Regulation and Policy

FERC cuts $9.8 million from agencies’ annual charges bills

The Federal Energy Regulatory Commission again has determined that other federal agencies failed to clearly document their costs for participating in the hydro licensing process. FERC cut $9.8 million — 60 percent — from a total of $16.2 million in reimbursement sought from hydropower licensees for fiscal year 2005.

In a notice issued Sept. 18, FERC announced it completed its review of cost data submitted by the Agriculture, Commerce, and Interior departments for fiscal 2005. FERC said it determined only $6.4 million in agency costs were clearly documented and, therefore, included in annual charges bills FERC mailed to licensees in August.

FERC said it accepted only part of the costs reported by Interior’s Bureau of Reclamation, National Park Service, and U.S. Fish and Wildlife Service, and by Agriculture’s U.S. Forest Service, and Commerce’s NOAA Fisheries. It rejected costs reported by Interior’s Bureau of Indian Affairs, Bureau of Land Management, U.S. Geological Survey, Solicitor’s Office, Office of Environmental Policy &Compliance, and Office of Policy Analysis.

The commission identified instances in which: supporting documentation simply was not provided; no distinction was made between costs for projects owned by municipal and non-municipal entities; and estimated costs were presented with no explanation of the basis of the estimates. In other instances, limited documentation was provided but not linked to a viable accounting system.

FERC is required to determine the reasonableness of costs incurred by other federal agencies to participate in hydro licensing. Federal policy requires that recipients of special benefits from federal activities — such as hydropower licenses — pay user charges to cover the cost of providing those benefits. FERC bills hydro licensees to cover its own costs, plus the costs of other federal agencies that participate in the licensing process.

The 60 percent failure rate of other agencies’ documentation is an improvement over FERC’s previous analysis. In June, FERC declared the agencies failed to clearly document 86 percent of their costs, prompting it to reduce annual charges billings by $96 million for FERC proceedings in fiscal years 1998-2004. (HNN 7/25/06) At that time, FERC said the agencies properly documented only $16 million of their $112 million in total reported costs.

FERC issued related annual charges assessments for fiscal years 1998-2004 the week of July 17. FERC said it reduced the cost bases used to calculate the previous annual charges assessments and applied a credit to the fiscal year 2002-2004 assessments of licensees with pending appeals.

More licensees appeal new annual charges bills

Meanwhile, a group of licensees for 93 projects filed a FERC appeal challenging other agencies’ costs in FERC’s annual charges bills for fiscal year 2006. While FERC includes its own charges for the current fiscal year in the bills, it includes other federal agencies’ costs for previous fiscal years.

The licensee group, which was not involved in previous challenges, said FERC failed to explain whether, and how, it determined that the other federal agencies’ charges were �reasonable� and not likely to increase the price to consumers of power, as required by the Federal Power Act.

The group said FERC established procedures in the 2004 City of Idaho Falls annual charges case and said, in future, FERC would provide cost submissions to licensees and would hold a technical conference with licensees and the agencies. FERC then would give the agencies a month to submit revisions before actually issuing bills.

“These procedures were not followed in the case of the FY05 OFA (other federal agency) administrative charges,” the petition said. “Commission licensees were not provided with any OFA cost submissions… In addition, the ‘mechanism’ the commission established in Idaho Falls to resolve issues between licensees and OFA — the technical conference — was never held.”

The licensees also said the hydro project generation totals used to allocate fiscal 2003 assessments among non-municipal projects were identical to the generation totals FERC used for fiscal year 2002, and thus were not based on actual generation amounts for fiscal year 2003.

There are 18 utilities in the group filing the joint appeal: Appalachian Power Co.; Avista Corp.; Duke Power Co. LLC; Erie Boulevard Hydropower L.P.; FirstEnergy Generation Corp.; Greenwood County, S.C.; Indiana Michigan Power Co.; Jersey Central Power &Light Co.; Nebraska Public Power District; Northern States Power Co.; Northern States Power Co. (Wisconsin); Ohio Power Co.; Pacific Gas &Electric Co.; PSI Energy Inc.; Public Utility District No. 2 of Grant County, Wash.; Safe Harbor Water Power Corp.; TransCanada Hydro Northeast Inc.; and York Haven Power Co. Several other utilities that are not members of the group have filed separate appeals.