PG&E withdraws Potter Valley hydro relicensing, FERC opens orphan project solicitation

California electric utility Pacific Gas and Electric Company has withdrawn its expression of intent to seek a new license for the Potter Valley Hydroelectric Project, saying its relicensing would be contrary to the interests of its electric ratepayers. The withdrawal has prompted federal hydropower regulators to institute an "orphan project" process to find interest from other entities in seeking a license for the project. If no other entity seeks and obtains a new license for the project, PG&E would be responsible for surrendering the existing project license.

The Potter Valley Project is located on the Eel and East Fork Russian Rivers in northern California, about 15 miles northeast of the city of Ukiah. Originally licensed by the Federal Power Commission in 1922, and owned by PG&E since 1930, the project includes Lake Pillsbury, impounded by Scott Dam; the Van Arsdale Reservoir, impounded by the Cape Horn Diversion Dam; and a tunnel, penstock and powerhouse located in the headwaters of the Russian River Basin. PG&E estimates the average annual generation of the project to be 19,900 megawatt-hours, with an installed capacity of 9.4 megawatts. The current license issued by the Federal Energy Regulatory Commission expires on April 14, 2022, requiring PG&E to submit a new license application by April 14, 2020.

On April 6, 2017, PG&E filed a pre-application document (PAD) and notice of its intent (NOI) to file an application for a new license. But on January 25, 2019, PG&E filed notice of the withdrawal of its NOI and PAD, indicating it is no longer seeking a new license for the project and is terminating its efforts to transfer and sell the project.

In that notice, PG&E said it has "determined that it would be contrary to the interests of its electric ratepayers to continue relicensing the Potter Valley project." PG&E said it had long recognized hte project as "uneconomic for PG&E's ratepayers (i.e. the cost of production exceeding the cost of alternative sources of renewable power on the open market)." PG&E cited "continued declining energy markets, potential increased costs associated with anticipated new license conditions, and challenging financial circumstances" as leading the company to conclude it cannot justify to its ratepayers further expenditures associated with the project.

PG&E noted its anticipation that the Commission would institute its "orphan project" process under the Commission's rules to solicit license applications for Potter Valley from other entities, and expressed its understanding that PG&E would be responsible for surrendering the existing license if no other entity seeks and obtains a new license for the project. PG&E closed by saying it "recognizes the value of Potter Valley to local communities because it provides for the protection of important environmental resources, consumptive water uses, public recreation, and other economic values" which the utility said should be appropriately considered if it is required to file a surrender application.

In response, on March 1, 2019, the Commission issued a Notice Soliciting Applications for a new license for the Potter Valley project within 120 days. The Commission noted that if no other applicant files an application for a license by April 14, 2020, PG&E would be provided with written notice that no timely application for the project has been filed, and would then have 90 days within which to file a schedule for the filing of a surrender application for the project.

FERC relicenses Poe hydro project

The Federal Energy Regulatory Commission has issued an order issuing a new hydropower license to utility Pacific Gas & Electric Company for its Poe Hydroelectric Project.

The 143-megawatt project is located on the North Fork Feather River in northern California, and includes land within the Plumas National Forest. Originally licensed in 1953, the project includes two dams impounding reservoirs, a 33,000-foot-long pressure tunnel bypassing about 7.6 miles of the river, and a powerhouse with two turbines.

The Commission issued a new 40-year license for the Poe project to PG&E on December 17, 2018. In relicensing proceedings, the Commission considers a number of public interest factors, including the economic benefits of project power. In general, the Commission evaluates the economics of a hydropower project by comparing the current costs of the project to likely alternative power, without considering forecasts concerning potential future inflation, escalation, or deflation beyond the license issuance date. The Commission says the basic purpose of its economic analysis is to provide a general estimate of the potential power benefits and the costs of a project, and of reasonable alternatives to project power.

In the Poe project's case, the Commission noted that after considering mandatory conditions and other measures suggested by Commission staff, PG&E's annual cost of operating the project would be about $9,590,000. Assuming that the project would generate an average of 498,113 megawatt-hours of energy annually, this works out to $19.3 per megawatt-hour. By comparison, the Commission found that the project's the corresponding alternative energy cost plus the value of its dependable capacity gave this power a value of $50,800,000, or $102 per megawatt-hour in the first year of operation, the project would cost $41,210,000 or $82.7 per megawatt-hour less than the likely alternative cost of power.

FERC issues notices for America's Water Infrastructure Act of 2018 implementation

Federal hydropower regulators have issued a pair of notices framing the implementation of recently enacted legislation designed to streamline the processes for licensing some hydroelectric projects.

On October 23, 2018, President Trump signed the America's Water Infrastructure Act of 2018. The new law amends several portions of the Federal Power Act which govern how the Federal Energy Regulatory Commission issues preliminary permits, hydropower licenses, and approvals for qualifying conduit hydropower facilities. It also directs the Commission to:

• Issue a rule within 180 days establishing an expedited process for issuing and amending licenses for qualifying facilities at existing nonpowered dams that will seek to ensure a final decision by the Commission on an application for a license no later than two years after receipt of a completed application;
• Issue a rule within 180 days establishing an expedited process for issuing and amending licenses for closed-loop pumped storage projects that will seek to ensure a final decision by the Commission on an application for a license no later than two years after receipt of a completed application;
• Along with the Secretaries of the Army, Interior, and Agriculture, jointly develop a list of existing nonpowered federal dams that the Commission and the Secretaries agree have the greatest potential for non-federal hydropower development, to be published within 12 months; and
• Hold a workshop within 6 months to explore potential opportunities for development of closed-loop pumped storage projects at abandoned mine sites, and issue guidance within one year to assist applicants for licenses or preliminary permits for closed-loop pumped storage projects at abandoned mine sites.

