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Bonneville's Balancing Act

In the Pacific Northwest, you either spill water or spill wind.

Fortnightly Magazine - September 2011

plants. And BPA under this policy wouldn’t consent to pay a negative price, nor would it agree to compensate curtailed wind generators for lost PTCs and RECs (see, Final Record of Decision, May 13, 2011) .

Contemporaneous with adoption of its new environmental redispatch policy, Bonneville notified its generation interconnection customers that it was unilaterally revising each existing large generator interconnection agreement to clarify that nonfederal generators (such as thermal and wind) would be bound to comply with orders from the balancing authority (BPA) directing them to reduce generation. In fact, in its final record of decision, Bonneville stated that these unilateral amendments would simply clarify existing contractual rights.

BPA’s new policy kicked in almost immediately after its adoption. Beginning on May 18, and extending through July 18, BPA redispatched ( i.e., curtailed) approximately 97,000 MWh of wind generation (5.4 percent out of some 1.76 million MWh of wind generation produced during that period) to deal with the 2011 high-water event. During the same period, BPA sold approximately 250,000 MWh of federal hydropower generation at a price of zero.

The wind industry quickly replied, with Iberdola, NextEra, Invenergy, PacifiCorp, and Horizon joining in a complaint filed at FERC alleging that by displacing wind with hydropower, BPA in effect was confiscating transmission rights, denying comparable service as required by FERC Order 890, and unlawfully abrogating generation interconnection agreements. The complaint suggests numerous remedies, including the idea that FERC exercise its authority under Federal Power Act 211A to compel Bonneville to file a reciprocity open-access transmission tariff (OATT) (FERC Dkt. EL11-44, filed June 13, 2011, amended June 17, 2011) .

At its heart, the complaint argues that while BPA remains bound to meet public policy goals, the law nevertheless should roll the costs of these environmental tasks into BPA’s power marketing activities, as a cost of doing business, either by forcing BPA to pay negative prices, or else compensate curtailed generators for lost revenues.

As stated by attorney Donald Kaplan (K&L Gates), representing PPL Companies, “BPA seeks to use its market power over transmission … to avoid costs to its customers associated with … spill and water constraint requirements…

“BPA has shifted the costs of complying with environmental regulations from its power customers to its transmission and interconnection [wind] customers.”

Kaplan suggests that BPA’s environmental redispatch policy is really “just a discriminatory solution to an economic problem” (Comments of PPL Companies, filed July 17, 2011) .

Other opponents worry that Bonneville’s redispatch policy will impose a chilling effect on wind industry development. Caithness, which received a partial loan guarantee from DOE last December to aid $1.3 billion in financing for its planned 845-MW Shepherds Flat project in eastern Oregon—one of the world’s largest wind projects—warns Bonneville that state RPS laws in the Pacific Northwest “will never be met” if BPA can expropriate wind project transmission rights by unilaterally amending signed interconnection agreements.

Portland General Electric voices concern that BPA policy will send “false signals” about grid flow patterns because it substitutes hydropower for wind without changing the transaction e-tags.

As Xcel adds, “failure