Bonneville Power v. Iberdrola: Tea Leaves Into FERC Order No. 1000?

by Carolyn Elefant on December 23, 2011

in FERC Order 1000

At first blush, FERC’s December 14 ruling in BPA v. Iberdrola doesn’t have anything to do with FERC’s Order No. 1000. (By the way, our bundled product is still availablehere).

BPA v. Iberdrola involved a complaint by a group of wind generators against BPA, alleging that BPA’s Environmental Dispatch Policy, which was designed to enable BPA to comply with its obligations under the Endangered Species Act, unduly discriminates against wind by increasing hydropower production during high water periods (to minimize harm to salmon) and curtailing wind generation. By contrast, Order No. 1000 requires utilities to develop processes for transmission planning and allocation of transmission costs. Yet despite the differences in subject matter, the BPA v. Iberdrola decision offers some insight into how Order No. 1000 will ultimately apply to non-jurisdictional utilities, i.e., municipal-owned or public power utilities which are excluded from the Federal Power Act’s definition of “public utility.”

In BPA v. Iberdrola, FERC agreed with the wind generators that BPA’s curtailment practices accorded undue preference to federal hydropower resources over non-federal wind generation. FERC explained that by curtailing wind delivery, BPA was able to spare its customers added costs at the expense of wind generators. To remedy BPA’s discriminatory practices, FERC, for the first time, invoked its authority under Section 211A of the FPA to order BPA to change its curtailment practices.

Although FERC’s use of Section 211A in BPA v. Iberdrola was a first, Section 211A had already made an appearance in the Order No. 1000 proceedings. In Order No. 1000, FERC ruled that the reciprocity policy, first developed in Order No. 888′s open access transmission tariff docket (OATT), would continue to govern non-jurisdictional utility’s obligations under Order No. 1000. Under the reciprocity policy, FERC does not “compel” non-jurisdictional entities to file OATTs. However, non-jurisdictional entities that do not voluntarily file an acceptable OATT are excluded from the “safe harbor” protection of FERC’s open access policies and may be denied open access reciprocity by other transmission providers.

In Order No. 1000, FERC reasoned that the reciprocity practices first developed in Order No. 888 should continue to apply with similar force to the transmission planning and cost allocation requirements under Order No. 1000. FERC added that if reciprocity wasn’t enough incentive to convince non-jurisdictional utilities to abide by Order No. 1000, FERC could apply its Section 211A power over non-jurisdictional utilities on a case-by-case basis to compel their participation.

On rehearing, participants attacked FERC’s ruling on Section 211A from both ends. Municipal and public power interests argued that FERC lacks any power under Section 211A to force non-jurisdictional utilities to participate in transmission planning or cost allocation. Meanwhile, some investor owned-utilities and generators asserted that FERC it would be discriminatory for FERC to not mandate the participation of non-jurisdictional entities in the transmission planning and cost allocation, and that FERC should have gone farther, and invoked Section 211A to subject all transmission owners, jurisdictional or not, to Order No. 1000′s requirements. Now, it’s up to FERC to resolve the Section 211A issues on rehearing.

FERC’s willingness to invoke Section 211A in BPA v. Iberdrola may placate the utilities and generators arguing on rehearing that FERC did not go far enough in exercising its power under Section 211. After all, if FERC was willing to use its Section 211A powers against BPA, a sister federal agency subject to the unforgiving requirements of the Endangered Species Act, it would have even fewer reservations in doing so when a small municipal power entity is the target. Thus, thoe groups that challenged FERC for failing to use the full scope of its Section 211A powers to subject all non-jurisdictional entities to Order No. 1000 may now have enough confidence in FERC’s willingness to use its enforcement powers against public power entities that they may be willing to forego any eventual judicial review on the Section 211A issues.

On the other hand, those non-jurisdictional entities that challenged FERC’s power to use Section 211A even on a case by case basis may now have more cause for concern that FERC will actually do so. However, there may not be much that these entities can do (except to seek a legislative remedy) to correct an adverse ruling from FERC on rehearing. In my view, if non-jurisdictional entities pursued judicial review of FERC’s case-by-case policy, most likely, a court would declare the case unripe for review until such time as FERC invokes Section 211A in an actual case. As such, at least for the short-term, FERC’s decision to invoke Section 211A on a case by case basis will probably stand.

One final point. While I expect the BPA v. Iberdrola case to make its way through the rehearing process and the courts, the resulting decision will not necessarily resolve the question of the scope of FERC’s power under Section 211A. As a federal power authority, BPA has unique statutory obligations to keep power costs low while repaying investment costs to the federal treasury. Given BPA’s statutory obligations, a court could readily find that BPA’s federal hydropower resources are not comparable to non-federal wind resources and therefore, BPA’s curtailment practices did not discriminate. Under this approach, the court could rule in favor of BPA without ever reaching the issue of FERC’s authority under Section 211A.

What’s your opinion of FERC’s use of Section 211A?  And how do you think these issues will resolve? Please share your comments below.

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