On December 3, 2019, FERC issued an order in response to South Carolina Public Service Authority’s (“SCPSA”) October 8, 2019 request for a determination under section 36(c) of the Federal Power Act (“FPA”) that certain project investments made over the term of the existing license for the Santee Cooper Project meet the criteria set forth in FPA section 36(b)(2), and therefore should be considered when the Commission establishes the length of the next license term for the Project. The Commission’s December 3 order held that most of the prior investments identified in SCPSA’s request—approximately $90 million—met the statutory criteria and will be considered when the Commission sets the new license term in its future order on relicensing.
By way of background, Congress in late 2018 passed the America’s Water Infrastructure Act of 2018 which, among other things, adds a new section 36 to the FPA (see October 16, 2018 edition of the WER). Section 36(b) provides that the Commission, when establishing the term of a new license, “shall give equal weight to:”
(1) investments by the licensee to implement the new license under this subchapter, including investments relating to 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 required or authorized by the new license; and
(2) investments by the licensee over the term of the existing license (including any terms under annual licenses) that—
(A) resulted in 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; and
(B) were not expressly considered by the Commission as contributing to the length of the existing license term in any order establishing or extending the existing license term.
In addition to requiring the Commission to consider these investments made over the course of the existing license term, FPA section 36 provides an opportunity for hydropower licensees to obtain a Commission determination at any time as to whether a certain project investment meets these criteria under section 36(b), and therefore to be considered when the Commission establishes the new license term length upon relicensing. Section 36(c) provides:
At the request of the licensee, the Commission shall make a determination as to whether any planned, ongoing, or completed investment meets the criteria under subsection (b)(2). Any determination under this subsection shall be issued within 60 days following receipt of the licensee’s request.
Taking advantage of this new statutory program, SCSPA’s October 8 request identified 11 major investments made during the Project’s license term, dating back to the mid-1980s, and ranging from seismic upgrades and other dam safety upgrades, to replacement of turbine-generator units. The request documented these investments and explained how each met one or more of the criteria set forth in FPA section 36(b).
FERC’s December 3 order found that most met the section 36(b) criteria and will be considered when the Commission sets the new license term in its relicensing order. In some instances, the Commission determined that the investment “appears to meet” the section 36(b) criteria, but suggested that SCPSA may elect to “provide additional information to clarify aspects of the investment, if any, that enhanced the project beyond repairs and replacements necessary to ensure continued operation of the project.” Thus, the Commission’s December 3 order suggests that ordinary operation and maintenance investments do not meet the section 36(b) criteria.
The Commission’s Order is the second in which it made a determination under the newly-enacted section 36(b) of the FPA. The first was its August 9, 2019 Order finding that certain investments made by Public Utility District No. 1 of Chelan County, Washington—totaling approximately $600 million and including rehabilitation of powerhouses and improvement of the spillway—met the criteria of section 36(b).
A copy of FERC’s order is available here.