Another Victory at FERC for Wind Generators in BPA Oversupply Dispute
On December 20, the Federal Energy Regulatory Commission (Commission) issued two orders related to the Bonneville Power Administration’s (Bonneville) transmission service curtailment practices under a protocol originally called the Environmental Redispatch and Negative Pricing Policies (Environmental Redispatch Policies). The Commission both: (1) reaffirmed its authority under Federal Power Act (FPA) Section 211A and its exercise of that authority in this case in order to remedy Bonneville’s unduly discriminatory practices against wind generation; and (2) directed Bonneville to significantly revise its proposed oversupply curtailment policies and cost allocation mechanisms in order to ensure comparability and eliminate undue discrimination.
In May 2011, Bonneville adopted its Environmental Redispatch Policies, under which it unilaterally curtailed generators and utilized their firm transmission rights without compensation to deliver federal hydropower during certain high water situations. Bonneville stated that this policy was a necessary component of its compliance with certain of its organic and environmental statutory requirements. In June 2011, a coalition of wind energy facility owners filed with the Commission a complaint and petition for order under Section 211A of the Federal Power Act (FPA), requesting the Commission order Bonneville to discontinue its discriminatory practices.
In December 2011, the Commission granted this complaint, directing Bonneville to file revisions to its Open Access Transmission Tariff (OATT) to provide for transmission service on terms and conditions that are comparable to those under which Bonneville provides service to itself and that are not unduly discriminatory or preferential. Subsequent to this order, Bonneville, along with others, filed a request for rehearing and/or clarification of the order. Bonneville also made a subsequent compliance filing, proposing a new protocol to govern during oversupply conditions, called the Oversupply Management Protocol (OMP). Under the OMP, Bonneville proposed to displace certain non-Federal generation during oversupply events using a least-cost displacement curve. Generators that elected to be compensated for displacement in accordance with the least-cost displacement curve would be allocated back 50 percent of the total displacement costs through the proposed cost allocation methodology. Generators that did not elect to be compensated would be assigned a zero displacement cost and be displaced first, without receiving any compensation or cost allocation.
Today, the Commission ruled on both the requests for rehearing of the December 2011 order and Bonneville’s OMP compliance filing (OMP Compliance Filing), affirming its prior determinations and ordering Bonneville to significantly revise its proposed oversupply curtailment policies and cost allocation mechanisms in order to ensure comparability and eliminate undue discrimination.
Request for Rehearing Denied
In its rehearing order, the Commission affirmed its prior determination that it has authority under Section 211A to direct Bonneville to provide transmission service prospectively under terms and conditions that are comparable to those under which it provides transmission service to itself, and are not unduly discriminatory or preferential. The Commission stated that FPA Section 211A grants it broad legal authority to require unregulated transmitting utilities to provide comparable transmission service, and, as a result, Section 211A “is an appropriate statutory tool in this instance to ensure transmission service on a comparable basis for all resources connected to Bonneville’s transmission system. In our December order, we determined that Bonneville’s Environmental Redispatch Policy significantly diminished access to Bonneville’s transmission system for certain resources, which compelled us to act pursuant to this statutory authority.” Further, the Commission rejected arguments that Section 211A is limited by the Ninth Circuit’s jurisdiction under the Northwest Power Act, as none of the legal precedent cited by parties challenging the Commission’s jurisdiction addresses the Commission’s authority to ensure comparable transmission service under Section 211A.
Next, the Commission dismissed arguments that its authority under FPA Section 211A supersedes Bonneville’s other statutory obligations, stating that its FPA Section 211A authority is not superior to, and does not override, Bonneville’s other statutory obligations. To that end, the Commission emphasized that it did not direct Bonneville to act in a manner inconsistent with its other statutory obligations, and further pointed out that Bonneville’s OMP Compliance Filing contains statements by Bonneville itself stating that it believes it is capable of providing comparable transmission service in accordance with FPA Section 211A while also satisfying its other statutory obligations.
Finally, the Commission clarified, with very little explanation, that its December 2011 order did not expressly require that Bonneville file and maintain an entirely new, updated OATT pursuant to FPA Section 211A, but rather directed Bonneville to file revisions to its tariff to address the Commission’s comparability concerns with respect to Environmental Redispatch Policy. Consequently, given the fact that the Commission’s ruling is specific to Bonneville’s Environmental Redispatch Policies, transmission customers with objections to Bonneville OATT practices they believe to be noncomparable or unduly discriminatory will need to file additional, new FPA Section 211A requests in order to get relief.
Further Compliance Filing Required for Oversupply Management Protocol
While noting that Bonneville, in its OMP Compliance Filing, had made changes to its Environmental Redispatch Policies to provide needed specificity and detail in the non-rate terms and conditions of the procedure, the Commission found that, “taken together, the rates and non-rate terms and conditions of the OMP and the cost sharing arrangement proposed by Bonneville do not result in transmission service for generating resources at rates that are comparable to those Bonneville charges itself, and on terms and conditions that are comparable to those under which Bonneville provides to itself and that are not unduly discriminatory or preferential.” The Commission went on to observe that transmission service for wind generators that submit displacement costs represents a fraction of the firm transmission service on Bonneville’s system during oversupply situations, yet those entities are allocated half of displacement costs. The Commission stated that “[b]ased on the record in this proceeding, we are not persuaded that a 50/50 sharing of displacement costs results in comparable transmission service for displaced wind generators.” The Commission directed BPA to make a compliance filing within 90 days, “setting forth a methodology to allocate displacement costs in a manner that equitably allocates such costs to all firm transmission customers based on their respective transmission usage during oversupply events, or setting forth a different method altogether that ensures comparability in the provision of transmission service by Bonneville.”
The Commission opted not to rule on specific provisions of the OMP, instead focusing on the central question of the provision of comparable transmission service. For instance, the Commission also stated that Bonneville should consider the following when revising its oversupply management policies: (1) thermal resource displacement costs should be considered; (2) for purposes of transparency, Bonneville should identify those specific actions it will take prior to displacing generation; (3) Bonneville should identify how it would bring before the Commission any changes that may result in the proposed cost allocation methodology during a formal rate case under the Pacific Northwest Electric Power and Conservation Act, and; (4) though e-tags for curtailed energy within the operating hour need not be changed, consistent with applicable NERC and NAESB standards, in instances where an oversupply event lasts longer than a single hour, Bonneville must make the appropriate change to the e-tags for subsequent hours affected by the OMP.
A link to today’s orders are here and here.
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