Network Upgrades: Fox Run Goes from $38 Million to $47 Million Without Changing One MW
Fox Run Solar has not changed.
It is still the same 200 MW project at the same POI with the same equipment.
But its Network Upgrade assignment changes anyway.
In the Cluster Study, assume the shared upgrades look like this:
Substation Network Upgrade — total facility $20m
System Network Upgrade — total facility $80m
----
Total shared Network Upgrade facilities $100m
Fox Run is not allocated all $100 million.
Use an illustrative cluster allocation consistent with the two different pro forma allocation concepts:
Fox Run share of Substation Network Upgrade $5m
Fox Run share of System Network Upgrade $33m
----
Fox Run assigned Network Upgrades $38m
The $5 million substation share represents a simplified per-capita allocation.
The $33 million system share represents a simplified proportional-impact allocation.
Those percentages are teaching assumptions.
The actual transmission-provider tariff and study calculation control.
Now another project in the cluster withdraws.
A restudy reallocates the same general shared system burden and Fox Run's assigned amount becomes:
Substation share $6.67m
System Network Upgrade share $40.33m
------
Fox Run restudy assignment $47.00m
Fox Run changed nothing.
Its Network Upgrade bill increased by:
$47m - $38m
= $9m
or:
$9m / $38m
= 23.7%
That is the economics of a cluster.
A Network Upgrade assignment is not merely an engineering cost estimate.
It is also a tariff allocation that depends on the projects around you.
The $100 million facility and the $38 million assignment are different numbers
Order No. 2023's pro forma LGIP does not allocate every shared Network Upgrade by one generic percentage.
For cluster studies:
- Substation Network Upgrades are allocated using the prescribed per-capita structure; and
- System Network Upgrades are allocated using a proportional-impact method.
The proportional-impact method measures the degree to which each generating facility contributes to the need for a specific System Network Upgrade.
So Fox Run's model should not contain one line called:
Network Upgrade cost = $38m
It should contain at least:
Total shared facility cost $100m
Fox Run allocated share $38m
Fox Run funding obligation $38m
Potential transmission-credit / repayment [tariff]
Those values answer different questions.
The transmission engineer cares about the $100 million facilities.
The project-finance model cares about Fox Run's assigned funding and timing.
The initial Cluster Study number is deliberately non-binding
The pro forma Cluster Study Report provides:
- required Interconnection Facilities and Network Upgrades;
- allocated cost responsibility;
- a non-binding good-faith cost estimate; and
- a non-binding good-faith estimated time to construct.
So Fox Run's $38 million is useful.
It is not a fixed-price EPC commitment from the transmission owner.
This distinction should be visible in the investment committee paper:
Current assigned Network Upgrades $38m
Study stage Cluster Study
Cost status non-binding estimate
Remaining restudy risk YES
If the IC slide simply says:
Network Upgrades: $38m
the most important information is missing.
The peer withdrawal changes Fox Run's project-finance case twice
Fox Run's restudy result becomes $47 million.
The first impact is obvious:
Incremental upgrade assignment $9.0m
The second comes from the Order 2023 security ladder.
At the $38 million Cluster Study result, Fox Run's 5% readiness level was:
5% × $38m
= $1.90m
After the $47 million restudy, entering the Facilities Study takes total readiness security to:
10% × $47m
= $4.70m
At LGIA, the combined Commercial Readiness + LGIA security level becomes:
20% × $47m
= $9.40m
Compare that with the original $38 million study case:
20% × $38m
= $7.60m
The peer withdrawal therefore creates:
$9m additional assigned upgrade cost
+
$1.8m additional LGIA-level security
before schedule impacts.
One event has changed both sources-and-uses and corporate liquidity.
The 23.7% restudy increase is also just below an important exit threshold
The previous article showed the withdrawal-penalty exemption for a greater-than-25% Network Upgrade cost increase after the latest Cluster Restudy compared with the preceding Cluster Study or Restudy report.
Fox Run moved:
$38m → $47m
which is:
23.7%
The project has suffered a $9 million increase.
It has not crossed that specific >25% cost-shock exemption threshold.
If the withdrawal penalty otherwise applies and Fox Run exits during the restudy stage, the stage formula is 5% of the estimated Network Upgrade cost:
5% × $47m
= $2.35m
Subject to the material-impact test and the exact tariff, Fox Run can therefore be looking at:
Project economics worsened by $9.00m
Potential withdrawal penalty to abandon 2.35m
------
Combined decision swing $11.35m
That is why the correct question after a restudy is not:
Did the upgrades increase?
It is:
Did they increase enough to make staying uneconomic, and what does leaving cost at this stage?
Withdrawal-penalty funds can mitigate a peer's impact — they do not guarantee full protection
Order No. 2023 also links withdrawal penalties back to the projects that remain.
Within the cluster, collected penalty funds are first used for relevant study costs and can then be applied to net increases in shared Network Upgrade cost assignments caused by withdrawn customers, subject to the detailed pro forma methodology.
That is important.
