Headwater benefits charges affect hydropower projects

Tuesday, November 15, 2011

Suppose you own a federally-licensed dam and hydroelectric generation facilities on a river.  The amount of electricity you can produce is determined by factors including how much water is flowing through your turbines every second and the dam’s “head”, or effective height through which that water falls.  Over an entire year, the amount of power you can produce is also affected by how much water can be stored in the watershed above your dam, and how well you can regulate the flow of water through your turbines.  For example, if you can impound more floodwaters upstream instead of spilling excess water over the dam, you can maintain maximum flows through your powerhouse for a longer period of time than you otherwise could.

Now suppose someone else builds a dam upstream from your site that enables better storage and regulation of water flows through the river.  Setting aside any environmental impacts from that change in flow, one upside of the improved flow regulation is that you can produce more power at your dam thanks to the upstream improvements.

Under the Federal Power Act, you may be required to reimburse that upstream dam owner for an equitable part of the benefits you receive from its improvements.  Federal hydropower licenses typically include a provision requiring the licensee to reimburse the owner of an upstream improvement for these headwater benefits.

Under the Commission’s regulations, headwater benefits charges can be calculated using an “energy gains” methodology.  This analysis includes an assessment of the difference between the number of kilowatt-hours of energy produced at a downstream project with the headwater project and that which would be produced without the headwater project.  Alternatively, dam owners may negotiate an agreement on headwater benefits charges and present it to the Commission for approval as a settlement offer.

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