BPA Seeks Comment on Draft Proposal to Split Environmental Redispatch Costs
The Bonneville Power Administration (“BPA”) made headlines this week with the release of its Draft Oversupply Management Protocol (the “Draft Oversupply Protocol”). BPA’s Draft Oversupply Protocol is intended to address concerns raised by BPA’s Environmental Redispatch (“ER”) policy of curtailing wind generation without compensation during periods of high water. Back in December, in response to a complaint filed against BPA by a group of owners of Pacific Northwest wind energy projects, the Federal Energy Regulatory Commission (“FERC”) issued an order holding that BPA’s ER policy was unduly discriminatory and preferential, in violation of Section 211A of the Federal Power Act (the “ER Order”). FERC directed BPA to file a revised Open Access Transmission Tariff (“OATT”) by March 6, 2012 addressing the comparability concerns raised in the proceeding in a manner that would provide for transmission service that is not unduly discriminatory or preferential. Click here to read our Energy Law Alert on the ER Order.
BPA and several other parties filed requests for rehearing of the ER Order. FERC’s procedural rules provide that if FERC does not act on a rehearing request within 30 days of the filing, the request for rehearing is deemed denied. Earlier this week, FERC issued an order (the “Rehearing Order”) granting rehearing in order to give itself more time to consider the matters raised in the requests for rehearing. Notwithstanding the Rehearing Order, BPA must still submit its compliance filing on the initial ER Order no later than March 6.
In preparation for its March 6 compliance filing, BPA released for comment its Draft Oversupply Protocol. In a nutshell, BPA proposes to provide approximately 50 percent compensation to operating wind generators in order to continue its ER policy of (i) curtailing wind generators during periods of high water, and (ii) using the wind generators’ reserved transmission capacity to deliver federal hydropower.
Under BPA’s Draft Oversupply Protocol, BPA would compensate wind generators for the costs of displacing wind curtailed during ER events. The displacement costs include the production tax credits and renewable energy credits the generators would have earned had their generation not been curtailed. However, for wind projects that reach commercial operation before March 6, 2012, approximately 50 percent of the displacement costs would be recovered from the wind generators through a new rate. BPA would allocate the other 50 percent of the costs to the users of the Federal Base System. Wind generators with a commercial operation date after March 6, 2012 have the choice of (i) avoiding the new rate by being redispatched without compensation or (ii) receiving partial compensation for the ER curtailments and sharing in the costs. BPA proposes to conduct a rate case to determine how it will recover the displacement costs (i.e. what percentage of the costs it will collect from the wind generators and what percentage of the costs it will collect from users of the Federal Base System).
BPA is accepting comments on the proposal until noon on February 21, and will host a workshop on the proposal on February 14, from 9 am to noon. Click here for information on the workshop and how to submit comments.
BPA Issues Decision on Wind Integration Charge in 2010 Rate Case
Today, the Bonneville Power Administration (“BPA”) issued its Final Record of Decision (“Final ROD”) in the 2010 Rate Case. The Final ROD is part of an early wave of efforts by transmission providers to charge wind generators for the costs of providing “integration” or “balancing” services. Transmission providers are responsible for maintaining reliability of the transmission system. To do so, they must balance both loads (the electrical power consumed by customers) and resources (generation from hydro, thermal, or wind power plants) on their systems. BPA reserves part of its hydro resources so that if a large wind “ramp” event occurs, in which the wind output increases or decreases in a short amount of time, BPA can deploy its hydro reserves to keep the grid in balance. Before 2009, BPA did not charge a wind integration rate for providing such balancing services.
Background
BPA first proposed a wind integration charge in the 2009 Wind Integration Rate Case. This case was settled, with BPA's wind generator customers agreeing to a rate that was approximately four times lower than what BPA initially proposed in the 2010 Rate Case in exchange for BPA working toward the implementation of operational advances that would bring down the cost of providing wind integration services.
In its 2010 Rate Case Initial Proposal, BPA sought to charge its wind generator customers a wind integration rate of approximately $12 per megawatt-hour (“MWh”). BPA's wind generator customers argued that this rate would deter renewable energy development in the Pacific Northwest and make it difficult for the region to meet the Obama Administration's clean energy goals. BPA maintained that this charge was necessary, in part because the wind fleet had increased to such an extent that BPA feared it would be unable to provide enough reserves while also preserving system reliability. BPA argued that the increased size of the wind fleet was compounded by the wind generators’ inability to accurately account for wind ramp events in their schedules, thereby requiring BPA to hold a significantly larger amount of reserves in order to provide balancing services.
BPA's Decision
Once the wind generators on BPA’s system were made aware of their scheduling inaccuracies, they began taking steps to improve their scheduling. As BPA acknowledged in its Final ROD, over the next several months, BPA’s wind generator customers made significant improvements. Due in part to the wind fleet’s improved scheduling accuracy, the Final ROD sets the wind integration rate at approximately $5.70/MWh—less than half the rate in the Initial Proposal. This rate is subject to Federal Energy Regulatory Commission approval and varies somewhat depending on a project’s capacity factor.
The rate ultimately set by BPA has been criticized as not being cost-based, partly as a result of the way in which BPA allocated its embedded costs and its decision to also charge wind generators for lost "surplus" sales as a result of holding generation in reserve. BPA's wind generator customers argued that BPA's cost allocation violates Federal Energy Regulatory Commission policy. The wind generators also pointed out that BPA has been slow to implement the operational advances that would significantly lower the cost of wind integration. Despite the disparate views of BPA and its wind generator customers, the Final ROD echoes some of the arguments made by the wind generators in bringing the rate down from the initial $12/MWh and demonstrates a willingness by BPA to continue to work with the wind industry on improving its wind integration services.
Stoel Rives represented the Northwest Wind Group, a coalition comprised of Renewable Northwest Project and five major wind energy developers—BP Alternative, Columbia Energy Partners, enXco, Horizon Wind Energy, and RES America Developments Inc.—in this proceeding. We will be sending out an Energy Law Alert discussing the Final ROD and its implications for the wind industry shortly. If you’d like to receive Stoel Rives Energy Law Alerts, click here and fill out the form.
