FERC approves formula for BPA curtailment of wind generation in favor of excess hydro

The Federal Energy Regulatory Commission has approved a cost allocation method by which transmission operator Bonneville Power Administration may fund the costs of reimbursing wind power projects whose generation is curtailed to make room on the grid for free excess federal hydropower resulting from high river flows in the Columbia River Basin.

The rulings, issued Oct. 16, follow up FERC orders in December 2012 in which FERC conditionally accepted BPA’s filing of an Oversupply Management Protocol under which BPA proposed to partially compensate wind generators if it should be forced to curtail their generation. At that time, FERC also ordered BPA to submit an additional compliance filing that allocates curtailment costs in a manner that ensures that non-federal generators receive comparable transmission service to the service BPA provides itself.

BPA’s original Environmental Redispatch Protocol was invoked in times in which high river flows forced the agency to spill large amounts of water, rather than passing it through turbines of the federal hydropower system. BPA is forced by rulings under the Endangered Species Act to continue to run some excess water through the turbines to protect threatened salmon and steelhead from high dissolved gas concentrations in spilled water that bypasses turbines. BPA said the action also maintained the reliability of the power grid and avoided shifting costs to BPA customers.

In times of excess hydropower, BPA traditionally curtailed generation by thermal power plants and provided their customers with the excess hydropower free of charge. The thermal plants, although not generating, experienced a saving in fuel costs.

That changed as 4,500 MW of wind generation was added in recent years to the BPA system. The wind generators, who have no fuel costs, filed a complaint with FERC in June 2011 urging it to stop BPA from using its transmission monopoly power to curtail competing generators in an “unduly discriminatory manner.” If wind plants do not generate they lose revenues from renewable energy credits and production tax credits.

FERC ruled in December 2011 that the federal transmission operator must stop curtailing wind generators in favor of its own hydropower without compensating the wind projects for lost production tax credits, renewable energy credits, and revenue from power purchase agreements. However, wind generators continued to complain about lack of an open access transmission tariff governing their access to the grid.

Under its new Oversupply Management Protocol, BPA first would work with the U.S. Army Corps of Engineers and the Bureau of Reclamation to manage federal hydroelectric generation and spill water up to dissolved gas limits. BPA then would offer low-cost or free hydropower to replace the output of thermal and other power plants, with the expectation that many would voluntarily reduce generation to save fuel costs.

Curtailment compensation cost $2.7 million

If hydropower supply still exceeds demand, BPA would then reduce the output of remaining generation within its system, including wind energy, in order of least cost. It said it would compensate the affected generation for lost revenues, including renewable energy credits and production tax credits.

FERC said, to date, BPA has incurred $2.7 million in oversupply costs, all in 2012.

In the Oct. 16 orders (EL11-44 and EF14-5), FERC accepted BPA’s proposal to allocate the costs of invoking the Oversupply Management Protocol to transmission rates of all generators scheduled to use transmission at the time of the hydropower oversupply event. If that had been invoked in 2012, BPA said it would have allocated 72 percent of the cost to federal power generation, 14 percent to thermal generators and 14 percent to wind generators.

BPA argued that interconnection is a transmission service, therefore, oversupply costs are transmission costs, rather than power costs. FERC agreed.

“Under the OMP, Bonneville incurs costs in order to curtail wind generators during oversupply conditions — a situation that did not exist prior to the interconnection of significant amounts of wind generation on Bonneville’s transmission system,” FERC said. “Because this interconnection of wind resources to Bonneville’s transmission grid is directly related to Bonneville incurring oversupply costs, we find that Bonneville’s oversupply costs are properly categorized as transmission costs.”

FERC said the latest version of the OMP that it approved expires on Sept. 30, 2015, requiring BPA to make a filing with FERC to justify its continued use beyond that date.

“We encourage Bonneville to continue to work with its stakeholders to develop a mutually agreeable long-term solution to manage oversupply conditions, rather than continuing to rely on involuntary curtailment,” the commission concluded.

The FERC orders may be obtained from the commission Internet site under http://www.ferc.gov/whats-new/comm-meet/2014/101614/E-3.pdf and http://www.ferc.gov/whats-new/comm-meet/2014/101614/E-9.pdf.

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