FERC Rules That BPA Curtailment of Wind Energy Violates Federal Power Act

Source:  Stoel Rives Energy Law Alert, December 9, 2011.

Using its authority under Section 211A of the Federal Power Act (“FPA”), the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued an orderWednesday holding that the Bonneville Power Administration’s (“BPA”) Environmental Redispatch policy of curtailing wind energy was unduly discriminatory and preferential and did not result in transmission service that was comparable to the service BPA provided to itself. The Commission ordered BPA to file a revised Open Access Transmission Tariff (“OATT”) with FERC within 90 days from the date of the order to address the comparability concerns raised in the proceeding.

Background on BPA’s Environmental Redispatch Policy

The basis for the petition was a policy that BPA adopted on May 13, 2011, announcing that during periods of high water and low load, BPA would curtail renewable and thermal generators and substitute federal hydropower in place of the curtailed generation. BPA would then make the transmission capacity that had previously been reserved for use by non-federal generators pursuant to long-term contracts available for delivery of federal hydropower.

BPA asserted that these curtailments were for environmental and reliability reasons and called for BPA to unilaterally amend its large generator interconnection agreements (“LGIAs”) with interconnection customers in order to allow for Environmental Redispatch. In addition, BPA asserted that it would not pay negative prices to sell the excess federal hydropower or compensate the non-federal generators whose transmission capacity was being used for the delivery of the excess federal generation. Between May 18 and July 10, 2011, BPA curtailed over 97,000 megawatt-hours of renewable generation pursuant to the Environmental Redispatch policy, resulting in lost revenues for renewable generators eligible for production tax credits and/or renewable energy credits.

The Complaint and Responses

A group of owners of wind energy projects in the Pacific Northwest (including both renewable energy developers and investor-owned utilities) filed a petition with FERC on June 13, 2011 asserting that BPA’s Environmental Redispatch policy violates FPA Section 211A and is unduly discriminatory against wind generators. The petition requested that the Commission order BPA to (i) revise its practices regarding the curtailment of wind energy pursuant to the Environmental Redispatch policy so that such practices comply with Section 211A of the FPA; (ii) abide by the terms of its LGIAs by “immediately providing effective and nondiscriminatory interconnection service”; and (iii) file an OATT for Commission approval to “remedy its unduly discriminatory and preferential practices” in the provision of transmission and interconnection service.

Several intervenors filed comments in support of the petitioners’ request for the Commission to act pursuant to its authority under FPA Section 211A. Another group of intervenors filed comments in support of BPA’s Environmental Redispatch policy as a reasonable and non-discriminatory means for BPA to both maintain system reliability and comply with its environmental responsibilities. BPA argued that challenges to its Environmental Redispatch policy were within the exclusive jurisdiction of the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) and that FERC did not have the authority to act under Section 211A. Indeed, while the FERC proceeding was underway, several of the petitioners and intervenors filed petitions for review of BPA’s Environmental Redispatch policy with the Ninth Circuit.

Certain of BPA’s public power customers filed a motion with the Commission to hold the FERC proceeding in abeyance, pending resolution of the Ninth Circuit proceeding. Members of both houses of Congress also weighed in, urging BPA to resolve the dispute through settlement.

The December 7th FERC Order

As a threshold matter, the Commission determined that it does have authority to grant relief under FPA Section 211A to ensure open access to transmission service at comparable and not unduly discriminatory or preferential rates, terms and conditions. The Commission noted that it “does not take the exercise of [its] authority under FPA Section 211A lightly” and that it expected to use that authority only in rare circumstances.

The Commission also denied the motion to hold the case in abeyance pending the outcome of the Ninth Circuit proceeding because of the Commission’s exclusive authority to order an unregulated transmission provider to comply with the provisions of Section 211A. In response to BPA’s arguments regarding the Ninth Circuit’s jurisdiction over the dispute, the Commission noted that its prospective exercise of authority under FPA Section 211A was not limited by the Ninth Circuit’s jurisdiction to review past actions taken by BPA to determine whether they violated BPA’s enabling statutes. In other words, the FERC and Ninth Circuit proceedings could proceed on separate tracks because each proceeding is predicated on alleged violations of different statutes, some of which belong before the Ninth Circuit, and the FPA Section 211A claim, which belongs before the Commission.

With respect to Environmental Redispatch, the Commission found that BPA’s policy results in non-comparable transmission service that unfairly treats non-federal generators connected to its transmission system by interrupting such generators’ firm transmission service without causing similar interruptions to the firm transmission service held by federal resources. The Commission found that regardless of the magnitude of the losses suffered by the curtailed non-federal generators, the Environmental Redispatch policy results in transmission service that is not comparable to the service BPA provides itself, and thus warranted FERC taking action pursuant to its Section 211A authority.

The Commission also rejected BPA’s arguments that certain provisions of BPA’s LGIAs with its non-federal transmission customers support Environmental Redispatch because of BPA’s obligations under its organic and applicable environmental statutes. Importantly, FERC noted that on a prospective basis, BPA is required under Section 4.3 of its LGIA to comply with all applicable laws and regulations, including the requirements set forth in the order under Section 211A. The Commission concluded that BPA cannot extend its current Environmental Redispatch policy or implement a new environmental redispatch policy that results in non-comparable transmission service.

In terms of relief, the Commission ordered BPA to file, within 90 days of the date of the order, 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 did not specify the precise terms and conditions that must be set forth in the revised OATT, but instead encouraged BPA to work with the other parties in finding “mutually agreeable alternatives that provide fair and equitable solutions to address temporary over-generation during high water periods.” In addition, noting the “extraordinary circumstances present here,” the Commission offered to provide staff support to assist with developing tariff provisions to respond to its order.

If you have any questions about the content of this alert or related proceedings regarding BPA’s Environmental Redispatch policy, please contact:

Stephen Hall at (503) 294-9625 or schall@stoel.com
Dina Dubson at (503) 294-9675 or dmdubson@stoel.com
Jason Johns at (503) 294-9618 or jajohns@stoel.com