a lengthy rate proceeding, BPA officials have decided to allocate oversupply
costs to generators within its balancing authority area based on their
scheduled use of transmission during oversupply events.
costs occur when BPA uses its Oversupply Management Protocol to displace
generation in its balancing authority area with federal hydropower and
compensates generators for certain costs related to the displacement.
release of the final record of decision March 27 concluded the formal rate
proceeding, which began in November 2012. BPA will submit the rate to the
Federal Energy Regulatory Commission for approval. The rate, which will be
effective through the fiscal year 2014-2015 rate period, also will recover the
costs incurred since 2012, when BPA established the protocol.
2012, the agency incurred $2.7 million in displacement costs. BPA did not have
to implement the oversupply protocol in 2013.
officials say there are many perspectives on who should pay the costs of
argument is that the costs are caused by BPA’s fish and wildlife obligations
and the inability to sell excess power, and that these costs must be borne by
argue that, because BPA didn’t incur these costs when it managed high water
occurrences before open access and the influx of wind energy, the displacement
cost should be borne by wind generators or transmission customers.
view is that the displacement costs are caused by both BPA’s fish and wildlife
obligations and its integration of significant amounts of new wind generation
that will not voluntarily curtail for zero-priced power.
understand and respect the perspectives of the many parties to this case,” said
Administrator Elliot Mainzer in his preface to the record of decision. “I have
taken into account all of their submissions, including those filed in response
to the draft record of decision. I have selected an alternative that I believe
is consistent with our multiple statutory responsibilities, is rooted in the
basic principles of cost causation and fairness that underlie BPA’s rate
directives, and reflects the guidance we have received from FERC.”
generators on line in BPA’s balancing authority area during oversupply contribute
to the costs of displacement. Therefore, BPA says it is reasonable to allocate
costs to those generators on line during oversupply events proportional to
their scheduled generation, which represents their contribution to the
magnitude of the event.
methodology, suggest BPA, could also encourage generators to minimize
generation during oversupply events, increasing BPA’s ability to dispose of
excess federal hydropower.
oversupply is most likely to occur during the spring runoff, the need to
implement the Oversupply Management Protocol depends on a combination of
factors, such as the shape of the runoff and the demand for power in
says it will monitor forecasts throughout the spring and manage oversupply
conditions with the most operationally feasible and cost effective means
available. If oversupply conditions appear imminent, BPA will host a Spring
Operations Forum conference call, which gives generators the opportunity to
learn about the potential for oversupply as well as the steps BPA is taking to
mitigate the risk of implementing the Oversupply Management Protocol.
says it is committed to mitigating oversupply by first taking other available
actions, such as marketing strategies that allow BPA to shift generation out of
light-load hours (10 p.m. to 6 a.m.) into hours when there is greater demand
for power. BPA uses the protocol only as a last resort to balance energy supply
and demand, and reduce the amount of total dissolved gas in the river to
protect fish and other aquatic species.
me, the oversupply issue has been somewhat disheartening,” Mainzer stated,
“because it pits two clean energy resources — hydro and wind — and their
respective interests against each other at a time when we should be working
collaboratively to find ways to better leverage and harmonize our zero-carbon
said he looks forward to working with regional interests to identify a
long-term solution to the oversupply issue that enables the region’s
zero-carbon hydro and wind energy resources to operate together more
established the Oversupply Management Protocol to reconcile several objectives:
to preserve reliability of the electric system; protect aquatic species,
including threatened and endangered salmon; and continue the commitment to
supporting renewable resource development. Compensating renewable generators
for energy that is displaced with federal hydropower under the protocol allows
BPA to meet those objectives.
protocol is also an important tool to limit cost exposure to the displaced
generators’ actual costs, rather than subjecting ratepayers to a potentially
volatile negative market. Under the protocol, the agency reimburses renewable
generators within its balancing authority area only for payments they would
otherwise receive for producing power, including (1) production tax credits,
(2) renewable energy credits unbundled from the sale of energy, and (3) losses
with respect to contracts executed before March 6, 2012, for the bundled sales
of renewable energy credits and energy. In addition, renewable generators must
provide auditable cost information, and are displaced in order of least cost.
record of decision is posted at www.bpa.gov/goto/OS14