1999 ANNUAL REPORT

FEDERAL

ENERGY

REGULATORY

COMMISSION
Cover photo courtesy of Idaho Power Company
FEDERAL ENERGY

REGULATORY COMMISSION

1999 ANNUAL REPOR T

For sale by the U.S. Government Printing Office

Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328

ISBN 0-16-050361-2
MEMBERS OF THE FEDERAL

ENERGY REGULATORY COMMISSION

James J. Hoecker

Chairman

Vicky A. Bailey

Commissioner

Linda K. Breathitt

Commissioner

Curt L. Hebert, Jr.

Commissioner

William L. Massey

Commissioner

TABLE OF CONTENTS

Members of the Federal Energy Regulatory Commission 2

Letter from the Chairman 3

Overview 4

Energy Markets 10

Energy Projects 19

Hydroelectric Power Table 30

2
LETTER FROM THE CHAIRMAN

To the Senate and House of Representatives:

I am pleased to submit to the Congress the Federal Energy Regulatory Commission’s

annual report, covering the fiscal year from October 1, 1998, through September 30,

1999.

This is the 79th report issued by the Commission and its predecessor, the Federal

Power Commission. As an independent agency, the Commission oversees key

operating functions of the natural gas, electric utility, hydroelectric power, and oil

pipeline transportation industries.

This Annual Report is unique. The agency now operates at the crossroads of a new

energy economy. As this report indicates, Fiscal Year 1999 was a period in which the

Commission was preparing to change its organization, regulatory approaches, and

management culture to permit it to be more responsive to fundamental changes in all

regulated industries. For the first time, the annual report is organized according to the

agency’s two key regulatory processes, around which its staff has been reconfigured:

developing and maintaining competitive energy markets and authorizing and

overseeing energy projects in the public interest. The Commission’s strategic

direction is to maintain strong environmental and safety regulation and economic

regulation that will be sufficiently strong until the competitive market can evolve to

assume much of that responsibility.

For fiscal year 1999, Congress appropriated $167.5 million to support Commission

activities. Under the authority of the Omnibus Budget Reconciliation Act of 1986

and other laws, the Commission recovers all of its costs from regulated industries

through fees and annual charges. Revenues generated from these sources completely

offset congressional appropriations and therefore result in a net cost to the treasury

of zero dollars. As a result, the users and beneficiaries of the Commission’s

services—not the general taxpayers—pay its operating costs.

The Commission remains dedicated to protecting the economic welfare of American

consumers of energy and to ensuring a healthy, competitive, and efficient energy

industry.

Respectfully,

James J. Hoecker

Chairman

3
OVERVIEW

The Federal Energy Regulatory Commission (FERC) administers

numerous laws and regulations involving key energy issues. These

include: transportation of natural gas in interstate commerce; transportation of oil by pipeline in interstate commerce; transmission

and wholesale sales of electric energy in interstate commerce; licensing and inspection of private, municipal, and state hydroelectric projects; and oversight of related environmental matters. The

law requires the Commission’s economic regulatory activity because

the transmission of electricity, natural gas and oil is often a natural

monopoly.

Preparing the Commission to meet the challenges of the 21st

Century means adapting to new energy market conditions and information technologies, and improving processes for greater productivity and cost control. Where possible, the Commission now

promotes market competition as a substitute for command-and-control regulation. It is undergoing a major reengineering as it prepares

to take on the new challenges.

Under its FERC First reengineering, the Commission is changing its core approach to regulation and revamping its working environment as well as undertaking internal restructuring. In Fiscal ’99,

it moved from the design phase to implementation, which is due to

be completed in 2000.

 The Commission considers communication with its wide range

of constituents (e.g., landowners, utility industries, environmentalists, etc.) to be critical. The Commission has undertaken a systematic effort to enhance relationships with Congress, federal and state

agencies, and other stakeholders, to improve overall coordination

and communication.

As the fiscal year ended, Y2K issues were a key concern. The

Oil and Gas Sector Working Group, headed by Chairman Hoecker

and sponsored by the President’s Council on Year 2000 Conversion,

was a model of cooperation between industry and government, working to address the Y2K issues at a national level and reaching out to

individual companies.