On November 13, 2018, the Commission established three dockets in order to implement the requirements of the Act: RM19-6-000 (Licensing Regulations under America’s Water Infrastructure Act of 2018); AD19-7-000 (Nonpowered Dams List); and AD19-8-000 (Closed-loop Pumped Storage Projects at Abandoned Mines Guidance). The Commission's notice establishes a schedule with abbreviated deadlines for the development of these materials, with notices of proposed rulemaking for the expedited licensing processes expected in January or February 2019.

As part of the provisions calling for new expedited processes for issuing and amending licenses for qualifying facilities at existing nonpowered dams and closed-loop pumped storage projects, the new law also requires the Commission to convene an interagency task force, including appropriate federal and state agencies and Indian tribes, to coordinate the regulatory processes required to construct and operate these projects. Also on November 13, the Commission published a notice inviting these groups to request participation in the interagency task force. Federal and state agencies and Indian tribes who wish to participate on the interagency task force must file a statement of interest with the Commission by November 29, 2018.

New law eases some hydro licensing processes

A recently-enacted federal law will make it easier for hydroelectric project developers to secure a license for new hydroelectric facilities at existing non-powered dams.

U.S. rivers are home to thousands of dams, most of which impound water but don't generate electricity. A 2013 report suggested only 3% of the nation's 80,000 dams were used to produce hydroelectric power. In an effort to facilitate the development of hydroelectric facilities at some of these non-powered dams, Congress recently enacted the America's Water Infrastructure Act of 2018.

Title III of the Act relates to energy matters. One section of the Act extends the default term of preliminary permits for hydropower development from three to four years. The Act authorizes the Federal Energy Regulatory Commission to extend the period of a preliminary permit for up to four additional years, and to issue an additional permit under "extraordinary circumstances."

Another section of the Act speeds up the process through which the Commission evaluates proposals to develop "qualifying conduit hydropower facilities" and increases such a project's maximum installed capacity from 5 megawatts to 40 megawatts.

A third section of the Act requires the Commission to, within 180 days, issue a rule establishing an expedited process for issuing and amending licenses for hydroelectric facilities meeting defined criteria. These criteria require the "qualifying facilities" to be associated with an existing dam or other barrier operated for the control, release, or distribution of water for agricultural, municipal, navigational, industrial, commercial, environmental, recreational, aesthetic, drinking water, or flood control purposes, which as of the date of the Act's enactment was not generating electricity with Commission-licensed or exempted hydropower generating works. The Act also requires that the operation of these facilities must not result in any material change to the storage, release, or flow operations of the associated qualifying nonpowered dam.

The Act also includes provisions creating an establishing an expedited process for issuing and amending licenses for closed-loop pumped storage projects, and prescribing the considerations for setting the terms of new licenses for existing projects through the relicensing process.

The Act, which was introduced in the Senate as S.3021, was signed by President Trump on October 23, 2018, and became law the same day. The Commission has until April 2019 to issue the rules required by the Act.

FERC denies tidal pilot license extension

U.S. hydropower regulators have denied a request to extend the term of the country's first hydrokinetic project pilot license, instead holding that the original license's 10-year term should be enough time for the developer to complete testing and to decide whether to apply for a subsequent license.

At issue is Verdant Power, LLC's  Roosevelt Island Tidal Energy Project No. 12611 (RITE Project). The 1,050-kilowatt hydrokinetic tidal project site is located in the East River near New York City. In 2012, the Federal Energy Regulatory Commission issued the project a "pilot project license" under a newly developed process designed to allow entities to test new hydrokinetic technologies, identify appropriate sites, and confirm the technology's environmental or other effects. That pilot license allowed the construction, operation, and maintenance of the RITE Project for a 10-year period, expiring on December 31, 2021.

In 2017, the company described plans to install the pilot project's first phase in the 2019-2020 timeframe. On December 29, 2017, Verdant filed a request to extend the term of its pilot license for the RITE project by five years, to give it more time to acquire operational monitoring data that will inform subsequent phases of the pilot project and the relicense application.

But by order dated May 3, 2018, the Commission denied Verdant's request for a license extension. The Commission noted that the pilot license bore a 10-year term, twice as long Commission staff's original conceptions of hydrokinetic pilot project licenses for up to 5-year terms for testing purposes. The Commission noted, "Barring extraordinary circumstances, 10 years – double the period set forth in the white paper – should be enough time to complete a testing program and to make a decision on whether to file an application for subsequent license. Verdant has not demonstrated such circumstances."

Noting the remaining time left on Verdant's license, as well as the time left to Verdant before any application for a new license, the Commission denied the company's request for a license extension.

Vermont Yankee decommissioning settlement

The owner of the closed Vermont Yankee Nuclear Power Station and the company proposing to buy and decommission the plant have announced a settlement with the state of Vermont and other interested parties. Under the settlement agreement and a related memorandum of understanding, proposed buyer NorthStar Group Services Inc. would provide increased financial assurances and a "comprehensive reporting protocol" and agreed to detailed standards for restoring the project site in the town of Vernon. If approved by regulators, the deal could also lead to the Vermont Yankee plant's decontamination and dismantlement about 45 years sooner than current owner and licensee Entergy Corp. originally proposed.

The Vermont Yankee Nuclear Power Station began commercial operation in 1972. Entergy bought the plant from the Vermont Yankee Nuclear Power Corp. in 2002, and shut it down permanently on December 29, 2014. In a Post Shutdown Decommissioning Activities Report contemporaneously filed with the Nuclear Regulatory Commission, Entergy said it expected to initiate decontamination and dismantlement of the Vermont Yankee site in 2068, with projected completion of both decommissioning and site restoration by 2075. In November 2016, Entergy proposed selling the site to NorthStar for decommissioning.

