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BHE Forced to Explore Alternatives to Competitively Neutral Disposition of Long-Term Contracts After FERC Order
September 20, 2011
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Bangor Hydro-Electric informed the Maine PUC that it is, "exploring alternatives regarding the disposal of the energy," from the Rollins Wind Project, after FERC denied BHE's sought waiver to allow BHE transmission function employees to engage in ministerial actions needed to make sales of the Rollins output in the ISO New England spot market.
Specifically, FERC denied, without prejudice, a request from BHE for a waiver of the Standards of Conduct to permit its transmission function employees to engage in actions necessary to effectuate spot market resales of energy in the ISO New England real-time market as a price taker (TS11-5).
FERC's order prevents BHE from disposing of energy from the long-term contract in BHE's preferred manner, which would have been competitively neutral to the retail market. Additionally, another possible, competitively neutral mechanism for disposition of the energy from the long-term contract -- an auction process conducted by the PUC -- was previously deemed not workable due to the intermittent nature of the generation at issue.
This leads to the potential that, due to a lack of alternatives, the output of the long-term contracts will be applied to Standard Offer sales in some fashion since competitively neutral market sales cannot be effectuated.
As previously reported (7/25), BHE sought the waiver because a separate marketing group which conforms to FERC's Standards of Conduct does not exist within BHE's current structure (having no need for one under its current operations). Creating such a separate group, solely to sell the Rollins energy as a price taker, would result in additional costs which would not be incurred but for the requirement for a separate marketing group.
BHE noted that the ministerial actions for which it sought the waiver would require no decision-making, no discretion, and would not give BHE any ability to capitalize on any non-public transmission information. Additionally, BHE noted that, as a transmission-owning member of ISO-NE, the functional control of its higher voltage transmission system has been turned over to ISO-NE. In this regard, BHE said that it has limited functional control over transmission and has only limited ability to do anything that could result in restricted access to its system.
However, FERC found that BHE failed to specify whether it has access to information concerning the operation of the transmission facilities that it turned over to ISO-NE. FERC said that the requirements for a waiver include that the requesting party has no access to information concerning the operation of the transmission facilities it has turned over to the ISO/RTO; and obtains information about such matters only by viewing the ISO/RTO's pertinent Open Access Same-Time Information System (OASIS) postings.
While BHE said its circumstances were similar to those in which FERC granted a waiver to Commonwealth Edison, FERC said that unlike the QFs at issue in the Exelon proceeding that had no access to the PJM market, Evergreen Wind, owner of the Rollins project, would be entering the amounts into the ISO-NE market itself.
"It is not clear from Bangor Hydro's filing whether Evergreen Wind would be required to enter all of the output from Rollins Project that Bangor Hydro is required to purchase or whether it would have discretion to change that amount depending on prices, and whether Bangor Hydro has the ability to influence that decision. Bangor Hydro's filing also does not address whether it would earn a profit or margin from resales. In addition, Bangor Hydro states that it intends the waiver to apply to 'similar circumstances in the future' but does not provide the specifics of such circumstances. We, therefore, find that Bangor Hydro's filing does not provide sufficient details to determine whether its resales of power from Rollins Project would constitute passive resales similar to the ones addressed in Exelon," FERC ruled.
FERC said that it would revisit its determination if Bangor Hydro brings forward information demonstrating that it meets the criteria for waiver, such as by clarifying the issues noted by FERC above.
FERC ordered that Bangor Hydro shall have 60 days to either: (1) submit information demonstrating that it has no access to information concerning the operation of the transmission facilities to the ISO/RTO and that it obtains information about such matters only by viewing the ISO/RTO's pertinent OASIS, or (2) begin compliance with the Commission's Standards of Conduct requirements.
Although FERC invited BHE to submit additional information, BHE made no commitment in comments to the Maine PUC that it would continue pursuit of the waiver to effectuate sales of energy from the long-term contracts in the spot market, rather than pursuing alternatives for disposition of the power.
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