The Center of the Action: The Federal Energy Regulatory Commission

FERC's origin and traditional attitudes toward hydro development • the scope of FERC's jurisdiction • FERC's organization • the quasi-judicial character of FERC • PURPA—the Public Utility Regulatory Policies Act

CITIZENS ARE COMMONLY SURPRISED to learn that the fate of their favorite stream may be decided by a little-known agency in Washington, D.C., named the Federal Energy Regulatory Commission—more commonly called FERC or the Commission. Under federal law, the Commission has primary authority to decide whether a proposed hydroelectric project may be built, and on what terms. Various federal and state agencies also play important roles in regulating hydroelectric development, but the Federal Energy Regulatory Commission is at the center of the action.

This chapter provides an overview of the Commission's place in the hydroelectric regulatory process and of its jurisdiction and methods of operation.

THE HISTORY OF HYDROPOWER REGULATION

The Commission, originally known as the Federal Power Commission, was established by the Federal Water Power Act of 1920, renamed the Federal Power Act in 1935. In the early part of this century, Congress became frustrated with the division of authority over hydroelectric development among different agencies and enacted the Federal Water Power Act. Its primary purpose was to reduce administrative confusion by centralizing the planning and regulation of hydroelectric power in a single agency.

Congress's move to streamline the administrative process in 1920 was, in part, to encourage development of river resources for more power. In 1920, hydropower was generally viewed as a boon to economic development, and free-flowing rivers were considered just one more element of the limitless bounty of nature. Today, nearly 70 years later, the public has a more balanced view of hydropower development, and a greater appreciation of the value of free-flowing rivers.

Over the last several decades, in response to these new attitudes, the concentration of authority in the Commission has been steadily eroded, and there has been a corresponding increase in the authority of other federal and state agencies. As a result of the 1972 amendments to the Clean Water Act, the states and the U.S. Army Corps of Engineers now have independent authority to decide whether or not to permit the construction of nonfederal hydroelectric projects. Similarly, the authority of the federal land management agencies to regulate nonfederal hydroelectric development on their lands has, arguably, been strengthened by other reforms to federal laws. (See chapter 7 for a detailed discussion of these laws.)

More recently, Congress enacted the Electric Consumers Protection Act of 1986 (ECPA), adopting important amendments to the Federal Power Act. ECPA strengthens the authority of federal and state fish and wildlife agencies over hydroelectric development. ECPA also directs the Commission to give "equal consideration" to power generation and the recreational and ecological values of free-flowing streams in making its decisions. ECPA requires the Commission, for the first time, to consider whether proposed developments are consistent with state scenic rivers programs and other state or federal river plans.

Despite these important legislative reforms, the Commission has responded slowly to its evolving mandate; the original goal of facilitating hydroelectric development through centralized regulatory control remains entrenched in the thinking at FERC. An understanding of the Commission's institutional bias for promoting hydropower is essential if an effective strategy for dealing with a hydropower proposal is to be developed. The Commission can be convinced, and forced through court action if necessary, to do well by the environment. But citizens may be disappointed if they rely on the goodwill of the Commission to protect the best local boating or fishing stream from inappropriate hydroelectric development.

Though FERC remains at the center of the action, the increasing involvement of other federal and state agencies in the regulatory process means that you should not overlook the possibility of achieving your objectives through these other agencies. Frequently, state and federal resource management agencies are more sympathetic to environmental concerns than is the Commission because these agencies are specifically charged with protecting the resources. Sometimes these agencies have the authority to stop projects, or at least to ensure that adverse environmental effects are mitigated.

