In 2011, five wind resources generators filed a complaint with the Federal Energy Regulatory Commission (FERC) alleging that the Bonneville Power Administration was providing transmission service in an unduly discriminatory and preferential manner that favored its own generation over that of third parties.1 The resolution of this complaint will mark an important step in defining the scope of FERC’s authority under section 211A of the Federal Power Act (FPA), which gave the commission increased authority over the transmission practices of nonpublic utilities. It is also another example in which FERC must balance transmission issues related to the particular characteristics of wind-generated electricity.
Bonneville Wind Power Transmission v. FERC
Bonneville Wind Power Transmission v. FERC
Vol. 51 No. 1
By
Stephen J. Snyder is an associate in the Corporate Department of Paul Hastings, LLP, in Washington, D.C.
Background. Bonneville, a nonpublic utility, is a federal agency within the US Department of Energy that is responsible for marketing power generated at federal hydroelectric projects in the Pacific Northwest. It also provides transmission service to third parties. Although Bonneville has provided open access transmission service, FERC recently determined that Bonneville’s Open Access Transmission Tariff (OATT) does not substantially conform to the commission’s pro forma OATT as set forth in FERC order No. 890, and is not acceptable as a reciprocity tariff.2
In May 2011, Bonneville finalized an environmental redispatch protocol in order to address periods of over-generation of electricity. During high-water periods, hydroelectric facilities must either run excess water through generating turbines, producing excess energy, or bypass the turbines by diverting the water over spillways, which increases the level of gases dissolved in the water below the dams. These gases may be harmful to aquatic species and violate the Clean Water Act and Endangered Species Act. The protocol was designed to allow hydro facilities to increase their generation while ordering the curtailment of other generating sources to avoid an over-generation imbalance. This generation has no added cost, and Bonneville would satisfy the energy schedules of curtailed generators by replacing the curtailed electricity with federal hydro-generated electricity.3
The five complainants argued that Bonneville was impermissibly favoring federal hydro-generation by curtailing nonfederal generating sources and appropriating the firm transmission rights procured by those sources to satisfy the needs of the federal generation. This noncomparable treatment was especially acute for facilities using wind power, because these sources have no fuel cost savings when curtailed. Also, a portion of the value generated by wind projects comes from sales of renewable energy credits (RECs) or accumulation of production tax credits (PTCs) that are only created when the wind facilities are operating. Also, some wind power purchase agreements specifically require wind-generated electricity. In late 2011, while recognizing the competing requirements facing Bonneville, FERC ruled that the protocol violated FPA section 211A by offering noncomparable transmission services to the complainants and by failing to offer service that is not unduly discriminatory or preferential.4 Bonneville responded by filing a new oversupply management protocol in the complaint docket and by filing a petition for declaratory order seeking approval of a reciprocity tariff, including the new protocol, in a nonjurisdictional docket.
The FERC order granting the complaint and Bonneville’s response has highlighted the evolving nature of the commission’s understanding of its authority under section 211A enacted with the Energy Policy Act of 2005. In relevant part, it provides that with certain exceptions:
the Commission may, by rule or order, require and unregulated transmitting utility to provide transmission service: (1) at rates that are comparable to those that the unregulated utility charges itself; and (2) on terms and conditions (not relating to rates) that are comparable to those under which the unregulated utility provides transmission services to itself and that are not unduly discriminatory or preferential.5
In granting the complaint, FERC interpreted this provision as giving it the authority to require that Bonneville provide comparable transmission service to nonfederal electric generators. FERC found that the protocol did not give nonfederal generators comparable transmission service and ordered that “Bonneville must submit a revised OATT, pursuant to section 211A, that addresses the comparability concerns raised in this proceeding in a manner that provides comparable service that is not unduly discriminatory or preferential.”6
Bonneville responded by submitting a compliance filing describing a new attachment P to its tariff. Bonneville attempted to address the “comparability concerns” by replacing the protocol with the oversupply management protocol that includes payments to curtailed resources that experience costs related to lost PTCs or REC sales or contract costs flowing from the forced curtailment. Bonneville quickly followed this compliance filing with the filing of a reciprocity tariff in a nonjurisdictional docket.7 Thus while the compliance filing and resulting protests were pending before FERC, another proceeding including the same new protocol is also before FERC but subject to a different standard. Therefore there is dispute as to what standard FERC will apply, or if, as the five complainants have argued, Bonneville is attempting to split its tariff with a jurisdictional piece related to curtailment under the new protocol and a voluntary tariff, subject only to FERC withdrawal of reciprocity status.
