RECBWG: JTIQ Draft Tariff (20230425)

Environmental Sector Comments on JTIQ Cost Allocation
May 10th, 2023

The Environmental Sector appreciates the opportunity to provide comments to the RECBWG on JTIQ cost allocation. 

The Environmental Sector appreciates MISO and SPP’s overall JTIQ effort, including spreading the cost of interregional lines over multiple DPP cycles to lower the cost for individual generators, which ultimately lowers costs to load. We encourage MISO to explore the potential for competitively bidding JTIQ lines, which will further lower cost for load.  

One of JTIQ’s innovations was to provide certainty to generator developers on the costs of their network upgrades before those developers entered the DPP.  Recently, MISO and SPP announced that additional costs could be added later, which undermines this innovation.  We urge MISO and SPP to reconsider or, at least, limit the amount of additional costs related to SPP Affected Systems that could be added after a project enters the DPP.   

 The Environmental Sector appreciates the opportunity to weigh in as more details of the proposal are available. We look forward to providing comments when MISO publishes proposed Tariff and/or Business Practice Manual language and more details of the proposal are available. 

Invenergy thanks MISO for the opportunity to provide feedback on the proposed tariff framework for cost allocation and cost recovery of JTIQ.

Invenergy sympathizes with the need for efficiency and the limited time for stakeholder debate. The promise of DOE funding mitigates the impact of the 90% cost allocation to generation, and for the sake of expediency in approving the inaugural portfolio, Invenergy can accept this outcome. However, MISO and SPP have not justified the 90-10 gen-load split for all future JTIQ portfolios.

Invenergy maintains the position submitted to FERC’s Transmission and Interconnection NOPR that 345kV lines should be considered backbone upgrades. The JTIQ portfolio increases interregional backbone reliability and transmission headroom. The unique nature of these portfolios should differentiate them from routine generator upgrades and costs should be allocated commensurate with the benefits.

Invenergy asks the joint RTOs to specify that the 90-10 gen-load split will only apply to the first JTIQ portfolio and that future cost allocation methodology will be re-evaluated prior to the approval of the next JTIQ portfolio.

The NDPSC does not support allocating 90% of the JTIQ projects’ O&M cost to the constructing TO zone as is currently proposed. The rationale for such an allocation is that MISO wishes to follow the existing language of the GI tariff.  However, such an allocation is not following the spirit of what a generator interconnection network upgrade is. We believe these costs should be shared more broadly.   The five projects in the JTIQ portfolio don’t look like a typical generator interconnection network upgrade.  In fact, the $476M Bison- Hankinson to Big Stone South line – a single project representing nearly half of the $1B JTIQ portfolio — would never have proceeded as a generator interconnection network upgrade as it’s simply too expensive.  The same is true for the $331M Brookings Co – Lakefield project.  To further illustrate that some of these projects are distinguishable from typical generator interconnection network upgrade projects, there are roughly $40M of GI network upgrades on the Otter Tail Power (OTP) system to date. Under the current proposal, load in the OTP zone could be asked to take on 90% of the O&M for a project more than ten times that amount for a single project.  It is a disproportionate impact to load in certain zones and the current GI tariff provisions are not reasonable. 

 Rightfully recognizing these JTIQ projects provide benefits beyond any single generator and location, MISO resolved this issue in the proposed JTIQ cost allocation by spreading 90% of the cost of such projects across a group of generators who benefit across a wide geographic area. The remaining 10% of the JTIQ portfolio costs and associated O&M are also spread broadly across the MISO and SPP footprints.  It only makes sense to take a similar approach for the remaining 90% of O&M costs to be similarly broadly spread and not be assigned to the constructing TO zone. 

The OMS Transmission Cost Allocation Work Group (TCAWG) appreciates the opportunity to provide feedback to MISO on proposed Joint Targeted Interconnection Queue (JTIQ) project cost allocation and cost recovery tariff additions and revisions. This feedback is from an OMS work group and does not represent a position of the OMS Board of Directors.

The OMS TCAWG notes that MISO is requesting feedback on the JTIQ project cost allocation and cost recovery tariff additions and revisions without posting the red-line tariff language, so these comments are made without the benefit of seeing actual language.  The OMS TCAWG reserves the right to comment as the actual proposed tariff language is provided.  In particular, we look forward to seeing more details on the cost recovery formula and how it will be applied. 

The OMS TCAWG is concerned that there is at best some ambiguity regarding how some costs may be allocated to load.  Specifically, in the event that not enough generation signs a Generation Interconnection Agreement within the JTIQ area, MISO indicates that “discussions continue [as] to how to split these improbable costs between MISO and SPP.” MISO has indicated that the majority of the benefits of these JTIQ projects will flow to the SPP.  Presumably those allocations of cost would follow those benefits.  It is unclear why the question of how to split such costs between RTOs would still be on-going and why those allocations would not follow the same split as the other cost allocations between SPP and MISO for these projects. Does MISO envision any scenario in which load in MISO would get allocated costs for projects in the SPP region if those generators do not show up?  The TCAWG would have serious concerns with such an approach and would request that guardrails be included in the draft tariff language to prevent such a shift in cost allocation onto MISO load. We would appreciate any further specific details that may be provided on this point.

