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It's the Money, Not the Fish

Bonneville Power, wind curtailments and the bigger picture.

Fortnightly Magazine - July 2012

output economically given the current energy bid floor. In particular, the current bid floor level of -$30/MWh is not sufficient to compensate reductions in energy output from VERs (variable energy resources, such as intermittent wind) who receive additional revenues outside the ISO markets [such as from PTCs and RECs] … and does not allow these resources to bid economically in many cases.”

Powerex warns further that asymmetrical negative pricing poses a particular danger, as when seams form between separate adjacent regions with and without negative pricing:

“If BPA establishes a $0/MWh price floor and the CAISO allows negative prices in its markets, there are likely to be hours when California-sourced energy will flow northbound into BPA’s balancing area when California energy prices are lower than zero. This will exacerbate oversupply problems … at times when BPA is attempting to find loads with which to sink its own surplus energy.

“BPA has not addressed how it will respond… [W]ill BPA attempt to block transactions to loads within its balancing area if those loads choose to purchase negatively priced energy from suppliers outside BPA’s area?”

From Bonneville’s perspective, negative prices pose no problem for the federal hydropower it sells to its native public power “preference” customers in the Pacific Northwest at tariffed rates. Rather, it’s the revenue that BPA earns on surplus hydropower sold at prevailing market rates outside its balancing area—the output and sales that Bonneville protects when it curtails wind—that remain at risk.

That’s why the wind industry complainants describe Bonneville’s wind curtailments as being “about money, not fish.”

Turlock’s comments echo that point:

“In reality there is a market price for energy that is negative and BPA does not want to receive that price.”

Swings and Roundabouts

What most have seen as a negative price, others portray as a subsidy—a subsidy that Bonneville now proposes to pay to the wind industry, and that some say exceeds Bonneville’s statutory authority.

Back in 2010, the U.S. Court of Appeals for the 9th Circuit held that Bonneville’s decision to extend a $30 million gift to Alcoa violated Bonneville’s charge to remain self-sustaining and operate on sound business principles, despite Bonneville’s argument that the gift was justified to preserve jobs and keep Alcoa afloat as one of Bonneville’s lucrative direct service industrial customers. (Pacific NW Gen. Co-op. v. BPA, 596 F.3d 1065.)

And in written comments filed with FERC, the Western Public Agencies Group—a collection of small municipals and public utility districts in Washington State—argues that PNGC likewise proves that Bonneville has no license to pay lost opportunity costs, including PTCs and REC revenues, to wind power producers curtailed to allow Bonneville to meet carry out its environmental responsibilities.

As the group argues, “These unbounded voluntary payments are of the same nature as past subsidies that Bonneville has attempted to favor upon other customer groups …

“Bonneville is simply giving money away.”

By contrast, Turlock sees a situation that’s perfect for forward contracting.

Rather than enforce the curtailment queue, Turlock argues that Bonneville “would be much better served” seeking long-term forward deals—to negotiate in advance