WSPP Legal Update Operating Committee Meeting Lake Tahoe

Transcription

1 WSPP Legal Update Operating Committee Meeting Lake Tahoe March 4-6, 2013 Arnie Podgorsky and Patrick Morand Wright & Talisman, PC Washington, DC These are training materials and do not contain legal advice

2 Contents FERC Regulatory Context 3-4 Ancillary Services NOPR Developments 5-11 FERC Order 771: Access to e-tag Data BPA: Oversupply Management Protocol Refunds from Non-Jurisdictional Entities Order No. 1000: Developments Wright & Talisman, P.C. All rights 2

3 Regulatory Context - Federal FERC enforces the Federal Power Act (FPA) For all entities subject to FERC jurisdiction, FPA requires that all rates, terms and conditions be just and reasonable ( J&R ) Public power, Public Marketing Agencies (PMA), and most cooperatives are exempt from FERC jurisdiction, but FERC may impose some regulation through its authority to require reciprocity transmission tariffs from exempt entities PMAs operate under separate statutes, which impose additional legal obligations and rights J&R requirement applies to cost of services, impacts of market power on market based rates (MBR), transactional conditions, discrimination, transmission access (use and interconnection), tariff terms and conditions, and more Wright & Talisman, P.C. All rights 3

4 Regulatory Context - States States, not FERC, regulate Retail rates Siting of transmission facilities and related issuance of certificates of public convenience and necessity (CPCN) (subject to Federal involvement in the event of statutorily specified period of delay in State action) Potentially anything else that the FERC does not regulate, for example Renewable Portfolio Standards d Greenhouse gas regulation Reliability assurance capacity Power contracts such as WSPP Agreement and confirmations are subject to J&R but contract breach also can be litigated in State courts under State law 4

5 ANCILLARY SERVICES NOPR: DEVELOPMENTS Third-Party Provision of Ancillary Services; Accounting and Financial Reporting for New Electric Storage Technologies, Notice of Proposed Rulemaking, IV FERC Stats. & Regs., Proposed Regs. 32,690 (June 22, 2012) Wright & Talisman, P.C. All rights 5

6 Ancillary Services NOPR Through its Avista line of decisions, FERC restricts third-party sales of ancillary services (AS) at MBR to public utility transmission providers outside RTOs Concern is that limited resources for AS will give sellers undue market power and ability to charge unjust rates Concern is that transmission provider (TP) will pay high rates and then pass them on to customers through the cost-based rates (CBR) in its open access transmission tariff (OATT) Restrictions require seller to demonstrate lack of market power to obtain an Avista MBR tariff authorizing i AS sales to TPs at MBR FERC s Notice of Proposed Rulemaking (NOPR) Ease the required market power analysis Establish optional price caps that would obviate the need for the market power analysis WSPP sought waiver of the Avista restrictions in its Service Schedules D&E filing; FERC rejected the request but initiated iti t the NOPR Wright & Talisman, P.C. All rights 6

7 Ancillary Services NOPR The NOPR proposed changes are positive, but insufficient to foster a competitive AS market After comments were filed, FERC Staff requested that WSPP and some others suggest what actions would suffice to foster competitive markets while guarding against undue market power WSPP and several members conferred with FERC Staff to discuss potential solutions Flex capacity, AS capacity/energy, and need for greater regulatory uncertainty, as discussed below Proposals address both sides of the AS market power concern (1) seller market power and (2) TP resales of AS at CBR under the TP s OATT 7

8 Ancillary Services NOPR Proposed Flex Product Capacity and/or associated energy sold for any duration and dispatch interval of no less than 5 minutes Minimum interval of 5-minutes is consistent with organized balancing markets Static dispatch within the interval (not AGC responsive) Purchaser can use Flex Capacity and associated energy for any purpose p where incremental or decremental energy, static within the interval, would augment system capabilities, including AS, but other purposes as well Special Avista MBR authority for this AS sale would not be required. Any seller can sell to any purchaser under seller s MBR capacity and energy tariff Wright & Talisman, P.C. All rights 8

9 Ancillary Services NOPR TP cost recovery to the extent TP used the Flex product to support AS provision to third-party OATT customers, TP can allocate the product cost at MBR to its AS revenue requirement and resulting rates through its FPA 205 filing process when updating its OATT AS rates FERC should provide regulatory certainty either that Flex product is not an AS, and is outside the Avista restrictions Or, if Flex is AS within Avista, then establish a safe harbor or waiver To assist FERC monitoring of MBR Flex transactions, FERC may consider special flagging in EQRs Wright & Talisman, P.C. All rights 9