Regarding possible DOE funding, the TCAWG requests that MISO provide information on how it anticipates that such funding would apply to the JTIQ projects, and in particular, to O&M costs and load’s allocation for E&C costs.  The TCAWG believes that to the extent federal funding offsets costs of the JTIQ projects, that funding should be shared accordingly with MISO load to offset cost allocations to load.  We would like to see such a provision included in the draft tariff language.

RECBWG: JTIQ Draft Tariff (20230425)
MISO Transmission Owners Feedback*
May 10, 2023

The MISO Transmission Owners submit the following feedback on two items discussed during the JTIQ Draft Tariff presentation at the April 25, 2023 RECB Working Group meeting. First, MISO is proposing that the transmission operations and maintenance (O&M) costs related to the 90% of the JTIQ project costs covered by interconnection customers be recovered from load in each RTO. Within MISO, the current proposal is to recover these O&M costs from the load in the zone of the constructing transmission owner. MISO has explained that this treatment of the O&M costs would be consistent with how O&M costs are treated in MISO for 345 kV Network Upgrades in the generator interconnection process.

The MISO Transmission Owners do not support allocating JTIQ-related O&M costs only to the load in the zone of the constructing transmission owner. While the MISO Transmission Owners appreciate that there is interest in aligning the JTIQ Tariff provisions with the existing generator interconnection process, not unlike other areas of the JTIQ proposal, the allocation of O&M costs to only the load in the constructing transmission owner zone is not appropriate because the JTIQ projects are significantly larger in scope, scale, and purpose than conventional MISO-only generator interconnection projects. The JTIQ projects address the Affected Systems issues at the seam and as proposed, the costs fall disproportionately on the loads in the transmission owner zones on the MISO and SPP seam. For the reasons stated above, the MISO Transmission Owners support sharing these O&M costs throughout MISO, instead of burdening only the load in the zone of the constructing transmission owner.

Second, while there has been some discussion at stakeholder meetings related to who is the ultimate backstop for JTIQ project costs if the JTIQ Participation Group is never large enough to cover the costs, MISO has not put forth a proposal on how to address this risk. The MISO Transmission Owners support including Tariff and Joint Operating Agreement language to provide cost recovery roughly commensurate with benefits received. The entities that are at risk of bearing the burden as the ultimate backstop should, if the costs fall upon them, receive benefits described in the Joint Operating Agreement consistent with the “builder receives benefits” principle.

* The following MISO Transmission Owners do not join these comments: East Texas Electric Cooperative and Lafayette Utilities System.

Mississippi Public Service Commission (MPSC) and Arkansas Public Service Commission (APSC) Feedback Regarding JTIQ Draft Tariff – RECBWG (20230425)

MISO Requested Feedback Statement:

In the April 25, 2023, meeting of the Regional Expansion Criteria and Benefits Working Group (RECBWG), MISO presented an overview of Joint Targeted Interconnection Queue (JTIQ) project cost allocation and cost recovery tariff additions and revisions.  Stakeholders were invited to submit feedback on the proposed tariff framework.

Comments are due by May 10, 2023.

Feedback:

The MPSC and APSC provide the following feedback (which includes some of the feedback provided to PAC):

1. MISO representatives have described the JTIQ process as a “one-off” noting that subsequent JTIQ studies and new projects/portfolios will not be routine. The Tariff changes should reflect these statements. One option is to sunset the JTIQ Tariff language and refile in the future if a subsequent portfolio is proposed. Alternatively, MISO should include threshold criteria that must be met before a subsequent JTIQ study process commences, including a super majority vote by the PAC requesting a new JTIQ study. Absent objective criteria, subsequent JTIQ studies will be based on MISO’s subjective preference.

2. Recognizing that JTIQ is a “one off,” MISO should be clear in Tariff language and transmittal letter that this filing will not be considered as precedential (binding) on the development of subsequent JTIQ portfolios.

3. Will the Tariff language restrict JTIQ projects to those that operate at 345 kV and higher?

4. MISO Load’s 10% (E&C and O&M) should be recovered from the subregion where the projects are located. MISO has acknowledged and FERC has accepted that the benefits of these projects do not extend across the MISO North/South interface. The JTIQ process deviates enough from the MISO generator interconnection process that the GIP cost allocation should not be used as a standard or basis for JTIQ cost allocation to load.

