Licensee group appeals FERC's 2012 annual charges bills

A group of 10 licensees operating 46 hydro projects has appealed the Federal Energy Regulatory Commission's issuance of 2012 annual charges bills contending $2.35 million in costs submitted by two federal agencies are inaccurate or unsubstantiated.

Recipients of special benefits from federal activities -- such as hydropower licenses -- must pay user annual charges to cover the government's costs of providing those benefits. FERC bills licensees to cover its own costs, plus the costs of other federal agencies that participate in licensing.

FERC is required to determine the reasonableness of costs incurred by the other agencies. It requires other federal agencies to submit their costs on a specific form by Dec. 31 of each year. It then allows licensees to review and comment on costs, holds a technical conference, and then issues bills that divide the total costs among all licensees.

The appeal, led by the city of Idaho Falls, Idaho, challenges $1.91 million in costs submitted by the National Marine Fisheries Service and $443,000 submitted by the Fish and Wildlife Service.

Licensees: NMFS filing late, unsupported, erroneous

Filed Sept. 17 by Washington law firm Van Ness Feldman, the appeal is mostly critical of the NMFS submission, which was filed Jan. 11, two weeks after the FERC deadline, and made available to licensees Jan. 27.

"NMFS' summary information, however, did not meet the commission's requirement for 'detailed cost accounting reports or cost allocation analyses which support each cost category listed on the form,'" the licensees said. "In stark contrast to the itemized and voluminous cost reports submitted by the other larger OFAs (other federal agencies), NMFS' filing consisted only of 17 pages of annual total cost summaries from each of NMFS' various regional and other offices."

The licensees also complained that, contrary to commission requirements, NMFS provided no explanation of the cost codes for reporting the annual total costs, such as whether cost codes were established exclusively for capturing Federal Power Act Part I hydro administration costs, whether costs are segregated between municipal and non-municipal licensees, and whether NMFS personnel accurately used the codes.

Although FERC ordered NMFS to provide additional supporting information, the licensees said NMFS provided only a one-page response with no further explanation. On March 22, the day of the technical conference and too late for licensee review, a more detailed NMFS report was made available that still failed to meet FERC requirements, the licensees said.

"Licensees pointed out that NMFS' cost report -- as in every prior year -- is replete with errors, as it included in its reports costs incurred in non-FPA Part I activities (such as costs associated with federal hydropower projects, gas pipelines, and liquid natural gas facilities) and mistakenly reported non-municipal project costs as municipal project expenses and vice versa," the licensees said.

The licensees noted that, until 2012, FERC had never accepted a substantial portion of NMFS costs -- due to erroneous reporting and failure to meet FERC reporting standards established in 2004.

Fish and Wildlife mixes municipal, non-municipal project costs

The licensees also challenged $443,000 in costs submitted by the Fish and Wildlife Service. When licensees expressed concern about FWS reporting, the agency confirmed that numerous costs submitted by FWS were not segregated according to municipal and non-municipal projects.

Despite licensee objections, FERC staff included the disputed costs in the 2012 annual charges bills. The licensees accused FERC staff of "arbitrarily and capriciously" concluding the costs were reasonable under the Federal Power Act.

"...Commission staff's decision to include over $1.91 million in costs reported by NMFS inexplicably departed from long-standing practice, lacked support of substantial evidence, and disregarded commission procedures," the licensees argued. "Second, by accepting NMFS' untimely certified cost report, which was not provided to licensees prior to the technical conference, staff ignored commission-mandated deadlines, undermining the very purpose of the technical conference and stripping licensees of an opportunity to raise and resolve issues prior to billing. Lastly, in accepting certain E4 costs reported by FWS, staff failed to adhere to commission-required standards governing the segregation and reporting of OFA costs."

The licensees, who had paid the annual charges under protest pending appeal, urged the commission to issue refund checks to the appellants.

In addition to the city of Idaho Falls, appellants include the city of Seattle, Wash.; Chelan County, Wash., Public Utility District; Sacramento Municipal Utility District; South Sutter Water District; New York Power Authority; Consumers Energy Co.; Louisville Gas & Electric Co.; FPL Energy Maine Hydro LLC; and Merimil Limited Partnership.

Prompted by previous hydro licensee appeals, a 2003 court order required FERC to determine the reasonableness of costs incurred by other federal agencies, rather than simply passing the charges through to project owners for reimbursement.

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