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Energy
Advisory Bulletin
FERC
Responds Positively to Chelan P.U.D. Rehearing Request on Cost Cap
and Project Boundary Issues
By
Daniel
M. Adamson, Brian
Gish and Lisa
B. Zycherman
On April 19,
2007, the Federal Energy Regulatory Commission (FERC) granted rehearing
in part to the Public Utility District No. 1 of Chelan County, Washington
(“District”) of the Nov. 6, 2006 Commission staff order
issuing a new license for the 48-megawatt Lake Chelan Hydroelectric
Project (“Project”). The rehearing order includes improvements
in the Commission’s treatment of license article cost-caps
arrived at as part of negotiated relicensing settlements. The cost-cap
issue has been a major issue for licensees who have negotiated cost-caps
on certain obligations with agencies and stakeholders which have
then been overridden by the Commission.
In the rehearing
order, the Commission affirmed its authority to “add provisions
that are supplemental to, or more stringent than, the mandatory
conditions,” to ensure that cost capping provisions for funding
conditions do not render implementation of a needed measure “incomplete.”
However, FERC agreed with the District’s argument that any
exercise of FERC’s authority to require a licensee to surpass
cost caps must be subject to notice and opportunity for hearing.
Accordingly, FERC modified Article 402 of the District’s new
license to explicitly include notice and opportunity for hearing
for any changes to funding levels for specific measures. This change
will provide the District a valuable tool for preserving the benefits
of the cost caps it negotiated as part of its relicensing settlement.
In addition, FERC agreed with the District that when a settlement cost cap is included in a mandatory license condition that FERC determines is not in the public interest under Section 10(a)(1) of the Federal Power Act (FPA), the reservation of authority in Article 402 does not apply to those cost caps. The District had argued that if the Commission believed a license measure was not in the public interest there was no reason for the Commission to reserve its authority to require a licensee to spend more on such a measure. FERC agreed. In the case of the Lake Chelan Project new license, this is a significant change because the Commission held that a number of the license articles included as mandatory FPA Section 4(e) were not in the public interest under Section 10(a)(1). Consequently, the spending limits in these articles are now “hard caps.”
FERC’s
Order also addressed several Project lands issues raised by the
District. With respect to wildlife habitat lands, FERC denied rehearing
on the District’s request that Article 406 of the new license
be revised to delete a provision for bringing lands requiring ongoing
maintenance to ensure the success of wildlife habitat measures into
the Project boundary. The Commission stated that it retained the
authority to bring such lands within the Project boundary, even
if the lands at issue are not “contiguous with the project
or are located some distance from the project.” However, the
FERC clarified that it “generally do[es] not require lands
on which one-time measures are implemented to be included within
project boundaries.”
Finally, FERC
affirmed the conclusion in the original license order that, given
the value of whitewater resources associated with the Project, a
three-year whitewater conditions monitoring study in an extremely
hazardous river reach may not be indefinitely delayed while the
District seeks to resolve liability concerns. Consistent with its
relicensing settlement agreement the District had sought to delay
the whitewater releases and monitoring study until it had obtained
liability insurance or until an applicable state statute had been
amended to include an extension of immunity protections for recreational
whitewater releases.
For
more information, please contact:
This
advisory is a publication of the Energy Department of Davis Wright
Tremaine LLP. Our purpose in publishing this advisory is to inform
our clients and friends of recent developments in energy law. It
is not intended, nor should it be used, as a substitute for specific
legal advice as legal counsel may only be given in response to inquiries
regarding particular situations. Attorney Advertising. Prior results
do not guarantee a similar outcome. Thank you.
Copyright
© 2007, Davis Wright Tremaine LLP.
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