On August 9, 2019, the Federal Energy Regulatory Commission (“FERC”) ruled that hundreds of millions of dollars of ongoing and future investments by Chelan County Public Utility District (“Chelan PUD”) in the Rock Island Hydroelectric Project qualified as early-action investments under the new section 36(c) of the Federal Power Act (“FPA”).  Accordingly, FERC will consider these significant investments when the Rock Island Project undergoes relicensing of its FERC license prior to the 2028 expiration of the license.

FERC’s August 9 order provides a strong framework for other FERC hydropower licensees to obtain longer license terms during relicensing, through an application for early-action investment determination under FPA section 36(c).

Section 36 of the FPA, recently enacted by Congress as part of the America’s Water Infrastructure Act of 2018, directs FERC—when establishing the length of license terms during relicensing—to consider a broad array of investments that a licensee made during the existing license term.  These include: redevelopment, new construction, new capacity, efficiency, modernization, rehabilitation or replacement of major equipment, safety improvements, or environmental, recreation, or other protection, mitigation, or enhancement measures conducted over the term of the existing license.  For investments that meet one or more of these categories, the only requirement imposed by the new section 36 is that the investment must not have been considered by the Commission as contributing to the length of the existing license term in a prior Commission order.

Historically, FERC declined to consider early-action investments when establishing the new license term in relicensing.  While FERC’s 2017 Policy Statement on Establishing License Terms for Hydroelectric Projects made strides to change this practice, the new section 36 greatly expands the Policy Statement by requiring FERC to consider licensees’ early-action investments more comprehensively.

On June 10, 2019, Chelan PUD filed the first-ever request under section 36(c), seeking a determination from FERC that certain investments would contribute to the length of its new license as early-action investments.  Specifically, Chelan PUD sought confirmation that FERC would consider the following types of early-action investments:

  • Rehabilitation and modernization of powerhouse turbine and generator equipment;
  • A new office, warehouse, and storage facilities;
  • Replacement of dam safety equipment at the Rock Island Project spillway; and
  • Implementation of Chelan PUD’s Endangered Species Act habitat conservation plan (“HCP”) for various salmonid species (e. Chinook salmon, sockeye salmon, coho salmonid, and steelhead).

In its August 9 order, FERC determined that Chelan PUD’s rehabilitation of powerhouse turbine and generator equipment, as well as replacement of dam safety equipment, meet the requirements of FPA section 36 and, therefore, will be considered when FERC establishes the length of the new license term during relicensing.  With regard to the environmental measures under the HCP, FERC concluded that these “appear” to meet the Section 36 criteria for environmental improvements, as they “assist in the recovery, protection, and habitat enhancement of Columbia River salmonids,” but invited Chelan PUD to submit additional information to ensure that such requirements were not considered by the Commission when it last relicensed the project in 1989.  Finally, with regard to the new office, warehouse and storage facilities, FERC concluded that it could not determine whether investment in these new facilities would quality as “project-related” investments under the criteria of FPA section 36.  However, FERC invited Chelan PUD to submit additional information to assist its determination as to whether these facilities meet the new statutory criteria.

A copy of FERC’s order is available here.