NHA opposes FERC plan for earlier start of hydro license annual charges

The National Hydropower Association has urged the Federal Energy Regulatory Commission to abandon proposed new rules that would change the start date for assessment of annual charges on private hydropower licensees to two years from the date of license issuance.

“NHA believes the NOPR (Notice of Proposed Rulemaking) would significantly impact the hydropower industry resulting in fewer hydropower projects being built,” NHA said July 21 in comments opposing the NOPR. “… Further, at a time when Congress and the administration have acted to incentivize the development of new hydropower, NHA believes the NOPR would frustrate the intent of these policies.”

Recipients of special benefits from federal activities — such as hydropower licenses — must pay user annual charges to cover the government’s costs of providing those benefits. FERC bills licensees to cover its own costs, plus the costs of other federal agencies that participate in licensing under the Federal Power Act.

Current rules provide that private hydropower licensees must begin paying annual charges upon commencement of project construction, while licensees or exemptees that are state or municipal governments are assessed annual charges when project operation commences.

In a notice of proposed rulemaking (RM15-18) issued May 14, FERC noted that private licensees now are required to notify FERC when project construction starts for the purpose of assessing annual charges. The annual charges assessment date therefore is uncertain, based on the licensee’s ability to begin construction, or upon occasion, to request an extension in the two-year construction start deadline.

Saying the change would provide “administrative efficiency,” the proposed rulemaking would simply require assessment of annual charges two years from the effective date of the license order, exemption, or amendment authorizing additional capacity. Based on previous experience, FERC estimated an average of 5.2 licensees or exemptees per year would begin paying annual charges before starting construction.

NHA argued that FERC’s 1995 Order 576 correctly established assessment of annual charges upon commencement of construction. It quoted Order 576 saying, “…if a few years of pre-construction relief from annual charges enables one or more licensees of new projects to bring their projects to fruition, these new projects will help share the existing licensees’ burden (to pay total annual charges) … it also marks the point in time in which funding is available from construction loans.”

“Therefore, projects experiencing difficulties that would require ‘pre-construction relief’ are precisely the types of projects that the commission had in mind when issuing Order 576 and adopting the current practice of assessing annual charges upon the commencement of construction,” NHA said. “By shielding projects from annual charges during the pre-construction phase in order to ‘bring them to fruition,’ Order 576 acknowledged that the assessment of annual charges too early in the lifecycle of a project can be an impediment to project completion.”

In response to FERC’s assessment that only about five projects a year would be affected by the change, NHA noted FERC only issues about 10 licenses, exemptions or amendments per year.

“Therefore, approximately half of all applicants going through the licensing, exemption, or amendment processes will be negatively affected by the NOPR,” NHA said.

Although it urged FERC to reject the proposed rules, it said if FERC must change the annual charges date for non-municipal licensees, then it should make the date conform to that imposed on projects owned by municipalities, at the commencement of project operation.

The notice of proposed rulemaking may be obtained from the FERC Internet site under http://www.ferc.gov/whats-new/comm-meet/2015/051415/H-3.pdf.

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