No. 200
Monday October 18, 1999 Page A-23
ISSN 1523-567X
Regulation, Law & Economics

Utilities Coalition Asks Congress to Streamline Relicensing Process, Citing Cost, Length

A new coalition of more than 285 organizations Oct. 13 asked Congress to reform the federal hydroelectric licensing process, saying that the current process is overly cumbersome and expensive. WaterPower: The Clean Energy Coalition asked Congress to pass the Hydropower Licensing Process Improvement Act, sponsored by Sen. Larry Craig (R-Idaho) in the Senate (S. 740), and by Rep. Edolphus Towns (D-N.Y.) in the House (H.R. 2335). The 106th Congress has taken no action on either bill to date. Under current procedures, it can take between eight years and 10 years to relicense a hydropower project at a cost of $1 million per year to the license holder, according to a WaterPower statement. In addition, after the relicensing process is completed, the generation capacity of hydropower projects may fall by as much as 8 percent due to new restrictions on the license, the coalition claimed. Furthermore, a wide variety of federal agencies is able to set standards and requirements for the licenses, "without regard to their effects on project economics, energy benefits, and values protected by other statutes or regulations," the statement said. License holders, meanwhile, have no way to appeal these requirements except through litigation. "I have had first-hand experience with the hydroelectric relicensing process and I can tell you that it is frustrating to all concerned," said Betsy Moler, former chairman of the Federal Energy Regulatory Commission, which has primary jurisdiction over nonfederal hydropower projects. Moler is the spokesperson for the coalition. The coalition is composed of hydro industry groups and non-industry allies, including hydro producers and suppliers, municipalities, businesses, and consumer, labor, recreational, and farming groups.

Legislation Needed

Without legislation to correct these shortcomings, supporters say, the lost generation capacity may not be replaced and hydropower projects may even be abandoned altogether. "Faced with the uncertainties currently plaguing the relicensing process, some existing licensees are contemplating abandonment of their projects," Craig said March 25 on the Senate floor when he introduced his bill. Federally regulated hydropower projects produce about 5 percent of the nation's power, Douglas Smith, FERC general counsel, told a House subcommittee Sept. 25, 1998. Within the next decade, projects that generate about half of that capacity will be up for renewal, Craig said.

Environmental Group Opposed

The proposed legislation "asks the wrong questions, identifies the wrong problems, and puts forward the wrong solutions," according to Andrew Fahlund, policy director for hydropower for American Rivers, an environmental group. "If their intention is to avoid environmental responsibility and their responsibility to serve the public trust, then they are doing a good job with the Craig bill," he continued. The proposed legislation would place a variety of restrictions on the federal agencies that have a role in the relicensing process, he said. "This is a very complicated process, no doubt about it. It is a multijurisdictional process because rivers are multijurisdictional," Fahlund added. Because a variety of environmental laws have been enacted since many existing projects originally were licensed, a number of federal agencies take part in relicensing, Smith told the House subcommittee in 1998. For example, the Federal Power Act authorizes the departments of Agriculture and Interior to impose mandatory conditions on projects located on federal reservations. It also authorizes the departments of Commerce and Interior to impose mandatory fishway prescriptions, so that fish are not completely blocked from traveling through the river by the dam.

Clean Water Act

The Clean Water Act, meanwhile, authorizes states to impose mandatory conditions as part of the state water quality certification program. "The Craig bill is a process reform bill in that it creates a whole bunch of additional hoops that these agencies have to jump through, and if they fail to jump through the hoops, then they lose their authority" to participate in the process, Fahlund said. Although he acknowledged that the relicensing process is long and expensive, he also noted that hydropower licenses are valid for 30 years to 50 years and that the private license holders get free use of a public resource--a river--during that time. "The hydropower industry is concerned that they are going to have to pay more money than they have in the past, and I think they will," Fahlund said. "But they have had a free ride for 50 years ... and if they want to continue to operate, they should have to mitigate the harm they do to fish and wildlife and riverine systems."

Numbers Disputed

Fahlund also disputed many of the figures cited by the coalition. For example, the coalition's claim that hydropower projects experienced an 8 percent drop in capacity following relicensing is based on a General Accounting Office report from 1993. A more recent report, with a larger sample size, shows that figure to be closer to 1 percent, he said. He also said that the time it takes to relicense a project is overstated--a claim backed up by FERC figures. Based on applications filed in 1993, when the agency received an unusually large number of relicensing requests, it took an average of 3.5 years for the relicensing procedure to be completed, according to FERC spokeswoman Celeste Miller. For projects that chose an alternative licensing procedure, that time frame dropped 7 months to 18 months. Regardless, Fahlund also questioned the scope of the problem in the larger scheme of the nation's electric supply. Since only 5 percent of the nation's electricity is derived from federally regulated hydropower projects, and half of that is up for relicensing in the next decade, only 2.5 percent of the nation's power supply would be affected by the relicensing process, he pointed out.

By David Safford

Copyright c 1999 by The Bureau of National Affairs, Inc., Washington D.C.