The Bonneville Power Administration (BPA) and its customers have reached an agreement that settles the portion of BPA’s current transmission rate case (BP-14) that defines charges for balancing services within BPA’s service territory within the generation inputs portion of the rate case.
Balancing services are those services employed to maintain a constant balance between the energy produced and the energy consumed. The agreement announced May 16 settles the parties’ disputes concerning generation inputs and sets 10 transmission ancillary and control area services rates for the rate period, which covers fiscal years 2014 and 2015.
“It’s a major accomplishment to get this agreement done and settled, because there’s still a lot of work to do,” a BPA spokesperson told TransmissionHub May 17. The rates to be charged for power and transmission over the next two fiscal years must still be decided through the open rate case.
Specifically, the generation inputs agreement removes three proposed formula rates that would have passed on the costs of procuring third-party resources to augment balancing reserves. Those rates were replaced with fixed rates and an established acquisition budget that alleviates the cost uncertainty.
The agreement sets rates for the ancillary services of regulation and frequency response, energy imbalance service, and two categories of operating reserve: spinning reserve and supplemental reserve service.
The agreement also sets rates for control area services, including regulation and frequency response, generation imbalance, spinning and supplemental reserve service, variable energy resource balancing service and dispatchable energy resource balancing service.
Ancillary services are services that support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the transmission system. Control area services are those services available for reliability obligations of a party with resources or loads in the BPA control area, the spokesperson said.
Under the agreement, the parties also agree that the rates stated are subject to adjustment due to BPA’s power services adjustments, charges, and special rate provisions.
All of the settlement rates applicable to variable energy resources are lower than the rates BPA originally proposed after accounting for the elimination of the formula rates, BPA said in a statement announcing the agreement. Three of the four variable energy rates are lower than today’s equivalent rates, the agency added.
The agreement acknowledges that “both the rate structure and the operations related to the integration of variable energy resources and dispatchable energy resources in Bonneville’s balancing authority area are in a transitional period.” Accordingly, the agreement also calls for BPA and parties to its rate case to defer new legal and regulatory action until the end of the upcoming rate period, which is Sept. 30, 2015.
Deferring any new legal actions will allow the region to work together and focus on long-term sustainable solutions to these issues and provides time for the region to develop energy scheduling options and other tools expected to significantly reduce renewable resource integration costs.
“We have a challenge ahead of us, but I am confident we can work together to find innovative and less costly energy balancing solutions,” Bill Drummond, BPA administrator, said.
The settlement also establishes a $2m annual budget to augment BPA balancing services when operational constraints cause BPA to lower the amount of balancing reserves it would otherwise provide.
In addition, it includes a commitment from BPA to implement two 15-minute scheduling options as soon as feasible. While electricity in the Northwest has long been bought and sold on an hourly basis, wind and other variable resources have brought about the need for more frequent scheduling, the agreement noted. Shorter dispatch intervals can help lower costs by reducing reserve requirements. The agreement also allows billing for dispatchable energy resources using a five-minute measurement. That change should allow those resources to lower their integration costs when compared to the presently applied one-minute billing interval, according to the agreement.
One party, Powerex, objected to the agreement. It objected to the proposed use of financial reserves attributed to transmission services to fund revenue shortfalls, as well as the agreement of the parties not to challenge the underlying assumptions used to establish the rates.
The rate case began in November 2012 and will conclude in late July. At the conclusion of the rate case, BPA will file the final rate proposal with FERC for interim approval of the rates to be effective from Oct. 1, 2013 to Sept. 30, 2015.