On November 2, the Federal Energy Regulatory Commission rejected a request from PacifiCorp that would have softened the cost of walking away from an interconnection agreement. The utility had asked FERC to apply only the transitional withdrawal penalty — nine times the study cost — to projects studied through its transitional cluster, even after those projects executed a Large Generator Interconnection Agreement. FERC refused. Any interconnection customer that executes an LGIA, the Commission held, is subject to the standard withdrawal penalty: 20 percent of identified network upgrade costs. The transitional cluster is no exception.
The order is short, unprotested, and — on its face — narrow. No party intervened or protested by the September 24 deadline. One commissioner dissented. But it answers a question every transmission provider working through Order No. 2023’s transition has had to ask: does the cheaper transitional penalty follow a project through the whole process, or end when it signs the agreement? FERC’s answer: it ends at the signature.
What PacifiCorp asked for
PacifiCorp filed its proposal on September 3, 2026, in Docket No. ER26-3712-000. The filing would have added a definition of “Transitional Withdrawal Penalty” to the utility’s pro forma LGIA and revised its definition of “Withdrawal Penalty,” so that customers studied through the transitional cluster study process would face only the transitional penalty — nine times the study cost — even after executing an LGIA.
The distinction is not a technicality; it is a large difference in money. Under the transitional procedures, a project that withdraws pays nine times what its studies cost; under the standard rule, a project that has executed an LGIA and then withdraws pays 20 percent of the network upgrade costs identified for it. Study costs are typically a small fraction of upgrade costs, so for any project assigned substantial upgrades, the transitional penalty is far cheaper. PacifiCorp’s proposal would have let transitional-cluster projects carry the cheaper exit price into the most committed stage of the process. The utility’s argument rested on expectations: it had consistently told customers that transitional penalties would apply throughout the transitional cluster process, including after LGIA execution, and upending those expectations could disrupt its processing of the cluster. The customers, on this account, had planned around the lower penalty.
FERC was unmoved. The Commission said PacifiCorp’s arguments were not sufficient, and that the utility had not explained how its revisions would address the Commission’s concerns about late-stage withdrawals. The telling point is the one FERC asked: not whether PacifiCorp had been consistent in its messaging, but whether the proposal protected the queue from projects that sign an agreement, hold a position, and then walk away. PacifiCorp, in FERC’s view, did not answer it.
What FERC actually decided
The core of the order is a reading of the pro forma tariff, and FERC’s reading is blunt: the rules are not ambiguous. PacifiCorp had argued that the pro forma interconnection procedures leave room to read the transitional penalty as applying after LGIA execution. The Commission disagreed. In its view, the pro forma rules plainly provide that any interconnection customer that executes an LGIA — including a customer studied through the transitional cluster study process — is subject to the standard withdrawal penalty of 20 percent of identified network upgrade costs.
That finding does most of the work in the order. Because the tariff is unambiguous, there is nothing to interpret in PacifiCorp’s favor and no gap for a utility-specific revision to fill: the transitional penalty is a feature of the transitional procedures — the bridge from the old serial process to the new cluster process — not a permanent discount that survives into the LGIA stage. The rejection is more striking for being unprotested; in the ordinary course, an unprotested section 205 filing that raises no obvious problem is accepted. FERC rejected this one anyway, on its own reading of its pro forma rules — a sign of how seriously it takes the penalty structure as a piece of Order No. 2023’s design rather than a detail to be negotiated utility by utility.
The dissent
Commissioner Lindsay S. See dissented, and her objection goes to the heart of the order. “Today’s order rejects an unprotested filing on the basis that the relevant tariffs unambiguously require us to do so. With respect, they do not,” she wrote. In her view, the pro forma rules do not compel the result the majority reached — which means the Commission was not forced to reject the filing, but chose to, and should have weighed PacifiCorp’s proposal on its merits rather than disposing of it as a misreading of unambiguous text.
The dissent matters for two reasons. First, it signals that the legal question is genuinely contestable: a commissioner who has read the same tariff language reaches the opposite conclusion about what it requires, which gives PacifiCorp a clear line of argument if it seeks rehearing. Second, it frames the dispute as one about regulatory judgment, not textual compulsion. If the tariff is ambiguous, the question becomes whether the softer penalty for transitional-cluster projects is good policy — whether protecting the expectations of projects mid-transition outweighs the risk of late-stage withdrawals. That is the debate the majority declined to have, and the dissent insists it should have had.
Why the penalty exists at all
To understand why FERC guards the withdrawal penalty so jealously, it helps to recall what the queue actually is. As this publication’s explainer on interconnection queues set out, queues are options portfolios, not construction pipelines: historically, only a small share of queued capacity — typically in the low teens to around twenty percent — ever reaches commercial operation. The rest withdraws, and every withdrawal forces restudies of the projects behind it, invalidating months of engineering work and reassigning upgrade costs.
The withdrawal penalty is the mechanism that makes that churn expensive enough to be honest. Order No. 2023, issued July 28, 2023, built the penalty to escalate as a project advances, reaching 20 percent of estimated network upgrade costs when the customer executes the LGIA: early on, when a developer is still testing viability, exit is cheap; late in the process, when the project has consumed study resources and shaped the cluster’s upgrade plan, exit is expensive. That is why the LGIA stage is the wrong place for a discount. By the time a customer executes an LGIA, the studies are done, the upgrades are identified and costed, and the transmission owner is preparing to build. A withdrawal then does not merely trigger a restudy; it strands engineering, delays the upgrades other projects were counting on, and can leave costs to be reallocated across the projects that remain. A penalty of nine times study cost would price that exit far below the disruption it causes.