10 Ancillary Services NOPR Proposed AS Capacity/Energy Capacity/energy for AS, limited to OATT Schedules 3, 5, 6 (Regulation and Frequency Response, and Contingency Reserves) 1 month limit on the transaction, the anticipated period of unexpected system need, unless FERC approves a longer term sold directly to TP or merchant affiliate for the stated purpose p of meeting the TP s need to deliver AS to third-party customers under its OATT Any seller can sell under its capacity/energy MBR, without an Avista MBR tariff 10

11 Ancillary Services NOPR Conditions on TP cost recovery of the MBR TP can recover cost of AS capacity/energy at MBR through its section 205 filing process when updating its OATT AS rates, provided that inclusion of MBR purchases cannot increase the weighted average of the TP s costs more than 10% Transactions longer than 1 month would be excluded from cost recovery through TP s AS rates, unless TP obtained FERC authority to included To assist FERC monitoring of AS Capacity/Energy MBR transactions, FERC may consider special flagging in EQRs 11

12 ORDER NO. 771: FERC ACCESS TO E-TAG DATA Availability of E-Tag Information to Commission Staff, Order No. 771, 141 FERC 61,235 (Dec. 20, 2012) 12

13 FERC Access to e-tag Data This final rule grants FERC access, on a non-public and ongoing basis, to e-tags used to schedule interchange transmission As social security numbers now are used as data identifiers, the use of e-tags is growing from transmission scheduling to providing broader information about interchange transactions Provides FERC with additional information about transactions in bilateral markets Another example: California i Air Resources Board relies on e- Tags to track power imported into California for greenhouse gas emissions FERC predicates its authority to access e-tags on its anti-manipulation authority under FPA 222 and investigative authority under FPA 307(a) Wright & Talisman, P.C. All rights 13

14 FERC Access to e-tag Data Beginning March 15, 2013, e-tag Authors and Balancing Authorities must ensure FERC access to e-tags by designating FERC as an addressee with view only rights e-tag Authors and Balancing Authorities must grant e- Tag access to RTOs, ISOs, and their market monitors upon request, even for transactions that do not flow into, out of, or through their footprints Subject to confidentiality Note: FERC granted a one-year delay in implementing the Order No. 768 requirement that e-tag ID data be included in EQRs FERC seeks to assess the benefits and burdens of that requirement Wright & Talisman, P.C. All rights 14

15 BPA: OVERSUPPLY MANAGEMENT PROTOCOL Iberdrola Renewables, Inc. et al. v. BPA, Order Conditionally Accepting Compliance Filing, 141 FERC 61,234 (Dec. 20, 2012) Iberdrola Renewables, Inc. et al. v. BPA, Order Denying Rehearing, 141 FERC 61,235 (Dec. 20, 2012) 15

16 BPA: Oversupply Management Protocol Background Responding to unusually high flows on the Columbia River, Bonneville Power Administration (BPA) implemented its Environmental Redispatch Protocol (ERP), under which h BPA curtailed wind generation of other parties within BPA s Balancing Authority Area and replaced that power with BPA hydro power generated to reduce the elevated water levels Allowed BPA to avoid spilling, with resulting fish-kill problems and associated violations of environmental laws Some say, so that BPA could avoid paying negative prices to unload power that it would have needed to generate to avoid spilling The Complaint-- On June 13, 2011, some wind generators in the Pacific Northwest filed a FPA 206 complaint against BPA alleging that BPA used its transmission market power to curtail wind generators in an unduly discriminatory manner in order to protect BPA s preferred power customers against BPA power sales at costs BPA considered too low Wright & Talisman, P.C. All rights 16

17 BPA: Oversupply Management Protocol Background The wind generators alleged that BPA s ERP and BPA s refusal to pay negative prices improperly placed the entire burden of managing the run-off on one class of customers, the wind generators Invoking FPA 211A, the wind generators asked FERC to order BPA, among other things, to revise its curtailment practices to comport with the undue discrimination standards file an OATT for FERC approval BPA s Answer BPA answered that ERP was a final agency action and therefore can only be challenged in the Ninth Circuit Court of Appeals (and not FERC) even if FERC had jurisdiction to review the ERP, the ERP was not unduly discriminatory BPA argued that FERC cannot force it to pay negative prices, that FERC does not have authority to remedy BPA s alleged violations of the Northwest Power Act (NWPA), and that FERC cannot order it to submit an OATT for approval under FPA 211A 17

