FERC upholds lottery for simultaneous hydropower permit applications

The Federal Energy Regulatory Commission has rejected a challenge to its unprecedented use of a drawing to pick from among three preliminary permit applications that were filed simultaneously under FERC’s electronic filing policy.

The case called into question FERC’s use of the drawing, which is not outlined in commission regulations, and FERC’s practice of accepting electronic filings overnight and stamping them all as received at the opening hour, 8:30 a.m., on the following business day.

FERC issued a preliminary permit (No. 13366) on Nov. 5, 2009, to the city of Angoon, Alaska, to study developing the 20-MW Ruth Lake hydroelectric project on Ruth Lake and Delta Creek near Petersburg, Alaska. It denied competing applications by two other municipalities, Petersburg Municipal Power & Light (No. 13364) and the city and borough of Wrangell, Alaska, (No. 13363). (Hydro Review September 2008) It also rejected an application by a non-municipality, Cascade Creek LLC, (No. 12619).

Petersburg filed for a rehearing, calling FERC arbitrary and capricious on several points, including FERC’s use of a lottery drawing to pick a winner from among the three municipal applicants. FERC denied rehearing March 18.

Three criteria to award permits

FERC regulations provide three criteria for selecting preliminary permit applicants. First, an application from a municipality receives preference over a non-municipality. The Cascade Creek application was rejected on that basis.

The second criterion provides that FERC should choose the application that is best adapted to develop the water resource. If all applications are considered equal, as in this case, then FERC uses the third criterion, naming the first application to be filed.

All three municipal applications had been filed electronically overnight Feb. 2, 2009: Petersburg at 5:03 p.m., Wrangell at 5:04 p.m., and Angoon at 5:13 p.m. However, under FERC procedure, all three were dated 8:30 a.m. Feb. 3, the following morning when FERC opened for business.

Faced with what it considered three simultaneous applications, FERC ordered a drawing to pick the winner. Angoon was picked first, followed by Petersburg and Wrangell.

In its March 18 rehearing order, FERC rejected Petersburg’s challenge to the unprecedented drawing to name a winner. Like the first-to-file tiebreaker, the drawing is not a perfect solution, FERC said, but it is impartial and transparent.

FERC also rejected Petersburg’s contention that FERC should have used the electronic filing times to establish which applicant was first to file, in this case, Petersburg by one minute. The commission said to do so would encourage a first-to-file race after 5 p.m. on the day that a previous permit expires, as in this case. FERC said applicants without the highest-speed Internet service could be disadvantaged.

FERC seeks to eliminate “game-playing”

FERC said it would continue to stamp overnight electronic filings at 8:30 a.m. the next day. However, it did modify its policy for in-person paper filings in the morning.

Previously, the first person in line at 8:30 a.m. would receive that stamp, with additional applicants receiving later stamps. FERC said hereafter all persons waiting in line when the dockets office opens will receive an 8:30 a.m. stamp.

FERC said that would eliminate “what has in some cases been the unfortunate and unseemly consequence of people waiting overnight in line in an effort to be first. Generally, the method described above should eliminate game-playing with regard to filing hydroelectric applications.”

Permit-holder diligence to be enforced

The commission did acknowledge that increased interest in new hydro sites could spur more such competitions. For that reason, FERC said it would be more vigilant to ensure that permit holders are actually studying their sites and not merely “site banking” for possible future development. For that reason, FERC said it would require Angoon to file progress reports every six months to ensure progress, with a threat of cancellation if Angoon is not diligent.

In a concurring opinion, Commissioner Philip Moeller elaborated on that point. He noted the previous permit holder for Ruth Lake made no significant progress in six years, preventing others from developing the site.

“While we wish to give interested permit holders adequate time to study and consider sites for potential hydropower development, the commission should not allow time to elapse unnecessarily when there are multiple interested parties and intense competition for development of a site,” Moeller said.

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