PUD says BPA plan helps wind energy producers at ratepayer expense

Grays Harbor PUD commissioners have joined with more than 20 other districts and utilities in authorizing legal action against a new Bonneville Power Administration policy to address the regional problem of what to do when too much energy is available.

The policy essentially would curtail production - particularly wind generation - when there is too much power for BPA to handle, a situation that usually occurs in the spring. And it would also pay the wind energy producers for their lost revenue. PUD commissioners say that amounts to subsidizing an already subsidized industry by passing the costs on to BPA customers like the Grays Harbor district.

It could cost about $12 million a year to compensate wind producers for lost revenues from reduced generation, according to a BPA analysis that also warns: "Although the total could range from nothing to more than $50 million, in extreme conditions."

In a resolution passed unanimously last week, the PUD commissioners authorize an attorney to file a petition for review with the federal Ninth Circuit Court of Appeals seeking a review of what is known as BPA's Oversupply Management Protocol.

Filed by the federal agency in March, the policy document would provide low-cost or free federal power to generators, such as wind producers, that are forced to curtail production during high wind and water events that leave the BPA transmission grid with too much power.

The PUD resolution notes that half of the cost and reimbursement expenses of the curtailments will be paid "by anyone who buys Federal Base System power, being primarily preference customers." The Grays Harbor PUD is a preference customer that gets 78 percent of its power resources from BPA.

Under the new protocol, BPA would first work with the U.S. Army Corps of Engineers and federal Bureau of Reclamation to manage the federal hydroelectric generation system and cut back on production. BPA then would offer low-cost or free hydropower to replace output of thermal and other-source power plants.

"If electricity supply still exceeds demand, BPA would then reduce the output of remaining generation with its system, including wind energy, in order of least cost," according to a BPA outline of the new policy. "BPA would compensate the affected generation for lost revenues, including renewable energy credits and production tax credits."

To recover the costs, BPA then is expected to initiate a new rate case "in which it will propose dividing compensation costs roughly equally between users of BPA's Federal Base System and generators eligible for compensation from BPA."

The Grays Harbor PUD resolution states that BPA lacks specific statutory authority to make the proposed curtailment payments and that the policy is "inconsistent with sound business principles." It also argues the proposal is at odds with federal production tax credit policies and state renewable energy credit policies.

Liz Anderson, the PUD's community and government relations director, noted the BPA policy was in response to an order by Federal Energy Regulatory Commission, which gave BPA a deadline for a new approach to the problem but stopped short of ordering what that approach would be.

"Our concern ... is that by requiring BPA customers to pay for lost production tax credits, it shifts the burden from taxpayers nationwide to ratepayers in the region," Anderson said.

PUD Commissioner Tom Casey said most of the region's utilities and power districts have joined together in calling for action to overturn the policy. Other PUDs that are part of the Western Public Agencies Group against the policy include Clallam County PUD, Clark County PUD, Kittitas County PUD, Mason County PUD, Pacific County PUD, Skamania County PUD and Wahkiakum County PUD.

Casey argues that if you cause an "imbalance in the system" of power generation, such as too much wind power being generated to be used, you should bear the cost.

"To the extent that they cause an expense by huge impulses of power on the system, it causes imbalances that we have to scramble to fix," Case said of wind generators. "If it costs us money to fix that, then they need to pay for it."

Casey said the overall challenge will be to the FERC ruling itself, a move backed by the Public Power Council, which represents Northwest consumer-owned utilities on issues related to the Columbia River federal power system.

What is proposed amounts to a subsidy to wind generators that already receive subsidies.

"Heavy subsidies paid by the federal treasury and state mandates to build renewable energy resources have been very successful at encouraging the growth of wind farms," Casey said in a recent newsletter to ratepayers.

But the subsidies and credits they receive, Casey said, are paid on the basis of actual wind generated electricity that goes to load.

"They want that cash replaced and they want BPA to provide that cash since BPA is the transmission system that controls the load and generation balance in the system," Casey said.

That money, he added, would come from ratepayers as an increase in your home or business power bill. It will increase as more and more wind mills are built."