FEDERAL ENERGY REGULATORY COMMISSION 

WASHINGTON, DC 20426 

OFFICE OF THE CHAIRMAN 

The Honorable John Boehner 

Office of the Speaker of the House 

U.S. House of Representatives 

H-232 

Washington, D.C. 20515 

Dear Speaker Boehner: 

October 17, 2013 

I am pleased to enclose the Federal Energy Regulatory Commission's fifth report 

on government dam use charges under Section 10(e)(2) of the Federal Power Act. 

Section 1 0( e)( 4) of the Act requires that every five years the Commission review and 

report to Congress on the appropriateness of the statutory limits on the charges. 

The report recommends that the limits set by Section 1 0( e )(2) remain unchanged. 

Enclosure 

Cc: The Honorable Fred Upton 

The Honorable Henry Waxman 

The Honorable Ed Whitfield 

The Honorable Bobby L. Rush 

Sincerely, 
FEDERAL ENERGY REGULATORY COMMISSION 

WASHINGTON, DC 20426 

OFFICE OF THE CHAIRMAN 

The Honorable Joseph R. Biden, Jr. 

President 

United States Senate 

S-212 U.S. Capitol 

Washington, D.C. 20510 

Dear Mr. President. 

October 17, 2013 

I am pleased to enclose the Federal Energy Regulatory Commission's fifth report 

on government dam use charges under Section 10(e)(2) of the Federal Power Act. 

Section 1 0( e)( 4) of the Act requires that every five years the Commission review and 

report to Congress on the appropriateness of the statutory limits on the charges. 

The report recommends that the limits set by Section 10(e)(2) remain unchanged. 

Enclosure 

Cc: The Honorable Ron Wyden 

The Honorable Lisa Murkowski 
FEES FOR THE USE OF GOVERNMENT DAMS 

FIFTH REPORT TO CONGRESS 

OF THE FEDERAL ENERGY REGULATORY COMMISSION 

EXECUTIVE SUMMARY 

Pursuant to Section 10(e)(1) ofthe Federal Power Act (FPA), the Federal Energy 

Regulatory Commission (Commission) levies and collects annual charges from the 

licensees of hydroelectric projects that use government dams or other structures owned 

by the United States. FPA Section 10(e)(2) imposes limits on those fees, and FPA 

Section 1 0( e)( 4) requires that the Commission review the appropriateness of these 

statutory limits and report to Congress its recommendations thereon. 

The Commission has reviewed the fees in consideration of their statutory purposes 

and in light of current economic and regulatory trends and the Hydropower Regulatory 

Efficiency Act of 20 13. We conclude that the fees continue to provide reasonable 

compensation to the government. While in the last five years some licenses for both 

constructed and unconstructed projects at government dams have been surrendered or 

terminated, there is no indication that the dam-use fees played a role in such outcomes. 

In addition, the Commission has issued 18 new licenses to projects located on 

government dams in the last five years that will be subject to these fees when they begin 

to generate power. This report therefore recommends to Congress that the limits set by 

Section 1 0( e )(2) remain at their present levels. 
Introduction 

FEES FOR THE USE OF GOVERNMENT DAMS 

FIFTH REPORT TO CONGRESS 

OF THE FEDERAL ENERGY REGULATORY COMMISSION 

The Electric Consumers Protection Act (ECP A), which became law on 

October 16, 1986, amended those portions of Section IO(e) ofthe Federal Power Act 

(FPA) that authorize the Commission to collect annual charges from hydropower 

licensees whose projects make use of government dams or other structures owned by the 

United States. 

As amended by ECPA, Section 10(e)(2) ofthe FPA states: 

In the case of licenses involving the use of Government dams or 

other structures owned by the United States, the charges fixed (or 

readjusted) by the Commission under [Section IO(e)(l)] for the use of such 

dams or structures shall not exceed 1 mill per kilowatt-hour for the first 40 

gigawatt-hours of energy a project produces in any year, 1 112 mills per 

kilowatt-hour for over 40 up to and including 80 gigawatt-hours in any 

year, and 2 mills per kilowatt-hour for any energy the project produces over 

80 gigawatt-hours in any year. Except as provided in [Section 1 O(f)], such 

charge shall be the only charge assessed by any agency of the United States 

for the use of such dams or structures. 

Section 1 0( e)( 4) states: 

Every 5 years, the Commission shall review the appropriateness of 

the annual charge limitations provided for in [Section 10(e)(2)] and report 

to Congress concerning its recommendations thereon. 

In 2012, such charges were collected from 59 projects. In the last five years, from 

2008 to 2012, $15,854,289.74 has been assessed. An additional18 projects will be 

subject to charges when they begin to generate power. 

