BPA prepares hydro oversupply plan to compensate wind curtailment

WASHINGTON 2/28/12 (PennWell) -- Bonneville Power Administration is preparing to file a plan with the Federal Energy Regulatory Commission that will compensate wind power generators when BPA orders them to cease generation to make room on the grid for free excess federal hydropower resulting from high river flows in the Pacific Northwest.

BPA issued a draft Oversupply Management Protocol, taking comments through Feb. 21. It now plans to review comments and complete a document for filing with FERC by March 6.

FERC ruled wind curtailment unduly discriminatory

FERC ruled in December (EL11-44) 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. Under its Environmental Redispatch Protocol, BPA had traditionally curtailed thermal power generators who, although not generating, did experience a saving in fuel costs.

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." BPA began limiting the output of non-hydroelectric energy in May 2011 due to high flows creating an oversupply of hydropower.

The agency said it acted to protect salmon and steelhead from high dissolved gas concentrations in water that bypasses turbines. It said the action also maintained the reliability of the power grid and avoided shifting costs to BPA customers. It stopped the practice when flows returned to normal in July.

FERC ruled BPA's policy resulted in non-comparable transmission service that is unduly discriminatory and preferential. It ordered BPA to file an open access transmission tariff within 90 days that would satisfy FERC's directive to provide transmission service that is not unduly discriminatory or preferential.

Oversupply Management Protocol to compensate wind

Under the new proposal, 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.

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

On average, BPA expects to compensate wind producers about $12 million per year, although the total could range from nothing to more than $50 million in extreme conditions. BPA said it expects reductions in wind generation will be unnecessary in about one of every three years.

"BPA proposes allocating costs (of compensation) roughly 50/50 among users of BPA's Federal Base System and wind project owners/purchasers, recognizing that logical but contrary arguments have been made on both sides," the agency said.

The proposal would cover costs of curtailing wind generation this spring from BPA's transmission reserve account until a rate can be established to recover the costs. BPA plans to initiate a new rate case in which it would propose dividing compensation costs roughly equally between users of the Federal Base System and wind energy operators within BPA's system.

Meanwhile, in response to requests for rehearing from BPA and several other parties, FERC has agreed to reconsider its order based on additional filings from the parties. A case also has been filed in the 9th U.S. Circuit Court of Appeals dealing with the same issues as the FERC proceeding.

Information on the Oversupply Management Protocol is available on BPA's Internet site under http://www.bpa.gov/corporate/AgencyTopics/ColumbiaRiverHighWaterMgmnt/?utm_source=Go+Address&utm_medium=Print&utm_campaign=Oversupply.

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