5. Recognizing that the purpose of JTIQ is to coordinate projects on the SPP/MISO seam to facilitate generator interconnection and reduce the cost of network upgrades (not shift the cost of those upgrades to load), MISO should develop an analysis that measures the savings (reduced cost of interconnection-related network upgrades) resulting from the JTIQ process. Measuring these benefits will help determine whether subsequent JTIQ study processes and investment are cost beneficial.

6. MISO’s proposal to add language to specify that “load will cover any costs that are not covered by IC” is a fundamental departure from Order 2003, MISO’s Generator Interconnection Procedures, and FERC’s generator interconnection cost allocation precedent. MISO’s proposal would make load the default guarantor for JTIQ investment.

Under the MISO GIP, network upgrades are not constructed without a contractual commitment by interconnecting customers to be pay the cost. No commitment - - no upgrade. MISO’s “build it and they will come” approach makes load the ultimate payer if the JTIQ facilities are undersubscribed or generators default on their obligations. In other words, MISO’s statement that load pays only 10% really means “at least 10%.” It could be much, much more. If insufficient generators subscribe to pay JTIQ costs or if generators subsequently default, load (customers) will be responsible to cover the cost difference between what interconnecting generators are willing to pay and the total cost of the projects.

MISO argues that the risk is very small, offering rhetoric but no analysis to support that. If the risk is small, why doesn’t MISO propose to have the interconnecting generators bear that risk. If the risk is high, it would be more reasonable to hold an open season so that sufficient interested generation developers have the opportunity to commit/sign up. If enough do, then construction could begin without putting customers at risk. And if they don’t sign-up, don’t build the projects. MISO’s proposal does nothing to mitigate this risk to load. There is no cap on how much of the JTIQ costs could be borne by load. This aspect of the proposal is fundamentally unfair to load.

7. MISO has not explained what happens should a generator developer default before or during operations. If a developer commits to pay JTIQ costs as a condition to interconnecting, those payments should be guaranteed for the term of the agreement or other interconnecting generators (not load) should be obligated as the insurers of last resort. The Tariff change should capture this treatment and protect load from being the insurer after the fact.

8. MISO proposed to develop a separate JTIQ Agreement in an effort to avoid changing existing agreements. MISO has not explained the relationship between the JTIQ Agreement and each generators GIA. Do the terms parallel? Do the agreements have separate financial security requirements? Is a default on one agreement considered a default on the other? These Agreements should be drafted with an eye towards protecting load from additional cost responsibilities that would not exist under current generator interconnection agreements and current interconnection procedures.

9. The Tariff should explain how the true-up process works to ensure load pays no more than 10% of the cost. That true-up applies to payments due to (i) insufficient generator developers committing to pay JTIQ costs, and (ii) generators that default on their payment obligations (e.g., early termination of operations, default on financial assurance). True-up must include interest to ensure return of the time value of money.

10. MISO has not explained how it will track overpayments by load. These over payments could last for years. There must be a way to determine what portion is paid by load, the appropriate interest rates to be paid to reimburse the time value of money and other aspects of the reimbursements.

Council of the City of New Orleans (Council)

Response to RECBWG Feedback Request on JTIQ

Submitted by May 10, 2023

 The Council appreciates the opportunity to provide feedback to MISO on the proposed JTIQ project cost allocation and cost recovery.  As an initial matter, the Council does not oppose the proposed JTIQ projects, but the Council has a concern about MISO’s proposed cost allocation.

 The Council understands that the identified JTIQ projects are characterized as generator interconnection projects, and therefore, are subject to MISO’s existing cost allocation method of 90% to interconnecting generators and 10% to system-wide load for projects > 345 kV.  The Council also understands that the identified JTIQ projects are located only in the MISO-North subregion along the seams with SPP.

 That said, the Council is unaware that MISO has performed any analysis or provided any data that demonstrates that the benefits from the proposed JTIQ projects will actually flow to the MISO-South subregion (and specifically New Orleans) commensurate with the costs that will be allocated in light of the limited transfer capabilities over the north-south intertie.  Without this showing, MISO has not demonstrated how a 10% allocation of JTIQ costs to system-wide load is just and reasonable.[1]

 Accordingly, the Council asks MISO to either make the necessary showing or consider changing its proposed allocation to system-wide load.

Clean Grid Alliance Comments on JTIQ Cost Allocation
May 10^th, 2023

Clean Grid Alliance appreciates the opportunity to provide comments to the RECBWG on JTIQ cost allocation. 

We appreciate the efforts of both MISO and SPP to creatively address the need for interregional backbone transmission. Not for lack of need, but due to policy barriers, no interregional transmission has been built to date at the MISO-SPP seam. Because of this, the need and burden has fallen on generation interconnection customers, who are only one of multiple beneficiaries of this backbone transmission. Stakeholders at the April 2023 RECBWG meeting noted there would be significant benefits to markets with the construction of JTIQ lines, above and beyond the benefit of enabling generator interconnections. 

