NWEC Comments on BPA's oversupply management procedure

 

NW Energy Coalition Comments on the
Bonneville Power Administration’s
Draft Oversupply Management Protocol

February 21, 2012

The NW Energy Coalition appreciates the opportunity to comment on the Bonneville Power Administration’s Draft Oversupply Management Protocol (“Draft Protocol”).

The Draft Protocol proposes to address, all in one package, three separate but linked phases: (1) resolving the dispute over the cost shift onto renewable generators that occurred in 2011 as a result of the soon-expiring Interim Environmental Redispatch and Negative Pricing Policies adopted a year ago; (2) the need to address potential oversupply conditions in the oncoming spring and summer 2012 runoff period; and (3) a more permanent method for handling oversupply conditions in future years.

We agree with Bonneville that it is important to find regional solutions to regional problems.  However, the course that Bonneville has steered over the last year has decreased rather than strengthened the belief that a regional process will produce the needed results.  While it has some workable elements, we do not believe that the proposed Draft Oversupply Management Protocol provides a true “regional solution.”

What would a strong regional solutions process involve?

First, it must start with Bonneville’s obligations to meet the requirements of all applicable laws, including its organic statutes and the Federal Power Act, the Endangered Species Act and the Clean Water Act.

Second, Bonneville must engage in a coherent process to achieve a truly “regional solution” that gains assent if not 100% agreement.

Third, the process must include all stakeholders, and Bonneville must stay open to all reasonable policies and measures.  Everyone recognizes that harmonizing all of Bonneville’s obligations is not easy.  Therefore Bonneville must be open to all proposals that might help address the immediate problem as well as longer-term structural solutions.

Fourth, an effective regional solutions process must have a balanced series of phases.  We start by stressing the importance of broad and effective stakeholder involvement from the beginning to the conclusion of the process, to make sure all the best ideas are brought forward and considered, to insure that all perspectives in the region are considered, and to help build support for the policy outputs.

Confidential settlement discussions and a plethora of informal conversations may be needed to achieve success in addressing any significant regional problem, but transparency is essential for each phase.  The kind of confidential discussions Bonneville managed over the last several months did not contribute as effectively as they should have to the Draft Protocol.  We do not know with whom Bonneville was speaking, what indeed was being “settled,” the subjects discussed or the learning that resulted, crucially including the advantages and drawbacks to potential measures to address the oversupply problem.

Bonneville’s series of proposals has not satisfied immediate concerns about oversupply management. In addition, because of the broader context, oversupply is now linked to other policy matters including the regulatory relationship between FERC and BPA; fish and wildlife protection efforts; the BPA transmission tariff, rates and planning; cost causation principles for ratemaking; and clean energy development strategy.

Oversupply management policy has become linked with and to some degree become a proxy for those other important issues. This conflation is making it more difficult to address those areas as well as oversupply management itself.

The proposed oversupply management approach has a number of innovative features that deserve additional consideration.  Given the linkages to other disputed policy areas, however, if BPA goes forward with the Draft Protocol, it is important to link it much more clearly to a broader solutions approach that is so far receiving relatively little attention, and to limit the proposal in specific ways that will reduce the concern that it will set precedents in other processes.

1.  Sunset.  To begin with, if adopted, the policy should have an explicit time limit of no more than two years (the 2012 and 2013 water years), building in an expectation and time certain for review and then modification of the proposed policy, or adoption of a different and better one.

2.  Review.  The protocol should explicitly include a thorough and transparent review of conditions, choices and results of its implementation, including full consideration of data and analysis methods. This will enable effective critique and improvements to the protocol or finding a better approach. The previous promises by Bonneville have not turned out to be enough.[1]

Without such a comprehensive and open review, the difficulties we are now having in evaluating the 2011 results will be compounded.  In particular, Bonneville’s interpretation of the degree to which “environmental redispatch” of thermal and renewable generation curtailments and simultaneous reduced spill and increased FCRPS turbine generation actually benefitted fish passage and survival remains almost unexplored.  This also suggests it may now be time to link a specific review of 2011 results to a larger, independently conducted and authoritative study of hydro operations, fish protection and transmission operations, which would be valuable for many other purposes.

3.  Cost causation.  BPA has offered this proposal in the context of a “rough justice” approach to solving a difficult problem with opposed stakeholder positions and very little time for a decision. BPA must make clear that its proposed 50-50 split for cost allocation of oversupply curtailment costs beyond the value provided by free replacement energy does not have precedential value for other ratemaking efforts.

We agree that both renewable generators and users of the BPA system should pay some proportion of those costs.  However, the “true” or equitable division of those costs may well be very different than 50-50, especially once full system costs and benefits are considered together and fairly. Thus, while it is evident that there is not enough time to study and come to an agreement on a criteria-based cost causation approach immediately, a 50-50 split for a temporary period must not carry any precedential weight.

4.  Regional Solutions.  BPA must include more explicit commitment in the stopgap protocol toward a true regional solutions approach.  This should include three aspects:

• Very short term actions that BPA has constrained or ruled out (such as out of balancing area hydro swaps and thermal power displacement) should be reviewed again with full stakeholder input.
• BPA should expand and accelerate its efforts to construct an agenda to explore solutions with other stakeholders in the region, and make this a fully delineated partnership effort with the Northwest Power and Conservation Council, moving beyond the welcome but informal first steps under the auspices of the Northwest Wind Integration Forum. We believe any such effort should not be constrained to oversupply conditions alone but to the broad array of issues needing attention for full development and integration of our renewable energy resources.
• As the broad agenda for solutions is moving forward, a number of more limited studies should proceed on a fast track, including an in-depth study of options for the hydro swaps and thermal displacement measures mentioned above; a thorough review of the role and future of the Columbia Generating Station; active review and potential development of the first stage of an Energy Imbalance Market; and acceleration toward deployment of demand side solutions including end user storage (building on the results from the current water heater pilots, etc.).

In summary, we are concerned that a disagreement over a cost shift arising from an interim policy to address infrequent oversupply conditions during an unusually high runoff season in 2011 has now blossomed into a multi-layered dispute in many venues.  This is bringing other structural issues to the fore in a way that is not conducive to discussion and resolution.  The policy response to a relatively small matter has eroded trust and is jeopardizing clean energy development in the Northwest and narrowing the potential for many different kinds of issues to be resolved.

We believe there is still time for Bonneville to adjust the Draft Protocol to address some of its limitations, as suggested above, and to elevate efforts to develop both short term and structural policies and measures to address oversupply conditions.

Even more importantly, this is a moment when Bonneville can address the broad context of its multiple obligations as an opportunity to achieve true regional solutions.