This is the fifth five-year report on the appropriateness of the Section 10(e)(2) 

annual charge limitations. The report consists of four sections: a brief discussion of the 

history of charges for the use of government dams, a review of the amounts collected by 

the Commission for such use, an examination of economic factors bearing on the 

appropriateness of the charge limitations, and the Commission's recommendations 

concerning the need for modification of the charges. 

- 2 -
History of Charges for Use of Government Dams 

Before 1984, the Commission assessed charges for the use of government dams 

and other United States structures (hereinafter, government dam use charges) on a caseby-case basis, usually charging licensees 50 percent of the shared net benefit. The 

project's net benefit was defined as the difference between the value of the power (taken 

as the least expensive alternative power) and the cost of project power (computed from 

the costs of building and operating the project). 

In 1984,1 the Commission simplified its federal dam use charges by adopting 

graduated flat rates, concluding that this method "best balances the statutory goals of 

providing a reasonable return to the Federal government, encouraging hydropower 

development, especially small projects, and minimizing costs to consumers." 2 

In ECPA, Congress adopted the method and rate levels of the Commission's new 

charges, fixed these rates as the maximum allowable, and specified that these rates shall 

be the only federal dam use charges assessed by any agency ofthe United States.3 The 

Commission currently levies these maximum values, as it has since adopting them in 

1984. 

Amounts Collected Under Section 10(e)(2) 

In 2012, 59 ofthe 1,018 projects under Commission license4 

were assessed 

1 Annual Charges for Use a/Government Dams and Other Structures under Part I 

of the Federal Power Act, 49 Fed. Reg. 22770 (June 1, 1984), FERC Stats. and Regs., 

Regulations Preambles (1982-1985) ~ 30,570 (1984) (Order No. 379). 

2 !d. at 30,947. 

3 The Commission also collects: (a) from major licensees (those with installed 

capacities greater than 1,500 kW) annual charges for administration of Part I of the FPA 

and for use of government lands, pursuant to FP A Section 1 0( e)( 1 ); and, (b) from 

licensees that enjoy headwater benefits from government projects, charges pursuant to 

FPA Section IO(t). The government dam use charges discussed herein constituted about 

8 percent ofthe Commission's total Section IO(e) and (t) annual charge collections for 

fiscal year 2012. 

4 Projects exempted from licensing under Section 30 of the FPA or Section 405(d) 

of the Public Utility Regulatory Policies Act of 1978, 16 U.S.C. § 2705 (2012), are not 

subject to government dam use charges because, to qualify for such exemptions, they 

may not use government dams or other structures. 

- 3-
government dam use charges under Section IO(e)(2) ofthe FPA. In 2008, 59 projects 

were assessed such charges. The amounts assessed annually from 2008 through 2012 are 

shown below: 

Year 

2008 

2009 

2010 

2011 

2012 

Amount 

$2,759,627.91 

$2,914,93 7.63 

$3,286,713.90 

$3,599,533.86 

$3,293,476.44 

Number ofProjects5 

59 

56 

57 

56 

59 

In addition, there are currently 18 projects under license at government dams that 

are not being charged pending completion of construction and generation ofpower.6 

Economic Considerations 

The benefit that a licensee enjoys by use of a government dam depends primarily 

upon the value ofthe energy produced. Since ECPA was enacted in 1986, no appreciable 

change occurred in the benefit to licensees of using government dams (Figure below).7 

We therefore conclude that the current maximum charges in FPA Section 10(e)(2) 

continue to provide appropriate compensation to the government. 

5 This is the number of projects that were assessed actual annual charges for use of 

a government dam for the particular year, but the total number of operational and 

constructed projects subject to dam charges is 98. Some projects were granted yearly 

waivers or exemptions from annual charges, while other projects for various reasons were 

not assessed charges in a particular year. 

6 Of the 18 licenses, two are stayed; five are undergoing construction; and eleven 

are undergoing pre-construction activities. An additional nineteenth project license was 

issued but subsequently surrendered. 

7 For additional tables and details, visit Department of Energy, Energy Information 

Administration Web Page, http://www.eia.doe.gov/fuelelectric.html. 

- 4 -
Figure 8.10 Average Retail Prices of Electricity 

Total, 19Gtl-201t 

12-

2-....._ __ __ 

1960 1!165 19~5 1~>·1~ 

By s..ctor, Nomi""P Prices, 1960-2011 

12-

0 I II I ,Jas 

' 1n - (2005] -.&. calculalld Dy 1151rg !PI& dln!OIOIIIc p!ldUC!ImpfiCII ~ llotlararu•T-0!. 5ee"CC'lalnei!Dalar5"111GICIOOiaf}. 

·see-PI'Ia!"II!G.......,. 

Recommendation 

By Sector, 2011 

14-

~~-·-

By Sedor, Re~ Prices, 1960-2011 

15-

Given that no appreciable change has occurred in the benefit to licensees of using 

government dams, we recommend that the Congress make no change in the annual 

charge limitations of Section 1 0( e )(2) of the FP A. 

- 5 -