THE SCOPE OF FERC'S JURISDICTION

The jurisdiction of the Commission over hydroelectric development was created by the Federal Power Act. In practice, however, the Commission has jurisdiction over the overwhelming majority of nonfederal hydroelectric projects built or proposed in the United States. Thus, most citizens concerned with particular projects will not be affected by the issue of Commission jurisdiction. Nevertheless, for those interested, it is summarized here. The Commission has mandatory jurisdiction over any proposed or existing hydroelectric project

• if it occupies federal public lands or federal reservations, including Forest Service lands, Bureau of Land Management lands, and Indian reservations

• if it is located on a navigable stream, including, for example, any river historically used to transport logs

• if it uses "surplus" water or water power from a federal government dam, such as a dam constructed by the U.S. Army Corps of Engineers or the Bureau of Reclamation

• if it was constructed after 26 August, 1935 and is "located on a non-navigable stream subject to Congress' jurisdiction under the Commerce Clause [or that] affect[s] the interests of interstate or foreign commerce," including any project that feeds power into an interstate power grid

As discussed above, Commission jurisdiction is confined to hydroelectric developments sponsored by nonfederal entities. These include private developers, stockholder-owned utilities, and state or local entities, such as public utility districts. The Commission does not regulate hydroelectric developments sponsored by federal agencies, such as the U.S. Army Corps of Engineers or the Bureau of Reclamation. The Commission does not have authority over river development for purposes other than hydropower.

The issue of Commission jurisdiction is important if you are interested in one of the scores of existing projects around the country that should have a Commission license but does not. As the Commission's jurisdiction has expanded over the years, some dam owners, either deliberately or by oversight, have not come forward and applied for Commission licenses. If you are interested in correcting environmental problems at an unlicensed dam, an appropriate first step might be to encourage the Commission to make it a priority to determine if it has jurisdiction over the project. A subsequent licensing process will provide an opportunity to impose new conditions on the project, to correct environmental problems.

American Rivers and other conservation groups have used this approach with good results as part of an effort to restore Atlantic salmon runs to the Saco River in Maine and New Hampshire. The Swan Falls Dam, near the New Hampshire border, was subject to Commission jurisdiction but had never been licensed. The dam had neither upstream nor downstream fish passage facilities and, in the absence of a Commission licensing proceeding, it would have been difficult to get these facilities installed. The conservation groups wrote to the chairman of the Commission, urging her to make the licensing of Swan Falls Dam a high priority. The Commission granted the request and has now commenced formal proceedings to bring the Swan Falls Dam under license.

FERC'S ORGANIZATION

The Commission is a five-member regulatory body housed, for administrative purposes, within the U.S. Department of Energy. The Commissioners are appointed by the president with the advice and consent of the Senate. The president has responsibility for designating one of the Commissioners as the chairman of the Commission.

In addition to exercising regulatory authority over nonfederal hydroelectric development, the Commission also regulates interstate sales of natural gas and electric power. Indeed, the Commission's other regulatory responsibilities overshadow its hydroelectric work load. This, too, helps to explain the Commission's traditional lack of attention to the environmental consequences of hydroelectric development.

The Commission typically meets once or twice a month at its headquarters in Washington, D.C. While its meetings are generally open, there is rarely an opportunity for members of the public to address the Commission. Most matters that come before the Commission, such as deciding whether or not to issue a license for a hydroelectric project, are acted on without discussion.

Much of the actual work and decision making are carried out by the staff of the Commission. Most of the staff working on hydropower issues are assigned to the Office of Hydropower Licensing. The office has three basic divisions: (1) the Division of Project Review, which reviews project applications; (2) the Division of Project Compliance and Administration, which enforces the terms and conditions of Commission orders and works to bring existing unlicensed projects under Commission jurisdiction; and (3) the Division of Dam Safety and Inspections, which administers the Commission's dam safety program. (See the organizational chart below.) Other Commission staff working on hydropower projects include a number of lawyers, in FERC's Office of General Counsel, who are assigned to hydroelectric issues, and several individuals who serve on the personal staffs of the chairman and the other Commissioners. The Commission also has five regional offices. (See Appendix A for FERC's addresses and telephone numbers.)

The processing of each proposed hydroelectric project usually is overseen by a project manager. This is the key person to get to know at the Commission. The project manager should be able to tell you the status of the hydroelectric application and to resolve any questions you may have. (See chapter 5 for a discussion of the Commission's ex parte rules.)

