Charges and Fees for Hydroelectric Projects

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 11 and 381

[Docket No. RM93-7-000; Order No. 576]

Charges and Fees for Hydroelectric Projects

Issued: March 15, 1995.

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is

amending its regulations governing the assessment of annual charges for

the administration of Part I of the Federal Power Act, 16 U.S.C. 792-

823b. The final rule adopts a maximum charge and makes the assessments

commence at the same time as the commencement of project construction.

The final rule eliminates annual charges for minor licensees, and does

not (as originally proposed) adopt annual charges for existing

exemptees. The final rule eliminates filing fees for future exemption

applications, and adopts annual charges with respect to exemptions that

are issued in the future for projects that are equivalent in size to

those of major licensed projects. The final rule retains at this time

the separate allocation of annual charges for administrative costs for

municipal and non-municipal licensees, and retains as well the existing

formulae for allocating those costs between the two classes of major

licensees. The final rule defers consideration of those issues to a

future proceeding.

EFFECTIVE DATE: April 21, 1995.

FOR FURTHER INFORMATION CONTACT: Barry Smoler, Office of the General

Counsel, Federal Energy Regulatory Commission, 825 N. Capitol Street

NE., Washington, DC 20426, (202) 208-1269.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of

this document in the Federal Register, the Commission also provides all

interested persons an opportunity to inspect or copy the contents of

this document during normal business hours in Room 3104, 941 North

Capitol Street, NE., Washington, DC 20426.

The Commission Issuance Posting System (CIPS), an electronic

bulletin board service, provides access to the texts of formal

documents issued by the Commission. CIPS is available at no charge to

the user and may be accessed using a personal computer with a modem by

dialing (202) 208-1397. To access CIPS, set your communications

software to 19200, 14400, 12000, 9600, 7200, 4800, 2400, 1200 or

300bps, full duplex, no parity, 8 data bits, and 1 stop bit. The full

text of this document will be available on CIPS for 60 days from the

date of issuance in ASCII and WordPerfect 5.1 format. After 60 days the

document will be archived, but still accessible. The complete text on

diskette in Wordperfect format may also be purchased from the

Commission's copy contractor, La Dorn Systems Corporation, located in

Room 3104, 941 North Capitol Street NE., Washington, DC 20426.

I. Introduction

The Federal Energy Regulatory Commission (Commission) is amending

its regulations governing the assessment of annual charges for the

administration of Part I of the Federal Power Act (FPA).\1\ The final

rule adopts a maximum charge and makes the assessments commence at the

same time as the commencement of project construction. The final rule

eliminates annual charges for minor licensees, and does not (as

originally proposed) adopt annual charges for existing exemptees.\2\

The final rule retains at this time the separate allocation of annual

charges for administrative costs for municipal and non-municipal

licensees, and retains as well the existing formulae for allocating

those costs between the two classes of major licensees. The final rule

defers consideration of those issues to a future proceeding.

\1\16 U.S.C. 792-823b.

\2\As discussed below, the final rule eliminates filing fees for

future exemption applications, and adopts annual charges with

respect to exemptions that are issued in the future for projects

that are equivalent in size to those of major licensed projects.

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II. Public Reporting Burden

Under the current regulations, major non-municipal licensees file

annual reports containing data on their electric generation during the

prior fiscal year. The final rule does not alter that reporting burden.

III. Background

On January 26, 1994, the Commission issued a Notice of Proposed

Rulemaking (NOPR) proposing to revise its regulations governing the

assessment of annual charges under FPA Part I.\3\ As explained in the

NOPR, the Commission is required by section 10(e)(1) of the FPA\4\ to

collect annual charges from licensees for the cost of administering

Part I of the FPA. Part 11 of the Commission's regulations\5\ provides

the manner in which licensees are charged for such costs. Prior to the

adoption of the current regulations in 1958 and 1963, administrative

charges were not based on the actual costs of the government, but were

in the nature of set fees that were billed for a calendar year.\6\

Under the current regulations, the reimbursable costs are determined on

a fiscal year basis.

\3\IV FERC Stats. & Regs.  32,505. The NOPR was published in

the Federal Register on February 3, 1994, 59 FR 5142.

\4\16 U.S.C. 803(e)(1).

\5\18 CFR part 11.

\6\The system of basing the annual charges on actual costs was

adopted in Order No. 205, 19 F.P.C. 907 (1958) (with respect to

municipal licensees only), and in Order No. 272, 30 F.P.C. 1333

(1963) (all other licensees); see also Order No. 272-A, 31 F.P.C.

1555 (1964).

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Section 3401 of the Omnibus Budget Reconciliation Act of 1986

(OBRA) \7\ requires the Commission to recover all of its costs for the

fiscal year through annual charges and fees.\8\ The annual charges

assessed pursuant to OBRA are based on an estimate of the Commission's

current-fiscal-year costs, with subsequent adjustments based on actual

costs.\9\ Pursuant to OBRA, the Commission collects annual charges to

recover the costs of administering Parts II and III of the FPA, as well

as the costs the Commission incurs in administering the Natural Gas

Act, the Natural Gas Policy Act, and the Interstate Commerce Act. In

this regard, we note that section 3401(a)(2) of OBRA provides that

``[t]he provisions of this subtitle shall not affect the authority,

requirements, exceptions, or limitations in sections 10(e) and 30(e) of

the Federal Power Act.''

\7\Pub. L. No. 99-509, Title III, Subtitle E, sec. 3401 (1986)

(codified at 42 U.S.C. 7178). OBRA is implemented in Part 382 of the

Commission's Regulations, 18 CFR Part 382.

\8\See Joint Explanatory Statement of the Committee of

Conference to Accompany H.R. 5300 (Conference Report), H.R. Rep. No.

1012, 99th Cong., 2d Sess. 238, reprinted in 1986 U.S.C.C.A.N. 3607,

3883.

\9\The former procedures for estimating the costs and later

adjusting the assessments were described in Order No. 472, 52 FR

18201 (May 14, 1987), FERC Stats. & Regs. (Regulations Preambles

1986-1990)  30,746 at pp. 30,612 and 30,616-17.

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In response to the NOPR, the Commission received 73 comments. The

[[Page 15041]] commenters are listed in Appendix A of this final rule.

The proposals in the NOPR, the comments thereon, and the Commission's

determinations thereon are discussed below on a subject by subject

basis.

IV. Discussion

As explained in the NOPR, former Sec. 11.1 of the Commission's

regulations provided three different allocation formulae for three

different classes of licensees. For non-municipal licensees of projects

of more than 2,000 horsepower of installed capacity, former

Sec. 11.1(a) set forth an allocation formula based on a combination of

the project's authorized installed capacity and the energy actually

generated. For municipal licensees of projects of more than 2,000

horsepower, former Sec. 11.1(b) set forth an allocation formula based

solely on capacity. For all licensees (both municipal and non-

municipal) of projects of 2,000 horsepower or less of installed

capacity, former Sec. 11.1(c) specified an annual charge of five cents

per horsepower, with a minimum charge of $5 per year.

The NOPR proposed two alternatives. In Alternative A, the

Commission proposed to base the allocation of all of the annual charges

among a single class of licensees and exemptees, including all major

and minor municipal and non-municipal licensees and all exemptees. The

allocation would be based solely on the respective capacity of each

hydropower project as measured in kilowatts. Under Alternative B, the

Commission proposed to retain separate categories and formulae for

major municipal and non-municipal licensees. Minor licensees and

exemptees would be classified with the comparable groups of major

licensees, and their charges would be assessed pursuant to the formulae

currently used for those groups.