The complainants have interpreted section 211A and FERC’s order granting their complaint as requiring Bonneville to file a commission-jurisdictional OATT pursuant to section 211A. In fact, because Bonneville filed only a proposed attachment with the new protocol with its compliance filing, the complainants proposed that FERC import Bonneville’s reciprocity tariff filed in a nonjurisdictional docket and accept it, with revisions, as Bonneville’s jurisdictional OATT. They therefore take a broad view with respect to the expansion of FERC’s authority over nonpublic utilities. In effect, in order to ensure that a nonpublic utility provides comparable transmission rates and terms and conditions, the complainants argue that FERC may direct a nonpublic utility to keep a jurisdictional tariff on file.
This is a broad reading of section 211A, but it is plausibly consistent with FERC’s action “requiring the filing of a tariff that will govern service provided by Bonneville in the future.”8 Conversely, FERC also expressed a desire to show restraint in applying section 211A, foreseeing that “the need to use this statutory authority would be rare.”9 How FERC responds to Bonneville’s attempt to maintain a voluntary reciprocity tariff while also filing its new protocol in a jurisdictional docket will provide insight into how aggressively the commission may effectuate its section 211A authority.
Integration of Wind Power. In addition to raising important issues regarding the scope of section 211A relevant to FERC’s authority over certain heretofore largely nonjurisdictional entities, the Bonneville protocols and their relation to over-generation and FERC’s responses are important for the increasingly adamant struggles between producers of wind and other variable energy resources and transmission providers. The nature of wind generation, including how it is financed and how and when it produces energy, is a recurring topic for recent FERC dockets.
Bonneville highlights recent sizable increases in the wind generation utilities must absorb into their systems. The integration of large amounts of variable energy resources and the impact on the grid is very much on FERC’s mind, as evidenced recently by FERC Order No. 1000’s emphasis on public policy goals in transmission planning, and its recent order modifying the pro forma Large Generator Interconnection Agreement to require variable energy resources generators to provide meteorological data in an effort to improve forecasting and integration.10
Transmission providers are also exploring ways to manage increased wind penetration with their obligations to provide nondiscriminatory open access. For example, FERC recently conditionally approved Southwest Power Pool proposed tariff amendments that would allow curtailment of currently nondispatchable resources, including intermittent renewable resources, to relieve congestion.11 To justify this change, the Southwest Power Pool noted that in just the last five years, its nondispatchable capacity has increased from 1,810 MW to 5,494 MW. Similarly, Bonneville notes that it “takes pride” in the fact that it has “the highest ratio of wind capacity to peak load of any balancing authority in the country,”12 but also takes pains to make clear how this growing wind fleet increases its need for flexibility in managing its system. This tension will continue to play out, informed in part by the outcome of Bonneville’s dispute with its wind generators.
Endnotes
1. See Iberdrola Renewables, Inc., et al. v. Bonneville Power Admin., Docket No. EL11-44-000, Complaint and Petition for Order Under Federal Power Act Section 211A (June 13, 2011) (“Complaint”).
2. See United States Dep’t of Energy – Bonneville Power Admin., 128 FERC ¶ 61,057 (2009), reh’g denied, United States Dep’t of Energy – Bonneville Power Admin., 135 FERC ¶ 61.023 (2011).
3. See Complaint at 14.
4. See Iberdrola Renewables, Inc., et al., v. Bonneville Power Admin., 137 FERC ¶ 61,185 (2011) (“December 7 Order”).
5. 16 U.S.C. § 824j-1 (2006).
6. December 7 Order at ¶ 78.
7. United States Dep’t of Energy – Bonneville Power Admin., Docket No. NJ12-7-000, Notice of Petition for Declaratory Order (April 4, 2012).
8. December 7 Order at ¶ 30.
9. Id. at ¶ 32.
10. Integration of Variable Energy Resources, Order No. 764, 139 FERC ¶ 61,246 (2012).
11. Southwest Power Pool, Inc., 140 FERC ¶ 61,225 (2012).
12. United States Dep’t of Energy – Bonneville Power Admin., Docket No. NJ12-7-000, Request for Leave to Answer and Answer at 5–6.
