The Bonneville Power Administration’s proposal for managing generation oversupply should be rejected, Xcel Energy (NYSE:XEL) said in a March 27 filing to FERC that criticized the BPA’s proposal (Docket No. EL11-44-000).
The Minneapolis, Minn.-based utility argued that BPA’s proposal to curtail certain types of generation, namely wind, in favor of its own hydropower generation does not address FERC’s concerns over discriminatory and noncompetitive transmission treatment.
BPA’s oversupply management protocol (OMP) would “improperly provide Bonneville the right to curtail third-party generators whose operation is not the cause of the [total dissolved gas] problems on Bonneville’s system,” Xcel Energy said in the filing.
A coalition of Northwest wind generators in May 2011 filed a complaint with FERC, arguing that BPA’s curtailment of wind during periods of high river flows was discriminatory and noncompetitive. BPA markets hydroelectric generation from the Columbia River and in accordance with environmental regulations, during these periods would curtail wind generation instead of spilling water over spillways, which increases the level of total dissolved gas (TDG) in water and, beyond certain levels, endangers certain aquatic life.
On Dec. 7, 2011, FERC ordered that BPA file an open access transmission tariff (OATT) that does not discriminate against wind generators. On Feb. 7, BPA instead released a proposal offering to compensate wind generators for reducing their output. According to that proposal, BPA would later recover those compensatory costs through a 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 BPA’s preference customers.
Rather than propose a formula for compensating generators it has curtailed, BPA could have proposed a negative pricing policy that “modern electricity markets” employ, Xcel Energy said. In that scenario, the negative costs, Xcel Energy pointed out, would be borne by the generators causing the oversupply situation, namely BPA.
“Yet Bonneville has apparently rejected this common market solution to address its run-off issues,” Xcel Energy said, adding that a negative pricing policy would address some of FERC’s noncompetitive concerns.
“A negative market pricing proposal would also provide assurance to third parties that Bonneville has taken all reasonable alternative measures to address its oversupply situation by providing Bonneville a significant financial incentive to implement alternative measures that would avoid negative market pricing,” the company said.
Xcel also criticized the proposal for its lack of clarification as to when it would displace generation, which should occur when the grid is congested. According to FERC Order 890, transmission providers are required to make transparent their available transmission capacity calculations, the company noted.
“[C]urtailments should be made on a pro-rata basis based on actual system flows rather than the fictional determination of impacts on contract paths,” Xcel Energy said. “Absent utilization of actual system flows as a basis of curtailment, Bonneville’s grid will be underutilized and generation unnecessarily curtailed.”
Before BPA curtails third-party generation, it should be required to redispatch the system to avoid an overload, the company said.
Another comparability concern with the BPA’s OMP is apparent in Bonneville’s ability to use transmission service sold to other users and then “impose a cost on those other users associated with Bonneville’s confiscation of their transmission service,” Xcel Energy said.
Though this proposal has not been approved by the Bonneville Administrator, Xcel Energy noted, “Bonneville has shifted and is proposing to continue to shift costs from its preference customers to third parties. Generally, entities are charged for services provided. In the cost allocation methodology under the OMP, however, Bonneville proposes to charge entities for services for which they contracted but were not provided.”
The OMP would also allow BPA to take loads from third-party generators under conditions “less favorable to those generators than would occur if the system were simply redispatched,” Xcel Energy said.
To the extent that BPA needs more load to reconcile its TDG obligations and its wholesale energy market performance, its own customers should then be responsible for that reconciliation, not those who are using the transmission system in accordance with their rights under established contracts, Xcel Energy argued.