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It's the Money, Not the Fish

Bonneville Power, wind curtailments and the bigger picture.

Fortnightly Magazine - July 2012

merits of open access transmission. That dialogue yielded a policy position paper, in which Bonneville said it had gone through an “extensive internal process” to identify a number of admitted inconsistencies with the FERC OATT, leading it to question “whether it is worth the effort and expense to comply with the tariff.” (See, “Conferring with Customers on BPA’s Transmission Tariff and Reciprocity Status from FERC,” Feb. 2011, p.3.)

That missive gave FERC reason to confirm its denial of safe harbor status for Bonneville in a rehearing order issued in April 2011. Since then, according to the complainants, Bonneville has been attempting to revise its open access rules not through amendments to a filed OATT, but via various informal business practices. An example is BPA’s dispatch standing order (DSO) 216, which sanctions curtailment of wind generation when 100 percent of imbalance reserves are deployed.

The complainants add:

“If the commission … accepts Bonneville’s view … [it] can discard any hope that its open access reforms will have any effect in the Northwest.

“Worse yet, this will leave FPA sec. 211A a dead letter in all regions …

“Bonneville has been clear that it does not consider the loss of reciprocity to be significant, and based on Bonneville’s past behavior [we] have no reason to believe that reciprocity status, if granted, would be maintained.”

Runaway Costs

Most industry stakeholders seem largely to favor a market solution to resolve Bonneville’s stream-flow management problem, with resources somehow bidding on the right to be dispatched—including not only the aggrieved wind projects, but also non-federal thermal units and BPA’s huge federal dam projects. That likely would mean that prices at Mid-Columbia and other market-making hubs would turn negative, forcing Bonneville in effect to pay for the privilege of curtailing wind generation and displacing the output with its own surplus hydropower. Bonneville, however, has opposed this idea virtually from day 1, fearing “runaway costs” that would undermine its congressional charge to operate as a self-sustaining business.

This fear underpins BPA’s decision to set up a least-cost “displacement cost curve,” whereby all non-federal regional resources, including both wind and thermal plants, would file cost data specifying what payment they must receive to compensate them adequately for a forced curtailment imposed during periods of high runoff that make it difficult for Bonneville to manage its myriad number of obligations.

Wind units would be paid for lost PTCs and REC revenue, plus lost contract sales revenue for contracts executed before March 6, 2012. Bonneville would assign a zero displacement cost to thermal units, but allow them to satisfy minimum run and ramping requirements. With curtailments of non-federal resources occurring in least-cost sequence, BPA would displace thermal units first, before forcing wind power off the system so as to create unserved load as a market for its surplus hydropower—the energy that BPA must generate via turbines so as to bleed down reservoir levels without endangering fish with excessive spill.

In this way, Bonneville puts a ceiling on the cost it must pay to curtail wind, as it explained when it outlined for FERC