FERC policy on hydropower license term

Thursday, October 26, 2017

U.S. hydropower regulators have issued a new policy setting a default term of 40 years for original and new hydropower licenses, while identifying three circumstances that could warrant longer or shorter terms.  The Federal Energy Regulatory Commission's revised policy statement on establishing license terms could reduce cost and uncertainty for hydroelectric projects under its jurisdiction.

Federal law gives the Federal Energy Regulatory Commission jurisdiction over licensing most hydroelectric projects located at non-federal dams.  Section 6 of the Federal Power Act authorizes the Commission to issue hydropower licenses for a term not to exceed 50 years, but leaves the Commission some discretion to issue licenses for shorter terms.  

Prior to the October 19, 2017 policy statement, the Commission’s policy for projects located at non-federal dams was to offer a 30-year term where there is little or no authorized redevelopment, new construction, or environmental mitigation and enhancement; a 40-year term for a license involving a moderate amount of these activities; and a 50-year term where there is an extensive amount of such activity.  The Commission has found that measures including the construction of pumped storage facilities, fish passage facilities, fish hatcheries, substantial recreation facilities, dams, and powerhouses warranted longer license terms.

But after licensees and other stakeholders contested license terms in several recent cases, on November 17, 2016, the Commission issued a notice of inquiry seeking comments on whether, and if so how, it should revise its license term policy in effect at that time. As characterized by the Commission, most hydropower industry commenters supported the certainty offered by longer default terms, while most environmental groups, individuals, and resource agencies opposed them on various grounds.

On October 19, 2017, the Commission issued its Policy Statement on Establishing License Terms for Hydroelectric Projects. The new policy establishes a 40-year default license term for original and new licenses under the Commission’s jurisdiction with exceptions for coordination, deference to generally-supported comprehensive settlement agreements, and consideration of previously-authorized voluntary actions.  According to the policy statement, these exceptions will apply:
  • 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.
According to a presentation by Commission staff, the new policy "will provide greater certainty to licensees, resource agencies, and other stakeholders," will reduce administrative costs and provide licensees longer license terms to recoup costs, and could encourage licensees to voluntarily make improvements or agree with stakeholders to a license settlement agreement.

According to the Commission, it will apply this new policy to licenses issued following the date of its publication in the Federal Register with no retroactive application.  While the Commission said it would not entertain applications to amend existing licenses to extend their license terms simply on the basis of this new license term policy, it noted that license applicants with pending license applications may file a comprehensive settlement agreement, or an addendum to an existing agreement, that includes an explicitly agreed upon license term, or may make a filing demonstrating why the Commission should award them a longer license term.

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