A. Charges for Minor Licensees

As noted above, both Alternative A and Alternative B treated the

minor licensees in the same manner as the major licensees. In

Alternative A, all licensees were combined together in a single

allocation formula. In Alternative B, the minor licensees were included

in the respective allocation formulae for the major licensees. In other

words, the minor municipal licensees were included in the same

allocation formula with the major municipal licensees, and the minor

non-municipal licensees were included in the same allocation formula

with the major non-municipal licensees. The NOPR recognized that, under

either scheme, the charges for minor licensees may increase

substantially, but expressed the Commission's belief that the existing

charge of five cents per horsepower had been so heavily eroded by

inflation since it was adopted in 1963 as to have been rendered

comparatively meaningless.

The major licensees favor including the minor licensees in the same

assessment pool,\10\ while the minor licensees object. The major

licensees emphasize fairness in broadly spreading the Commission's

costs, while the minor licensees emphasize the burden on them.

\10\See, e.g., EEI at 16-17.

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Water Assn. contends that ``dramatic increases in fees'' would

cause some economically marginal minor licensees to abandon operation

of their projects.\11\

\11\Water Assn. at 3. See also North America.

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Some minor licensees contend that they cannot afford a minimum

annual charge of $100. Mackowiak, for instance, has a 37 kilowatt (kW)

project in his back yard, whose purpose is to provide electricity to

his home. He proposes that projects smaller than 100 kW in capacity be

excluded from the assessments.

We have decided not to assess annual charges on minor projects. As

a practical matter, excluding minor projects (i.e., projects of 1.5 MW

or smaller) will have no meaningful impact on the other licensees'

assessments, but will relieve minor licensees of a potentially onerous

burden.

In fiscal year 1993, a total of 1052 licensees were assessed a

total of $51,399,160 in annual charges for administration of Part I of

the FPA. Of that total, the 661 major licensees were assessed a total

of $51,350,699,\12\ while the 391 minor licensees were assessed a total

of $48,461.\13\ Thus, the major licensees accounted for 99.9 percent of

the total assessments, while the minor licensees accounted for only 0.1

percent of the total assessments.

\12\Of that total, 133 municipal major licensees were assessed a

total of $11,105,138, while 528 non-municipal major licensees were

assessed a total of $40,245,561.

\13\Of that total, 58 municipal minor licensees were assessed a

total of $3,404, while 333 non-municipal minor licensees were

assessed a total of $45,057.

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In other words, no major licensee derives any meaningful financial

benefit from including the minor licensees in the existing assessment

and allocation scheme. We believe that substantially increasing the

minor licensees' annual charges, as proposed in the NOPR, could impose

unreasonable burdens on many of those licensees, while exclusion of the

minor licensees from the new assessment and allocation scheme may

provide meaningful relief to many of those minor licensees.

Accordingly, we have defined the scope of the assessment process in new

Sec. 11.1(b)(1) so as to include only licensees whose projects exceed

1.5 MW in authorized installed capacity. The 1.5 MW is the equivalent

of the 2,000 horsepower definition of minor projects in former

Sec. 11.1.

B. Minimum and Maximum Charges

The NOPR proposed to establish a minimum and maximum annual charge.

The minimum annual charge would be $100. The maximum charge would set a

limit on annual charges so that, with respect to costs incurred by the

Commission, no licensee's project would be required to pay more than

2.0 percent of the total costs.\14\

\14\The proposed limit was modelled after the formula in

Sec. 382.203(b) with respect to annual charges for oil pipelines.

The maximum annual charge stated therein is 6.339 percent of the

total charges, but that figure is based on a much smaller number of

significant entities (interstate oil pipelines) sharing a much

smaller total cost.

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The NOPR also invited comment on other potential alternatives. With

respect to a minimum charge, other alternatives would be to waive

charges below a fixed dollar amount or below a fixed capacity. With

respect to a maximum charge, different percentages could be used for

the ceiling. If the formula were to be based solely on capacity,

another alternative would be to have a 50 percent discount for all

authorized capacity above a prescribed ceiling (e.g., 500 megawatts).

Many of the commenters express approval for a maximum charge, and

many of these comments come from licensees who would not themselves

benefit from such a cap. In general, the commenters believe that the

charges assessed to the largest projects are disproportionate.

Washington Company proposes a minimum base annual charge of

$500.\15\ Some smaller exemptees and minor licensees, on the other

hand, contend that the $100 minimum would be unduly burdensome on them.

\15\Washington Company at 5.

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Ogden opposes the two percent maximum charge on grounds that it

would solely benefit larger, non-municipal projects. Alaskan opposes

the maximum charge on grounds that, ``[i]f the charges are equitably

allocated at the outset, the effect of the proposed cap could be to

unfairly reallocate costs from larger to smaller projects.''\16\

Synergics also believes the cap is unfair.

\16\Alaskan at 5.

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Consolidated would lower the cap from 2 percent to 1.6 percent. Or,

using the alternative formula discussed in the [[Page 15042]] NOPR,

Consolidated would use a 75 percent discount factor for all capacity in

excess of 500 MW.\17\

\17\Consolidated at 11-12; see also Storage Council at 9-10;

Kvaerner at 10-11.

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Chelan argues that the proposed two percent cap is inequitable.

Chelan has two large projects each of which would fall beneath the cap,

while its downstream neighbor, Grant, has two comparable developments

that are grouped together into a single licensed project large enough

to benefit from the cap. Therefore, Chelan urges us to apply the cap to

licensees, not to projects. Chelan offers a further alternative: ``The

maximum charge per licensee could be 2 percent of the total

administrative costs, or .5 percent of the number of projects licensed

to it, whichever is greater.''\18\

\18\Chelan at 11-13.

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Grant suggests that the Commission conduct ``a reasonable project-

by-project sample study'' that would ``determine the average

relationship of administrative costs to project size,'' and thereafter

adjust the cap ``to reflect the outcome of the study.''\19\ Virginia

Electric proposes that the minimum charge be indexed to the rates of

inflation of the Commission's total costs.\20\

\19\Grant at 6.

\20\Virginia Power at 2.

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In light of our determination to assess annual charges only to

licensees whose projects have a capacity in excess of 1.5 MW, the

proposed minimum charge has been rendered moot. Accordingly, we have

not adopted it in the final rule.

Having considered the comments received, and for the reasons stated

in the NOPR, we will adopt the two percent maximum charge that was

proposed in the NOPR. We believe it is a reasonable compromise that

takes into account the financial capacity of the larger projects as

well as considerations of fairness in spreading the burden equitably

among licensees by putting finite limits on the extent of any one

project's burden.\21\

\21\We understand Chelan's point, but we believe that basing the

cap on licensees rather than on projects might result in as many

distortions as the one Chelan notes. No annual charge allocation

formula will ever be ``perfect'' or totally free of any distortion.

We believe that the one we have adopted is reasonable. In any event,

as noted below, our annual charge program is not predicated on

collecting from individual projects in proportion to their

responsibility for administrative costs incurred. For these and

other reasons, we also believe that no useful purpose would be

served by conducting the study suggested by Grant.

