At the Urging of Wind Generators, FERC Requires BPA to File a Non-Discriminatory OATT

On December 7, 2011, the Federal Energy Regulatory Commission (FERC) issued an order exercising, for the first time, its authority under Section 211A of the Federal Power Act (FPA).  FERC determined that the Bonneville Power Administration’s (BPA) reliance on its Environmental Redispatch and Negative Pricing Policy (Environmental Redispatch Policy), to curtail transmission service to interconnected generators in favor of BPA’s own generation, was unduly discriminatory because it resulted in terms and conditions of transmission service non-comparable to those under which BPA provides service to itself.  Acting under Section 211A, FERC required BPA, a federal agency not subject to FERC’s plenary rate jurisdiction, to file within 90 days an Open Access Transmission Tariff (OATT) that addresses the comparability concerns raised by the implementation of the Environmental Redispatch Policy.

BACKGROUND

BPA is a federal power marketing agency that is responsible for marketing federally generated electric power, including generation from hydroelectric dams in the Columbia River Basin, and for operating a majority of the high-voltage transmission in the Pacific Northwest.  Although BPA once filed with FERC an OATT under the safe harbor rules of FERC Order No. 888, FERC found, in 2009, that this OATT was no longer acceptable because it did not include the changes required to substantially conform with Order No. 890.

Under certain circumstances, high water flows in the Columbia River system create conditions where BPA can no longer store or spill excess water.  However, by running the excess water through its dams, BPA faced a potential oversupply of generation if other interconnected generation was not curtailed.  BPA applied its Environmental Redispatch Policy to accommodate excess federal hydropower generation and curtail non-federal generation, including the output of wind generators.  The Environmental Redispatch Policy, adopted as a business practice on May 13, 2011, permits BPA to curtail thermal generation, followed by wind generation if necessary, during periods when generation levels in BPA’s balancing authority area exceed load plus exports, and when environmental regulations prevent BPA from spilling additional water at its hydroelectric dams.

To support its curtailment decision, BPA asserted that its need to generate and transmit hydropower was a force majeure event under its Large Generator Interconnection Agreement (LGIA) with each of the curtailed wind generators.  BPA substituted excess electricity produced from its dams, at zero cost, for the power from curtailed generators.  As a result of the curtailment, the wind generators lost production tax credits that would have been derived from the generation, and their energy purchasers lost any renewable portfolio standard credit that would have been derived from the wind generation.

COMPLAINT AND FERC ORDER

In June 2011, a group of wind generation owners filed with FERC a complaint and petition for order under FPA Section 211A to protest BPA’s alleged discriminatory management of access to its transmission system to favor its own generation.  Section 211A was enacted in the Energy Policy Act of 2005 and authorizes FERC to require an unregulated transmitting utility, such as BPA, to provide transmission service on terms and conditions that are comparable to those under which the utility provides service to itself and are not unduly discriminatory or preferential.

FERC granted the petition in its December 7, 2011 order, finding that BPA had curtailed the non-BPA generators’ firm transmission service without causing similar curtailments of its own firm transmission service, and therefore failed to provide comparable transmission service.  FERC rejected BPA’s assertion that the Environmental Redispatch Policy qualified as a force majeure under the LGIA.

FERC ordered BPA to file an OATT, within 90 days, to address the comparability concerns raised in this proceeding.  FERC declined to specify the exact terms and conditions that must be included in BPA’s OATT and, instead, ordered BPA to reconcile the provision of comparable service with BPA’s obligations under its organic statutes.  FERC expressly noted that its exercise of Section 211A authority is prospective only and declined to address whether BPA should pay negative prices to resolve over-generation problems.

IMPLICATIONS

This order is significant for several reasons.  This is the first exercise of FERC’s authority under Section 211A to impose comparability requirements on transmission services offered by a government-owned transmission provider.  Recognizing that this will be viewed as a significant development by non-jurisdictional transmitting utilities, the order notes that FERC does not take the use of Section 211A lightly, and that it expects the need to use this authority will be rare.  In addition, FERC’s findings in this order may well affect proceedings pending in the Ninth Circuit with respect to other aspects of BPA’s Environmental Redispatch Policy.