FERC slashes $96 million from agencies’ annual charges billing

The Federal Energy Regulatory Commission has declared other federal agencies failed to clearly document 86 percent of their costs for participating in FERC’s hydro licensing process, prompting FERC to reduce their annual charges billings by $96 million.

In a June 28 notice, FERC said the other federal agencies properly documented only $16 million of their $112 million in total reported costs for FERC proceedings in fiscal years 1998-2004. As a result, the commission said it would adjust downward the annual charges bills sent to hydropower licensees.

FERC said its review of agency costs found instances in which:
o supporting documentation or analysis was not provided;
o documentation failed to distinguish between costs related to municipal and non-municipal hydro license applicants;
o estimated labor costs lacked an explanation of the validity or basis of those estimates; and
o limited documentation was provided but not tied to a viable accounting or financial system.

Annual charges reimburse government for licensing costs

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 is required to bill hydro licensees to cover FERC’s costs, plus the costs of other federal agencies that participate in the hydro licensing process.

Agency charges are not assessed on the basis of actual costs for licensing a specific project. Instead, the agencies’ estimated total costs for all activities related to hydropower licensing are divided up among all licensees. First, costs are separated into proceedings involving municipal and non-municipal projects. Costs are billed to municipal licensees based on installed capacity. Non-municipal licensees are billed based on capacity and a generation component.

FERC must determine reasonableness of other agencies’ costs

Prompted by hydro licensee appeals, a 2003 court order required FERC to determine the reasonableness of costs incurred by other federal agencies, rather than simply passing the charges through to project owners for reimbursement. As a result, FERC reviewed forms and supporting documentation submitted by the departments of Interior, Agriculture, and Commerce for fiscal years 1998-2004.

Licensees already have been billed and have paid annual charges for fiscal years 1998-2001. However, some of those licensees paid under protest and appealed, making them eligible for a credit for overpayments.

FERC issued related annual charge assessments for fiscal years 1998-2004 in the week of July 17. Based on its review, FERC said it is reducing the cost bases used to calculate the previous annual charges assessments and applying a credit to the fiscal year 2002-2004 assessments of licensees with pending appeals.

That credit is based on the proportion of total unsupported costs to total costs previously assessed in fiscal years 1998-2001.

Licensees who did not appeal will not receive adjustments of previous bills. However, FERC had postponed billing licensees for fiscal years 2002, 2003, and 2004. As a result, savings from FERC’s review will be extended to all licensees for the years for which bills were not yet issued.

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