On December 7, 2011, the Federal Energy Regulatory Commission (FERC) determined that Bonneville Power Administration's (BPA) use of environmental redispatch to address excess water supply and low load by curtailing renewable and thermal generators in favor of federal hydropower providers unfairly discriminated against wind generators.1 This decision will have broad jurisdictional and alternative energy implications, given that FERC has exercised for the first time its Federal Power Act (FPA) section 211A authority to order BPA, an unregulated transmitting utility, to file changes to or replace its voluntarily-filed Open Access Transmission Tariff (OATT) to address undue discrimination regarding access to its transmission system.
FERC ruled:
- BPA's environmental redispatch policy significantly diminishes open access to transmission and results in non-comparable transmission service that is unduly discriminatory and preferential;
- FERC is authorized under section 211A of the FPA to require BPA, a non-jurisdictional utility, to file a tariff providing for transmission service on terms and conditions that are comparable to those under which BPA provides to itself and that are not unduly discriminatory or preferential;
- BPA may not extend its current environmental redispatch policies that result in noncomparable transmission service; and
- BPA may not rely on the terms of its Large Generator Interconnection Agreement (LGIA) as support for environmental redispatch.
BPA has ninety days from the Order to file revisions to its OATT that address the comparability concerns raised in the proceeding in a manner that provides comparable transmission service that is not unduly discriminatory or preferential.
FERC noted in its decision that the proceeding "presents a clear example of the importance of transmission," and said that "with additional transmission or comparable alternatives, BPA may have the flexibility necessary to meet all of its obligations, including open access, and fully integrate the variable energy resources seeking to access its transmission system."2
I. Background
BPA is not a "public utility" within FERC's jurisdiction under sections 201, 205 and 206 of the FPA. BPA is a federal power marketing agency within the United States Department of Energy, established to market electric energy generated by the BPA Project.3 BPA provides transmission service to third parties if BPA's transmission "is not required for the transmission of Federal energy."4 The Order arises from a petition initiated in June by a group of owners of wind facilities in the Pacific Northwest (Petitioners) who alleged that BPA was using its transmission market power to curtail wind generators in an unduly discriminatory manner.5
BPA uses environmental redispatch to address excess water supply by temporarily substituting Federal hydropower, at no cost, for wind power or other generation in its Balancing Authority Area (BAA). BPA said that it uses environmental redispatch, when necessary, to ensure compliance with the Endangered Specifies Act, Clean Water Act, and its other statutory responsibilities. During environmental redispatch, utilities and consumers who purchase wind power or other energy continue to receive full energy deliveries consistent with their transmission schedules, but the energy originates from the Federal Columbia River Power System, instead of other generating resources.6 In order to ensure that its BAA does not face reliability problems associated with overgeneration, BPA issues dispatch orders to curtail generation and substitutes energy from its hydro facilities to serve load.7
Petitioners argued that under its environmental redispatch policy, BPA engages in undue discrimination by curtailing wind generation and then using the firm transmission rights that had been associated with the wind generation output to deliver federal hydropower to the wind generators' customers.8
II. FERC Decision
A. Authority under Section 211A
Petitioners requested that FERC order BPA to revise its curtailment practices to comport with the undue discrimination standards of FPA section 211A, established under the Energy Policy Act of 2005, and to use its section 211A authority to direct BPA to remedy its discriminatory practices by filing an OATT for FERC approval.9 They contended that section 211A grants FERC the discretion to require unregulated transmission utilities such as BPA, to provide comparable, nondiscriminatory, open access to their transmission systems similar to the requirements imposed on public utilities.10
Section 211A of the FPA states that:
"Subject to section 212(h), the Commission may, by rule or order, require an unregulated transmitting utility to provide transmission services: (1) at rates that are comparable to those that the unregulated transmitting 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."11
BPA argued that the U.S. Court of Appeals for the Ninth Circuit has exclusive jurisdiction regarding claims against its policy and that FERC did not have the authority to act under section 211A. A petition for review also was filed with that court and a motion was filed at FERC to hold its decision in abeyance pending the outcome of the court petition.