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C. Commencement of Assessments

The NOPR recognized that, in the case of major construction

projects, the license may be in effect for several years before project

construction is commenced and before the project commences operation

and goes into service. With respect to non-municipal licensees, annual

charges are payable each year from the date of issuance of the license,

but there is no incoming stream of revenue during those years, because

no power is being generated. Municipal licensees, on the other hand, do

obtain an exemption from annual charges prior to and during the

construction period. This is because Sec. 11.6(g) of the regulations

provides a complete exemption from certain annual charges when a

municipal project is under construction and not generating power, on

the theory that the project is operating without profit within the

meaning of the municipal exemption in FPA section 10(e).

Under the various regulatory regimes discussed in the NOPR, the

Commission would maintain the above-described exemption from annual

charges with respect to municipal projects that have not yet commenced

commercial operation. In addition, the NOPR proposed to include in the

assessment formula (whatever it may be) only licensed and exempted

projects that have already been constructed or whose construction has

commenced. Although framed in terms of all projects, as a practical

matter, because of the exemption for municipal projects, the change

would primarily affect non-municipal projects.\22\

\22\The NOPR expressed the Commission's belief that commencement

of construction is a more appropriate determinant than completion of

construction, for two reasons. First, of all, the date on which

construction commenced is a legally precise, documented date,

whereas the date on which construction is completed is not defined

with the same precision. This is because section 13 of the FPA

requires that the licensee commence construction of the project

within fixed time periods after issuance of the license, as

specified in section 13 and the license. Thus, the Commission has

evolved standards for determining the precise date of commencement

of construction, and the hydropower industry is familiar with those

standards. Secondly, the NOPR expressed the Commission's

understanding that licensees of projects under construction can draw

on construction loan funds to pay the annual charges, whereas such

funds may not be available prior to the commencement of

construction.

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Some commenters advocate commencement of annual charge assessments

upon issuance of the license or even earlier. Some prefer to delay

commencement of charges until the project commences operating. And some

prefer the middle ground proposed in the NOPR--commencement of charges

after commencement of construction.

EEI opposes deferring commencement of billing until commencement of

construction, contending that it would give a ``free ride'' to

licensees whose pre-construction planning activities consume Commission

staff time. EEI would, instead, assess the charges during the pre-

construction period but defer their payment until after construction,

has commenced. Otherwise, according to EEI, the existing licensees

would be ``subsidizing'' the new licensees; it would be unfair to the

existing licensees, who all paid annual charges from the inception of

their licenses.23

\23\EEI at 12-14. EEI goes on to advocate filing fees for

applications for a preliminary permit or an original license. Those

proposals go beyond the scope of the NOPR and will not be considered

here.

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Consolidated states that large pumped storage projects require

substantial lead time for design and financing prior to commencement of

construction, and that during this period pumped storage developers

typically have limited funds available.24 Consolidated also points

out that the existing regulations based annual charges for non-

municipal pumped storage projects entirely on capacity, so that such

projects did not receive the partial or complete relief accorded to

non-municipal conventional projects and municipal projects, both of

whose charges were based in part or in whole on generation; charges

based on generation do not commence until after construction, because

nothing is generated until the project has been built. Thus,

Consolidated favors the NOPR's commencement proposal as a more

equitable solution.25 Consolidated also asserts that pumped

storage projects, because of their large scale, bear a disproportionate

share of the annual charges. According to Consolidated, in 1993 pumped

storage projects comprised three percent of the total number of

licensed projects but paid 32 percent of the total annual charges for

administrative costs.26

\24\Consolidated at 3-4.

\25\Id. at 4-5.

\26\Id. at 6.

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Storage Council points out that pumped storage projects typically

require two to four years of lead time after licensing before

construction commences; that the annual charges for those projects are

quite large; and that private developers of these projects need to

concentrate their available finances on project design and power

marketing.27

\27\Storage Council at 4-5.

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Noah Corp. states that ``(t)he elimination of annual charges until

construction start * * * is the most important part of this rulemaking.

It will make more projects happen, because it [[Page 15043]] will

encourage development by reducing risk cost.''28

\28\Noah Corp. at 1.

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Adirondack argues that it is unfair for non-municipal licensees to

have to pay annual charges during the construction period when

municipal licensees do not. Adirondack favors commencing all annual

charges at the commencement of project operation, i.e., the day on

which the project first generates electricity.29

\29\Adirondack at 2.

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Storage Partners also advocates the date of commencement of

commercial operations as the appropriate date of commencement of annual

charges. Storage Partners would define the commencement of commercial

operations in terms of the contractually defined date of that type

specified in construction contracts, financing commitments, and power

sales contracts.30

\30\Storage Partners at 4.

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PG&E contends that the intent of Congress in FPA section 10(e) was

to require annual licensees to pay annual charges throughout the term

of the license, including the years immediately after its issuance,

even if construction hasn't commenced.31 PG&E points out that this

is a period of significant Commission staff involvement in the

licensee's activities, as the staff monitors and approves various

aspects of design and construction.32

\31\PG&E's comments, however, do not provide convincing

documentation of such Congressional intent.

\32\PG&E at 6-8.

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Consumers Power contends that the Commission can provide adequate

relief to project-financed projects by authorizing deferred payment of

annual charges on a case-by-case basis.33 Duke advocates a system

of direct billing for actual services rendered, starting with the

Commission's initial involvement with the applicant/licensee.34

\33\Consumers Power at 6.

\34\Duke at 2.

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In light of all of the comments, and for the reasons stated in the

NOPR, we believe that the annual charges commencement date proposed in

the NOPR strikes a reasonable balance and compromise among the

financial concerns of the different licensees. Licenses are issued for

terms of as long as 50 years, and the projects themselves are often

designed and constructed to last much longer than the license. Thus,

over time, providing a modest level of relief to licensees of projects

that haven't yet commenced construction imposes a very small burden on

the existing licensees, because the licensees of newly constructed

projects will be sharing the total annual charges burden long after the

expiration of the short pre-construction period. Moreover, if a few

years of pre-construction relief from annual charges enables one or

more licensees of new projects to bring their projects to fruition,

these new projects will help share the existing licensees' burden.

As we explained in the NOPR, we prefer to use the date of

commencement of construction as the benchmark for commencement of

annual charge assessments, as opposed to the date of commencement of

operation, because the former has come to be defined (for other

purposes) with considerably greater precision in the case law. It also

marks the point in time at which funding is available from construction

loans.

D. From Horsepower to Kilowatts

As discussed above and in the NOPR, former Sec. 11.1 provided

different allocation formulae for municipal and non-municipal projects

of more than 2,000 horsepower of installed capacity. Both formulae,

however, took into account a project's authorized installed capacity

defined in terms of horsepower.

In the NOPR, the Commission proposed to revise former Sec. 11.1 to

substitute kilowatts for horsepower in stating a project's authorized

installed capacity. This change was designed to reflect modern usage in

the rating of equipment used in hydropower projects. For the few

licensed hydromechanical projects, all of which are quite small, the

Commission would impute a kilowatt figure by multiplying these

projects' existing horsepower capacity by three-fourths.

All of the comments received on this proposal were in favor of it.

Accordingly, for the reasons discussed in the NOPR, this proposal has

been adopted in the final rule.

E. The Determination of Authorized Installed Capacity

The NOPR explained that questions have occasionally arisen as to

how to define ``authorized installed capacity.'' The Commission

proposed to clarify the concept of ``authorized installed capacity'' by

defining it in the proposed new Sec. 11.1(i). The authorized installed

capacity would be expressed in kilowatts, and would be the lesser of

the capacity of the generator or the turbine. Thus, if the capacity of

the generator exceeded the capacity of the turbine, then the capacity

of the turbine would apply, and vice-versa. The availability of stream

flow, however, would not be considered.35

\35\The NOPR stated that the proposed rule would codify the

policy articulated in Public Utility District No. 2 of Grant County,

Washington, 62 FERC  61,229 (1993).

