On August 16, 2019, in Docket RM17-8, FERC issued an order on rehearing and clarification regarding generator interconnection reforms. In the Order, FERC affirmed that the DC Court of Appeals decision in Ameren, where the Court remanded to FERC a decision to remove from the MISO tariff the unilateral transmission owner funding of interconnections, did not implicate FERC’s revisions to the pro forma Large Generator Interconnection Agreement (LGIA) adopted in Order No. 845. Order 845 did not change the funding option pursuant to which transmission providers can earn a return of, and on, the costs of network upgrades. FERC also clarified that RTOs and ISOs can request an independent entity variation and address whether the relevant provisions in their tariffs implicate Ameren. Lastly, FERC addressed rehearing requests on the indemnity provision in the LGIA. FERC declined to expand the applicability of the indemnity provision because: (1) the existing language already provides indemnification for the transmission provider for a significant number of third party claims arising from the interconnection customer’s option to build construction; (2) even if the indemnity provisions do not apply, the transmission provider may pursue a claim for breach if the interconnection customer’s conduct . . . breaches the interconnection agreement; and (3) article 5.2 gives the transmission provider ‘significant oversight authority’ over the option to build, which, if exercised properly, gives the transmission provider a significant role in ensuring that the interconnection customer’s exercise of the option to build does not expose the transmission provider to liability. FERC denied a request that it clarify that transmission providers have the right to seek both indemnification and direct damages from the interconnection customer for the life of the facilities that the interconnection customer
constructed pursuant to the option to build since the pro forma LGIA already makes clear that indemnity provisions and a party’s right to seek direct damages for defaults under the pro forma LGIA survive the termination of the agreement. FERC also found that the term “construction” used in pro forma LGIA article 5.2(7) is not unreasonably vague, especially considering FERC’s intentional omission of the terms “engineering” and “procurement,” which FERC used in other LGIA articles (5.2(1) and 5.2(2)).
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.