BPA proposal to compensate wind generators may come up short – industry attorney

The Bonneville Power Administration’s (BPA) proposal to compensate wind generators for curbing their power attempts to mitigate FERC’s concerns about fair transmission treatment but may be insufficient, an industry attorney told TransmissionHub

BPA, a federal agency that markets hydroelectric generation from the Columbia River, on Feb. 7 released a proposal offering to compensate wind generators for reducing their output during periods of high river flows. According to the proposal, BPA would later recover those compensatory costs through a subsequent rate case, which would be structured so that “roughly half” of the costs would be covered by wind interests, while the other half would be covered by public users, direct service industry customers and others that receive services from BPA’s hydro system, a BPA spokesperson told TransmissionHub Feb. 8. 

On average, BPA expects to compensate wind generators by about $12m per year for lost revenues related to reduced electricity generation, but acknowledged that compensation could range from nothing to $50m, BPA said in a statement. 

“The proposal does nothing to solve the problem; it just adds a new layer of complexity,” the industry attorney, who asked to remain anonymous, said in an interview Feb. 8. He added that the proposal shunts BPA’s obligations onto wind generators by saying, “Do me a favor, I’ll give you $10, but in my next rate case, I’ll charge you $12.”

The BPA spokesperson countered that such an outcome would not be expected, given the language of the proposal. 

According to Vinson & Elkins attorney Stephen Angle, BPA’s proposal takes into consideration the wind generators’ concerns. “That was actually what many of the generators had suggested in their pleadings at FERC when they were opposing Bonneville’s original policy,” Angle told TransmissionHub Feb. 8. “They were saying that to the extent they would curtail, BPA should compensate them for the losses they were incurring.” 

In the spring of 2011, BPA began curtailing wind generation in favor of deploying its own hydroelectric generation, citing environmental concerns. 

“We found ourselves with elevated gas levels in the river that can be harmful to aquatic species and endangered salmon,” the BPA spokesperson said. 

According to BPA’s Attachment P narrative to the Feb. 7 proposal, total dissolved gas (TDG) levels increase when water is spilled over spillways instead of run through turbines to generate electricity. During high-flow events that threaten to cause TDG levels to exceed state water-quality standards, BPA “tries to avoid spill by running water through generators to lower the amount of spill and reduce the TDG level,” BPA said in the narrative.      

Running the water through the turbines created a surplus of electricity. 

“We were down to a point where we were giving the energy away, where we could no longer find any load to serve with this [hydroelectric] energy; we then displaced the wind with hydro,” the spokesperson said. 

A coalition of Northwest wind generators in June 2011 filed a complaint with FERC, calling on Section 211A of the Federal Power Act to claim that BPA’s Interim Environmental Redispatch and Negative Pricing Policies failed to provide comparable transmission service. FERC in December 2011 ruled that BPA’s policies discriminated against wind generators connected to its system, and ordered BPA to revise its open access transmission tariff (OATT) to provide transmission service on conditions comparable to those it gives itself. 

However, the industry attorney claimed BPA’s explanation for wind curtailment does not accurately describe the situation. 

“The problem last spring was there was a lot of water in the river. BPA has to use that water to generate electricity but the market price was zero, nobody needed the energy, and the people who would buy it wanted to be paid for it,” he claimed.

“BPA didn’t want to pay to get rid of the energy so, instead, they forced the wind generators to shut down,” while claiming environmental reasons for doing so, he claimed.  

As they have signed long-term power purchase agreements, wind generators have customers that provide BPA a market and outlet for that surplus electricity. 

“No other utility, if they had too much energy, could say, ‘Rather than pay a price I don’t want to pay, I’m going to force someone else to turn off,'” the attorney said. 

Vinson & Elkins attorney Angle demurred, saying BPA probably would not incur too many losses by “giving away” surplus electricity. 

“I think in the limited times they’re talking about here, they can afford to sell the energy at a loss without having too much of a loss to its revenue,” Angle said. “BPA has a fairly unique system in that it’s so heavily hydroelectrically based and has a lot of environmental restrictions that it has to meet that it does have a significant issue with having to deal with avoiding spill at certain times.” 

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.