Denying the motion to hold the matter in abeyance, FERC determined that it has the authority under section 211A to require BPA to file a tariff providing for transmission service on terms and conditions that are comparable to those under which BPA provides to itself and that are not unduly discriminatory or preferential.12 FERC then exercised that authority for the first time. FERC emphasized that while it "[expects] that the need to use this statutory authority would be rare," the facts make a "compelling case here to exercise that authority to ensure open access to transmission service at comparable terms, and conditions." FERC went on to say that "clear and firm principles on open access give industry the confidence to invest in new generation resources and support the construction of associated transmission necessary to meet future needs," and FPA section 211A is one "statutory tool" with which to ensure open access to transmission service.13
Petitioners requested that FERC direct BPA to provide interconnection service under sections 210 and 212(i) of the FPA in the event that it declined to order BPA to provide comparable and nondiscriminatory transmission under section 211A. Because FERC found that it has the authority to grant relief under section 211A, it declined to address Petitioners' claims under sections 210 and 212.14
B. Comparable and Not Unduly Discriminatory Transmission Service
Petitioners alleged that, during environmental redispatch, BPA curtails competing non-federal generators and uses such generators' firm transmission rights to deliver energy produced by federally-owned hydroelectric facilities to load, forcing competing generators off the system and using such generators' firm transmission rights to deliver BPA's own energy.15
FERC found that BPA's environmental redispatch policy results in noncomparable transmission service that unfairly treats non-Federal generating resources connected to BPA's transmission system. It found that non-Federal renewable resources are similarly-situated to Federal hydroelectric and thermal resources for purposes of transmission curtailments because they all take firm transmission service, and that BPA affects non-Federal generators' ability to inject energy and the point of receipt and interrupts non-Federal customers' firm point-to-point transmission service without causing similar interruptions to firm transmission service held by Federal resources.16
C. Implementation of the Environmental Redispatch Policy Through Unilateral Modification to Existing LGIAs
FERC rejected BPA's assertion that certain provisions of its LGIA support environmental redispatch because of BPA's statutory obligations under its organic and applicable environmental statutes. BPA argued that section 9.7.2 of its LGIA authorizes it to interrupt or reduce deliveries of electricity from generating facilities in order to maintain system reliability, but FERC pointed out that service interruptions must be performed according to Good Utility Practice, which includes compliance with statutory obligations such as the requirement to provide comparable transmission service that is not unduly discriminatory or preferential.17
D. Negative Pricing
FERC declined to address whether BPA should have paid negative pricing to curtail generation rather than imposing the environmental redispatch policy, as suggested by Petitioners and some commenters.18
III. Conclusion
Using its FPA section 211A authority for the first time, FERC ordered BPA to submit a revised OATT that addresses the comparability concerns raised in the proceeding in a manner that provides comparable transmission service that is not unduly discriminatory or preferential. FERC encouraged the parties to work together with FERC staff to establish "mutually agreeable alternatives" to address over-generation while ensure open and fair transmission access. BPA has 90 days from the date of the order to file the revisions.
Footnotes
1. Order Granting Petition, 137 FERC ¶ 61,185 (2011) (Order).
http://www.bpa.gov/corporate/AgencyTopics/ColumbiaRiverHighWaterMgmnt/OtherDocs/FERC-order-Dec7.pdf
2 Order at P 35.
3 Order at P2; 16 U.S.C. § 832 (2006).
4 Order at P2; 16 U.S.C. § 873(e) (2006).
5 Order at P 1.
6 Order at P 4.
7 Order at P 5.
8 Order at P 8.
9 Order at P 9.
10 Order at P 19.
11 Order at P 30; 16 U.S.C. § 824j-1 (2006).
12 Order at P 30.
13 Order at P 32.
14 Order at P 31.
15 Order at P 36.
16 Order at P 62.
17 Order at P 73.
18 Order at P 66.
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