Court Affirms Reduced Period of Renewal

The U.S. Court of Appeals for the District of Columbia Circuit has sustained a 2015 decision by the Federal Energy Regulatory Commission (FERC) under which an electric utility’s quest to renew its license to operate a hydroelectric facility was granted, but for a 40-year term rather than the 50 years sought by the company. The petitioning utility, Duke Energy Carolinas, had asked that it be authorized to run the Catawba-Wateree Project for another 50 years, in line with the station’s original license which had been for a 50-year term.

The initial hydropower license allowed Duke Energy to manage more than 200 miles of the Catawba River as it winds its way through the Carolinas. The utility’s hydroelectric operations along the river include more than a dozen hydro generation stations and 11 individual reservoirs, one of the largest of which is Lake Wateree in South Carolina.

 The first of the Catawba hydropower facilities commenced service in the late 1950s, with the associated license expiring in 2008. Although the company had moved to start the license renewal process some two years prior to the expiration date, a series of procedural delays caused the license to lapse before the FERC ruled on the utility’s renewal application.

 When it finally did so, however, the FERC determined that the Catawba- Wateree Project was not a suitable candidate for the maximum 50-year license. But neither did the commission find it appropriate to renew the license for the minimum 30-year term. Instead, the FERC reissued the license for a 40-year period.

In explaining its reasoning, the FERC had noted that the Federal Power Act provides for new hydropower licenses of not less than 30 years nor more than 50 years, the actual duration of a license being dependent on how much new construction, additional capacity, and/or redevelopment is anticipated for the facility in future years. According to the commission, a 30-year license is deemed proper when only minimal new measures are projected, while a 40-year term is proper for more “moderate” additions and improvements. A 50-year renewal is reserved only for those hydroelectric stations that are likely to involve “extensive” new enhancements or upgrades in upcoming years, the FERC said.

In comportment with such criteria, the FERC had determined that Duke Energy’s proposed relicensure of the Catawba-Wateree Project should be for only a 40-year period. The commission stated that while the utility had outlined an ambitious budget for additions and improvements at the facility, the actual nature of the work was more in line with classification as moderate measures rather than extensive betterments. That is, the FERC said, its decision on license renewals is driven more by the type of additions and projects expected to be undertaken than by their costs.
Duke Energy sought rehearing of the 40-year term, citing a 2007 FERC decision awarding a new 50-year license to a different hydro project largely on the basis of the applicant’s anticipated capital investments, rather than ultimate upgrades and enhancements.

Despite denying rehearing, the FERC acknowledged that the company had presented a reasonable interpretation of that prior ruling. The commission conceded that the scope of the work involved in the 2007 case, which pertained to the Niagara Project in New York, was not substantially larger than those proffered in the Catawba-Wateree case.At the same time, though, the FERC declared that earlier order to be a clear outlier compared to all other hydropower relicensing proceedings since then. Consequently, the commission confirmed the 40- year term of the renewal for the Catawba-Wateree Project.Duke Energy next appealed to the federal court, where it again argued that FERC’s prior decision should be accepted as precedent for using the costs of proposed upgrades as a measure of whether such work is minimal, moderate, or extensive. The court, however, agreed with the FERC that the agency’s relicensing decisions since the Niagara Project proceeding had not used cost or investment as a means of adjudging the nature and extent of any additions or improvements expected.

Moreover, the court said that the FERC had acted within the bounds of its authority, and had appropriately explained such, in shifting its policy on hydro facility license renewals. The court observed that the commission had quite aptly pointed out how much cost estimates for projects can vary and fluctuate over time, such that using a “strictly quantitative analysis” as the basis for relicensing decisions can be problematic.

In dismissing the utility’s objections to the 40-year term, the court said that the FERC’s response to Duke Energy’s petition for rehearing had been sensible, comprehensive, and downright “fulsome.” The court added that the company’s reference to the 2007 Niagara Project might have been more persuasive had it been raised several years ago.

As FERC orders on license renewals stand, now, though, the court found that the commission’s 40-year term of renewal for the Catawba-Wateree Project was entirely consistent with recent precedent. Duke Energy Carolinas, LLC v. Federal Energy Regulatory Commission, No. 16-1296, Mar. 6, 2018 (D.C.Cir.).