient. I wanted to know how it went, and where it’s going. Here’s our conversation:

IREC: Jason, you’re reasonably satisfied with Utah’s current draft interconnection rule. How did IREC become involved in Utah? Did you receive an invitation to participate?

JK: The Utah Public Service Commission did what lots of state commissions do and held workshops to develop interconnection procedures before opening a rulemaking docket. What was so unusual about Utah is that they had a series of informal workshops over many months. It’s important to get involved at that early stage because that’s when decisions are first made; later on, there’s a draft rule and all we can do is propose changes. Usually before there’s a formal rulemaking before the commission, there’s a series of informal workshops. Being in those workshops has the obvious benefit that we influence what ends up in the draft rule, but there’s an added bonus that the commission knows we’ve put effort into the process and that probably gives our comments in the rulemaking some added weight.

IREC: How did you hear about the workshops? Did you receive an invitation to participate?

JK: In some states, we’re already involved and we wind up on a mailing list and get an email notice. In other states, we’ve been contacted because a commissioner or staffer knows about IREC from our work over the years, our presentations at NARUC [the National Association of Regulatory Utility Commissioners] and the Freeing the Grid report. Elsewhere, we’ll just hear informally from a local group or some contact of ours that workshops are starting.

In Utah, there’s a fantastic local group called Utah Clean Energy that asked if we could jump in. Part of the reason we got involved is because we knew that we would have local support. In fact, if you want to be a party to the rulemaking process, you generally haveto be part of the workshop process. And unless you’re heavily involved in a state, you might not hear from them inviting you to participate. IREC was invited by Utah Clean Energy to be a part of Utah’s interconnection rulemaking process, so that’s how we became involved.

IREC: So are informal workshops the exception to the norm? How else does rulemaking happen?

JK: States don’t always do the same process–not all conduct workshops. Sometimes they decide to start by using rules from a neighboring state and dive right into the rulemaking. I think Utah did it well with these and had a really efficient process, even compared with other states that have gone through workshops. They got lots of input for their draft rule and even broke down the rule into clauses in a spreadsheet to get input on every element from all the parties in the workshops. You could say their draft rule is really a consensus document. So by the time the draft rule gets to the commission, it’s understood that there’s a lot of agreement already.

The other thing about Utah that’s pretty unique is that there’s only one IOU[Investor-Owned Utility]–Rocky Mountain Power (RMP). There are a lot bunch of small coops that aren’t fully regulated by the Commission. Those coops are subject to the rule, but they can decide to do something different by going through their own rulemaking. Included in this group were RMP, a representative from the coops, IREC, Utah Clean Energy, a solar installer, a state government representative, and Mike Coddington from the National Renewable Energy Laboratory (NREL). IREC’s Mike Sheehan was also involved. Commission staff ran the meetings, but the commissioners themselves weren’t involved. It was a really cooperative process. One of RMP’s representatives was David Taylor, he’s technically savvy and understands the issues; that allowed us to make a lot of progress. It’s a very nice way to work; it’s efficient.

IREC: Was interconnection the only item on the agenda? What about net metering? I thought they worked best together.

JK: Actually, there was a net metering rulemaking at the same time. Net metering is pretty straightforward, so workshops aren’t needed. Kevin Fox represented IREC in that rulemaking and we had a very good outcome, again working closely with Utah Clean Energy. That rulemaking happened after the interconnection workshops. The Commission dropped interconnection procedures for over a year after the workshops were done and went through the whole net metering rulemaking. In the meantime, I was starting to wonder whether we’d ever see a rulemaking for interconnection. While the order surprised me, it is because they were doing net metering workshops at the same time. It’s great to be working in a state where they’re doing both so we can make sure they align.

IREC: So what’s in the draft interconnection rule? You must seem to like what’s in it so far.

JK: This rule has lots of things we’re looking for, and lots of things we have in the IREC model rules. No one thing is unusual in state rules, but only a few states have pulled them all together. Getting all the key items is really great.

Here’s what’s in the Utah draft interconneciton rule:

–no insurance requirement up to 2MW;

–Level 1 increases from 10kW to 25kW, with no application fee and a simple agreement;

–no disconnect switch under 10 kW. This is great because it covers most residential installations;

–quick dispute resolution by the Commission;

–use of FERC’s standard interconnection SGIA agreements (adding an insurance provision); and

–no explicit restriction of third party ownership.

The updated IREC Model Interconnection Procedures, which will be coming out later this week, has recommended going from a 10kW cutoff for Level 1 to a 25kW cutoff, so we’re pretty pleased that this was included in the draft Utah interconnection rule. Utah also included meter aggregation.

IREC: The part about ‘quick dispute resolution by the Commission.’ Dispute resolution isn’t typical in commission rulemaking? How do disputes get resolved?

JK: Dispute resolution is a problem in lots of states actually. If it’s left vague, then there’s lots of opportunity for utilities to have the final word. The draft Utah rule says that if there’s a dispute, then it’s put in writing and talked about. If it’s not resolved quickly, then the parties can file the dispute with the commission–a third party– who will resolve it quickly. So this is real dispute resolution here; that there’s someone besides the parties who will resolve the dispute. That’s better than throwing disputes into an arbitration process that can take a lot of time and money.

