FERC’s generator interconnection reforms changed how projects enter and move through transmission queues. For developers focused on collateral, one specific change under Order No. 2023-A is particularly important: surety bonds are now an expressly permitted form of financial security for certain interconnection deposits.
The rule does not create a blanket right to use surety for every interconnection obligation. Instead, it applies to a defined set of readiness and study-stage deposits.
What Orders 2023 and 2023-A Changed
FERC issued Order No. 2023 in July 2023 as a broad reform of the generator interconnection process. Among other changes, the rule introduced larger financial commitments intended to discourage speculative projects from remaining in the queue.
Under the original rule, several of these deposits generally had to be provided in cash or through an irrevocable letter of credit.
Order No. 2023-A, issued in March 2024, expanded the acceptable forms of security to include surety bonds.
FERC specifically included surety for:
- Commercial Readiness Deposits
- Deposits before the Transitional Serial Study
- Deposits before the Transitional Cluster Study
- Cluster Restudy deposits
- Deposits before the Interconnection Facilities Study
The practical takeaway is that Order 2023-A applies primarily to early-stage readiness and study-related interconnection collateral.
An RTO or utility may independently allow surety for all other obligations, but that permission would come from its own tariff or agreement rather than from Order 2023-A itself.
How the Rule Is Being Implemented
Order 2023-A established the federal requirement, but each transmission provider must implement that requirement through its own FERC-approved tariff.
PJM provides a clear example of how that process works.
In its initial Order 2023 compliance filing, PJM proposed to prohibit the use of surety bonds for commercial readiness deposits and certain study-stage deposits. FERC rejected that approach and directed PJM to revise its tariff to allow surety bonds for commercial readiness deposits.
PJM subsequently revised its tariff to expressly allow surety bonds for commercial readiness deposits through a required PJM surety bond form. FERC accepted those revisions as compliant with Orders 2023 and 2023-A.
The PJM proceeding shows the practical effect of the rule: transmission providers can shape how surety is implemented, including the required bond form and related terms, but they cannot eliminate surety for obligations where FERC has required it to be available.
What Surety Bond Providers Need to Look At
The key question is not simply whether an RTO “accepts surety.”
Developers need to determine:
- Whether the specific collateral obligation falls within the deposits covered by Order 2023-A
- Whether the applicable tariff provisions are effective for the relevant project or queue cycle
- What surety bond form the RTO requires
- What eligibility, draw, payment, renewal, and cancellation terms apply
Those details can materially affect whether a bond is practical to place and how it is priced.
A bond with next-day payment obligations, limited investigation rights, strict rating requirements, or broad enforcement provisions presents a different risk profile from a more traditional surety instrument.
For that reason, the tariff and bond form need to be reviewed together.
What This Means for Developers
Order 2023-A gives developers another potential source of collateral capacity for a defined set of early-stage interconnection obligations.
For portfolios with multiple projects in the queue, that can reduce reliance on cash and bank LC capacity at a stage when liquidity is often needed elsewhere.
The opportunity, however, depends on the details of the applicable RTO tariff and bond form.
The federal rule establishes where surety must be available. The regional tariff determines how usable that option is in practice.
This article is for informational purposes only and does not constitute legal, financial, or investment advice.
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