Interconnection with a utility grid could be more expensive in the future for independent power producers | Norton Rose Fulbright
Independent power producers must pay the cost to connect their power plants to the local grid. This is the only way to move the electricity to market. Interconnection with the grid usually requires not only a radial line from the independent power plant to the nearest utility substation, but also improvements to the grid itself to accommodate the additional electricity. The grid improvements are called “network upgrades.”
The utility usually builds the intertie and network upgrades and has the independent generator reimburse it for the cost.
However, the Federal Energy Regulatory Commission has said it is inappropriate for utilities to make independent generators bear the cost of network upgrades. Independent generators can be charged for the cost of the “direct intertie” — the radial line and related equipment that connects the plant to the grid. However, network upgrades are supposed to be paid for by all users of the grid. Current FERC policy is to require utilities to repay any amounts collected from generators for network upgrades within five years with interest.
The energy bill currently stalled in Congress would reverse this policy. The bill would give utilities the option of asking FERC to let them charge the generator for the cost of network upgrades or to pass through the cost to all grid users in transmission rates. However, FERC could not allow the cost to be passed through to all grid users in situations where the grid improvements are only needed because of the addition of the generator’s power plant.
The bill would also bar FERC from requiring utilities to pay interest when returning amounts collected from generators for network upgrades.
Entergy and Southern Company asked for this language.