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FERC issues policy on licensing terms for hydroelectric projects located at non-federal dams

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The Federal Energy Regulatory Commission (FERC) issued a new policy on establishing licensing terms for hydroelectric projects located at non-federal dams.

FERC issued the policy on Oct. 19, which establishes a 40-year default license term for original and new licenses under FERC jurisdiction. The new policy takes effect on the date it is published in the Federal Register.

There are about 1,030 active, non-federal hydropower licenses issued by the federal government. Under the Federal Power Act, FERC has authority to license these facilities. Over the next five years, 24% of all non-federal hydropower capacity will face relicensing.

The policy statement stems from a notice of inquiry FERC issued on Nov. 17, 2016, seeking comments on whether, and if so how, it should revise its current license term policy.

A statement released during the Commission’s presentation, in part said, “The Commission’s new license term policy will have many benefits. It will provide greater certainty to licensees, resource agencies, and other stakeholders. Because many projects would be relicensed less frequently, the policy would also lower administrative costs for all stakeholders and provide licensees longer license terms to recoup costs.

“The policy may also encourage licensees to voluntarily make capacity upgrades and enhance recreational and environmental resources during the prior license term in order to obtain a subsequent license term longer than 40 years. In addition, the policy may further encourage license applicants and stakeholders to negotiate a license settlement agreement.”

However, FERC identified three circumstances where it will consider issuing a license for fewer or more than 40 years:

  • When necessary to coordinate license terms for projects located in the same river basin; 
  • When a license term is explicitly agreed upon in a generally supported comprehensive settlement agreement, provided that there is no conflict with coordination of license terms for projects located within the same river basin; and 
  • When significant measures are required under the license to be issued, or significant measures were voluntarily implemented during the prior license term, provided it does not conflict with coordination of license terms for projects located within the same river basin.

The policy could significantly impact the hydropower industry in the next several decades.

In December 2016, the Hydro Review article on “Competing Relicensing Applications: Assessing the Threat to Existing Licensees,” cited testimony before the U.S. Congress from Ann Miles, director of the Office of Energy Projects at FERC.

Miles noted that more than 500 hydroelectric projects will commence a relicensing process between 2016 and 2030. These projects represent about 50% of the licensed hydroelectric projects under FERC jurisdiction and 30% of all licensed hydro capacity.

Information published in The National Law Review by Van Ness Feldman LLP on potential positive impact of the FERC policy indicates “A default 40-year term, as opposed to the prior minimum term of 30 years, affords a licensee needed time to recoup the costs to implement a new license, which often includes new capital and maintenance costs, foregone energy and capacity, reduced flexibility of project operations, and increased continuous flow releases.” 

Additionally, licensees could reduce their costs for relicensing, and according to NLR, “The revised policy also could incentivize capacity upgrades and new resource protection measures during the license term, which were not credited in the new license term under FERC’s previous policy.”

 

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