On March 7, 2018, Entergy and NorthStar announced what they called "significant milestones in the approval of the proposed transaction": signing a settlement agreement and memorandum of understanding with Vermont state agencies and other interested parties. Agencies signing the agreement, in whole or in part, included the Vermont Department of Public Service, Agency of Natural Resources, Department of Health, and Attorney General's Office.  Other signatories to the settlement include the Town of Vernon Planning and Economic Development Commission, the Windham Regional Commission, the Abenaki Nation of Missisquoi and the Elnu Abenaki Tribe, and the New England Coalition on Nuclear Pollution (NEC).

Under the settlement's revised vision of the proposed transaction, NorthStar has committed to initiate decontamination and dismantlement by 2021 (and potentially as early as 2019) and to complete decommissioning and restoration of most of the Vermont Yankee site by 2030 (and potentially as early as 2026). The Independent Spent Fuel Storage Installation or ISFSI would remain on-site.

The settlement also calls for NorthStar to provide additional financial assurance beyond that originally proposed. Enhanced financial assurance provisions include an increase in the amount of NorthStar's corporate support agreement from $125 million to $140 million; establishment of an escrow account, subcontractor guaranty, and pollution insurance requirements; and a comprehensive reporting protocol. Entergy also committed to contribute to the Site Restoration Trust, and to possibly use future proceeds from litigation against the U.S. Department of Energy over spent fuel storage costs as additional financial assurance.

The settlement remains subject to approval by the Vermont Public Utility Commission. The transaction would also require approval by the U.S. Nuclear Regulatory Commission.

FERC proposes revoking hydro license for noncompliance

U.S. hydropower regulators have proposed revoking a Michigan hydroelectric project's license under the Federal Power Act, following findings of violations of numerous license provisions, agency regulations and orders.

At issue is the Edenville Hydroelectric Project, No. 10808, located on the Tittabawassee and Tobacco Rivers by Wixom Lake in Michigan. The Federal Energy Regulatory Commission initially issued a license for the 4.8-megawatt Edenville project in 1998. That license was eventually transferred to a company named Boyce Hydro Power, LLC.

According to public records in the Commission docket for the license, "Boyce Hydro has a long history of non-compliance" with license terms and conditions and with related provisions in the Federal Power Act and Commission regulations and orders. Orders in the docket recite history including a 2017 Compliance Order finding noncompliance with respect to the adequacy of the project's spillway capacity and other matters. As noted in the docket, "The Commission’s primary concern has been the licensee’s longstanding failure to address the project’s inadequate spillway capacity, which currently is designed to pass only approximately 50 percent of the PMF. Failure of the Edenville dam could result in the loss of human life and the destruction of property and infrastructure."

The Commission has tools that it can use to compel compliance with its laws and regulations. For example, on November 20, 2017, Commission staff issued an order requiring the licensee to cease generating at the Edenville Project.

Beyond ordering the project to stop generating power, the Commission can revoke a license. Section 31(b) of the Federal Power Act allows the Commission to issue an order revoking a license, after providing notice and an opportunity for an evidentiary hearing, if it finds that a licensee knowingly violated a final compliance order and was given a reasonable time to comply with that order before the revocation proceeding was commenced. 

On February 15, 2018, the Commission issued an Order Proposing Revocation of License in the Edenville project's docket. In that order, the Commission noted that the licensee "has failed for many years to comply with significant license and safety requirements, notwithstanding having been given opportunities to come into compliance... The licensee failed to meet nearly all the obligations in the compliance order, even after Commission staff granted multiple extensions."

The Commission noted that public safety "would not be affected by revoking the license." It noted that if the Commission were to revoke the license, its jurisdiction would end, and authority over the site will pass to the State of Michigan’s dam regulatory authorities.

The Commission also noted that revocation of the project license "does not mandate removal or any modification of the dam," citing both its broad authority under the Federal Power Act and its general policy not to condition the effectiveness of a license revocation on a licensee that has shown its unwillingness to comply with other Commission orders.

The Commission set a 30-day deadline within which the licensee may request an evidentiary hearing before an Administrative Law Judge, after which the Commission will decide the matter.

FERC policy on hydropower license term

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.

FERC issues license for Monongahela Locks and Dam 4 project

U.S. hydropower regulators have issued an original license for a proposed 12-megawatt hydropower project, to be located at the U.S. Army Corps of Engineers’ Monongahela Locks and Dam 4 facility on the Monongahela River, in Pennsylvania.

On February 27, 2014, FFP New Hydro, LLC subsidiary Solia 4 Hydroelectric, LLC filed, pursuant to Part I of the Federal Power Act, an application for a license to construct, operate, and maintain the Monongahela Locks and Dam 4 Hydroelectric Project No. 13767.  The company is affiliated with US Renewables Group.

The project would be located at one of the nine existing lock and dam sites on the Monongahela River, which the Army Corps operates for commercial and recreational navigation.  If developed, new facilities for the project would include an intake channel, spill gates, a powerhouse housing two equally sized Kaplan turbine-generator units with a combined capacity of 12 MW, a tailrace channel, a substation, a transmission line, and an access road.  The project will operate in a run-of-release mode, using flows made available by the Corps that would normally be released through the Corps’ spillway gates

Under the Federal Power Act, the Federal Energy Regulatory Commission is charged with regulating and reviewing applications for most non-federal hydropower projects.  Because the project uses the water power or surplus water of a government dam, occupies federal land, and is located on the Monongahela River, which is a navigable waterway of the United States, the Commission concluded that the project is required to be licensed pursuant to section 23(b)(1) of the Federal Power Act.

