Persistent Interconnection Challenges Risk DC’s Clean Energy Goals

This article explores significant interconnection challenges occurring in the District of Columbia (DC or the District), including persistent and substantial delays and expensive and opaque upgrade costs-and what the DC Public Service Commission (PSC) can do to remedy the situation. These issues threaten DC's ambitious goal of 100 percent renewable energy by 2032, making a solution from the Commission particularly urgent.

Last year, IREC released its 2023 Freeing the Grid grades for state interconnection rules. The report evaluated each state's rules compared to established interconnection best practices adopted in states throughout the country. The best practices cover key issues in interconnection rules, such as timelines, costs, reporting, and more. Of the 50 states plus the DC and Puerto Rico, only one-New Mexico-received an "A" grade, while six others, including DC, received "B" grades.

Although DC's interconnection rules received one of the highest FTG grades, those who have gone through the interconnection process there would likely not rate the District as highly. For years, interconnection customers have experienced serious issues such as lengthy delays and exorbitant and uncertain upgrade costs, according to many stakeholders, including the Office of the People's Counsel (OPC), DC's Department of Energy and Environment (DOEE), and the Chesapeake Solar and Storage Association (CHESSA).

The reason for the discrepancy between DC's FTG grades and the on-the-ground experience of customers is that FTG interconnection grades are based on the official, written policies-not how the local utility applies or executes those procedures in the real world. DC's electric utility, Pepco, is having significant and consistent challenges managing the interconnection process. While Pepco's execution of the District's interconnection rules has been problematic, the root of the problem appears to be a lack of enforcement of the rules by the DC Public Service Commission (PSC) and Pepco's interpretation of the rules in ways that exploit gaps and gray areas.

The implications of this broken interconnection process are significant-DC has some of the most ambitious clean energy goals in the nation and DERs are a critical component to meeting those goals.ambitious goal of 100 percent renewable energy by 2032, with 15 percent coming from local solar power by 2041. Read more about this goal and the codifying legislation at the DC Department of Energy & Environment website: https://doee.dc.gov/service/renewable-energy-district.">¹These issues have created tremendous uncertainty for prospective solar customers and solar developers, resulting in a chilling effect on the local solar market. Left uncorrected, these interconnection challenges may ultimately leave the District's clean energy goals out of reach. As a result, the DC PSC should expand interconnection rules to cover gaps and gray areas and make the rules more stringent and detailed to fix the plethora of issues affecting DC solar customers and ensure the DC solar market gets back on track.

DC Solar Market Sapped by Consistent Interconnection Delays

According to numerous stakeholders, interconnection timelines have been one of the biggest challenges for several years. In 2023, DC's Office of the People's Counsel filed a petition to investigate Pepco's compliance with DC interconnection rules. In the petition, the OPC said that "Pepco has subjected interconnection customers to inexplicable, substantial delays in processing interconnection applications" (p. 12).

While DC regulations specify timelines within which Pepco is required to complete certain steps of the interconnection process, "these timelines are missed time and time again by wide margins," according to an affidavit from one solar company operating in the District. For example, DC regulations stipulate that Pepco must complete its review of Level 2 (over 20 kilowatts up to 5 megawatts) projects "within fifteen (15) business days…". But according to Pepco's annual interconnection reports, they met the 15-business day timeline 76.10% of the time in 2023 and just 52% of the time in 2022.

Customers also experience consequential delays in other steps of the interconnection process that do not have specified timelines. A 2021 petition from CHESSA revealed that dozens of proposed mid-to-large scale solar projects between 2018 and 2021 experienced significant delays in receiving Authorization to Operate (ATO), the last step before a project can begin operation. Issuance of ATO is typically one of the shortest steps in the interconnection processCHESSA's 2021 petition.">², yet these 20 projects waited between 63 days and 413 days to receive ATO!

These delays have significant real-world financial implications. An analysis by CHESSA and CleanGrid Advisors found that the financial losses in lost savings to customer and foregone SRECSRECTrade, today one DC SREC can be sold for around $440.">³revenue ranges from $8,000 to over $380,000 per project. Across the 20 projects, the total losses amount to $1.6 million. The lack of an ATO timeline for Level 2 projects is a clear gap in DC regulations.

Across the 20 projects [analyzed by CHESSA and Clean Grid Advisors, that were subjected to interconnection delays by Pepco], the total losses amount to $1.6 million.

Interconnection customers also report that major timeline delays can occur after a project passes initial technical review, which is when the utility can issue its Approval to Install⁴(ATI). Last week, CHESSA filed a petition for emergency rulemaking stating that the time to receive ATI after a Level 2 request to interconnect "has increased substantially over the last couple of years" (p. 15). CHESSA notes that before 2022 the time to receive ATI was typically two to three months, but since then it sometimes exceeds six months.

According to CHESSA, one reason for the delays is lack of clarity and gaps in the ATI timelines. For example, for projects that do not require grid upgrades, DC regulations require Pepco to provide ATI if both (1) the proposed system passed the review screens and (2) Pepco determines it can be interconnected safely. Requiring both is redundant given that if the project passed the review screens it would be safe to interconnect and gives Pepco leeway in deciding when to issue ATI. For projects that require grid upgrades, there is no established deadline to provide ATI to the customer.

