Cadwalader Clients & Friends Memo: First Time for Everything – Finding Unduly Discriminatory Treatment of Wind Generators and Compelling Circumstances, FERC Exercises Its Section 211A Authority to Order BPA to Change Its Ways

Cadwalader Clients & Friends Memo: First Time for Everything – Finding Unduly Discriminatory Treatment of Wind Generators and Compelling Circumstances, FERC Exercises Its Section 211A Authority to Order BPA to Change Its Ways

Cadwalader, Wickersham & Taft LLP

The Federal Energy Regulatory Commission (FERC) has 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. 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.

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. BPA provides transmission service to third parties if BPA's transmission "is not required for the transmission of Federal energy." 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.

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. 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.

Petitioners argued that under its environmental redispatch policy, BPA engaged 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.

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