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FERC ruling on hydro licensing municipal preference was wrong, APPA, PPC say

From the January 27, 2014 issue of Public Power Daily

Originally published January 27, 2014

By Robert Varela
Editorial Director

The Federal Energy Regulatory Commission was wrong to add a geographic limitation to the Federal Power Act’s preference for municipal applicants for hydro licenses, APPA and the Public Power Council said in a Jan. 22 filing. APPA and the PPC asked the commission to rehear its Dec. 19 order finding for the first time that the preference for municipalities required by Section 7(a) of the FPA (in the case of competing applications for a hydro license) applies only to hydro projects that are in the "vicinity" of the municipality. 

"The Commission‟s new interpretation of the FPA’s Section 7(a) is contrary to principles of administrative decisionmaking; to its statutory mandate; and to sound public policy," APPA and the PPC said. In the Dec. 19 order in FFP Qualified Hydro 14, LLC, FERC applied its new interpretation to deny municipal preference to the Western Minnesota Municipal Power Agency and, after a random drawing, award a preliminary permit to FFP Qualified Hydro 14, LLC, a private company.

The Dec. 19 order concluded "that the FPA is ambiguous as to the scope of municipal preference; that the Commission has discretion to resolve that ambiguity; and that its proffered geographic limitation is a reasonable resolution," APPA and PPC said. "The Commission is wrong." Section 7(a) "is a clear and commanding directive from Congress to the agency." If the non-municipal applicant does not have a better proposal, "the plain text of Section 7(a) compels that the municipal applicant be granted a tie-breaker preference," they said. 

The legislative history is consistent with the text of the law, they said. "Congress did not intend the municipal preference to be discretionary, nor did it intend for it to have particular geographic limits." 

Courts have roundly rejected FERC’s apparent conclusion that because the FPA does not mention a geographic limitation on municipal preference, it is ambiguous on that point, APPA and PPC said. That Congress did not specifically prohibit the Commission from making such an exception to the municipal preference provision "does not, given the definitive and unambiguous language of Section 7(a), mean the statute allows it to do so."

The commission appears to argue that the statute, as written, could produce absurd results—an Eastern city claiming preference for a project in Hawaii—but "while these hypothetical factual scenarios may produce results that the commission does not like, they do not produce results that are absurd," APPA and PPC said. "Nor do they necessarily even produce results that are inconsistent with the public interest or the commission’s general administration of the FPA." Private entities regularly own and operate distant hydro projects and FERC has never held that geographic proximity is a factor in evaluating hydro proposals, they said.

FERC also needs to provide a reasoned analysis of why, without a change in circumstances, it departed "from nearly a century of precedent holding that the municipal preference is unlimited by geographic vicinity," APPA and PPC said. The associations also filed a motion to intervene late in the case, noting that FERC gave no indication it was considering the issue of potential geographic limits and never asked for briefs on the issue.

The commission "has applied municipal preference as it is written in the statute for nearly a century without any apparent difficulty," APPA and PPC said. That answers the "the question of whether it is administratively, logically, or substantively impossible to implement Congress’s plainly expressed directive. Clearly, it is not." 



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Senior Vice President, Publishing 
Jeanne Wickline LaBella

Editorial Director
Robert Varela

Editor, Public Power Daily
Jeannine Anderson

Communications Assistant
Fallon W. Forbush

Manager, Integrated Media 
David L. Blaylock

Integrated Media Editor 
Laura D’Alessandro