On July 21, 2017, the Commission issued its Order Issuing Original License for the Monongahela Locks and Dam 4 project.  The license authorizes the installation of 12 MW of new, renewable energy capacity, while requiring a number of measures to protect water quality, fish, wildlife, recreation, and cultural resources at the project.  It bears a 50-year term, the maximum allowable for an original license under Section 6 of the Federal Power Act.

According to the order, as licensed with mandatory conditions and staff-recommended measures, the levelized annual cost of constructing and operating the project will be about $3,563,340, or $72.88/MWh.  Its expected average annual generation will be 48,894 MW. 

The Commission noted that the project as licensed is best adapted to a comprehensive plan for improving or developing the Monongahela River, "because: (1) issuance of an original license will serve to provide a beneficial and dependable source of electric energy; (2) the required environmental measures will protect and enhance fish and wildlife resources, water quality, recreation resources, and historic properties; and (3) the 12 MW of electric capacity will come from a renewable resource that does not contribute to atmospheric pollution."

Maine tidal pilot project not seeking new license

The holder of a federal pilot license for a Maine tidal energy project has told regulators that it does not intend to relicense the project beyond the pilot license's expiration in 2022, pointing to tidal current velocities at the project site as inadequate to justify pursuing a commercial license.

At issue is the Cobscook Bay Tidal Project.  On February 27, 2012, the Federal Energy Regulatory Commission issued a pilot project license to ORPC Maine, LLC for the project for a period of eight years.  Later that year, it became the first grid-tied commercial tidal power plant in the U.S.

The Commission later granted a subsequent request by ORPC to extend its license term for the Cobscook Bay Tidal Energy Project from eight years to ten years, until January 31, 2022.  In that order extending the pilot license term, the Commission noted "the experimental nature of hydrokinetic devices, the licensee’s dedication to expanding and improving the technology and design of its project, and the insignificant or no impact to the surrounding environment by extending the license term two years."

Because the FERC licensing process can take years to complete, licensees are required to make public filings between 5 and 5-and-a-half years in advance of license expiry.  On March 14, 2017, ORPC made such a filing.  In that March 14 letter, ORPC noted some project successes:

The Cobscook Bay Tidal Energy site has served a pivotal role in the advancement of ORPC’s technology specifically and the domestic marine hydrokinetic industry generally. ORPC anticipates that the project infrastructure in place, the environmental monitoring and data analysis efforts, resource information documentation, and collaborative relationships with existing marine users will continue through the duration of the existing pilot license term. With concurrence of the Project Adaptive Management Team, we will be testing new generations of system components and assembled systems at the project site and will keep FERC informed regarding these efforts.

But then ORPC noted an intent not to seek a commercial license for the project after the pilot license's expiration:

While the project site serves as an excellent testing area, ORPC considers the tidal current velocities at the Project site inadequate to justify pursuing a commercial license. Therefore ORPC does not intend to file a NOI or PAD for the Project at this time.

In a May 25, 2017 letter to the licensee, Commission staff characterized the licensee's March 14 filing as "a notice of intent not to relicense the Cobscook Bay Tidal Project," citing the licensee's position on tidal velocities, and noting the licensee's stated intent to continue operating the project until the pilot license expires on January 31, 2022.

Licensee seeks West Branch and Sysladobsis Dam amendment

A Maine dam owner has applied to federal regulators seeking to exclude from its hydropower license one of two dam-based developments which comprise the project.

At issue is the January 31, 2017 application of Woodland Pulp LLC to the Federal Energy Regulatory Commission for an amendment to the license for the West Branch Storage Dam Project.  The West Branch project was first licensed in 1980, and currently operates under a license issued by the Commission in 2016.  It includes two developments -- Sysladobsis and West Grand -- each of which operates as a water storage facility to provide flood storage and flow releases for downstream hydroelectric generation. 

As described in the license amendment application, the Sysladobsis development includes Sysladobsis Dam.  This dam is about 250 feet long and 9 feet high, consisting of three earth embankment sections, a small timber gate structure, and a fish passage facility.  The dam impounds the 5,400-acre Sysladobsis Lake; water released from the dam flows Sysladobsis Lake into the downstream West Grand impoundment, then into either Grand Lake Stream or Grand Lake Brook.  The project does not include any electricity generating facilities, but rather operates as part of a 112-year-old system of headwater storage dams in the St. Croix River watershed including Woodland Pulp LLC’s Forest City Project No. 2660 which the licensee has applied and the recently relicensed Vanceboro Project No. 2492. Generation associated with these projects occurs at the Grand Falls and Woodland hydroelectric projects downstream on the St. Croix River.

The licensee has requested FERC approval to remove the Sysladobsis development from the West Branch Project as a legal matter, and proposes "to remove the two wooden gates at the Sysladobsis Dam," but says it "does not propose to remove the Sysladobsis Dam as part of the amendment, and such removal is not necessary or appropriate."  Rather, the applicant asserts, "There will be no structural alteration of the dam, and there will be no discharge into the water. Once the gates are removed, the dam will no longer act as a water control structure for Sysladobsis Lake. Instead, impoundment levels and outflow will be determined by the natural precipitation cycle."

According to the licensee's application, "This change is necessary since operation of the Project as-is will no longer be economic under the new license issued March 15, 2016."  The licensee cited license terms and conditions including specific water level requirements and operating plans, reporting, and consultation requirements, "some with unreasonable time constraints."  The application notes, "As such Woodland cannot continue to fund and support the Sysladobsis development and incur increased losses on non-economically viable facility components."

