The Hydropower Reform Coalition provided these comments in response to FERC’s “Notice of Inquiry: Financial Assurance Measures for Hydroelectric Projects,” 86 Fed. Reg. 7081 (Jan. 26, 2021) (NOI).
Until recently, most licenses and other authorizations were issued to public utilities that sold power under rates guaranteed to cover their costs for operation, maintenance, and retirement. No longer. Public utilities and merchant generators alike are not guaranteed to recover all costs in competitive power markets. The Commission now faces “increasing numbers of projects that are non-operational or out of compliance with their license conditions …” due to inability to pay for such compliance. NOI, para. 8. The Commission recognizes that its enforcement authorities “may not result in necessary license compliance.” Id. at para. 9. And inadequate fiscal capacity results in “threats to public safety and environmental resources,” particularly when projects are abandoned. Id. at para. 10.
We recommend that the Commission revise its practices to require financial assurances in all licenses for hydroelectric projects. This is based on statutory requirements.
Under Section 10(b) of the Federal Power Act, each licensee must construct project works as authorized and then avoid any alteration “not in conformity with the approved plans….” Under Section 10(c), a licensee must “…maintain project works in a condition of repair adequate for the purposes of navigation and for the efficient operation of said works in the development and transmission of power ….” It must “establish and maintain adequate depreciation reserves” for “all necessary renewals and replacements.” Id. Under Section 10(d), a licensee must also establish “amortization reserves” and maintain them until the termination of the license. Lastly, under Section 10(c), a licensee is responsible to address any damages caused by its project. In sum, the statute requires that a licensee must have fiscal capacity for license compliance. This capacity is not limited to power revenues and must include “reserves,” which are contingent mechanisms to address responsibilities for project maintenance and any license surrender.
Read our full comments here.
Read the Federal Register notice here.
FERC docket RM21-9-000: Financial Assurance Measures for Hydroelectric Projects. Document accession number 20210329-5034.