On October 21, the Federal Energy Regulatory Commission (Commission or FERC) issued an Order to Show Cause and Notice of Proposed Penalty to Ampersand Cranberry Lake Hydro, LLC (Ampersand).

The license for the Cranberry Lake Project, which is located on the Oswegatchie River in St. Lawrence County, New York, was originally issued to Trafalgar Power in 1987 but was transferred to Ampersand in 2015. The dam is owned by the Oswegatchie River-Cranberry Reservoir Regulating District Corporation (OR-CRRDC), a municipal corporation of the state of New York.  Ampersand previously maintained the dam and operated the hydroelectric project pursuant to a lease agreement with OR-CRRDC.

As part of Ampersand’s application to receive the transferred license, it committed to complete certain dam safety repairs involving the Project’s fuse plug in the dam’s embankment and to raise the height of the earthen embankment crest.  The fuse plug is designed to fail during very high flows to increase the Project’s discharge capacity.  Ampersand originally committed to complete the safety repair work in 2017 but failed to do so and instead filed a series of extension requests with Commission staff.  In January 2019, OR-CRRDC filed a complaint in New York State court alleging that Ampersand had failed to pay rent, water tax, and interest as required by the lease agreement, and sought damages of $16,471.68 or, in the alternative, an order evicting Ampersand from the leased property.

Throughout 2020, OR-CRRDC pursued termination of Ampersand’s lease and an order directing it to vacate the Project premises, while Ampersand continued to request extensions of time from Commission staff to complete the fuse plug repair work.  In December 2020, Ampersand submitted the required design drawings to Commission staff but noted that “recent discussions with counsel of the [OR-CRRDC] confirmed the likelihood that the ongoing lawsuit will be resolved with a termination of the lease and the obligation of Ampersand Cranberry Lake to vacate the property.”  In response, Commission staff issued a letter noting that “should the project lease be terminated and/or if you are unable to complete the fuse plug spillway modifications due to the on-going lease dispute, you would be in violation of Article 5 and subject to appropriate compliance actions.”

In July 2021, Ampersand and OR-CRRDC executed a settlement resolving the state litigation, which required Ampersand to terminate its lease and vacate the Project premises.  Ampersand did not complete the fuse plug repair work prior to termination of its lease.

The Commission’s October order found that, as a result of OR-CRRDC’s termination of Ampersand’s lease for the Project facilities, Ampersand was in violation of Article 5 of the Project license for failure to retain possession of all project property.  The Commission’s order found that Ampersand had been out of compliance for a total of 88 days, and that the maximum civil penalty was $23,607 per day, or $2,077,416.  The Commission’s order proposed a civil penalty of $600,000 pursuant to section 31 of the Federal Power Act and noted that, pursuant to that section, Ampersand had the option to choose between either an administrative hearing before an Administrative Law Judge prior to the assessment of a penalty or a prompt penalty assessment.  If Ampersand elects a prompt penalty assessment, such penalty must be paid within 60 days of the assessment.

The Commission’s order directed Ampersand to file, within 30 days, an answer showing cause why it should not be found to have violated Article 5 of the Project license and why the violation of Article 5 should not warrant an order assessing a civil penalty of $600,000.

Commissioner Danly issued a separate concurrence to underscore “how critical it is for the Commission to ensure that licensees have the financial wherewithal (and incentive) to physically maintain their facilities.”  He noted the Commission’s January 2021 Notice of Inquiry on financial assurance requirements and provided that, “when we move forward from the Notice of Inquiry, we will convene one or more technical conferences to offer more structured fora in which to explore these questions.”  The Commission’s order is available here.