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FERC orders BPA to revise policy on curtailment of wind generation

From the December 9, 2011 issue of Public Power Daily

Originally published December 9, 2011

The Federal Energy Regulatory Commission ordered the Bonneville Power Administration to revise its policy of temporarily substituting free hydro power for wind and other generation in order to deal with a surplus of hydro power. In its Dec. 7 order, the commission agreed with wind generators that BPA’s environmental redispatch policy was unduly discriminatory and preferential. FERC directed BPA to revise its policy within 90 days, but did not say what its new policy should be.

The Public Power Council expressed concern over the order’s impact on ratepayers. "We think Bonneville's policy on what to do in times of high water and too much wind generation is warranted in that it treats all generators equally to ensure system stability while maintaining river conditions to protect endangered fish," said PPC Executive Director Scott Corwin. "In this economy, we are concerned about whether the FERC ruling will lead to an unfair increase in costs to communities served with federal hydro power."

Wind generators argued that BPA’s approach asked them to decrease generation during some hours last spring and accept free hydro power in return; they lose federal tax credits or state renewable energy credits when the wind turbines are not allowed to generate power. PPC argued that it is improper under statute to burden regional consumers with the costs of these federal or state incentives when customers are not benefitting from the wind power.

"While FERC’s position is not a surprise, we believe it is misguided and jumps ahead of regional efforts to resolve the issue," Corwin said. "We will now evaluate our next legal steps. At the same time, we hope to continue to work with all regional parties to try to resolve this issue in a way that continues to protect fish and does not unfairly hit ratepayers." Since BPA’s existing policy was set to expire at the end of March in any case, the agency has been in discussions with parties about how to approach the issue for this year’s runoff season, he noted.

Bonneville Administrator Steve Wright said BPA was "surprised and very disappointed that the Federal Energy Regulatory Commission would choose at this moment to render a decision when it is aware that we have been urged by many members of the Northwest Congressional delegation to settle this issue, and when settlement discussions are proceeding in good faith. The temporary oversupply of energy is a Northwest challenge," he said. 

BPA and others had asked FERC to hold off ruling in the case pending the outcome of an appeal before the U.S. Court of Appeals for the Ninth Circuit. However, the commission declined, asserting that it had exclusive authority under Section 211A of the Federal Power Act to order an unregulated utility to provide nondiscriminatory, open access to its transmission system. The commission said its Section 211A authority is prospective only, and a Ninth Circuit review of BPA’s past use of its environmental dispatch policy does not limit prospective exercise of its Section 211A authority.

The commission said it "does not take the exercise of our authority under FPA Section 211A lightly," but found "a compelling case here to exercise that authority." The commission added that it expects to use its 211A authority rarely.

Bonneville argued that the real issue is whether BPA or any of its ratepayers should bear the costs of the production tax credits and renewable energy certificates that federal and state governments have established for wind generators. The fact that wind generators "may lose some revenue from tax credits does not make Bonneville’s policy non-comparable," BPA said.

Bonneville’s environmental redispatch policy "results in transmission service that is not comparable to the service it provides itself, justifying the commission's exercise of its authority under Section 211A," FERC held.

Building more transmission may be the answer, the commission suggested. "With additional transmission or comparable alternatives, Bonneville may have the flexibility necessary to meet all of its obligations, including open access, and fully integrate the variable energy resources seeking to access its transmission system," FERC said.


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