FERC denies latest challenge of relicensing 49.8-MW School Street

In its latest rebuff of a tardy competitor for a Mohawk River hydropower site, the Federal Energy Regulatory Commission has denied rehearing of its second order to relicense Erie Boulevard Hydropower L.P.’s 49.8-MW School Street hydroelectric project in New York.

FERC reaffirmed March 17 that competing developer Green Island Power Authority does not have standing to propose development of the competing 100-MW Cohoes Falls project at the School Street site. Even if Green Island did have standing, FERC reiterated, its cost estimates are unrealistic, making Cohoes Falls not a feasible alternative to School Street.

“Green Island has presented us with numerous, often contradictory arguments in support of its quest to obtain the School Street site,” FERC’s order denying rehearing said. “While Green Island has, on occasion, described its intent as simply to present an alternative for commission consideration, it is clear that Green Island seeks nothing less than a license for the Cohoes Falls Project, a project that is an untimely competitor pursuant to the relicensing provisions of the FPA (Federal Power Act).

“As we have seen, Green Island failed to timely intervene in the School Street proceeding, and nothing in the course of that proceeding required us to offer an additional opportunity to intervene. Moreover, Green Island’s Cohoes Falls Project fails on economic grounds to provide a reasonable alternative to the School Street Project. We therefore affirm our prior holdings and deny Green Island’s request for rehearing.”

Federal court had ordered reconsideration of challenge

Under orders from a federal appeals court, FERC reconsidered in April 2010, and again rejected, Green Island’s rival licensing proposal, instead reinstating the School Street relicense (No. 2539). The latest order was a denial of Green Island’s request for reconsideration.

FERC issued a 40-year relicense in 2007 to Erie Boulevard Hydropower for the upgrade and continued operation of School Street, which diverts water from the Mohawk River upstream of Cohoes Falls, bypassing 4,500 feet of riverbed, including the falls, New York’s second tallest.

In relicensing the project, FERC rejected several attempts by Green Island to propose the competing 100-MW Cohoes Falls project in lieu of renewing School Street. FERC rejected a preliminary permit application by Green Island (No. 12522), noting the Cohoes Falls project only could be developed if School Street — which has generated power since 1916 — were decommissioned and removed. FERC rejected a 2004 motion by Green Island to intervene, finding the motion was filed 13 years late in the proceeding, which began in 1991.

Responding to Green Island’s appeal of the original relicense order, the 2nd U.S. Circuit Court of Appeals had said FERC erred by failing to consider a new intervention by Green Island when FERC allowed Erie Boulevard to modify its relicense proposal based on terms of a settlement agreement. The appeals court remanded the case to FERC to consider first whether the settlement agreement was a “material amendment” to the proposed project and, if so, to consider whether Green Island’s motion to intervene is proper and, if so, to consider the Cohoes Falls project proposal.

FERC: Changes must result in “a different project”

Under the court’s mandate to reconsider, FERC declared the changes made by the settlement agreement did not constitute a material amendment because they did not materially alter physical structures of the project or materially alter the project’s flow regime. On rehearing FERC emphasized that changes must be “fundamental and significant” so as to constitute “a different project.”

Because there was no material amendment to the project, FERC said it was not obligated to let Green Island intervene. Nevertheless, the commission decided to examine the Green Island proposal under its obligation to ensure that the project FERC licenses is “best adapted” to develop the site. At that point, FERC declared the Cohoes Falls project — which would include demolition of School Street’s dam and powerhouse and construction of all-new weir, intake, powerhouse, tunnels, and transmission lines — is economically infeasible.
FERC found that Green Island’s estimated cost of $923 per kW to develop Cohoes Falls is extremely low compared to Idaho National Laboratory’s median cost of $3,700 per kW to develop new capacity at an undeveloped site, as well as Erie’s estimated cost of $2,250 per kW to develop the additional capacity at the School Street project.

FERC said Green Island estimated the total cost to build Cohoes Falls would be $75 million. However, FERC said the developer failed to include $1 million to acquire New York land and water rights, $1.8 million to decommission School Street, and payment to Erie to acquire School Street, a net investment estimated at $7.9 million. Adding those amounts and updating the cost to 2010 dollars, FERC put Green Island’s estimate at $92.2 million.

However, FERC said Idaho National Laboratory’s median cost for such a project would be about $370 million in 2010 dollars. On rehearing FERC rejected Green Island’s contention that its figures were more accurate.

FERC opts for “unbiased” cost estimates

“It would not be appropriate to use cost estimates that might be unreasonably low or unrealistic to give the appearance that the proposed project would be financially feasible,” the commission said. “… Therefore, our use of the impartial and unbiased Idaho National Laboratory report was appropriate for that purpose.”

FERC rejected Green Island’s argument that FERC’s cost comparisons were arbitrary and capricious.

“Cost effectiveness is an important element of this determination,” the commission said. “In our view, it would be arbitrary and capricious here to require decommissioning of an existing project in favor of a new alternative that would likely produce power at a cost that is much higher than both the existing project and the likely cost of alternative power.”

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