DC Solar Projects Saddled with Expensive and Opaque Upgrade Costs

Another critical issue in Pepco's interconnection process relates to the costs when upgrades to the electric distribution grid are needed. DC regulations require that the utility provide the estimated costs for any grid upgrades required for interconnection, including "equipment, engineering, procurement and construction work including overheads." However, according to customers, these estimates are not provided in a detailed or itemized format but as a lump sum. This lack of transparency is particularly challenging for applicants who want to understand how these costs are changing over time and may be basing financing for future projects on expected costs.

According to CHESSA's recent petition for emergency rulemaking, Pepco's standard interconnection cost per watt for Level 2 projects has "more than doubled since early 2023." CHESSA is unclear on how or why Pepco's cost estimate methodology has changed in recent years. Furthermore, the "requirements seem to be applied unevenly by Pepco in the District. When interconnection customers inquire into the rationale for grid upgrade costs, they frequently change" (p. 12).

The recent cost increases and lack of cost transparency have resulted in significant financial uncertainty for interconnection applicants and have a real impact on clean energy adoption. High grid upgrade and interconnection facility costs are often a leading cause in making projects infeasible. A 2022 Washington Post article highlighted how some DC residents have been saddled with exorbitant grid upgrade fees, as much as $20,000, ultimately leading them to cancel the projects.

The recent cost increases and lack of cost transparency have resulted in significant financial uncertainty for interconnection applicants and have a real impact on clean energy adoption.

A more recent example comes from New Columbia Solar (NCS), a DC-based solar developer that filed a petition in early 2024 in response to unreasonable true-up interconnection invoices from Pepco that were sent well after the utility had provided its final approval of the project. NCS reported several instances where Pepco sent true-up invoices that were 162%-736% more than the original estimate. Critically, these true-up invoices were sent to NCS 203-844 days after ATO, not only violating requirements in the interconnection agreements, but also preventing NCS from offsetting or reducing the costs and eliminating any potential profit margin.

Solving These Challenges: Recommendations for the DC PSC

As discussed earlier, there is significant and merited concern among DC stakeholders regarding Pepco's ability to complete interconnection steps within a reasonable timeframe and provide a reasonable level of certainty regarding upgrade costs. There are a number of existing approaches the PSC could use to address the issues outlined.

To ensure an overall healthy and proactive interconnection process, the PSC should revise interconnection rules by:

• Establishing an Interconnection Task Force or Forum that meets quarterly to discuss how the rules are performing as well as interconnection challenges and potential solutions
• Establishing an Interconnection Ombudsperson to help track and facilitate the efficient and fair resolution of disputes

To help improve interconnection timelines, the PSC should revise interconnection rules by:

• Adding a timeline for ATO for Level 2 systems
• Clarifying and addressing gaps in ATI
• Expanding utility reporting requirements to ensure that sufficient data is collected to allow the Commission to monitor how well Pepco's interconnection process is functioning for all classes of solar installations.
• Expanding corrective action plans to apply to other steps in the interconnection process, including when Pepco fails to issue Level 2 ATO in a timely fashion
• Strengthening corrective action plan requirements by mandating the inclusion of specific and detailed descriptions of internal policy or staffing changes Pepco intends to implement, how each change is expected to reduce timelines, and set a target date for completion of corrective measures. The plans should be updated via quarterly progress reports until all actions are completed

To improve interconnection upgrade cost certainty, the PSC should revise interconnection rules by:

• Establishing a maximum 25% cost envelope for upgrade cost estimates
• Requiring that upgrade cost estimates are provided in a detailed and itemized format
• Requiring Pepco to publish an annually updated itemized cost guide that identifies the typical range of costs associated with equipment and labor estimates

The issues outlined here and expanded upon in petitions and comments by OPC, CHESSA, and DOEE are problematic and must be addressed immediately to ensure DC can meet its ambitious clean energy goals. Pepco claims it has implemented some enhancements and process improvements in early 2023, yet it remains unclear if these changes are alleviating any of the issues. For example, in its most recent quarterly report, Pepco reported that it failed to meet the interconnection timelines for 71.4% of community solar facilities during the quarter ending June 30, 2024. Furthermore, new problems, such as those highlighted in the September 2024 CHESSA emergency petition, continue to bubble up signaling the issues are systematic and likely to continue until PSC regulations are updated.

IREC encourages the DC PSC to take immediate action to revise the District's interconnection rules to address known gaps and gray areas and make the rules more stringent and detailed. The PSC should also implement a standing task force or forum to monitor how the rules are being implemented and identify other needed improvements on a regular basis.

1. DC has an ambitious goal of 100 percent renewable energy by 2032, with 15 percent coming from local solar power by 2041. Read more about this goal and the codifying legislation at the DC Department of Energy & Environment website: https://doee.dc.gov/service/renewable-energy-district.
2. Prior to issuing ATO, Pepco has the option to perform a Witness Test, which verifies the project and all equipment meet applicable standards, within 10 business days. If the system passes the test, or if Pepco decides not to conduct the test, the customer should receive the ATO shortly after. For more details on the reasons for the ATO issuance delays see page 4 of CHESSA's 2021 petition.
3. Solar Renewable Energy Certificates are an incentive that DC solar customers can earn based on how much electricity their system produces. One megawatt hour (MWh) produced equals one SREC. According to SRECTrade, today one DC SREC can be sold for around $440.
4. ATI is defined, according to DC rules, as "written notification that the Small Generator Facility is conditionally approved for installation contingent upon terms and conditions of the Interconnection Request, and the EDC may provide such conditional approval by furnishing to Interconnection Customer an EDC-executed copy of the Interconnection Agreement."

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