In a separate docket, the Commission is considering an application by the same licensee to surrender its Forest City project license.

Boom in FERC hydro relicensing

U.S. federal hydropower regulatory staff currently has a full workload processing original license, relicense, and exemption applications, as well as its compliance and dam safety work, according to testimony presented to the House Energy & Commerce Committee, Subcommittee on Energy -- and this workload is expected to increase as many hydro projects face relicensing proceedings.

The Federal Energy Regulatory Commission regulates over 1,600 non-federal hydropower projects located at over 2,500 dams, under Part I of the Federal Power Act.  These projects collectively represent about 56 gigawatts of hydropower capacity, over half of the nation's total hydropower capacity.

The Federal Power Act generally requires non-federal hydropower projects to be licensed by the Commission if they: (1) are located on a navigable waterway; (2) occupy federal land; (3) use surplus water from a federal dam; or (4) are located on non-navigable waters over which Congress has jurisdiction under the Commerce Clause, involve post-1935 construction, and affect interstate or foreign commerce.  Licenses are generally issued for terms of between 30 and 50 years, and are renewable.

According to testimony presented to the House Energy & Commerce Committee, Subcommittee on Energy on May 3, 2017, the Commission's relicensing workload "has started to increase and will continue to remain high well into the 2030s."  Between fiscal years 2017 and 2030, the Commission projects that about 480 older projects will begin the pre-filing consultation stages of the relicensing process.  These projects facing relicensing represent about 45 percent of Commission-licensed projects, and one-third of jurisdictional licensed hydropower capacity.

The testimony also notes that some of these projects may face different standards in a relicensing context than were considered when their current or original licenses were issued.  Many projects now entering relicensing were first licensed in the early to mid-1980s, following the enactment of PURPA but prior to enactment of modern environmental standards.

For example, the Electric Consumers Protection Act of 1986 directed the Commission, when issuing licenses, to give equal consideration to power and development, energy conservation, fish and wildlife, recreational opportunities, and other aspects of environmental quality.  This mandate may not have applied to a 40-year license issued in 1982, but would come into play during a relicensing case initiated in 2017.

The House Subcommittee on Energy is considering discussion drafts and several pieces of legislation affecting hydropower, including the Hydropower Policy Modernization Act of 2017; the Promoting Hydropower Development at Existing Non-Powered Dams Act; the Promoting Closed-Loop Pumped Storage Hydropower Act; the Promoting Small Conduit Hydropower Facilities Act of 2017; and the Supporting Home Owner Rights Enforcement Act.

FERC 2-year licensing pilot workshop

The regulatory process for Federal Energy Regulatory Commission licensing of hydropower projects can take many years and significant expense -- but can it be improved following a two-year pilot process ordered by Congress?  After running a pilot process for one license application, the Commission has scheduled a workshop to discuss lessons learned from its pilot licensing process.

Under the Federal Power Act, the Commission is responsible for licensing most non-federal hydropower development in the U.S.  Concerned over the duration and expense of the regulatory process, Congress enacted the Hydropower Regulatory Efficiency Act of 2013, section 6 of which directed the Commission to investigate the feasibility of a two-year licensing process, develop criteria for identifying projects that may be appropriate for the process, and develop and implement pilot projects to test the process.

After a January 6, 2014 solicitation for pilot projects, the Commission selected Free Flow Power Project 92, LLC's (FFP) proposed 5-megawatt project at the Kentucky River Authority's existing Lock & Dam No. 11 on the Kentucky River.  The January notice set minimum criteria and a process plan for projects that may be appropriate for licensing within a two-year process, including:

• The project must cause little to no change to existing surface and groundwater flows and uses;
• The project must not adversely affect federally listed threatened and endangered species;
• If the project is proposed to be located at or use a federal dam, the request to use the two-year process must include a letter from the dam owner saying the plan is feasible;
• If the project would use any public park, recreation area, or wildlife refuge, the request to use the two-year process must include a letter from the managing entity giving its approval to use the site; and
• For a closed-loop pumped storage project, the project must not be continuously connected to a naturally flowing water feature.

After trying a two-year pilot to abbreviate its hydropower project licensing process, the Commission has scheduled a workshop to discuss the pilot's effectiveness.

FERC considers hydro license term policy

U.S. hydropower regulators have requested public comments on whether to revise a policy setting the length of license terms for hydroelectric projects.  The Federal Energy Regulatory Commission's notice of inquiry could lead to changes in how the Commission sets license terms.

Under Section 6 of the Federal Power Act, the Commission may issue hydropower licenses for a term not to exceed 50 years.  Original licenses have no minimum license term.  Section 15(e) of the Federal Power Act provides that any new license (i.e. relicense) shall be for a term that the Commission determines to be in the public interest, but not less than 30 years or more than 50 years.

Within these statutory bounds, the Commission has discretion to set its own policy governing the term length of hydropower licenses.  At present, the Commission policy is to set a 50-year term for licenses issued for projects located at federal dams. For projects located at non-federal dams, the Commission’s current policy is to set 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 described the purpose of this policy as "to ease the economic impact of new costs, promote balanced and comprehensive development of renewable power generating resources, and encourage licensees to be better environmental stewards."  But the lengths of new licenses have been contested in several recent relicensing proceedings, in which parties have argued that the Commission should have considered or given more weight to other factors.  These other factors proposed for consideration include capacity-related investments or environmental enhancements made by the licensee during the current license and before issuance of the new license; total cost of the relicensing process; losses in generation value related to environmental measures; the license terms of projects that the licensee states are similarly situated to its project; and the license term provided for in settlement agreements.

