Developers Encouraged to Participate in Upcoming California RFOs

Client Alert: Developers Encouraged to Participate in Upcoming California RFOs in Light of Proposed Modifications to the CAISO Interconnection Queue Management Process

On June 12, 2024, the CAISO Board of Governors will decide whether to approve the California Independent System Operator (“CAISO”) proposed Revised Addendum to Final Proposal (the “Addendum”).  Resulting from the 2023 Interconnection Process Enhancement initiative, which has been a stakeholder process focused on “enhancing coordination of resource procurement and interconnection, resource planning and transmission to achieve state reliability and policy need,” the Addendum clarifies:

• How CAISO will implement the zonal approach and assess available transmission capacity for each cluster;

• The scoring process, along with recommendations to load-serving entities (“LSE”) on the LSE allocation process; and

• The CAISO’s reasoning behind the treatment of Energy Only resources 

Background

Stakeholders have been engaged in workshops related to Track 2 of the 2023 Interconnection Process Enhancement initiative since early 2023.  The purpose of the initiative has been to adopt processes that build on the requirements established by FERC Order 2023.  The stakeholder process culminated with the drafting of a Final Proposal on March 28, 2024.  The Final Proposal is noted as being “part of a broader effort to tighten linkages among resource and transmission planning activities, interconnection processes, and resource procurement, as the ISO works . . . to accelerate development and deployment of critical resources.”[1] CAISO issued the Addendum with revisions in early May 2024 and conducted a workshop in mid-May to answer stakeholder questions concerning the Addendum.  The Addendum, Final Proposal, workshop presentations and web meeting videos can be found here.

Proposed Addendum

Due to the significant volume of projects requesting interconnection, a core tenet permeates the initiative.  This tenet centers around the prioritization of projects located in areas where either transmission capacity exists or new transmission has been approved.  In addition, the CAISO seeks to provide “opportunities to identify and provide alternative points of interconnection or upgrades.”[2]  To achieve such result, a zonal approach has been proposed such that prior to the interconnection request window, stakeholders will be provided with information that identifies the available transmission capacity within the transmission zones.  By utilizing transmission constraint information along with allocated Transmission Plan Deliverability, CAISO will determine available transmission capability for future clusters to be studied.  The zonal approach will be utilized to designate zones as TPD or Merchant zones.  If a project is within a TPD Zone, CAISO will utilize a “constraint-based approach based on the project’s point of interconnection to determine if a project can move forward to the scoring phase.”  Whether a project can move forward to the study process will depend upon project scores, distribution factors, and 150% of available capacity for each known constraint area.

 The Addendum further clarifies the scoring process, highlighting a goal of ensuring that the “most ready projects advance to the study process.”[3]  Interconnection customers will be required to submit documentation supporting their score and LSEs, rather than interconnection customers, will have to demonstrate commercial interest in the project by providing CAISO with point allocations for specific projects.  Developers should take note that while CAISO purports that it does not intend to dictate procurement rules, CAISO has encouraged LSEs to conduct public Request for Information, Request for Offers, or a functionally equivalent process such that there is a fair, transparent, and competitive opportunity for LSEs to consider various projects such that an LSE can decide which project an LSE will award its allocated commercial interest points.  In light of CAISO’s recommendations, it is expected that the 2024 RFO season should be robust and developers are encouraged to participate in any upcoming RFOs or RFIs in order to increase any potential opportunities for future projects obtaining LSE allocation points within the interconnection scoring process.

 The Cluster 15 study window is expected to open in fall 2024 and will be the first time that the LSE commercial interest allocation process is implemented.  CAISO proposes elasticity within the Cluster 15 timeline to enable LSEs to have additional time to submit their first LSE allocations to the CAISO.  Otherwise, going forward (aside from Cluster 15) LSEs will be required to provide the CAISO with their elections no later than 10 calendar days after the close of an interconnection request window, and in the case of Cluster 15 only, 21 calendar days.

 The Addendum finally addresses concerns expressed by stakeholders with respect to the treatment of Energy Only projects seeking to interconnect.  The interconnection procedures for Energy Only projects will only include two options: a Reimbursement option, and non-reimbursement option. The Reimbursement option is available for projects seeking to interconnect in zones that have been identified as having a need for Energy Only resources within the CPUC IRP base case portfolio and LRA plans.  The Non-Reimbursement option is available for those projects seeking to interconnect in zones not identified as having a need for Energy Only resources within the CPUC’s IRP base case portfolio and LRA plans.  Energy Only projects that seek to interconnect under the Non-reimbursement option will not be subject to the scoring criteria and will be eligible to be studied.  However, Reimbursement Energy Only projects will be scored and compete to be studied with a scoring matrix similar to FCDS projects.

 Key Takeaway

Given the scoring criterion expressed in the Final Proposal and clarifications made within the Addendum regarding the LSEs’ point allocation process, developers with future projects that require interconnection studies and full deliverability will likely have a higher chance of moving forward in the interconnection study process if the project has the benefit of a LSE point allocation election.  Participation in RFOs, RFIs, bilateral negotiations or other procurement processes with LSEs are encouraged in order to increase a project’s likelihood of receiving a LSE point allocation.  If the Addendum receives final approval, CAISO expects to file tariff amendments with FERC in July 2024.

 [1] “2023 Interconnection Process Enhancements: Track 2 Final Proposal”, California ISO, May 28, 2024, at 6.

[2] “2023 Interconnection Process Enhancements: Revised Addendum to Track 2 Proposal”, California ISO, May 17, 2024, at 3.

[3] Addendum, at 6.

 For further information concerning the Addendum or Final Proposal, please contact either:

Shae Harvey (213) 631-5299 or Karleen Stern (415) 235-6559