The Commission has delegated broad decision-making authority with respect to hydroelectric development to the director of the Office of Hydropower Licensing. For example, the director is authorized to act on license, exemption, and preliminary permit applications in every case where there is no formal opposition to the application. (The Commission has, however, reserved the right of applicants and intervenors to appeal the director's decisions to the Commission.) Other examples of delegated authority are laid out in the Commission's regulations.

The Commission also has a permanent cadre of administrative law judges. These judges are available to conduct trial-type proceedings to resolve disputed factual issues. Any party to a hydroelectric proceeding is entitled to an adjudicatory hearing before an administrative law judge if the record contains conflicting evidence on material factual issues and if the party has made a timely request for a hearing.

THE COURTLIKE CHARACTER OF FERC

In dealing with FERC, keep in mind that the Commission views itself as a quasi-judicial, or courtlike, body Based both on its legislative mandates and on its institutional history, the Commission's central mission is to decide specific cases—whether or not to permit the construction of a proposed project, or what new terms to impose on a project at the time of relicensing. In this respect, FERC is very different from management agencies, such as the Forest Service, or enforcement agencies, such as the Environmental Protection Agency.

Several things follow from the Commission's courtlike character. First, the basic work of the Commission and the staff is to call balls and strikes—to resolve specific cases based on the evidence that applicants, intervenors, and others present. The Commission is not organized to affirmatively seek out potential environmental issues or public concerns not already brought to light. It relies on applicants, federal and state agencies, Indian tribes, and the public to carry the burden of bringing issues forward to the Commission. As a result, the Commission pays little attention to comments submitted by the public not supported by solid factual information and strong legal logic.

Second, very formal rules govern public participation in the Commission's decision-making process. Most federal agencies provide a variety of relatively informal means for citizens to provide oral and written comments on proposed agency action. By contrast, the Commission will not seriously consider the views of any citizen who has not become an official party—almost like a litigant in court—to a Commission proceeding. This means that a letter protesting the project is unlikely to have much influence on the Commission's decision. Although the Commission will accept such a letter of comment, you will be a party to the proceeding only if you file a motion to intervene.

Furthermore, like a court, the Commission enforces strict procedural rules. For example, if a citizen fails to file a motion to intervene by the official deadline (see chapter 5), he or she must file a separate motion for leave to file a late intervention motion, which the Commission might well deny. The Commission has been known to reject motions to intervene when the moving citizens failed to include a certificate of service or adequately describe their interest in a proceeding.

On the other hand, the Commission has granted some motions for late intervention when there were only weak justifications for not having met the original filing deadline. The lesson is that the Commission acts on each petition on a case-by-case basis, and it may well be worth filing even if you are late.

A WORD ABOUT PURPA

The Public Utility Regulatory Policies Act (PURPA), enacted in 1978, has been the single most important force driving the hydropower gold rush of the 1980s.7 PURPA created the opportunity for independent power producers—as distinguished from public and private utilities obligated to serve retail power customers—to enter the business of developing hydroelectric projects (as well as certain other types of energy projects). The details of how PURPA works are beyond the scope of this handbook, but a thumbnail sketch of PURPA will be useful in understanding the regulatory forces driving hydroelectric development. Also, as a result of the enactment of ECPA, some unique environmental requirements now apply to projects developed under PURPA (see chapter 3).

Congress enacted PURPA in 1978 in response to prevalent concerns about the adequacy and security of the nation's energy supplies. In order to reduce the country's dependence on fossil fuel, and on imported oil in particular, Congress sought to encourage the construction of a variety of "small" power facilities by independent power producers. (Congress defined small power facilities as those having a capacity of less than 80 megawatts, which in the case of hydro projects is actually quite large indeed.) To achieve this objective, Congress provided various incentives for independent power producers, including the guaranteed right to sell to utilities the power they produce.