In a November 17, 2016 notice of inquiry, the Commission outlined five potential options that Commission staff has identified for establishing license terms:

(1) retain the existing license term policy; (2) add to the existing license term policy the consideration of measures implemented under the prior license; (3) replace the existing license term policy with a 50- year default license term unless the Commission determines that a lesser license term would be in the public interest (f or example, to better coordinate, to the extent feasible, the license terms for projects in the same river basin for future consideration of cumulative impacts); (4) add a more quantitative cost- based analysis to the existing license term policy ; and (5) alter current policy to accept the longer license term agreed upon in an applicable settlement agreement, when appropriate. 

The Commission now seeks comment on issues relating to license terms, due within 60 days from the Notice of Inquiry's November 25 publication in the Federal Register.

New Jersey FERC license surrender and dam removal

U.S. energy regulators have accepted an application to surrender the licensee for a New Jersey hydropower project.  Earlier this month, the Federal Energy Regulatory Commission accepted Great Bear Hydropower Inc.'s application to surrender its license for the Columbia Dam Project, located on the Paulins Kill.  While the Commission decision to accept license surrender does not necessarily mean the dam will be removed, it represents a significant step toward letting the dam owner pursue dam removal if it wishes.  The case also illustrates tensions between hydropower development and dam removal, which remain active in U.S. policy discussions, and the consequences of state jurisdiction following FERC license surrender.

On January 15, 1986, the Commission issued a 40-year license for the construction, operation, and maintenance of hydroelectric facilities at the existing Columbia Dam.  The project includes a 20-foot-high, 330-foot-long concrete dam, originally built by a utility in 1909.  The site was sold to the state in 1955, after which the original electric generation was discontinued.  Following the project's 1986 licensing by FERC, the licensee added a powerhouse containing two generating units with a total installed generating capacity of 530 kilowatts.

The dam remains owned by the state of New Jersey as part of the Columbia Wildlife Management Area, and the licensee has been operating the project under a long-term lease with the state. But significant efforts are under way to improve water quality in the Delaware River basin.  The Nature Conservancy has described a strategy for watershed restoration that features the Columbia Dam's removal as a key component.  After the state and The Nature Conservancy entered into an agreement to remove the dam, the licensee ultimately agreed to surrender its license and remove only its hydroelectric facilities originally added to the dam, leaving the state to perform any future dam removal.

Because the Columbia Dam Project is subject to Part 1 of the Federal Power Act, its license could not be surrendered without approval of the Federal Energy Regulatory Commission.  The licensee applied for surrender in October 2015.  The Commission granted that approval on August 10, 2016.

The FERC license surrender does not necessarily mean that the dam itself will be removed, although it does provide for decommissioning of the hydropower equipment.  The Commission accepted the licensee's proposal to remove the generating equipment, transformers from the powerhouse, and disconnect the electric connection to the local utility.  The license surrender will not be effective until the Commission agrees that the project’s facilities have been decommissioned in accordance with this surrender order.

As for the dam, the Commission noted, "It will be up to the state of New Jersey, the dam owner, to decide whether to remove the Columbia Dam, once the hydroelectric facilities have been decommissioned.  Dam removal would have some ecological, social, and economic benefits for the Paulins Kill watershed."  Following the effectiveness of license surrender, safety matters would primarily be state jurisdictional, and any dam removal would proceed primarily under state law.

While hydropower continues to play a significant role in the overall U.S. energy mix, with new and ongoing federal initiatives to increase hydropower generation, in some cases economics and environmental considerations may lead to the surrender of some project licenses.  This may be particularly true for some relatively small dams with fish passage issues facing relicensing in coming years.

Maine tidal project preliminary permit issued

A tidal energy developer has been granted a preliminary permit to study a proposed project in Western Passage, near the city of Eastport, Maine.

Under the Federal Power Act, most grid-connected tidal power projects require licensing by the Federal Energy Regulatory Commission.  Section 4(f) of the Federal Power Act authorizes the Commission  to issue preliminary permits to allow prospective applicants for a hydropower license time to secure the data and perform the acts required to prepare a license application.  A preliminary permit preserves the holder's right to have first priority in applying for a license for the project being studied.

On December 4, 2015, ORPC Maine, LLC applied for a preliminary permit to study the feasibility of the proposed Western Passage Tidal Energy Project No. 14743.  As described in that application, the project would include fifteen of ORPC's proprietary 500-kilowatt hydrokinetic marine turbine-generator units for a combined capacity of 7.5 megawatts, along with anchoring and mooring systems, and transmission lines running ashore to an existing distribution line.  The materials describe an estimated average annual generation of 2.6 to 3.53 gigawatt-hours.

The Commission granted that preliminary permit by an order dated July 13, 2016.  In that order, the Commission addressed comments filed by the Maine Department of Environmental Protection, the U.S. Department of the Interior, the Passamaquoddy Tribe, and an individual.

In its comments, the tribe raised concerns over what the Commission calls "site banking".  As described by the Commission, the essence of its policy against site banking is that "an entity that is unwilling or unable to develop a site should not be permitted to maintain the exclusive right to develop it."  In some cases, the Commission invokes its policy against site banking to deny applications for successive preliminary permits.

The tribe questioned whether ORPC Maine should be granted a new preliminary permit when it has held two prior preliminary permits for the site of the proposed Western Passage Project -- the first issued in 2007, and a successive permit in 2011 -- without ever filing a development application. 

But in ORPC's case, the Commission noted that the project site has been unencumbered by a permit since ORPC's most recent permit expired in 2013, and that no other entity has filed a preliminary permit or development application for the site.  The Commission concluded that "a sufficient amount of time has passed for any other entity interested in developing the Western Passage Project site to have filed a preliminary permit or development application for the site and none has done so. Consequently, issuing a permit at this time to ORPC Maine for this site would not contribute to site banking."