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The capacity would be based on the actual power of the equipment in

question without regard to whatever ``nameplate'' rating might be

physically affixed to the unit (although, with respect to a new or

unmodified unit, the ``nameplate rating'' may well coincide with the

definition proposed herein). If the generator or turbine are

subsequently modified, such as by rewinding the generator, the capacity

would be recalculated accordingly.

This proposal drew a variety of comments. EEI, for instance,

proposes convening a technical conference to discuss the matter.36

\36\EEI at 16.

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Central Maine suggests that the Commission ``take into account

actual performance limitations such as age, wear, and cavitation limits

when determining authorized capacity.''37

\37\Central Maine at 4.

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Independent contends that turbine and generator nameplate ratings

may be less than accurate as a determinant of actual capacity.

Independent states that turbine ratings vary according to gate or head,

and that the total capacity of a multi-unit powerhouse may well be less

than the sum of the individual generator nameplate ratings because of

the hydraulics of a multi-unit site.38 Washington Company and

Westinghouse make the same points.39

\38\Independent at 2-3. See also National Hydro at 2.

\39\Washington Company at 7; Westinghouse at 2.

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Portland Co. would base the determination of capacity solely on the

manufacturer's nameplate rating, contending that this method ``is

simple, fair and predictable.'' Portland Co. claims that the formula

proposed in the NOPR is unreasonable because hydro turbines have ``a

unique gate position (water flow) vs. megawatt output efficiency

curve'' that has ``established upper and lower cavitation limits.'' Use

of the maximum head gate opening is unrealistic, because the turbine

runner might be damaged at that point on the curve. Portland Co. would

use, instead, ``the design upper cavitation limit as defined by the

turbine manufacturer at the rated head.''40

\40\Portland Co. at 3.

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PG&E advocates measuring capacity in kilovolt-amperes (kVA),

because manufacturers rate their generators' capacity in kVA.\41\

\41\PG&E at 5-6. We note that the portion of the definition in

Sec. 11.1(i) that deals with the capacity of generators is framed in

part in kVA. It is then converted to kilowatts for purposes of

comparison with the capacity of the turbine. [[Page 15044]]

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Westinghouse points out that profitability hinges in significant

measure on the price and other terms of a company's power sales

contracts, rather than on the raw capacity of the company's equipment.

Therefore, Westinghouse suggests utilizing financial data on operating

income and profitability in allocating annual charges. Westinghouse

would also adjust the annual charges to reflect the extent to which

poor management on the part of the regulated entity increases the level

of the Commission staff's regulatory activities with respect to that

entity.\42\

\42\Westinghouse at 3.

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The most efficient use of the water resource is at ``best gate''

rather than at ``maximum gate.'' Therefore, in response to the

comments, we have substituted ``best gate (maximum efficiency point)''

for ``maximum head gate'' in the turbine portion of the definition in

Sec. 11.1(i). We will not, however, adjust the total capacity of the

turbines at a multi-unit powerhouse to reflect the peculiar hydraulics

of the site. That is precisely the sort of potentially contentious

complexity we seek to avoid.

We will also clarify the NOPR's reference to the generator's

``nameplate'' rating. The rating on the generator's nameplate at

licensing will be deemed to be the capacity of the generator unless the

generator has been modified or rewound subsequent to licensing such

that the nameplate no longer accurately describes the generator's

actual capacity.

We are unwilling, however, to inject into the calculation such

subjective and extraneous factors as the efficiency of the licensee's

management or the profitability of the licensee's operation. Moreover,

our annual charge program is not predicated on collecting from

individual projects in proportion to their responsibility for

administrative costs incurred.

F. The Five Megawatt and Conduit Exemption Costs

As explained in the NOPR, section 30 of the FP\43\ provides that

the Commission may exempt from the FPA's licensing provisions any

facility (other than a dam, and within certain megawatt limits) which

is constructed or operated to generate electric power, if the facility

is located on non-federal land and ``utilizes for such generation only

the hydroelectric potential of a manmade conduit, which is operated for

the distribution of water for agricultural, municipal, or industrial

consumption and not primarily for the generation of electricity.''

\43\18 U.S.C. 823a.

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Sections 405 and 408 of the Public Utility Regulatory Policies Act

of 1978 (PURPA), as amended by section 408 of the Energy Security Act

of 1980,\44\ provide that the Commission may exempt from the FPA's

licensing requirements small hydroelectric power projects that are

located at the site of an existing dam (or utilize natural water

features without the need for a dam) and that have a proposed installed

capacity of five megawatts (MW) or less.

\44\16 U.S.C. 2705 and 2708.

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In the NOPR, the Commission expressed its belief that it has the

legal authority under OBRA to assess annual charges to exemptees,\45\

and proposed to do so with respect to both the 5 MW and the conduit

exemptions.\46\

\45\Section 3401(a) of OBRA provides as follows:

\46\Holders of 5 MW and conduit exemptions would, however, be

able to apply for exemption from annual charges based on their

municipal status.

(a) In General.--(1) Except as provided in paragraph (2) and

beginning in fiscal year 1987 and in each fiscal year thereafter,

the Federal Energy Regulatory Commission shall, using the provisions

of this subtitle and authority provided by other laws, assess and

collect fees and annual charges in any fiscal year in amounts equal

to all of the costs incurred by the Commission in that fiscal year.

(2) The provisions of this subtitle shall not affect the

authority, requirements, exceptions, or limitations in sections

10(e) and 30(e) of the Federal Power Act.

Whereas this provision makes clear that OBRA does not authorize

the collection of annual charges from, e.g., municipal licensees who

qualify for an exemption under the terms of section 10(e) of the

Federal Power Act, projects under exemptions from licensing are not

subject to section 10(e), and therefore charging them under OBRA

does not affect any provision of section 10(e).

Section 30(e) of the Federal Power Act requires the Commission

to collect from exemption applicants and certain license applicants,

on behalf of the U.S. Fish and Wildlife Service, the National Marine

Fisheries Service, and state fish and wildlife agencies, these

agencies' project-specific costs under section 30(c) (establishment

of mandatory conditions with respect to fish and wildlife

resources). These agencies are required to subtract from their

section 10(e) claims the money they recover under section 30(e). 5

MW and the conduit exemptions.

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Finally, pursuant to former Sec. 381.601, the Commission imposed a

filing fee for applications for a 5 MW exemption. As a part of its

proposal to assess annual charges on 5 MW exemptees, the NOPR proposed

to delete Sec. 381.601 from the regulations.\47\

\47\As noted in the NOPR, the Commission does not impose a

filing fee for applications for conduit exemptions.

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EEI supports the proposal in the NOPR for the same reasons that it

supports inclusion of minor licensees in the same pool with major

licensees.\48\

\48\EEI at 17.

Humboldt contends that OBRA does not confer any legal authority to

assess annual charges independent of the authority conferred by section

10(e) of the FPA, which (as the NOPR noted) applies to licensees. Thus,

Humboldt contends that the Commission lacks legal authority to assess

annual charges to exemptees.

Humboldt further contends that the assessment of annual charges

against exemptees violates the Congressional purpose and spirit of

PURPA, which was to encourage certain small power projects by freeing

them from regulatory requirements and costs.\49\

\49\Humboldt at 3-4. See also Westinghouse at 3-4.