Clean Grid Alliance understands that MISO has proposed JTIQ cost allocation to be split 90% to generators and 10% to load. However, as noted, many additional stakeholders will significantly financially benefit from these lines and it is highly likely that load will benefit well beyond the proposed 10% allocation. Because of this we believe the following points must be memorialized in JTIQ policy language:  

• The 90/10 split should be premised on receiving DOE funding at 50%. Clean Grid Alliance does not support a 90/10 split in the absence of DOE funds. 
• DOE funding to be pro rata and benefit the 90%/10% with contributions in kind. To be clear, the 50% contribution would go toward total cost of the line and the remainder split 90%/10%.
• A more detailed cost/benefit analysis and allocation structure will be undertaken for future “tranche” efforts if DOE funding is not available.
• Policy language to include a mechanism for (non-load, non-generator) stakeholders who will benefit, to financially “opt in” to the JTIQ lines and receive benefits. Beneficiaries can be determined from an economic congestion analysis before and after JTIQ lines. 
• Policy language to prevent “free riders” – Entities that do not financially contribute toward JTIQ lines shall be prevented from financially benefitting.
• TO-Self funding should not be applied to JTIQ lines. However if it can be demonstrated that transmission owners are genuinely carrying costs above and beyond the reliability and financial benefits they will be receiving, a net present value, upfront payment for a reasonable rate of return could be considered. Please see Appendix A to these comments for one proposal.
• JTIQ lines to be competitively bid by default for construction in cases where DOE funding is not secured. This will ensure the lowest cost and best available terms. 
• Risk mitigation mechanisms from project cost increases and schedule delays built into JTIQ policy to protect generation interconnection customers and load
• Generators to pay standard DPP milestone financial payments for JTIQ lines, similar to all generator interconnection Network Upgrades, which require 20% security by GIA execution. 

Questions: 

• MISO and SPP explained that generators would have to put up 20% of the security for their pro-rata share of JTIQ lines at GIA execution, as well as the standard Network Upgrades milestones at decision points. However the JTIQ whitepaper shows generators putting up 100% of security, including 30% in earlier phases and 70% at Decision Point 3. Clean Grid Alliance does not support the latter arrangement. Please confirm the former is the intention and what policy language will reflect. 
• MISO and SPP noted that TO self-funding costs were not factored into the DOE application, but that if DOE funds were secured, capital costs would be reduced by 50% and therefore no rate of return would be ascribed to the DOE funded portion of JTIQ lines. Please confirm this characterization is correct and the policy language to reflect it.  

Finally, it is worth noting that stakeholder feedback on JTIQ cost allocation (including these comments) will be incomplete until actual Tariff language is available for review and comment. MISO has stated an intention to finalize the stakeholder process in June, but stakeholders need at least two opportunities to review and provide feedback on actual policy language, once it is available. An updated timeline reflecting two feedback opportunities in the future once policy language is made available, would be appreciated. 

Sincerely,

Dr. Rhonda Peters
Clean Grid Alliance Technical Consultant

Appendix A:

Alternative to TO Self-Funding

With traditional generation interconnection projects, the IC fully funds the network upgrades prior to the construction of the facilities.  There is no period where the TO is funding the project and there is no risk to load.  Under JTIQ, if generators were to put 20% of their $/MW charge as security at GIA execution, TOs would be funding the projects during a gap period before generators come online.  (This situation would not exist if generators are required to provide security for 100% of their $/MW charge.) Once the generator comes online charges become directly assigned to projects, but there would be a period where the TO carries some capital at risk at 20% security (but not at 100% security).  

Problems with self-funding

• A 20-year payment requirement moves capital costs to operational costs.  This can have negative impacts on ICs ability to claim Investment Tax Credits on the full cost of the investment and negatively impact tax equity financing.  
• In addition to the actual payment, the IC is required to post security adding an additional layer of costs for ICs.
• The expansion of the self-funding has been rejected in nearly every docket in front of FERC. Proposing self-funding for JTIQ risks further rejection by FERC further delaying the projects.  

Solution

Interconnection customers could make a single payment that represents its share of the connection costs and a fair rate of return consistent with the period the TO’s capital is utilized to cover the gap between transmission coming online and generation coming online.  The costs would also be grossed up to cover taxes.  The IC would have the option to make a single payment or to enter into a self-funding agreement.  

Advantages

• Reduced risk to load.  Load customers have a lower period of exposure because the IC is paying for the network upgrades in a single payment.  They also have lower exposure because the upgrades would not be in network rates once the IC capital contribution is included. 
• ICs have reduced liability and are better able to capitalize ITCs.  They also have more certainty on costs – yearly payments can fluctuate based on capital cost and tax rates.  
• Reduces risk of FERC rejection by adding flexibility for ICs to make a single payment that better reflects the TO risk.