Hydro license transfers and fitness

U.S. hydropower regulators have approved the transfer of the license for an Idaho hydroelectric project, despite an argument that the transferee is not fit to operate the project. At issue is the Smith Creek Project, No. 8436, located on Smith Creek in the Panhandle National Forest in Idaho.

The Federal Energy Regulatory Commission issued a 50-year license for the project in 1987, which was transferred to Eugene Water & Electric Board in 2000. Earlier this year, EWEB applied to the Commission for a transfer of the Smith Creek project license to Smith Creek Hydro, LLC.  American Whitewater opposed the transfer, raising arguments including that Smith Creek did not meet the Commission's "fitness standard".

On June 23, 2016, the Commission issued an order approving the Smith Creek license transfer.  In that order, the Commission noted that while Section 8 of the Federal Power Act governs license transfers, it does not articulate a standard for approving a transfer application.  Under Commission precedent, a transfer may be approved on a showing that the transferee is qualified to hold the license and operate the project, and that a transfer is in the public interest.  According to the Commission, an applicant's fitness, including its prior performance as licensee, is a relevant factor to be considered in a licensing decision.  In performing a fitness inquiry, the Commission typically takes a broad look at conduct by affiliated entities: "The Commission does not separate the identities of partners and partnerships where matters of fitness to receive a license are concerned. In fact, the Commission has consistently examined the conduct of the persons controlling and directing licensees and exemptees in this context."

In the Smith Creek case, American Whitewater argued that "Smith Creek is unfit to hold a license based on compliance issues at the Power Creek Project No. 11243, the Cascade Creek Project No. 12495, and the unlicensed Electron Hydroelectric Project."  The group pointed to a fatality by avalanche during the Power Creek project construction, the fact that the Cascade Creek project was issued preliminary permits but was never licensed, and that litigation was pending relating to the alleged Endangered Species Act violations at the Electron project.

While the Commission does not list Smith Creek as a licensee on any of these projects, it did consider these allegations relating to entities now or formerly affiliated with Smith Creek.  But the Commission declined to find a lack of fitness of the transferee.  It distinguished the issues raised by American Whitewater, noted the transferee's responsiveness to Commission staff inquiries, and overall compliance with the Commission.  The Commission described denial of a license application on the ground of lack of fitness as "a strong sanction, particularly since the Commission has the means to secure license compliance, including civil penalties."  It therefore approved the Smith Creek license transfer.

Whitestone hydrokinetic license surrendered

Despite efforts to offer a streamlined regulatory path for some demonstration hydropower projects, earlier this year the holder of a hydrokinetic pilot project license for a project proposed for the Tanana River in Alaska surrendered its license due to an inability to find financing. The case of the Whitestone Poncelet River-In-Stream-Energy-Conversion (RISEC) Pilot Project No. 13305 illustrates the Federal Energy Regulatory Commission’s hydrokinetic pilot project licensing process, the difficulties of testing and developing new hydropower technologies, and how the Commission handles pilot license surrender.

Whitestone Power and Communications, an assumed name of the Whitestone Community Association, had proposed the project as a 100-kilowatt demonstration of its proprietary hydrokinetic prototype technology. It was to be located on the Tanana River at its confluence with the Delta River, about 90 miles southeast of Fairbanks. A Poncelet undershot waterwheel and generator unit mounted on a floating platform, seasonally installed and moored to a cliff. Power produced would be supplied to the Golden Valley Electric Association grid.

The Federal Energy Regulatory Commission granted WPC a five-year pilot project license on October 19, 2012. In processing WPC’s application, the Commission used a hydrokinetic pilot project licensing process derived from from its Integrated Licensing Process. According to the Commission, the hydrokinetic pilot project licensing process was designed “to meet the needs of entities, such as Whitestone, who are interested in testing new hydropower technologies while minimizing the risk of adverse environmental impacts.” The Commission describes the goal of the pilot licensing process as “to allow developers to test new hydrokinetic technologies, to determine appropriate sites for these technologies, and to confirm the technology’s environmental and other effects without compromising the Commission’s oversight of the projects and limiting agency and stakeholder input.”

As outlined in a white paper prepared by Commission staff, a hydrokinetic pilot project should be: (1) small; (2) short term; (3) located in environmentally nonsensitive areas; (4) removable and able to be shut down on short notice; (5) removed, with the site restored, before the end of the license term (unless a new license is granted); and (6) initiated by a draft application in a form sufficient to support environmental analysis. After finding the WPC project met these standards, the Commission issued it a license in 2012. Article 301 of the license required the licensee to commence construction of the project works within two years from license issuance, i.e., by October 19, 2014.

Despite winning a license, the project was never built. In 2014, WPC asked for and received a two-year extension of the start-of-construction deadline, “due to unforeseen setbacks in obtaining the necessary financing to begin construction.” But in that order, the Commission reminded the licensee that, pursuant to section 13 of the Federal Power Act, the deadline for starting construction may only be extended once, for a period not exceeding two additional years. Therefore, the Commission noted its inability to grant any further extensions of time for the commencement of project construction.

But in September 2015 WPC applied to the Commission for surrender of its license. In its surrender application, WPC stated that it was unable to obtain the funding necessary to construct the project and had not constructed any project facilities.

In April 2016, the Commission granted WPC's surrender application without condition, citing the facts that the licensee had not commenced construction and that the project site remained unaltered.

