FERC rules tribes exempt from some energy regulation

When a Native American tribe acquires a hydroelectric power plant licensed by the Federal Energy Regulatory Commission, does the project become exempt from some federal regulations?

Yes, according to a FERC order recently issued to the Confederated Salish and Kootenai Tribes of the Flathead Reservation.

The tribes are poised to become the first American Indian tribe to own and operate a Commission-licensed hydroelectric power plant, the Kerr Hydroelectric Project.  Docketed by FERC as Project No. 5, the Kerr Project consists of a reservoir, dam, penstocks, 196-megawatt power plant, and related assets located on Flathead Lake and Flathead River, mostly within the Tribes’ treaty-reserved Flathead Reservation.

The Commission issued the Kerr Project's current license on July 17, 1985, with a 50-year term.  Under the terms of a settlement between Montana Power Company and the Tribes as competing applicants for the license, the utility and the Tribes were joint licensees, and after a term of thirty years, the license allows the project to be transferred to full ownership by the Tribes.  While Montana Power Company's interests were sold to PPL Montana, LLC and ultimately transferred to Northwestern Corporation, the Tribes are slated to take over the project on September 5, 2015. On this date of conveyance, the Tribes will be the sole owner and operator of the Kerr Project, through and until the license expires on September 4, 2035.

In anticipation of that conveyance, the Tribes and their wholly owned operating company known as Energy Keepers, Inc. or EKI petitioned the Commission for a declaratory order finding that they are exempt public utilities under section 201(f) of the Federal Power Act and that they are not required to maintain or make available their books and records to the Commission under the Public Utility Holding Company Act of 2005 and related regulations.

Section 201(f) of the FPA provides exemptions from the Commission’s authority under most provisions of Part II of the FPA for “the United States, a State or any political subdivision of a state, or any agency, authority or instrumentality of any one or more of the foregoing, or any corporation which is wholly owned, directly or indirectly, by any one or more of the foregoing.”  This exemption is generally viewed as applicable to "governmental entities."  The Public Utility Holding Company Act of 2005, or PUHCA 2005, requires holding companies to provide the Commission access to their books and records. 

Based on the facts as presented in the Petition, the Commission determined that the Tribes and EKI are exempt public utilities as defined in section 201(f) of the Federal Power Act.   The Commission found that the Tribes are an “agency, authority or instrumentality” of the “United States, a State or any political subdivision of a state,” and that their wholly owned subsidiary EKI assists the Tribes in performing their inherent government functions.

The Commission also concludes that PUHCA 2005 and relevant Commission regulations do not apply to the Tribes and EKI.  The Commission found that EKI will operate the Kerr Project for the generation, transmission, or distribution of electric energy for sale and is thus an electric utility company, and thus a public utility company under PUHCA 2005 -- and therefore the Tribes are a holding company under PUHCA 2005.  However, because the Tribes are an exempt governmental entity, they are exempt from its books and records requirement.

The Commission thus determined that the Confederated Salish and Kootenai Tribes will be exempt from many parts of Part II of the Federal Power Act and the books and records requirement of PUHCA 2005.  While the Tribes are not scheduled to take over the Kerr Project until September 2015, they want to be able to secure contracts to sell the project's power well in advance.  The Commission's declaratory order reduces regulatory uncertainty, facilitating the Tribes' efforts to sell the project's future power into the Pacific Northwest electricity market.