Deadlines keep the world on track. They are the metric by which we manage our time, determine priorities and assess progress -- though some people are better at meeting them than others.
Among the many rules governing the electricity grid, there are innumerable timelines, deadlines and enforcement mechanisms in place to ensure the grid keeps humming along, providing safe and reliable electricity to the masses. Yet the surge of requests to connect new distributed energy resources to the grid and the resulting queue backlogs have revealed that states may be falling short when it comes to enforcing relevant timelines and deadlines for interconnection.
In the previous article in this series, we discussed the important role of clear and explicit interconnection timelines for expeditiously processing the increasing volume of applicants seeking to connect to the grid. But what good are timelines if they’re not followed? And how do you make sure that everyone -- both applicants and utilities -- does what they’re supposed to do on time?
The key is having clear rules for enforcement that avoid confusion and keep the interconnection queue moving.
Removing applicants from the queue
Timeline enforcement is especially important when connecting to the grid because everyone in the interconnection queue relies on the timeliness of everyone in front of them. If the utility is trying to look at the impact to the grid from one project, it needs to know the impacts of all the projects interconnecting ahead of it. So, when one applicant gets behind in meeting its deadlines -- or the utility isn’t keeping up with processing applications -- everything slows down and everyone suffers.
While many states specify timelines in their interconnection rules, few have specific provisions to address what happens when deadlines are missed or delayed. Clogged interconnection queues are becoming increasingly common as more clean energy projects seek to connect to the grid. For example, North Carolina has seen major queue backlogs for the past few years and continues to struggle with them, despite recently having taken some steps to clear its queue.
The timeline enforcement rules that do exist are typically focused on the applicants’ side, kicking an applicant out of the queue if it isn’t sticking with the timelines. While this seems straightforward, in practice, utilities have sometimes been hesitant to take the step because they worry about resulting complaints and disputes. Therefore, in addition to incorporating well-defined deadlines and extensions into their interconnection procedures when warranted, it’s important for states to make their queue-removal provisions clear and transparent.
Enforcing utility timeline compliance
The onus to keep the queue moving, however, does not fall solely on the applicants. Utilities also need to meet specified deadlines for completing studies and processing applications. A lagging queue has a big impact on applicants. They have set expectations with their customers and financiers, who in turn are holding applicants accountable for meeting those expectations. In some cases, missing deadlines can cause applicants to incur additional costs, impacting the applicant’s financing and bottom line.
Unfortunately, usually the only recourse for applicants when the utility is falling behind is to follow dispute resolution procedures, which typically culminate in filing a formal complaint. Frequently, an applicant doesn’t want to take the route of filing a formal complaint against the same utility that it needs to work with to get its project approved. Most will only take this step if it’s absolutely necessary.
So, how can states ensure that utilities adhere to deadlines?
They can adopt rules requiring utilities to regularly report on their timeline compliance. Then, if the reporting shows the utility isn’t meeting its deadlines, the state can consider whether and how to penalize or incentivize the utility appropriately. This keeps enforcement uniform for all, instead of leaving monitoring of the utilities up to whichever applicants feel compelled to pursue dispute resolution. Reliable, unbiased enforcement of utilities’ deadlines is critical because they are the key gatekeepers of the electricity grid and thus the energy market.
In addition, this approach remedies the imbalance between entities with and without a direct financial stake in the interconnection process. Applicants that fail to meet their deadlines risk getting kicked out of the queue, while utilities risk a commission-imposed penalty. Should formal complaints be deemed necessary, the option remains on the table but becomes more of a last resort, rather than the go-to enforcement mechanism.
Putting ideas into action
Does this sort of regulatory structure work? It appears to. Massachusetts adopted a timeline enforcement mechanism similar to what’s described above, providing for more reporting requirements for utilities and subjecting them to penalties for failing to comply with timelines. Since implementation of the timeline enforcement mechanism, along with other interconnection process improvements, Massachusetts utilities have reported that they are meeting interconnection timelines with flying colors. If other states adopt such an enforcement mechanism, we will be able to see whether it has its intended effect elsewhere, as well.
Neighboring New York is actively considering similar measures but is taking a somewhat different approach. Following a tremendous backlog in its queue as more and more distributed generation facilities attempt to come on-line, New York is currently evaluating rules that would incentivize timeline compliance as part of its broader Reforming the Energy Vision (REV) effort. A proposed interconnection “earning adjustment mechanism” (EAM) under development would allow New York utilities to earn more if they meet certain interconnection goals, including targets related to timeline compliance and customer satisfaction.
The interconnection EAM is one of several EAMs being considered, and together they represent New York’s first step toward a more outcome-oriented ratemaking paradigm. While time will tell, a carrot-and-stick combination of EAMs and other timeline enforcement provisions could be just the ticket for keeping queue backlog at bay.
But beyond these basic tools to incentivize timeline compliance, interconnection is further improved by increased data transparency and information sharing. For example, better access to grid data, through pre-application reports and distribution system maps, can help applicants identify good grid locations for projects and further streamline the process for everyone. And better tracking and reporting of data regarding the interconnection process itself can help regulators, utilities and other stakeholders identify bottlenecks and address them before they bog everything down.
Stay tuned for our next article in the series to learn what tools utilities and regulators are using to accomplish these important goals.
Erica McConnell is special counsel with Shute, Mihaly and Weinberger LLP, attorneys for the Interstate Renewable Energy Council. Laura Beaton is a fellow.