18 BPA: Oversupply Management Protocol FERC s December 7, 2011 Decisional Order FERC s Finding: Agreeing with the wind generators, FERC found that BPA s ERP was unduly discriminatory and preferential because it provided terms and conditions for transmission service to the wind generators that were less favorable and not comparable to terms and conditions BPA provided to itself Remedy: FERC required BPA to submit by March 6, 2012 a revised OATT that provides comparable transmission service that is not unduly discriminatory or preferential FERC declined to require BPA to compensate the wind generators for losses resulting from the curtailment 18

19 BPA: Oversupply Management Protocol FERC Order on Rehearing of December 7, 2011 Order On December 20, 2012, FERC confirmed its order of December 7, 2011 directing BPA to provide transmission service prospectively under terms and conditions that are comparable (non-discriminatory) to terms under which it provides transmission service to itself FERC emphasized that t it made no determination ti concerning BPA s past actions, but rather directed BPA to submit OATT revisions that prospectively provide for comparable service to non-federal resources This is FERC s effort to tread lightly around the exclusive jurisdiction of the US Court of Appeals under the NWPA to review BPA final agency actions. FERC concludes that it has authority under FPA 211A to order BPA to file a compliant reciprocity OATT, and appears reticent to issue broader relief which possibly would exceed its authority under 211A and possibly conflict with the NWPA. See the quote, next page 19

20 BPA: Oversupply Management Protocol Here is what FERC said (December 20, 2012) We do not agree that the Ninth Circuit s jurisdiction over final actions by Bonneville under the Northwest Power Act precludes the Commission from invoking its own independent statutory authority under section 211A. The legal precedent cited by parties to challenge our jurisdiction over Bonneville s actions has no bearing on our determination here, as that precedent does not address the Commission s authority to ensure comparable transmission service under section 211A. Thus, we reaffirm the finding that our authority to act in this case under section 211A is not limited it by the Ninth Circuit s it jurisdiction under the Northwest t Power Act. P

21 BPA: Oversupply Management Protocol BPA Compliance Filing BPA submitted a filing to comply with the December 7, 2011 Order. BPA amended its tariff to include an Oversupply Management Protocol (OMP) The proposed revisions provided for displacing generation during certain oversupply periods, and provided for compensation of costs incurred by wind generators as a result of displacement Displacement costs include compensation for production Tax Credits the generator would have received but for the displacement lost RECs unbundled from the sale of power and certain contract costs related to the bundled sale and purchase of both RECs and energy for a bundled price 21

22 BPA: Oversupply Management Protocol FERC December 20, 2012 Order on BPA s Compliance Filing On December 20, 2012 (same date as its rehearing order), FERC ruled that the proposed compliance OMP failed to provide terms for transmission service to BPA transmission customers comparable to the terms BPA provided to itself FERC concluded that the OMP continued to discriminate in the imposition of costs arising from BPA s management of transmission during oversupply Wind generators represent a fraction of the firm transmission service on BPA s system during oversupply, yet BPA would allocate one-half of displacement costs to this sector of the market 22

23 BPA: Oversupply Management Protocol FERC directed BPA to submit by March 20, 2013 (since extended) a methodology to allocate displacement costs equitably to all firm transmission customers based on their respective transmission usage during oversupply, or setting forth a different method altogether th that t ensures comparability FERC also directed BPA to identify the specific actions it will take prior to displacing generation to address oversupply 23

24 BPA: Oversupply Management Protocol Extension of Time for Further Compliance On February 19, 2013, FERC granted BPA s request for more time to make its compliance filing, to 30 days after BPA files its final OMP rate decision under 7(i) of the Northwest Power Act (NWPA) FERC explained that BPA is developing the OMP cost allocation methodology through a rate process under the NWPA, which BPA cannot complete by the deadline (March 20) FERC had mandated Some parties represented to FERC that an extension would allow the parties time to seek to achieve a mutually agreeable solution 24

