FERC decides not to rehear case involving Bonneville Power Admin.

The Federal Energy Regulatory Commission on June 26 decided not to rehear its prior order in a fight over whether wind generation in the Pacific Northwest is being improperly displaced by hydro generation and how that displacement should be compensated for.

On Dec. 20, 2012, the commission issued an order conditionally accepting Bonneville Power Administration’s (BPA) Oversupply Management Protocol (OMP) for filing, conditioned upon BPA submitting a further compliance filing under section 211A of the Federal Power Act (FPA).

The commission directed Bonneville to submit a compliance filing that proposed a cost allocation methodology under the OMP to allocate displacement costs in a manner that, in conjunction with the non-rate terms and conditions of the OMP, ensures comparable transmission service.

The commission also issued an order denying rehearing of the commission’s Dec. 7, 2011 order in this same docket. In the June 26 order, the commission denies rehearing of both the compliance order and the rehearing order.

In June 2011, Iberdrola Renewables Inc., PacifiCorp, NextEra Energy Resources LLC, Invenergy Wind North America LLC, and Horizon Wind Energy LLC filed a petition alleging that Bonneville, under its Interim Environmental Redispatch and Negative Pricing Policies (Environmental Redispatch Policy), had acted in an unduly discriminatory manner by directing the curtailment of wind generators and then using the wind generators’ firm transmission rights to deliver federal hydropower to the wind generators’ customers.

Those petitioners requested that the commission invoke its authority under section 211A to direct Bonneville to change its curtailment practices and to file a revised open access transmission tariff (OATT) with the commission. Petitioners also requested that FERC order Bonneville to act in accordance with the terms of its interconnection agreements with the petitioners by ceasing its curtailment practices immediately.

On Dec. 7, 2011, the commission issued an order finding that Bonneville’s Environmental Redispatch Policy resulted in the noncomparable treatment of non-federal generating resources interconnected to Bonneville’s transmission system. Under section 211A, the commission directed Bonneville to provide comparable transmission service to such resources prospectively by submitting tariff revisions that provide for transmission service under terms and conditions that are comparable to those under which Bonneville provides transmission to itself, and that are not unduly discriminatory or preferential.

On March 6, 2012, Bonneville submitted its compliance filing to address the concerns raised in the December 2011 order. Bonneville’s compliance filing proposed to amend its OATT to include the OMP, which sets forth the terms and conditions for displacing generation during periods of oversupply. Under the OMP, Bonneville proposed to retain the practice of displacing certain generation resources unilaterally. Bonneville proposed to displace generating units using a least cost displacement curve, which would be implemented by an independent evaluator, and to compensate such generation for displacement costs, including:

  • compensation for production tax credits (PTC) that the generator would have received but for the displacement;
  • compensation for lost renewable energy credits (REC) unbundled from the sale of power, and certain contract costs related to the bundled sale and purchase of RECs; and
  • costs and penalties related to the failure to deliver renewable power.

Compensation handled differently for pre- and post March 6 parties

With regard to compensation for lost contract revenues, Bonneville proposed to differentiate between generators that had entered into contracts prior to March 6, 2012, which would receive compensation for these losses, and those that entered into contracts after March 6, 2012, which would not. Bonneville argued that this differentiation was not unduly discriminatory or preferential because prospective contracts could be structured and priced to avoid these costs. Further, Bonneville pointed out that OMP does not unduly discriminate between new and existing generation because compensation for existing generators entering into new contracts after March 6, 2012, would not include compensation for lost contract revenues.

Nevertheless, Bonneville asserted that the commission has established precedent for allowable distinctions between new and existing customers. Bonneville stated that, in a PJM Interconnection case, the commission found that generators are bound by the rules in place at the time they enter the transmission provider’s interconnection queue, because the generator is on notice of the costs it will incur under those tariff rules, even if the tariff rules are subsequently changed. Bonneville argued that its OMP compensation rule is similar, because generators will be on notice of the rules that will apply after March 6, 2012, and can structure their economic models and contracts accordingly.

“The Commission will deny rehearing,” said the June 26 FERC decision. “Although not expressly addressed in the Compliance Order, the Commission accepted, as part of the overall OMP proposal, Bonneville’s proposal to exclude compensation for contract costs for generators with post-March 6, 2012 contracts. We find appropriate Bonneville’s proposal to compensate those generators with executed contracts that pre-date the filing of the OMP for contract costs resulting from displacement during oversupply events, while excluding compensation for lost contract revenues for generators that execute contracts after the OMP was filed (i.e., March 6, 2012).”

FERC added: “Generators that had already entered into contracts prior to March 6, 2012 had no opportunity to address and mitigate any possible losses associated with potential displacement during oversupply events. However, we find that, with notice of the proposed OMP compensation rules, generators entering into new contracts have the opportunity to structure their transactions in accordance with the applicable OMP compensation provisions. Although the specific facts differ from this case, PJM is relevant with regard to the issue of notice. Thus, because Bonneville’s filing of the OMP provided notice of the compensation rules that would apply prospectively, after March 6, 2012, we find that the Commission’s approval of this element of the OMP is consistent with Commission precedent on this issue, including PJM.”

Further, as Bonneville explained in its compliance filing, the proposed compensation under the OMP applies to all renewable generators – both new and existing – executing contracts after March 6, 2012. “Thus, we find no undue discrimination or preferential treatment with respect to compensation for contract costs,” FERC said. “For the same reasons, we find no inconsistencies between the Commission’s prior comparability directives, either in the December 2011 Order or in the Compliance Order and the Commission’s acceptance of the OMP compensation provisions.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.