It does not mean:
peer withdraws
→ remaining projects are held harmless
The amount of collected penalty can be smaller than the cost impact.
The funds can be needed for study costs first.
The allocation mechanics depend on the affected upgrades and projects.
For Fox Run, I would therefore model:
Gross restudy assignment $47m
Less confirmed withdrawal-penalty credit [only when known]
----
Net funding obligation [calc]
Do not forecast a penalty credit merely because somebody else withdrew.
Treat it as zero until the transmission provider identifies the amount and application.
The restudy can cost five months before it changes one dollar of capex
The pro forma Cluster Restudy deadline is 150 calendar days from the transmission provider's notice that a restudy is needed.
Fox Run's first article had:
Original project COD target Dec-2029
Initial grid-ready date after study Aug-2030
Now assume the peer withdrawal triggers a full 150-day restudy and, for illustration, that the grid-ready critical path moves another five months:
Revised grid-ready date Jan-2031
Using the same illustrative financing assumptions:
Average construction debt $180m
Interest rate 7%
Additional five-month delay
= $180m × 7% × 5/12
= $5.25m
Fox Run's deterioration from the initial $38 million study case is now:
Upgrade assignment increase $9.00m
Additional five-month debt carry 5.25m
------
Incremental identified deterioration $14.25m
The restudy is not just a better cost estimate.
It is a new schedule event.
The Facilities Study improves estimate accuracy; it does not create a fixed price
After restudies are complete, Fox Run reaches the Interconnection Facilities Study.
Under the federal pro forma process, the customer can receive:
90-day study
with no more than a ±20% cost estimate
or request:
180-day study
with no more than a ±10% cost estimate
Suppose the Facilities Study's central cost estimate for Fox Run remains $47 million.
The nominal accuracy ranges would be:
90-day / ±20%
Low $37.6m
High $56.4m
180-day / ±10%
Low $42.3m
High $51.7m
This is not a contractor guaranteed maximum price.
It is the required accuracy of the Facilities Study estimate.
That distinction matters in debt sizing.
The lender can reduce contingency as engineering maturity improves.
It should not treat a ±10% study estimate as a fixed-price construction obligation from the transmission owner.
A slower study can be worth buying if the narrower range changes the financing decision
The 90-day versus 180-day choice has an economic trade-off.
Suppose Fox Run is close to its investment hurdle.
At $47 million of assigned upgrades:
±20% range
= $37.6m to $56.4m
= $18.8m total range width
At ±10%:
$42.3m to $51.7m
= $9.4m total range width
The additional 90 days halves the nominal estimate band.
But 90 days also has carrying cost.
At the same $180 million average construction debt and 7% rate, if the later timing directly extends financing by three months:
$180m × 7% × 3/12
= $3.15m
That is not a reason to choose the faster study.
It is the cost of better information if the schedule moves one-for-one.
Fox Run should compare:
value of reducing cost uncertainty
versus
value lost from waiting
The engineering option has a financing price.
Who builds the upgrade can matter more than who pays for it
The pro forma LGIA generally places design, procurement, construction, installation and ownership of Network Upgrades with the Transmission Provider or Transmission Owner, subject to the applicable agreement and tariff.
Fox Run can therefore have:
Funding responsibility Fox Run
Construction responsibility Transmission Owner
Schedule control Transmission Owner / shared
PPA delay exposure Fox Run
Construction-debt carry Fox Run
That is the awkward project-finance allocation.
The party paying for a delay is not necessarily the party controlling the work.
Certain Stand Alone Network Upgrades can be candidates for a customer-build option under the pro forma framework.
Order 2023-A also clarified treatment for certain shared Stand Alone Network Upgrades where the affected interconnection customers agree.
But the option applies only to facilities that satisfy the tariff definition and agreement requirements.
Do not convert:
customer option to build exists
into:
sponsor can take over any late transmission work.
For each upgrade, the schedule should identify:
Facility
Owner
Builder
Long-lead equipment
Outage required
Customer-build eligible?
Expected completion
Required for energization?
Required for full service?
That is the critical-path table.
Cost allocation can change even when physical scope does not
Our Fox Run example deliberately held the total $100 million of shared facilities constant.
Only the allocation changed.
That is not the only possible outcome.
After a peer withdrawal, the restudy can also conclude that:
- the upgrade is no longer needed;
- a different upgrade is needed;
- the scope can shrink;
- the scope can grow; or
- a different set of projects causes the constraint.
So preserve two histories:
Physical scope history
Which facilities are required?
What is their total estimated cost?
What issue does each facility solve?
Allocation history
What share is assigned to Fox Run?
Which tariff method assigned it?
What changed after restudy?
If both histories live in one row called Network Upgrades, finance cannot tell whether a $9 million increase came from more steel or from a different allocation of the same steel.
Affected-system costs are another allocation engine
Fox Run also carries the $7 million illustrative affected-system work from the first article.
Order 2023's pro forma affected-system process uses proportional-impact cost allocation for Affected System Network Upgrades.