The Whitestone project was among the first to use the Commission’s hydrokinetic pilot project licensing process. But despite receiving expedited regulatory treatment in licensing, financing challenges led the licensee to surrender its license before the project could be constructed. Some other proposed hydrokinetic projects have been canceled or put on hold, following licensure; earlier this year, the Commission accepted license surrender for a Washington tidal power project licensed as a 10-year pilot project, after the public utility district proposing it found it economically infeasible. Another project -- an ocean wave energy farm off the Oregon coast -- surrendered its pilot license
 in 2014.

Edgartown's Muskeget tidal project faces questions

A municipal tidal power project proposed for the Massachusetts island of Martha's Vineyard faces federal deadlines if its licensing process is to continue.  The Muskeget Channel Tidal Energy Project, proposed by the Town of Edgartown, is seeking a pilot project license from the Federal Energy Regulatory Commission -- but faces questions from Commission staff.

On February 1, 2011, the Town of Edgartown filed, pursuant to the Commission’s pilot licensing procedures, a draft license application for the proposed Muskeget Channel Tidal Energy Project.  The project would feature an array of 14 marine hydrokinetic tidal turbines, with a commercial generating capacity of 5 megawatts or less.

But that license application remains incomplete.  On April 1, 2011, Commission staff issued a letter requesting that Edgartown provide additional information, including details about the proposed project and multiple plans, drawings, and reports.  Over the ensuing years, Edgartown filed some responsive information, but according to the Commission, Edgartown did not file the remaining information by the deadline or provide a schedule indicating when the information would be filed after the deadline was missed.

Over two years after the deadline, on April 21, 2016, Commission staff issued a letter requiring Edgartown to show cause, within 30 days, why Commission staff should not terminate the prefiling licensing process for the project.  According to the Commission, Edgartown did not respond, but Congressman William Keating asked the Commission to extend the show cause deadline until the Massachusetts Clean Energy Commission decides whether to award the project a grant.

In a June 2 letter, Commission staff directed Edgartown to, within 30 days, provide a schedule specifying when it will file with the Commission each of the outstanding items requested in Commission staff’s April 1, 2011 letter.  The letter says, "Upon receipt of this information, Commission staff will make a determination on how to proceed with the incomplete application for the Muskeget Channel Tidal Energy Project."  For now, the prelicensing process for the Muskeget tidal project remains pending.

Alta Ski Area conduit micro-hydro project

Alta Ski Area has proposed developing a micro-hydropower project along an existing pipeline, and hopes to benefit from a streamlined regulatory process.  Federal regulators have made a preliminary determination that the proposed Alta Micro-Hydro Project, in Alta, Utah, satisfies the requirements to be treated as a "qualifying conduit hydropower facility," which would not require licensing under the Federal Power Act.

Alta's proposed project would include a new powerhouse to be built along the existing underground 6-inch-diameter snowmaking water supply pipeline delivering water from Cecret Lake to the Wildcat Pump House, a new turbine/generating unit with an installed capacity of 75 kilowatts, intake and discharge pipes, and appurtenant facilities.  The unit is estimated to generate between 115 and 225 megawatt-hours annually.  There is no dam associated with the project.  Alta presented its micro-hydro project as part of a 2012 request to update its master plan, which the U.S. Forest Service accepted.

Ski areas with snowmaking capacity typically have existing pipelines and water infrastructure, coupled with significant vertical relief.  This can create opportunities to generate electricity using energy harvested from water flowing downhill through a pipeline, particularly if reducing system pressure (like a pressure relief valve) is otherwise needed. 

A 2013 law was designed to help small conduit-based hydropower projects by eliminating their need for a license or exemption from licensing issued by the Federal Energy Regulatory Commission.  Section 4 of the Hydropower Regulatory Efficiency Act of 2013 amended Section 30 of the Federal Power Act.  Section 30 now provides that a "qualifying conduit hydropower facility" -- one that is determined or deemed to meet defined criteria -- is not required to be licensed or exempted from licensing under the Federal Power Act.  These criteria include:

• The conduit the facility uses a tunnel, canal, pipeline, aqueduct, flume, ditch, or similar manmade water conveyance that is operated for the distribution of water for agricultural, municipal, or industrial consumption and not primarily for the generation of electricity.
• The facility is constructed, operated, or maintained for the generation of electric power and uses for such generation only the hydroelectric potential of a non-federally owned conduit.
• The facility has an installed capacity that does not exceed 5 megawatts. 
• On or before August 9, 2013, the facility is not licensed, or exempted from the licensing requirements of Part I of the FPA.

The Federal Energy Regulatory Commission administers this statute.  To start the regulatory process, on May 16, 2016, Alta filed a notice of intent to construct a qualifying conduit hydropower facility.  Alta supplemented its notice on May 20 to clarify that the project "will only operate when there is excess capacity available in the pipeline and when water is hydrologically available", generally after the winter snowmaking season, during spring runoff.  Alta also restated that the pipeline's main purpose will continue to be snowmaking.

Yesterday the FERC issued its notice of preliminary determination of a qualifying conduit hydropower facility for Alta's project.  That notice examines the project relative to each of the four statutory criteria, and then provides the Commission's preliminary determination:

The proposed addition of the hydroelectric project along the existing water supply pipeline will not alter its primary consumptive purpose. Therefore, based upon the above criteria, Commission staff preliminarily determines that the proposal satisfies the requirements for a qualifying conduit hydropower facility, which is not required to be licensed or exempted from licensing.

The notice also sets a 30-day deadline for filing motions to intervene, and a 45-day deadline for filing comments contesting whether the facility meets the qualifying criteria and providing an evidentiary basis.

Other recently proposed conduit hydro projects have been determined to be qualifying conduit hydropower facilities, including a Colorado project using an existing "ditch drop," a Castle Valley, Utah water treatment project, a California wholesale water agency conduit project, and a New Hampshire water works.