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Howard contends that ``(l)umping exempted and licensed projects

into a single administrative framework defeats the spirit'' of PURPA,

``which put small projects with minimal environmental impacts in a

separate category to facilitate their development and

operation.''50

\50\Howard at 2.

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Water Assn. states that many of its exemptee members ``are facing

dramatic reductions'' in their revenues and ``are reevaluating the

continued operation'' of their projects. Water Assn. believes that the

imposition of annual charges ``could easily tip the balance against

continued operation.''51

\51\Water Assn. at 2.

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Ann Arbor states that it relied in part on the absence of charges

when it redeveloped its two small (900 kW and 540 kW) exempted

projects, and that the assessment of annual charges might contribute to

a decision to sell or decommission one or both projects.52 Desert

also states that it relied, in part, on freedom from annual charges

when it decided to invest in its two small exempted conduit projects;

the two projects are operated on a not-for-profit basis to reduce water

rates.53

\52\Ann Arbor at 1.

\53\Desert at 1-2. See also Michiana.

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Columbus states that its exempted project ``was conceived to

demonstrate the feasibility of a municipality operating a low head

generator in Central Ohio at a water supply reservoir.''54

\54\Columbus at 1.

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Falls Creek contends that, by virtue of its exemption, the level of

regulatory services it receives is lower than those received by

licensees.55

\55\Falls Creek at 2.

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Haemmig states that his 1.4 kW project ``only produces

approximately $20 per year revenue for us.'' Adkins' project is located

in a national forest and is used solely to supply electricity

[[Page 15045]] to his ranch, whose alternate source of power is a

diesel generator. Lassen states that his 30 kW conduit exemption

project has a small positive cash flow but a negative rate of return,

and that the $100 minimum charge proposed in the NOPR would constitute

three percent of his gross revenue.

The Commission is persuaded by the comments that it should not

extend the annual charges scheme to the existing exemptees. We believe

that the statutory scheme by which the exemptions were authorized was

designed to induce the development of small projects, and that many of

the existing exemptees reasonably relied on freedom from annual charges

when they invested in their projects. We also note that many of the

existing exemptees paid a substantial filing fee at the time they filed

their applications for exemption. For all of these reasons, we will not

extend the scope of the annual charges scheme to encompass existing

exemptees.

As discussed in the NOPR, the filing fee for exemption applications

generates very little revenue but is so substantial as to likely deter

applicants from filing new applications. No comments were received on

the proposal to eliminate that filing fee. For the reasons stated in

the NOPR, we will delete it from the regulations.

We will, however, include in the annual charges allocation scheme

all exemptees whose projects exceed 1.5 MW in authorized installed

capacity and whose exemptions are issued subsequent to the effective

date of this final rule. Most of those exemptees will not have paid the

application filing fee, and they will be on notice of the annual

charges obligation at the time they choose to accept the exemption and

invest in the exempted project. The exemption will be conditioned on

knowing, voluntary acceptance of the obligation to participate in the

annual charges scheme. We will exclude from the annual charges all

projects of 1.5 MW capacity or less for the same reasons, explained

above, that we excluded all such projects that are licensed instead of

exempted. As a transition matter, we will allow any future exemptees

who paid the application filing fee prior to the effective date of this

final rule to credit that fee against their annual charge assessments

to the full extent of the fee that was paid.

G. Other Revisions to Annual Charges

Former Sec. 11.1(d) stated that the minimum annual charge for

projects involving transmission lines was $5. The NOPR noted that the

Commission's current practice is to state that charge in the articles

of the individual licenses, as appropriate. Therefore, the NOPR

proposed to conform the text of former Sec. 11.1(d) (renumbered as

proposed new Sec. 11.1(e)) to that practice. No comments were received

on this proposal, and the change has been made.

Former Sec. 11.20 provided two separate deadlines for payment of

bills for annual charges: 30 days for headwater benefits bills and 45

days for other annual charges bills. The NOPR proposed to make all such

bills payable upon 30 days of their rendition.

Many commenters express strenuous objection to this proposed

change,56 and no commenter supports it. Some commenters discuss

their experience with the time elapsed during mail transmissions

between themselves and the Commission. They also discuss the time

elapsed during mail transmissions within corporate or governmental

entities; the added delays and complexities of licensees who are

structured as corporate affiliates; and the layers of authority whose

prior approval is needed before issuing checks for large sums of money.

They discuss these matters in the context of the five percent per month

penalty for late payment of the annual charges bill.57

\56\See, e.g., EEI at 17-18; Central Maine at 4; Consumers at 7-

8; PG&E at 9. PG&E favors extending the period to 60 days.

\57\See section 17(b) of the FPA, 18 U.S.C. 810(b).

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Without endorsing any particular reason advanced by the commenters,

the Commission is persuaded by their collective response that the

present 45-day period should be retained. Therefore, the Commission

will conform the divergent deadlines in Sec. 11.20 by making both of

them 45 days.

The NOPR proposed a new Sec. 11.20, which would provide for

licensees to file an appeal of the bill to the Commission's Chief

Financial Officer. All decisions of the Chief Financial Officer on

appeals would be subject to rehearing by the Commission pursuant to

Sec. 385.713. This would essentially codify the current informal

practice. The NOPR noted that most billing disputes involve

mathematical calculations that can be readily resolved by discussion

with the Commission's staff without the need for a formal request to

the Commission for rehearing. The bill would still have to be paid

within 45 days of its rendition in order to avoid the assessment of

penalty payments under Sec. 11.21, but if a timely appeal or request

for rehearing were filed the bill could be paid under protest and

subject to refund. This provision would codify the Commission's current

practice. No comments were received on these proposals. They will be

adopted, for the reasons stated in the NOPR.

Former Sec. 11.6(i) required that applications for exemptions from

payment of annual charges ``shall be prepared on forms prescribed by

the Commission * * *'' Inasmuch as the Commission does not currently

prescribe such forms, the NOPR announced the Commission's intention to

delete the reference to such forms. No comments were received on this,

and the reference has been deleted.

The NOPR also proposed to add a sentence at the end of Sec. 11.6(i)

to clarify that bills for annual charges can be paid under protest and

subject to refund in the event that an application for an exemption

from payment is pending when the bill becomes payable. The NOPR

explained that this provision would codify the Commission's current

practice. No comments were received on this proposal, and we have

adopted it, for the reasons stated in the NOPR.\58\

\58\Snohomish suggests that the Commission pay interest on

annual charges paid in protest that are later refunded when the

protest is upheld. Snohomish argues that this would be fair and

equitable in light of the penalties for late payment of the charges.

Snohomish also suggests an escrow arrangement. The short answer is

that the penalties are mandated by the FPA, but the Commission has

no statutory authority to pay interest.

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The Washington State Energy Office and the U.S. Forest Service note

that the NOPR did not propose new regulations to implement section

1701(a) of the Energy Policy Act of 1992.\59\ That legislation involves

recovery through annual charges of certain costs incurred by federal

and state fish and wildlife agencies and other natural and cultural

resource agencies in connection with studies they perform pursuant to

Part I of the FPA. They urge us to propose new regulations to implement

section 1701(a). Citing section 504(g) of the Federal Land Policy

Management Act, the Forest Service also argues that ``any land use fees

charged by the Commission for hydropower projects should be based on

the fair market value of these lands for hydropower purposes.''\60\

\59\Pub. L. 102-486, 106 Stat. 2776-3133 (Oct. 24, 1992).

\60\Forest Service comments at 1.

