Restoring old mill hydro sites and FERC licensure

Suppose you own an existing water powered mill complex whose hydromechanical facilities have not been operational for decades.  You would like to develop a hydropower project at the site, using the existing dam, headrace, and headgates, plus new equipment including two small generators, penstocks, and appurtenant facilities, to provide electricity to your home and workshop.  Do you need a license from the Federal Energy Regulatory Commission?

In the case of the Egnaczak Net Zero Hydro Project proposed for the outlet of the Hoosic River in Cheshire, Massachusetts, the FERC concluded that section 23(b)(1) of the Federal Power Act requires that project's owners to obtain a license for the project's construction, maintenance, and operation.  Proposed by Kenneth and Susan Egnaczak, the Egnaczak Net Zero Hydro Project would have a total generating capacity of 10.7 kilowatts.

Pursuant to section 23(b)(1) of the Federal Power Act, a non-federal hydroelectric project must be licensed (unless it has a still-valid pre-1920 federal permit) if it:

(a) is located on a navigable water of the United States;
(b) occupies lands or reservations of the United States;
(c) utilizes surplus water or waterpower from a government dam; or
(d) is located on a stream over which Congress has Commerce Clause jurisdiction, is constructed or modified on or after August 26, 1935, and affects the interests of interstate or foreign commerce.

The fourth prong itself has three main elements: project located on a Commerce Clause stream, post-1935 construction or modification, affecting interstate commerce.  In this case, FERC concluded that the Egnaczak project satisfied the fourth prong.

First, FERC found that the Egnaczak project is located on a Commerce Clause stream.  Under a 1965 Supreme Court ruling, for purposes of Federal Power Act section 23(b)(1), Commerce Clause streams are the headwaters and tributaries of navigable waters of the United States.  While FERC declined to determine whether the Hoosic River is navigable at the site of the project, it concluded that downstream segments of the Hoosic are navigable, as is the Hudson River into which the Hoosic flows.

Second, FERC next found that installing new hydroelectric generating capacity constitutes post-1935 construction within the meaning of Federal Power Act section 23(b)(1). 

Third, FERC found that the project would offset both electrical and heating needs that would have been otherwise supplied by the interstate grid -- and thus that the project would affect the interests of interstate commerce.  A footnote notes, "It is well settled that small hydroelectric projects that are connected to the interstate grid affect interstate commerce by displacing power from the grid, and the cumulative effect of the national class of these small projects is significant for purposes of FPA section 23(b)(1)."

FERC concluded that because the project would be located on a Commerce Clause stream, would be constructed after 1935, and would affect interstate commerce through its connection to the interstate grid, Section 23(b)(1) of the Federal Power Act requires Kenneth and Susan Egnaczak to obtain a license for the project's construction, maintenance, and operation.  The FERC order also suggests the project may be eligible to obtain an exemption from licensing as a small hydroelectric power project of 10 megawatts or less, and encourages the applicants to investigate the requirements for securing an exemption from licensure.