IREC: I guess I’m surprised that dispute resolution isn’t a foregone conclusion. There’s always going to be a dispute, right? What’s the SGIA FERC standard agreement that you mentioneds? How does this that work?

JK: This is a little complicated. SGIP/SGIA stands for ‘small generator interconnection procedures’ or and ‘small generator interconnection agreements.’ FERC currently doesn’t have jurisdiction over most small generators (less than 20MW), but they developed the SGIP/SGIA partly for the rare instances when they do have jurisdiction, and to serve as a model for states to use.

Lots of states started with the SGIP/SGIA, and the IREC model did, too. It’s really important to include a standard agreement like the SGIA so that utilities and project developers don’t have to call in lawyers to negotiate interconnection agreements – that adds time and cost. Sometimes, state rules will say that utilities have to have standard agreements, but that means IREC probably won’t be involved and it’ll just be something that each utility creates, so some unhelpful provisions can get thrown in.

It’s definitely better to work out the standard agreement in the rulemaking, so I’m happy that Utah is taking that approach. We’ll have to modify the SGIA to work with Utah rules, but that won’t be too hard. The IREC Model Interconnection Rules go up to 10MW. Utah’s draft rule says it’s important to have standardized agreements and they propose to modify their rule to fit FERC’s rules on these. For insurance requirements, the SGIA leaves it up to the utility. Utah’s proposed rule waives insurance requirements for systems under 2MW.

IREC: And the third-party ownership provision? What’s the feeling here? Has this been a problem in the past? Why would this need to be addressed?

JK: Third party ownership is the norm for large systems in California and other states with lots of solar. Those owners can take advantage of the federal tax credits and depreciation, and they develop an expertise in developing and maintaining solar projects. Most utility customers have no experience with solar, no time or interest in learning, and they often don’t have the capital or the tax appetite to develop a project. Allowing third party ownership is critical, but we’ve had to deal with arguments that those owners fall within the definition of a “public utility”, meaning they’d be operating in the existing utility’s service territory, which isn’t allowed.

For interconnection procedures, the only thing we need to do is to make sure that they don’t preclude third party ownership. The Commission can address whether third party ownership is allowed under a separate docket, or maybe they’ll just allow it. In any event, the typical problem in interconnection procedures is that there will be a definition of a “customer-generator” as the utility customer who owns an on-site generator. If that sort of language is in the procedures, that creates a barrier even if third party ownership is generally allowed.

That’s a good example of an issue we raised in the workshops in Utah – the draft rules don’t set up a barrier to third party ownership; all we have to do is make sure it stays that way.

IREC: So overall, are you pleased with the outcome? It sounds like the process was efficient and productive, and the Utah’s model draft interconnection rule contains many things found in IREC’s model interconnection rule.

JK: We’re in the middle of the process, so I can’t say that I’m pleased with the outcome yet. The draft rule does look pretty good. My only criticism of the process is that it could have been better. The Commission could have started the formal rulemaking process right after workshops. We could have had good rules in place more than a year ago and projects would have been installed.

But, utility commissions have lots on their plates, lots of rate cases and other things going on. It’s easy to put this off. It’s hard to complain, really. The Commission put a lot into the draft rule and I’d rather have a really good draft after a year than a poor draft right away. But generally we’re pleased with the draft rule, and it can be improved, but as it stands, Utah’s rule will be one of the better rules in the country.

One part of the process was especially helpful, and I mentioned it before. Usually, parties give their comments generally without going through line-by-line, which makes it hard to track what each party said about each provision. These rulings are so complicated with lots of pages of detail. It’s hard to keep up with comments.

But in Utah, the rules were broken down into an Excel spreadsheet so people were actively encouraged to comment on discrete parts by section. It was a very large spreadsheet, but it had was a very organized approach to it. You could actually figure out what people were commenting on in say, Section 3.a.6. It was lots of work, line by line, but the spreadsheet invited comments. It was a very effective method to use for going through that level of detail.

IREC: So what now?

JK: Comments to the draft rule are due on October 1st, and IREC will submit comments to the draft rule. Usually the comment period address comments submitted by other parties. This isn’t the time to come up with new arguments, and the Commission may not even ask for reply comments. Once all the comments have been received, it’s up to the Commission to either issue an order with a new rule or bring all the parties together to discuss the issues in a hearing before issuing an order. If things move along quickly, then it’s possible that we’ll have a final rule by the end of this year, or early in 2010. Because the draft rule was carefully thought out and the parties worked well together, it should move along pretty quickly. Actually, RMP understands the issues, they know what’s important. They’ve been a good utility to work with. IREC will submit comments., but you never know.

IREC: Whew. All that effort for just one state. No wonder these things take so long. It’s a complicated and complex world you and the other IREC legal team inhabit, Jason. Thanks for the time to explain it. Keep up the great work.