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FERC Calls BPA’s High Water/Wind Power Cutoff Rule Discriminatory, Orders Correction In 90 Days
Posted on Friday, December 09, 2011 (PST)

The Federal Energy Regulatory Commission sided with wind generating companies in a Wednesday order giving the Bonneville Power Administration 90 days to correct what the commission called an “unduly discriminatory” policy limiting transmission of wind, thermal and other non-hydro power during high water flows in the Columbia River basin.

 

The FERC order is in response to a June 13 petition filed by a group of wind power generators in the Pacific Northwest in opposition to the BPA’s Environmental Redispatch Policy, which limits transmission of non-hydro energy during extraordinarily high water periods that the agency says historically occur about every third spring. 

 

Iberdrola Renewables, a member of a coalition of wind energy companies that petitioned FERC, hailed the ruling.

 

“We are pleased with the Commission’s action on this important case, which establishes that BPA must offer open and non-discriminatory access to its transmission grid customers,” said Don Furman, senior vice president of Iberdrola Renewables.

 

BPA implemented the Environmental Redispatch Policy on an almost daily basis during May and June due to near record flows down the Columbia-Snake river system. To accommodate transmission of the excess hydropower during high-water periods, the policy limits access to the region’s transmission system for energy from fossil fuels and wind.

 

BPA officials, however, argued in documents filed with the FERC that many of the issues included in the in the Dec. 7 FERC order are outside the FERC’s authority, and that the commission jumped the gun by issuing the order while the Environmental Redispatch Policy is under review by the Ninth Circuit Court of Appeals. Legal briefings are now scheduled to begin Feb. 15.

 

In addition, Doug Johnson, BPA spokesman, said, “a lot of the issues described in that order are issues we have been discussing in settlement talks. Those talks are confidential.”

 

Johnson said Thursday the BPA “is still digesting the order” and so he could not comment beyond the press statement issued Wednesday in which Steve Wright, BPA administrator said he wished the FERC would have given the agency and stakeholders time to work things out through ongoing settlement talks.

 

“We were surprised and very disappointed that the Federal Energy Regulatory Commission would choose at this moment to render a decision when it is aware that we have been urged by many members of the Northwest Congressional delegation to settle this issue, and when settlement discussions are proceeding in good faith,” Wright said.

 

“The temporary oversupply of energy is a Northwest challenge.  We believe it is the region’s responsibility to find the most appropriate way to address this challenge,” Wright said.

 

The Dec. order is in response to a petition filed June 13 by a group of wind generation companies across the Pacific Northwest who argue that the BPA should stop its practice of limiting transmissions of wind power during high water periods, or pay them for losses of income from federal and state renewable energy tax credits and other incentives based on the amount of wind energy they produce. The petitioners include Iberdrola Renewables, Inc.; PacifiCorp; NextEra Energy Resources; Invenergy Wind North America; and Horizon Wind Energy.

 

In documents submitted to the FERC, BPA officials said restrictions on transmission of wind energy over the agency’s power transmission system kick in during super high water periods such as last spring. In its response to the petition filed by wind energy companies, the BPA said it has two options for dealing with super high water flows - either running the excess water through hydro power generators and producing excess power on the Columbia River system of dams, or spilling it over dam spillways, which poses a risk to endangered salmon runs.

 

“The spill is a problem because it raises total dissolved gas levels in water, endangering salmon – a possible violation of Clean Water Act and Endangered Species Act obligations,” the BPA wrote in its FERC response.

 

BPA markets much of the power generated in the federal hydro system at cost and owns and operates three-quarters of high-voltage transmission lines in the Pacific Northwest. It also funds one of the largest fish and wildlife protection and restoration programs in the world.

 

To compensate wind energy companies and operators of coal and natural gas power plants and others whose energy transmissions are limited during the very high water periods, the BPA provides them excess hydropower at no cost, according to the BPA response.

 

However, the petitioners contend the trade of hydropower to offset transmission limits may have worked out well financially for thermal power generators, but not so well for the wind energy companies. They argued that it doesn’t pencil out for them due to the loss of federal and state renewable energy tax credits and federal production incentives withdrawn when wind power production drops below eligibility levels for the incentives.

 

To offset those potential losses of government subsidies, the petitioners are seeking to force BPA to also pay them for taking the free hydropower, according to the FERC documents. In response, BPA said it rejected requests for such “negative price” payments because such payments could create opportunities to distort the market and shift costs, potentially leading to rate increases to BPA customers and public utility ratepayers.

 

In its order, FERC said it recognizes the dilemma the BPA faces in navigating competing obligations, including the protection of endangered species, the provision of low cost power to its preferred customers and the integration of wind, solar and other variable energy resources.

 

However, the order goes on to say that the commission ruled in favor of the petitioners on the issue of open access to transmission lines because they believe that is a key component of congressional mandates governing the region’s power grid.

 

“Open access is a fundamental tenet of electricity markets,” the FERC wrote in its conclusion.  “Clear and firm principles of open access give industry the confidence to invest in new generation resources and support the construction of associated transmission necessary to meet future needs.”

 

During the 90-days FERC has given the BPA to revamp or replace its Environmental Redispatch Policy to improve open access to transmission for wind energy companies, Johnson said the BPA will continue negotiations through the settlement talks already under way.

 

“We have from the onset of talks been committed to a durable long-term alternative to the Environmental Redispatch Policy, as long as it addresses equitable cost allocation,” Johnson said.

 

Furman also pledged that the wind energy companies would continue to work with BPA to find an equitable solution.

 

“Despite our dispute on this issue, we have and will continue to work collaboratively with BPA. This is a great opportunity for the region’s utilities and consumers to work on long-term solutions,” Furman said. “We have a long history of working together to meet the region’s energy needs and look forward to better policies in the future.

 

The Renewable Northwest Project has come out in support of the FERC order calling the Environmental Redispatch Policy discriminatory.

 

“RNP is eager to continue working with BPA and regional partners toward solutions to over-generation that are economical, equitable and good for the environment,” and advance the Northwest’s future forward to deploying renewable energy.

 

“We are confident today’s FERC ruling will precipitate the new levels of collaboration and clean energy advancement,” the RNP wrote in a press statement addressing the FERC order.

 

On the other side of the issue, the Public Power Council issued a press statement Wednesday expressing concern that the FERC order could impact ratepayers by forcing BPA to pay for wind energy that is not needed and may not even be generated during the extraordinary high water periods when surplus hydro-power is being produced.

 

“While FERC’s position is not a surprise, we believe it is misguided and jumps ahead of regional efforts to resolve the issue,” Scott Corwin, executive director of the PPC said in a Wednesday press statement. “We will now evaluate our next legal steps. At the same time we hope to continue to work with all regional partners to try to resolve these issues in a way that continues to protect fish and does not unfairly hit ratepayers.”

 

Corwin said while the FERC ruling called for BPA to adopt a new policy within 90 days, the order stopped short of telling the agency what that new approach might be.

 

Since the BPA’s existing policy was set to expire in March, Corwin said the agency has already been in discussions with partners about alternatives for some time. 

 

For previous CBB stories on this issue go to:

 

http://www.cbbulletin.com/410980.aspx

 

http://www.cbbulletin.com/410604.aspx

 

http://www.cbbulletin.com/409985.aspx

 

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