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None of these matters was addressed in the NOPR, and they fall

beyond the scope of this rulemaking proceeding. Accordingly, they will

not be discussed or resolved in this final rule.

H. Separate Classes of Licensees; Capacity or Generation

Many commenters expressed their views on the choice between

[[Page 15046]] Alternatives A and B in the NOPR, i.e., whether to

maintain separate pools of costs attributable to municipal and non-

municipal licensees or to combine them into a single common pool of

costs for allocation among all licensees regardless of class. The non-

municipal licensees prefer to establish a combined pool, while the

municipal licensees prefer to maintain separate pools. The NOPR also

considered what formula to use to allocate costs among the licensees.

Within Alternative A, the NOPR discussed several potential variations:

(1) Base the allocation formula entirely on authorized installed

capacity; (2) base the formula entirely on generation; or (3) base it

on a combination of capacity and generation. Within Alternative B, the

NOPR retained the existing formulae (as described above) whereby the

allocation of costs for municipal licensees is based entirely on

capacity while the allocation for non-municipal licensees is based on a

combination of both capacity and generation.

Many commenters addressed this issue. The comments diverged widely,

cutting across municipal and non-municipal lines. Some commenters

preferred capacity, some preferred generation, and some preferred a

combination.

The Commission has decided to defer consideration of these issues

to a future proceeding. Because the Commission has not reached any

decision on whether to revise these aspects of the current regulations,

and if so, how, the final rule retains the separate pools of costs for

municipal and non-municipal licensees, and retains the distinctions in

the present formulae with respect to use of capacity and generation in

the respective allocations.

I. Transition Arrangements

In the NOPR, the Commission proposed a three-year transition period

for phasing in the changes described in the ``Alternative A''

regulatory text.

Many commenters supported use of a transition period in the event

that the Commission adopted significant changes in the annual charges

formulae. One commenter opposed having a transition period.\61\ Several

commenters suggested extending the transition period to five years, or

even to ten years.\62\

\61\Noah Corp. (at 2) contends that the phased-in transition

provisions are unnecessary and would further complicate the changes.

\62\APPA at 17; No. Cal. Power at 4; Okla. Authority; Public

Pool at 8-9; Westinghouse at 4-5.

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As discussed above, the transition period in the NOPR was proposed

to alleviate the dislocations attributable to adoption of the

Alternative A formula. The proposed regulatory text for Alternative B

did not include a transition period. Our decision to defer

consideration of the allocation formulae renders the proposed

transition period moot, and it will not be adopted. Thus, the maximum

charge, the exclusion of minor licensees, and the commencement of

assessments only after commencement of construction will all become

effective immediately.\63\

\63\We are, however, adopting a minor transition provision with

respect to the change from horsepower to kilowatts, discussed above.

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V. Regulatory Flexibility Certification

The Regulatory Flexibility Act of 1980 (RFA)\64\ generally requires

a description and analysis of proposed regulations that will have a

significant economic impact on a substantial number of small

entities.\65\ In the NOPR, we certified that the proposed regulations

would not have a significant economic impact on a substantial number of

small entities.

\64\5 U.S.C. 601-612.

\65\Section 601(c) of the RFA defines a ``small entity'' as a

small business, a small not-for-profit enterprise, or a small

governmental jurisdiction. A ``small business'' is defined by

reference to section 3 of the Small Business Act as an enterprise

which is ``independently owned and operated and which is not

dominant in its field of operation.'' 15 U.S.C. 632(a).

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The U.S. Small Business Administration, in its comments, asserts

that there are approximately 900 licensees and exemptees whose projects

have a rated capacity of less than 80 megawatts, and that section

3(17)(A) of the FPA uses that standard to define a ``small power

production facility.''\66\ The Association of California Water Agencies

(Water Assn.) contends that ``[a]dditional FERC fees for hydroelectric

licenses will be a major impact on already strained local water agency

budgets, and will additionally compromise the ability of the water

agencies to meet their mandate of providing essential services of

adequate water at reasonable costs.''\67\ Therefore, the Small Business

Administration and the Water Assn. urge the Commission to perform a

regulatory flexibility analysis. Several other exemptees also raised

this issue.68

\66\We note that the regulations previously in effect, as

discussed above, treated as ``minor'' for annual charge purposes

only those projects whose capacity did not exceed 2,000 horsepower,

which equates to 1.5 megawatts, not 80 megawatts.

\67\Water Assn. at 3-4.

\68\Conn. Producers; Desert.

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As discussed above, the Commission received numerous comments from

exemptees and minor licensees urging us to provide a measure of relief

from the proposed new regulations. In response to these comments, the

Commission has decided not to impose annual charges on either licensees

or exemptees whose projects have a capacity of 1.5 MW or less. This

encompasses all of the minor licensees and all of the exemptees of

comparable size. We have also excluded all of the existing exemptees

regardless of size. Accordingly, pursuant to section 605(b) of the RFA,

the Commission hereby certifies that the final rule adopted herein will

not have a significant economic impact on a substantial number of small

entities.

VI. Environmental Statement

Issuance of this final rule does not constitute a major federal

action having a significant adverse impact on the quality of the human

environment under the Commission's regulations implementing the

National Environmental Policy Act.\69\ The final rule adopted herein is

procedural in nature and therefore falls within the categorical

exemptions provided in the Commission's regulations. Consequently,

neither an environmental impact statement nor an environmental

assessment is required.\70\

\69\See Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats.

& Regs. (Regulations Preambles 1986-1990)  30,783 (Dec. 10, 1987)

(codified at 18 CFR part 380).

\70\See 18 CFR 380.4(a)(1). Water Assn. (at 4) contends that we

should prepare an environmental impact statement because, in its

view, the proposed revision of the annual charges allocation will

result in some projects ceasing to operate, thereby increasing the

burning of fossil fuels, thereby increasing air pollution. Putting

aside the procedural nature of the regulatory revisions, Water

Assn.'s assertions are purely speculative, relying on a tenuous

series of causal connections and a minute percentage of total

hydroelectric generation. Moreover, as discussed above, in response

to the comments received we have significantly modified the proposal

to relieve the potential burden on all existing exemptees and all

minor licensees.

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VII. Information Collection Statement

The Office of Management and Budget's (OMB) regulations at 5 CFR

part 1320 require that OMB approve certain information and

recordkeeping requirements imposed by an agency. The information

collection requirements pertinent to the existing regulations that are

retained by this final rule are contained in FERC-583 ``Annual Kilowatt

Generating Report (Annual Charges)'' (1902-0136). The Commission's

Financial Services Division uses the data for determination of the

amount of annual charges to be assessed licensees for reimbursable

government administrative costs. The Commission will submit to the OMB

a notification that these collections of information have been

modified. [[Page 15047]]

Interested persons may obtain information on these reporting

requirements by contacting the Federal Energy Regulatory Commission,

941 North Capitol Street NE., Washington, DC 20426 (Attention: Michael

Miller, Information Services Division, (202) 208-1415). Comments on the

requirements of this rule can be sent to the Office of Information and

Regulatory Affairs of OMB (Attention: Desk Officer for Federal Energy

Regulatory Commission).

VIII. Effective Date

This final rule is effective April 21, 1995.

List of Subjects

18 CFR Part 11

Electric power, Reporting and recordkeeping requirements.

18 CFR Part 381

Electric power plants, Electric utilities, Natural gas, Reporting

and recordkeeping requirements.

Lois D. Cashell,

Secretary.