The transitional cluster, explained
The transitional cluster is a creature of the move from serial to cluster studies, and its penalty regime was always meant to be temporary. Order No. 2023 required transmission providers to offer existing interconnection customers up to three transition options, depending on how far their requests had progressed under the serial process: continue with a transitional serial facilities study, enter a transitional cluster study, or withdraw from the queue without penalty. Customers entering the transitional cluster were required to post a $5 million deposit regardless of project size, and were subject to a withdrawal penalty of nine times study costs.
The design made sense as a bridge. Projects that had entered the queue under the old rules were being moved into a new process they had not chosen, and the lower transitional penalty acknowledged that they were mid-journey when the rules changed. But a bridge is not a destination, and PacifiCorp’s proposal would have extended the cheaper penalty past the point where the project signs the agreement that governs construction — effectively making the transitional regime permanent for its participants. FERC accepted PacifiCorp’s Order No. 2023 compliance filing in part on May 15, 2025, and the November 2 order does not disturb the transitional cluster itself, or the nine-times-study-cost penalty for withdrawals during the transitional study process. It draws the line at LGIA execution: a project that withdraws while still being studied transitionally pays the transitional penalty; a project that signs the agreement and then withdraws pays the standard one.
What changes for developers in PacifiCorp’s queue
For developers in PacifiCorp’s transitional cluster, the practical effect is a sharper decision point at LGIA execution. Before signing, the exit price is nine times study cost — a meaningful but bounded sum. After signing, it becomes 20 percent of identified network upgrade costs. For illustration: a project assigned $50 million in network upgrades would face a $10 million standard penalty on withdrawal after LGIA execution, against a transitional penalty measured in multiples of study costs that would ordinarily be far smaller. The exact gap depends on the project’s study costs and upgrade assignment, but signing now costs more to undo.
That changes the calculus in two ways. First, it raises the value of certainty before signing. Developers will want upgrade costs, construction timelines, and financing lined up before they execute, because the agreement is now harder to walk away from. That is, from FERC’s perspective, the point: the LGIA is supposed to be a commitment, and a commitment that is cheap to break is not much of a commitment. Second, it may push some marginal projects to withdraw before LGIA execution rather than after — while the cheaper penalty still applies. That is not necessarily bad for the queue: a withdrawal before signing triggers a restudy, but before the transmission owner has begun building and before the cluster’s upgrade plan has hardened around the project. Better an early exit than a late one.
The wider signal
The PacifiCorp order is a small decision with a legible principle: FERC will not let the transition soften the rules that make the new system work. Order No. 2023’s reforms — cluster studies, first-ready-first-served processing, readiness deposits, escalating withdrawal penalties — form a package, and the penalties are the enforcement mechanism for the rest. Cluster studies only work if the cluster is stable, and readiness deposits only screen out speculation if withdrawing forfeits something real. A discounted exit price at the LGIA stage would erode discipline precisely where the cluster is most fragile: at the handoff from study to construction, when a withdrawal costs the most.
The order also fits a pattern in FERC’s recent handling of interconnection exits. The Commission has been skeptical of proposals that make withdrawal cheaper, even when the applicant argues that cheaper exits would clear speculative projects from the queue faster. The logic is consistent: the queue does not need cheaper exits; it needs earlier and more honest ones, and the penalty schedule is already designed to produce them by making late exits expensive.
For other transmission providers, the message is that the transitional penalty is fenced in time and in process stage. Utilities still working through their own Order No. 2023 transitions — and several are, with backlogs that will take years to clear — should not expect FERC to approve tariff language extending transitional treatment past LGIA execution. The pro forma text, as FERC reads it, does not allow it, and the Commission has now shown it will enforce that reading even without a protest to prompt it.
What to watch
Three things will determine whether the November 2 order is the last word or the first round. The first is rehearing. PacifiCorp may ask the Commission to reconsider, and Commissioner See’s dissent hands it a ready-made argument: that the tariff is ambiguous, that the majority chose a policy outcome rather than following a textual command, and that the expectations of transitional-cluster customers deserve a hearing on the merits. A rehearing request would be due within 30 days of the order. Whether it files one will show how much the utility values the proposal versus how much it was simply regularizing language it had already used with customers.
The second is the behavior of the transitional cluster itself. Watch whether withdrawals in PacifiCorp’s queue cluster before LGIA execution in the coming months — the pattern the penalty schedule is designed to produce — and whether any project that has already executed an LGIA now seeks to withdraw and challenges the 20 percent figure.
The third is the compliance question the order leaves open. PacifiCorp told its customers one thing and FERC has now said the tariff requires another. The utility will need to reconcile its communications with its cluster participants to the order, and to do so without, in its own words, disrupting its processing of the transitional cluster. How it manages that will test whether the expectations argument PacifiCorp made was a genuine reliance problem or, as FERC evidently concluded, a reason to clarify the rule rather than to bend it. The transitional cluster was a bridge to a better process; on November 2, FERC confirmed that the bridge ends where the agreement begins.