25 BPA: Oversupply Management Protocol Related Proceedings In July and August 2011, the wind generators, along with several other entities, filed petitions for review of BPA s ERP in the Ninth Circuit (which some have asserted has exclusive jurisdiction to review the matter) The Ninth Circuit stayed the petitions until the later of January 2, 2013 or final action by FERC On February 15, 2013, the Ninth Circuit issued a briefing schedule, with opening briefs due on September 13,

26 REFUNDS FROM NON- JURISDICTIONAL ENTITIES Southwest Power Pool, Inc., Order on Rehearing, 142 FERC 61,135 (Feb. 21, 2013) Wright & Talisman, P.C. All rights 26

27 Refunds from Non-Jurisdictional Entities City of Vernon Line of Cases The D.C. Circuit it held that, t when an RTO includes costrecovery requirements of a non-public utility in its rate, FERC may subject that non-public utility s requirements to review under FPA 205 to help ensure that t the RTO s rates are just and reasonable However, the court also held that FERC cannot make the non-public utility s requirements subject to refund because FPA 201(f) expressly exempts such entities from FERC s jurisdiction As a practical matter, the FERC s authority to look at a nonjurisdictional entity s requirements would be employed in review of the RTO s CBR but not in an MBR context Wright & Talisman, P.C. All rights 27

28 Refunds from Non-Jurisdictional Entities FERC Refund Policy in These Reviews FERC addresses refund protection from non-public utilities in one of two ways FERC will allow the nonpublic utility s proposed rate to go into effect upon the requested effective date (1) if the non-public utility voluntarily commits to provide refunds if and to the extent its rate is found to be unjust and unreasonable; or (2) If the non-public utility does not voluntarily agree to provide refunds, FERC will exercise its FPA 206 authority to investigate the rate and only allow it to go into effect after hearing and settlement judge procedures 28

29 Refunds from Non-Jurisdictional Entities SPP Order FERC accepted for filing a non-public utility s rate, found that it may not be just and reasonable and instituted hearing procedures, but permitted the rate to go into effect even though the utility had not voluntarily committed to make its rate subject to refund The rate was charged for 11 months 29

30 Refunds from Non-Jurisdictional Entities SPP Order FERC acknowledged that it erred with regard to its own policy on refunds FERC explained that it could not require the non-public utility to refund charges already collected FERC ordered the RTO to stop charging the rate until after hearing and settlement t judge procedures to determine rate reasonableness, unless the utility agreed to provide refunds pending the reasonableness determination if the rate was found unreasonable 30

31 ORDER NO DEVELOPMENTS 31

32 Order No Developments On October 11, 2012, transmission providers were required to file OATT revisions to include local and regional transmission planning processes and a regional cost allocation methodology consistent with Order No s requirements On February 21, 2013, FERC issued the first orders reviewing transmission providers compliance filings Maine Public Service Co., 142 FERC 61,129 (2013) Duke Energy Carolinas LLC, 142 FERC 61,130 (2013) Wright & Talisman, P.C. All rights 32

33 Order No Developments Maine Public Service Co., 142 FERC 61,129 (2013) FERC waived the requirement that MPS participate in regional transmission planning MPS is not directly interconnected with the US transmission grid (only indirectly through Canada) or any other public utility FERC directed MPS to revise its filing to explain how its local transmission planning process will address transmission needs driven by public policy requirements FERC directed MPS to file revised language that states how it will select from multiple l applying public policy projects, and to post on its website explanations of those selections Wright & Talisman, P.C. All rights 33

34 Order No Developments Duke Energy Carolinas LLC, 142 FERC 61,130 (2013) FERC rejected Duke Energy s filing on the ground that Duke failed to form a transmission planning region that satisfied the requirements of Order No An individual transmission provider cannot by itself satisfy the Order No regional transmission planning requirements Because Duke and Progress Energy had merged, they were not separate transmission providers Duke s inclusion of Alcoa Power Generating, Inc. did not solve the problem because Alcoa had insufficient transmission facilities 34

35 Order No Developments Interregional Transmission Planning Order No requires that neighboring transmission planning regions coordinate the planning and cost allocation of projects that span more than one transmission planning region On February 26, 2013, in response to a request filed by several RTO and non-rto public utilities, FERC extended until July 10, 2013 the time for which public utility transmission providers must submit their Order No compliance filings with respect to interregional transmission coordination procedures and interregional i cost allocation methods Wright & Talisman, P.C. All rights 35

36 Contact For more information: Arnie Podgorsky Patrick Morand Wright & Talisman, P.C. All rights 36