In consideration of the foregoing, the Commission amends parts 11

and 381 of chapter I, title 18, Code of Federal Regulations, as set

forth below.

PART 11--ANNUAL CHARGES UNDER PART I OF THE FEDERAL POWER ACT

1. The authority citation for part 11 continues to read as follows:

Authority: 16 U.S.C. 791a-825r; 42 U.S.C. 7101-7352.

2. Section 11.1 is revised to read as follows:

Sec. 11.1 Costs of administration.

(a) Authority. Pursuant to section 10(e) of the Federal Power Act

and section 3401 of the Omnibus Budget Reconciliation Act of 1986, the

Commission will assess reasonable annual charges against licensees and

exemptees to reimburse the United States for the costs of

administration of the Commission's hydropower regulatory program.

(b) Scope. The annual charges under this section will be charged to

and allocated among:

(1) All licensees of projects of more than 1.5 megawatts of

installed capacity; and

(2) All holders of exemptions under either section 30 of the

Federal Power Act or sections 405 and 408 of the Public Utility

Regulatory Policies Act of 1978, as amended by section 408 of the

Energy Security Act of 1980, but only if the exemption was issued

subsequent to April 21, 1995 and is for a project of more than 1.5

megawatts of installed capacity.

(3) If the exemption for a project of more than 1.5 megawatts of

installed capacity was issued subsequent to April 21, 1995 but pursuant

to an application filed prior to that date, the exemptee may credit

against its annual charge any filing fee paid pursuant to Sec. 381.601

of this chapter, which was removed effective April 21, 1995, 18 CFR

381.601 (1994), until the total of all such credits equals the filing

fee that was paid.

(c) Licenses and exemptions other than State or municipal. For

licensees and exemptees, other than State or municipal:

(1) A determination shall be made for each fiscal year of the costs

of administration of Part I of the Federal Power Act chargeable to such

licensees or exemptees, from which shall be deducted any administrative

costs that are stated in the license or exemption or fixed by the

Commission in determining headwater benefit payments.

(2) For each fiscal year the costs of administration determined

under paragraph (c)(1) of this section will be assessed against such

licenses or exemptee in the proportion that the annual charge factor

for each such project bears to the total of the annual charge factors

under all such outstanding licenses and exemptions.

(3) The annual charge factor for each such project shall be found

as follows:

(i) For a conventional project the factor is its authorized

installed capacity plus 150 times its annual energy output in millions

of kilowatt-hours.

(ii) For a pure pumped storage project the factor is its authorized

installed capacity.

(iii) For a mixed conventional-pumped storage project the factor is

its authorized installed capacity plus 150 times its gross annual

energy output in millions of kilowatt-hours less 100 times the annual

energy used for pumped storage pumping in million of kilowatt-hours.

(iv) For purposes of determining their annual charges factor,

projects that are operated pursuant to an exemption will be deemed to

have an annual energy output of zero.

(4) To enable the Commission to determine such charges annually,

each licensee whose authorized installed capacity exceeds 1.5 megawatts

must file with the Commission, on or before November 1 of each year, a

statement under oath showing the gross amount of power generated (or

produced by nonelectrical equipment) and the amount of power used for

pumped storage pumping by the project during the preceding fiscal year,

expressed in kilowatt hours. If any licensee does not report the gross

energy output of its project within the time specified above, the

Commission's staff will estimate the energy output and this estimate

may be used in lieu of the filings required by this section made by

such licensee after November 1.

(5) For unconstructed projects, the assessments start on the date

of commencement of project construction. For constructed projects, the

assessments start on the effective date of the license or exemption,

except for any new capacity authorized therein. The assessments for new

authorized capacity start on the date of commencement of construction

of such new capacity. In the event that construction commences during a

fiscal year, the charges will be prorated based on the date on which

construction commenced.

(d) State and municipal licensees and exemptees. For State or

municipal licensees and exemptees:

(1) A determination shall be made for each fiscal year of the cost

of administration under Part I of the Federal Power Act chargeable to

such licensees and exemptees, from which shall be deducted any

administrative costs that are stated in the license or exemption or

that are fixed by the Commission in determining headwater benefit

payments.

(2) An exemption will be granted to a licensee or exemptee to the

extent, if any, to which it may be entitled under section 10(e) of the

Act provided the data is submitted as requested in paragraphs (d) (4)

and (5) of this section.

(3) For each fiscal year the total actual cost of administration as

determined under paragraph (d)(1) of this section will be assessed

against each such licensee or exemptee (except to the extent of the

exemptions granted pursuant to paragraph (d)(2) of this section) in the

proportion that the authorized installed capacity of each such project

bears to the total such capacity under all such outstanding licenses or

exemptions.

(4) To enable the Commission to compute on the bill for annual

charges the exemption to which State and municipal licensees and

exemptees are entitled because of the use of power by the licensee or

exemptee for State or municipal purposes, each such licensee or

exemptee must file with the Commission, on or before November 1 of each

year, a statement under oath showing the following information with

respect to the power generated by the project and the disposition

thereof during the preceding fiscal year, expressed in kilowatt-hours:

[[Page 15048]]

(i) Gross amount of power generated by the project.

(ii) Amount of power used for station purposes and lost in

transmission, etc.

(iii) Net amount of power available for sale or use by licensee or

exemptee, classified as follows:

(A) Used by licensee or exemptee.

(B) Sold by licensee or exemptee.

(5) When the power from a licensed or exempted project owned by a

State or municipality enters into its electric system, making it

impracticable to meet the requirements of this section with respect to

the disposition of project power, such licensee or exemptee may, in

lieu thereof, furnish similar information with respect to the

disposition of the available power of the entire electric system of the

licensee or exemptee.

(6) The assessments commence on the date of commencement of project

operation. In the event that project operation commences during a

fiscal year, the charges will be prorated based on the date on which

operation commenced.

(e) Transmission lines. For projects involving transmission lines

only, the administrative charge will be stated in the license.

(f) Maximum charge. No licensed or exempted project's annual charge

may exceed a maximum charge established each year by the Commission to

equal 2.0 percent of the adjusted Commission costs of administration of

the hydropower regulatory program. For every project with an annual

charge determined to be above the maximum charge, that project's annual

charge will be set at the maximum charge, and any amount above the

maximum charge will be reapportioned to the remaining projects. The

reapportionment will be computed using the method outlined in

paragraphs (c) and (d) of this section (but excluding any project whose

annual charge is already set at the maximum amount). This procedure

will be repeated until no project's annual charge exceeds the maximum

charge.

(g) Commission's costs. (1) With respect to costs incurred by the

Commission, the assessment of annual charges will be based on an

estimate of the costs of administration of Part I of the Federal Power

Act that will be incurred during the fiscal year in which the annual

charges are assessed. After the end of the fiscal year, the assessment

will be recalculated based on the costs of administration that were

actually incurred during that fiscal year; the actual costs will be

compared to the estimated costs; and the difference between the actual

and estimated costs will be carried over as an adjustment to the

assessment for the subsequent fiscal year.

(2) The issuance of bills based on the administrative costs

incurred by the Commission during the year in which the bill is issued

will commence in 1993. The annual charge for the administrative costs

that were incurred in fiscal year 1992 will be billed in 1994. At the

licensee's option, the charge may be paid in three equal annual

installments in fiscal years 1994, 1995, and 1996, plus any accrued

interest. If the licensee elects the three-year installment plan, the

Commission will accrue interest (at the most recent yield of two-year

Treasury securities) on the unpaid charges and add the accrued interest

to the installments billed in fiscal years 1995 and 1996.

