On December 7, 2011, the Federal Energy Regulatory Commission (“FERC or the “Commission”) issued an order directing the Bonneville Power Administration (“Bonneville”) to file revisions to its Open Access Transmission Tariff (“OATT”) to provide for transmission service on terms and conditions that are comparable to those under which Bonneville provides service to itself and that are not unduly discriminatory or preferential.

As a federal power marketing agency within the United States Department of Energy, Bonneville is not a public utility within the Commission’s traditional jurisdiction. While Bonneville has voluntarily provided transmission services pursuant to a reciprocity OATT in the past, its current OATT does not meet all of the Commission’s current OATT requirements.  This past May, Bonneville adopted the Environmental Redispatch and Negative Pricing Policies under which it has unilaterally curtailed generators and utilized their firm transmission rights without compensation to deliver federal hydropower during certain high water situations.  Bonneville stated this policy was a necessary component of its compliance with certain of its organic and environmental statutory requirements.  In June, a coalition of wind energy facility owners filed with the Commission a complaint and petition under a new provision of the Federal Power Act (“FPA”) that was added by the Energy Policy Act of 2005 (FPA Section 211A).  The wind owners requested that FERC order Bonneville to discontinue its Environmental Redispatch Policy and revise its OATT to provide transmission services on terms and conditions comparable to those under which Bonneville provides service to itself and that are not unduly discriminatory or preferential.

The Commission granted the petition, ordering Bonneville to file a revised OATT within 90 days and finding Bonneville may not extend its current or implement new Environmental Redispatch Policies that result in non-comparable transmission service.  While the Commission explained that it does not take the exercise of its authority under Section 211A lightly, it found that its authority is broad and not limited by Bonneville’s enabling and applicable environmental statutes.  Given the utmost importance of open access and the availability of adequate transmission to the electric industry, the Commission found it necessary to exercise its Section 211A authority.

The Commission found that Bonneville’s Environmental Redispatch Policy “significantly diminishes open access to transmission, and results in Bonneville providing transmission service to others on terms and conditions that are not comparable to those it provides itself.”  In particular, the Commission held that the policy results in unfair and noncomparable treatment of non-Federal generating resources connected to Bonneville’s system – resources the Commission found to be similarly-situated to Federal hydroelectric and thermal resources for purposes of transmission curtailments because all such resources take firm transmission service.  Specifically, the Commission explained that “[b]y directing non-Federal generators under their respective interconnection agreements ‘to reduce generation in accordance with Transmission Provider’s . . . Environmental Redispatch Business Practices,’ Bonneville affects the non-Federal generator’s ability to inject energy at the point of receipt and interrupts non-Federal customer’s firm point-to-point transmission service, without causing similar interruptions to firm transmission service held by Federal resources.”

Further, while the Commission recognized that Bonneville must reconcile several, sometimes competing, obligations set forth in its organic and environmental statutes, FERC directed Bonneville to also reconcile with those obligations Bonneville’s FPA statutory requirement that it provide comparable transmission service that is not unduly discriminatory or preferential.  Consistent with that over-arching finding, the Commission found that Bonneville may no longer rely on the terms of its Large Generator Interconnection Agreement (“LGIA”) as support for Environmental Redispatch.  Specifically, the Commission found that service interruptions under section 9.7.2 of the LGIA must be performed according to Good Utility Practice, which includes compliance with statutory obligations – such as the requirement set forth in the Commission’s order to provide comparable transmission service that is not unduly discriminatory or preferential, consistent with the provisions of Section 211A.  Bonneville must also perform all of its obligations under Section 4.3 of its LGIA and cannot rely on force majeure as support for environmental redispatch unless it can demonstrate that such redispatch does not interfere with Bonneville’s obligation to provide comparable transmission service that is not unduly discriminatory.

Finally, the Commission made no determinations as to whether actions taken by Bonneville in the past, whether pursuant to its Environmental Redispatch Policy or otherwise, were prohibited under Bonneville’s statutory authorities.  The Commission found that to the extent Bonneville’s past actions are subject to judicial review by the Ninth Circuit Court of Appeals, such review does not limit the Commission’s prospective exercise of authority in this proceeding under Section 211A.

A copy of the Commission’s order is available here.

*Disclosure – Troutman Sanders LLP represented Iberdrola Renewables, LLC in this FERC proceeding