That means the project can have two parallel sets of allocation mechanics:
Host-system Network Upgrades
and
Affected-system Network Upgrades
with different study reports, agreements, schedules and security.
For COD, the relevant date can be the later binding system date.
Do not bury affected-system obligations inside the host $47 million unless the documents actually combine them.
In Fox Run's model:
Host Network Upgrade assignment $47m
Affected-system work $7m
Other TP interconnection facilities $12m
----
Current illustrative grid-side package $66m
The original first-study package was $57 million.
The peer withdrawal has therefore moved the broader illustrative grid-side package from:
$57m → $66m
before additional carry.
Transmission credits can change economic burden without solving the funding problem
The federal pro forma LGIP provides that an interconnection customer funding Substation or System Network Upgrades is entitled to transmission credits under Article 11.4 of the LGIA.
The pro forma LGIA contains repayment mechanics for qualifying Network Upgrade advances.
The applicable regional tariff and project agreement control the actual Fox Run treatment.
This creates another three-number problem:
Network Upgrade funding obligation $47m
Cash / security timing current
Potential transmission-credit value future / tariff-dependent
Even if Fox Run ultimately recovers the full qualifying advance under its tariff, the project may still have to finance the $47 million before that recovery arrives.
So these two models are both wrong:
Network Upgrades = $47m permanent economic loss
and:
Network Upgrades = $0 because recoverable
The correct model has:
upfront funding
+
financing carry
-
PV of enforceable future recovery
=
economic burden
Only use the recovery line after legal diligence confirms that Fox Run actually owns it, can use it and can assign it as modeled.
Transmission credits are also an M&A asset
The pro forma repayment right can be assignable.
That matters if Fox Run is sold.
A buyer should distinguish:
cash already advanced for Network Upgrades
future funding still required
repayment / transmission-credit right
party entitled to future cash
assignment mechanics
Selling the project without transferring a valuable repayment right can split the interconnection economics from the asset.
Conversely, a seller should not value a tariff recovery that belongs to another party after closing.
The SPA diligence schedule should identify the right explicitly.
The contingency should shrink by study stage, not by habit
For Fox Run:
Cluster Study
Assignment $38m
Estimate status non-binding
Restudy risk high
Restudy
Assignment $47m
Estimate status still planning-stage
Peer-withdrawal effect known
Facilities Study
Central estimate [result]
Accuracy option ±20% or ±10%
Detailed scope more mature
LGIA / detailed engineering
Contractual facilities defined
Security posted
Procurement status track
Remaining cost uncertainty project-specific
The contingency should tighten as the evidence improves.
Do not carry one fixed 15% interconnection contingency from queue entry to financial close merely because that is the house assumption.
And do not take it to zero simply because the IA is signed.
The remaining uncertainty has changed.
It has not necessarily disappeared.
Fox Run's Network Upgrade page
A lender-ready schedule should separate the project into four bridges.
1. Facility bridge
Substation Network Upgrades $20m total
System Network Upgrades $80m total
-----
Shared facilities $100m
2. Allocation bridge
Initial Fox Run substation share $5m
Initial system-upgrade share $33m
----
Cluster assignment $38m
Restudy assignment $47m
Increase $9m
Increase % 23.7%
3. Funding / security bridge
5% readiness at $38m $1.9m
10% readiness at $47m $4.7m
20% LGIA-level security at $47m $9.4m
4. Schedule bridge
Initial grid-ready Aug-2030
Restudy delay 5 months
Revised grid-ready Jan-2031
Additional illustrative interest $5.25m
Now the project team can see whether the change was:
- scope;
- allocation;
- financing; or
- time.
That is far more useful than a single red cell called Interconnection Capex.
The questions I would take to the transmission team
For each major Fox Run upgrade:
- Is it an Interconnection Facility, Substation Network Upgrade or System Network Upgrade?
- What physical constraint requires it?
- What is the total facility cost?
- What methodology allocates Fox Run's share?
- What was Fox Run's proportional impact?
- Which peer projects share the facility?
- What happens to the scope and allocation if one of them withdraws?
- What withdrawal-penalty funds, if any, can offset the increase?
- Is the current estimate Cluster Study, Restudy or Facilities Study quality?
- Has Fox Run selected the 90-day ±20% or 180-day ±10% Facilities Study option?
- Who designs, owns and constructs the facility?
- Is any portion a Stand Alone Network Upgrade that Fox Run can build?
- What outage or long-lead procurement drives completion?
- What tariff repayment or transmission-credit right applies?
- Who owns that repayment right after an M&A transaction?
- Which date is actually on the project's COD critical path?
Fox Run's engineering did not change when its assignment moved from $38 million to $47 million.
Its cluster did.
That is why Network Upgrade risk cannot be underwritten like an EPC change order.
The cost, allocation, exit penalty, security and schedule are all produced by the interconnection process — and all five can move together.
Primary sources: FERC — Pro Forma LGIP · FERC — Pro Forma LGIA · FERC — Order No. 2023 Explainer · FERC — Order No. 2023-A Explainer