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.