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Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices
mechanisms in the licenses 1 and other authorizations it issues for hydroelectric projects, to ensure that licensees have the capability to carry out license requirements and, particularly, to maintain their projects in safe condition.
I. Background 1. Section 4e of the Federal Power Act FPA authorizes the Commission to issue licenses for the purpose of constructing, operating, and maintaining dams, water conduits, reservoirs, power houses, transmission lines, or other project works necessary or convenient . . . for the development, transmission, and utilization of power. 2 Approximately 1,600
hydroelectric projects throughout the United States are under Commission license. In issuing these hydroelectric licenses, the Commission is required to consider power and development purposes and give equal consideration to the purposes of energy conservation, the protection, mitigation of damage to, and enhancement of, fish and wildlife including related spawning grounds and habitat, the protection of recreational opportunities, and the preservation of other aspects of environmental quality. 3 Section 10a of the FPA requires that any project for which the Commission issues a license be best adapted to a comprehensive plan for improving or developing a waterway or waterways for the use or benefit of interstate or foreign commerce; for the improvement and use of waterpower development; for the adequate protection, mitigation, and enhancement of fish and wildlife; and for other beneficial public uses, including irrigation, flood control, water supply, recreation, and other purposes.4
2. Section 10c of the FPA also requires licensees to maintain the project works in a condition of repair adequate for the purposes of navigation and for the efficient operation of said works in the development and transmission of power, . . . make all necessary renewals and replacements, . . . establish and maintain adequate depreciation reserves for such purposes, . . . so maintain and operate said works as not to impair navigation, and . . .
conform to such rules and regulations as the Commission may from time to time prescribe for the protection of life, health, and property. 5
1 Use of the word license herein refers to both licenses and exemptions or licensees and exemptees, unless otherwise specified.
2 16 U.S.C. 797e.
3 Id.
4 16 U.S.C. 803a.
5 Id.

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3. In making its public interest determination under section 10a, the Commission considers a number of factors, including the economic benefits of project power. The basic purpose of the Commissions economic analysis is to provide a general estimate of the potential power benefits and the costs of a project, and reasonable alternatives to project power. As articulated in Mead Corp., project economics is one of many factors the Commission considers in determining whether or not, and under what conditions to issue a license.6
Ultimately, it is up to the applicant to decide whether to accept a license as conditioned and any financial risks that entails. However, the Mead Corp.
analysis is intended only to provide a rough estimate of the cost of project power compared to that of alternative energy sources: It is not intended to show whether and to what degree the project will have a positive cash flow over the life of the license. The Commission has explained that making predictions of long-term project economics would involve speculation as there are many variables, known and unknown.7
4. The Commission has taken steps to protect against the failure of a project sponsors financial planning. For example, to reduce the risk that a project under construction could be abandoned before completion of construction because of inadequate funds, the Commission has required the licensee to file a financing plan prior to beginning construction.8 Initially, financing plans were included in original licenses or relicenses with extensive new construction to ensure that construction could be completed; 9
however, the financing plan article has been modified to ensure funds are available for operation and maintenance 6 72 FERC 61,027, at 61,069 1995. For example, the Commission will impose reasonable conditions, regardless of their impact on project economics. See City of Tacoma, Wash., 84 FERC
61,107 1998, affd in pertinent part, City of Tacoma, Wash. v. FERC, 460 F.3d 53 D.C. Cir.
2006.
7 See Mead Corp., 72 FERC at 61,068 explaining that long-term economic analyses require many assumptions and that even under relatively stable conditions, such forecasts could never be more than a general guide.
8 See, e.g., City of Le Claire, Iowa, 74 FERC
61,127, at 61,462 1996. In requiring financing plans, the Commission has explained that it is concerned not only about potential environmental impacts associated with a partially constructed project, but also with ensuring that projects are developed in a timely and diligent manner. See, e.g., Clark Canyon Hydro, LLC, 150 FERC 61,195, at P 44 2015; see also City of Augusta, Ky., 72
FERC 61,114, at 61,594 1995.
9 E.g., Halecrest Co., 60 FERC 61,121 1992.

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in addition to construction.10
Accordingly, the Commission currently includes a financing plan article in licenses that authorize new construction.11 This article requires licensees to file a project financing plan with the Commission to show that the licensee has the necessary funds to complete project construction and to operate and maintain the project.12 This article, however, does not require a licensee to demonstrate the ability to finance unknown future obligations that may arise from environmental concerns or significant dam safety issues.
5. In rare cases, the Commission has also included a requirement to file a financial assurance plan.13 The financial assurance article requires licensees to submit a plan that identifies the costs of project facilities that would be removed, secured in-place, or otherwise modified to ensure public safety, as well as other measures needed to protect environmental resources, in the event the licensee cannot complete project construction or is unable to operate the project once construction is complete. After approval of the financial assurance plan and before beginning ground disturbing activities, the licensee must obtain a bond or equivalent financial instrument to ensure the licensee has the economic means to implement the plan. The licensee is also required to file annual reports to document that the bond or equivalent financial instrument remains in effect for the ensuing year.
6. However, the vast majority of existing licenses do not include requirements addressing whether a licensee can afford ongoing operation and maintenance expenses, required environmental or safety measures, or measures required to ensure the facility can meet future dam safety requirements.
7. Non-operational or non-compliant projects can pose public safety hazards 10 E.g., Marseilles Land and Water Co., 137 FERC
62,235, at art. 307 2011, order on rehg and clarification, 138 FERC 61,120 2012.
11 License amendments that approve construction for significant modifications to project facilities may also include financing plan requirements. See, e.g., BMB Enters., Inc., 147 FERC 62,044, at art.
206 2014.
12 E.g., Kenai Hydro, LLC, 168 FERC 61,125, at P 109 and art. 207 2019.
13 See, e.g., PacifiCorp, 144 FERC 62,239, at art.
307 2013 requiring license transferee to file financial assurance plan to demonstrate it had funds necessary to operate and maintain project.
See also Marseilles Land and Water Co., 137 FERC
62,235 at P 80 n.46 requiring financial assurance plan in addition to the financing plan for an original license, based on a reasonable possibility that the licensee could find itself in the position of having insufficient funds or project land rights to continue constructing or operating the . . . Project in the absence of a Financial Assurance Plan.

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