Market expert weighs in on CAISO's final IPE proposal to clean up interconnection queue

The final CAISO Interconnection Process Enhancements (IPE) proposal is going before the CAISO board of governors next week before being filed with the Federal Energy Regulatory Commission (FERC) for approval.

Seth Hilton, partner at law firm Stoel Rives, told NPM that the IPE final proposal is CAISO’s attempt to deal with the fact that its interconnection requests have “skyrocketed” and is overwhelmed in the interconnection queue.

“There’s way more capacity in the interconnection queue than California likely actually needs, so they’re attempting to modify the interconnection process so they can focus on viable projects and manage the queue and not be so overwhelmed with the number of interconnection requests,” Hilton said.

To do this, the IPE proposal would allow CAISO to focus on areas – or interconnection zones – where there is transmission or plans to build transmission. Projects would be scored in these areas to determine which should move through the study process rather than CAISO trying to study every single request that comes into the queue. Rather, there would be a “win-only” process where CAISO would select certain projects over the other to continue forward.

Each interconnection zone would have a 150% cap with the idea to not study projects unlikely to move forward. That cap would limit the number of projects that actually are studied.

“You want to fit within that cap to move forward,” Hilton said, though added that there is a merchant option for developers willing to pay for their own transmission. “But the cost associated with that would not make that a viable solution.”

The scoring process is proposed to be broken into three categories: commercial interest, project viability, and system need.

Under project viability, Hilton explained that this would indicate how far a project has moved towards construction. Under system need, this looks at if a project is actually needed for local capacity reasons or if it is a long-lead time resource where transmission has been approved.

Commercial interest is where stakeholders have raised concerns. This category would allow load-serving entities (LSEs) the ability to express interest in certain projects, which is how commercial interest criteria is scored.

“Effectively, LSEs would get an allocation based on available planned transmission capacity and their load share,” Hilton said. “Then that allocation essentially awards points to projects indicating commercial interest.”

The concern from some stakeholders is that many projects are likely to have the same score in the project viability and system need categories, making the commercial interest category the determining factor on whether a project moves forward to the study process.

“They are concerned that LSEs will have too much power in the process to vote in favor of one project instead of another and that will make the final determination,” Hilton said.

While non-LSE offtakers will have the ability to express commercial interest, Hilton explained that “it is much more limited” than the weight an LSE would have.

If the proposal moves to forward and is eventually implemented, “LSE interest will dictate to a significant extent which projects move through the interconnection process, so from a developer standpoint it will be important to get a designation of LSE interest in your project. Some projects won’t get that,” Hilton said.

Hilton also recognized that California has faced its interconnection challenge for a number of years because of delays due to the number of projects in the queue, as well as challenges with getting deliverability which is required for capacity to count for resource adequacy (RA) reliability issues.

“Something needs to be done to address the interconnection process, but concern is the power this gives LSEs in selecting projects,” he said.

The CAISO board is being presented with the final IPE proposal on May 22 and 23.

*This story was originally published exclusively for NPM subscribers last month.

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