(h) In making their annual reports to the Commission on their costs

in administering Part I of the Federal Power Act, the United States

Fish and Wildlife Service and the National Marine Fisheries Service are

to deduct any amounts that were deposited into their Treasury accounts

during that year as reimbursements for conducting studies and reviews

pursuant to section 30(e) of the Federal Power Act.

(i) Definition. As used in paragraph (c) of this section,

authorized installed capacity means the lesser of the ratings of the

generator or turbine units. The rating of a generator is the product of

the continuous-load capacity rating of the generator in kilovolt-

amperes (kVA) and the system power factor in kW/kVA. If the licensee or

exemptee does not know its power factor, a factor of 1.0 kW/kVA will be

used. The rating of a turbine is the product of the turbine's capacity

in horsepower (hp) at best gate (maximum efficiency point) opening

under the manufacturer's rated head times a conversion factor of 0.75

kW/hp. If the generator or turbine installed has a rating different

from that authorized in the license or exemption, or the installed

generator is rewound or otherwise modified to change its rating, or the

turbine is modified to change its rating, the licensee or exemptee must

apply to the Commission to amend its authorized installed capacity to

reflect the change.

(j) Transition. For a license having the capacity of the project

for annual charge purposes stated in horsepower, that capacity shall be

deemed to be the capacity stated in kilowatts elsewhere in the license,

including any amendments thereto.

3. In Sec. 11.6, the heading, the introductory text of paragraph

(a), and paragraph (i), are revised, and the cross-reference at the end

of the section is removed, to read as follows:

Sec. 11.6 Exemption of State and municipal licensees and exemptees.

(a) Bases for exemption. A State or municipal licensee or exemptee

may claim total or partial exemption from the assessment of annual

charges upon one or more of the following grounds:

* * * * *

(i) Application for exemption. Applications for exemption from

payment of annual charges shall be signed by an authorized executive

officer or chief accounting officer of the licensee or exemptee and

verified under oath. An original and three copies of such application

shall be filed with the Commission within the time allowed (by

Sec. 11.28) for the payment of the annual charges. If the licensee or

exemptee, within the time allowed for the payment of the annual

charges, files notice that it intends to file an application for

exemption, an additional period of 30 days is allowed within which to

complete and file the application for exemption. The filing of an

application for exemption does not by itself alleviate the requirement

to pay the annual charges, nor does it exonerate the licensee or

exemptee from the assessment of penalties under Sec. 11.21. If a bill

for annual charges becomes payable after an application for an

exemption has been filed and while the application is still pending for

decision, the bill may be paid under protest and subject to refund.

4. Section 11.20 is revised to read as follows:

Sec. 11.20 Time for payment.

Annual charges must be paid no later than 45 days after rendition

of a bill by the Commission. If the licensee or exemptee believes that

the bill is incorrect, no later than 45 days after its rendition the

licensee or exemptee may file an appeal of the bill with the Chief

Financial Officer. No later than 30 days after the date of issuance of

the Chief Financial Officer's decision on the appeal, the licensee or

exemptee may file a request for rehearing of that decision pursuant to

Sec. 385.713 of this chapter. In the event that a timely appeal to the

Chief Financial Officer or a timely request to the Commission for

rehearing is filed, the payment of the bill may be made under protest,

and subject to refund pending the outcome of the appeal or rehearing.

PART 381--FEES

5. The authority citation for Part 381 is revised to read as

follows:

Authority: 15 U.S.C. 717-717w; 16 U.S.C. 791-828c, 2601-2645; 31

U.S.C. 9701; 42 [[Page 15049]] U.S.C. 7101-7352; 49 U.S.C. 60502; 49

App. U.S.C. 1-85.

6. Section 381.601 is removed and subpart F is reserved.

Appendix A

(Note: This Appendix will not be published in the Code of

Federal Regulations.)

Commenters

Adirondack Hydro Development Corp. (Adirondack)

Adrian Haemmig (Haemmig)

Alabama Power Company (Alabama Power)

Alaskan Utilities (Alaskan)

Allegheny Power System (Allegheny)

American Public Power Association (APPA)

Association of California Water Agencies (Water Assn.)

Calaveras County Water District (Calaveras)

California Department of Water Resources (Cal. Water)

Calleguas Municipal Water District (Calleguas)

Central Maine Power (Central Maine)

City of Ann Arbor, Michigan (Ann Arbor)

City of Spokane, Washington (Spokane)

City of Tallahassee, Florida (Tallahassee)

Columbus Department of Public Utilities (Columbus)

Connecticut Small Power Producers Association (Conn. Producers)

Consolidated Pumped Storage, Inc. (Consolidated)

Consumers Power Company (Consumers Power)

Desert Water Agency (Desert)

Duke Power Company (Duke)

Eagle Mountain Energy (Eagle)

Edison Electric Institute (EEI)

Energy Storage Partners (Storage Partners)

Fairfax County Water Authority (Fairfax)

Falls Creek H.P.

Friant Power Authority (Friant)

Georgia Power Company (Georgia)

Great Bear Hydropower, Inc. (Bear)

Humboldt Bay Municipal Water District, Kaweah River Power Authority,

and Nevada Irrigation District (Humboldt)

Hydro Energy Storage Council (Storage Council)

Idaho Power Company (Idaho Power)

Independent Hydro Developers, Inc. (Independent)

James B. Adkins (Adkins)

James C. Katsekas (Katsekas)

John E. Howard (Howard)

Kvaerner Energy Development and Halecrest Company (Kvaerner)

Lassen Research (Lassen)

McCallum Enterprises Limited Partnership (McCallum)

Michiana Hydroelectric Company (Michiana)

Montecito Water District (Montecito)

National Hydro

Noah Corp.

North American Hydro, Inc. (North American)

Northern California Power Agency and the City of Santa Clara,

California (No. Cal. Power)

Ogden Environmental and Energy Services (Ogden)

Oklahoma Municipal Power Authority (Okl. Authority)

Otter Tail Power Company (Otter Tail)

Pacific Gas and Electric Company (PG&E)

Pennsylvania Power & Light Company (Pennsylvania Power)

Portland General Electric Company (Portland Co.)

Potlatch Corporation (Potlatch)

Power Authority of the State of New York (PASNY)

Public Generating Pool (Public Pool)

Public Utility District No. 1 of Chelan County, Washington (Chelan)

Public Utility District No. 1 of Douglas County, Washington

(Douglas)

Public Utility District No. 2 of Grant County, Washington (Grant)

Richard G. Mackowiak (Mackowiak)

Sabine River Authority of Texas and Sabine River Authority, State of

Louisiana (Sabine)

Sacramento Municipal Utility District (SMUD)

Seattle City Light (Seattle Light)

Snohomish County, Washington, Public Utility District No. 1

(Snohomish)

South Carolina Electric & Gas Company (Carolina Electric)

Summit Hydropower (Summit)

Susquehanna Power Company and Peco Energy Power Company

(Susquehanna)

Synergics Energy Development, Inc. (Synergics)

Tacoma Public Utilities (Tacoma)

U.S. Forest Service

U.S. Small Business Administration

Virginia Electric and Power Company (Virginia Electric)

Washington State Energy Office (Washington Office)

Washington Water Power Company (Washington Company)

Westinghouse Electric Company (Westinghouse)

Zoes J. Dimos (Dimos)

[FR Doc. 95-6979 Filed 3-21-95; 8:45 am]

BILLING CODE 6717-01-P