Meantime, the industries the Commission regulates are rapidly

changing their structures, operations, and investment strategies, reflecting a continuing evolution toward greater competition and a

convergence of natural gas and electric power markets. All the while,

the public is placing more value on environmental accountability,

causing tension between the need for energy supplies, with the complex supporting infrastructures, and the need for a healthy environment. As a result, other government agencies, industry participants,

and the public are becoming increasingly active in Commission proceedings and the Commission is actively engaged in balancing these

competing public values.

Natural Gas and Electric Markets

Expanding Competition. Natural gas commodity markets are competitive, and electricity as a commodity is increasingly sold at market rates. In both industries, competition to supply the basic commodity has required a new regulatory infrastructure. The

Commission’s challenge: to formulate a regulatory approach that

promotes competition while protecting customers from residual

market power.

Support in Congress and successive administrations for expanding competition in the natural gas, oil pipeline, and electric power

industries has also been a force for change. The Commission’s policies, such as open access to the electric transmission and natural gas

transportation systems, have contributed significantly to this growth

in competition. The result has been vastly increased competition in

both natural gas and electricity commodity markets and increasing

competition in natural gas transportation services.

New Market Institutions. The Commission’s open access policies

have led to greater variety in regulated services and also to the existence of a well-functioning market that serves as a platform for a

number of nontraditional services. Market and technology demands

are creating a need for regionalization. In electricity, regional transmission organizations (RTOs) promise to provide more efficient

pricing. Futures markets in both natural gas and electricity have

provided price transparency and a basis for hedging risk. These and

other innovative services have provided shippers and other market

participants with substantial savings.

Industry Structure Changes. As with many other industries undergoing regulatory transformation, the natural gas and electric industries are realigning themselves. In some cases this means restructuring along functional lines. For example, in the electric industry there is a tendency for companies to separate vertically so

that generation and transmission are handled by different companies. Then, within each sector, there is a natural tendency toward

consolidation. This consolidation can raise competitive issues by

reducing the number of energy providers. The significance of mergers and affiliate issues is greater than in the past, especially for generation, as the country relies more on competition to protect customers from market power.

Both mergers and divestitures have increased since the Commission issued its open access policies. By law, the Commission

reviews changes in ownership or control of electric transmission

facilities. The Commission must first decide whether particular

mergers are in the public interest and then monitor for overly concentrated markets and undue exercises of market power.

Growing Electronic Commerce. Electronic commerce is redefining the nature of the natural gas and electric business transactions.

Transactions are increasingly completed on the Internet. Both natural gas and electricity companies are moving from using electronic

bulletin boards to Internet websites. In addition, the electric industry is moving from manual to electronic tagging of transactions.

Electronic commerce is particularly important for the natural gas

and electricity industries. Natural gas and electric prices change very

rapidly in response to quickly changing market conditions. Electronic commerce promises to give more customers more control

over their energy use and the prices they pay to use it. This will

allow greater efficiency and may help dampen price volatility.

FERC M ISSION S T A TEMEN T

THE COMMISSION REGULATES KEY INTERSTATE ASPECTS OF

THE ELECTRIC POWER, NATURAL GAS, OIL PIPELINE, AND

HYDROELECTRIC INDUSTRIES. THE COMMISSION CHOOSES

REGULATORY APPROACHES THAT FOSTER COMPETITIVE

MARKETS WHENEVER POSSIBLE, ASSURES ACCESS TO

RELIABLE SERVICE AT A REASONABLE PRICE, AND GIVES

FULL AND FAIR CONSIDERATION TO ENVIRONMENTAL AND

COMMUNITY IMPACTS IN ASSESSING THE PUBLIC INTEREST

OF ENERGY PROJECTS.

4
OVERVIEW

Convergent Industries. A significant and increasing convergence

between the natural gas and electric industries raises significant

opportunities and challenges for both the industries and the Commission. For example, in some cases, natural gas pipelines and electric transmission services may begin to compete with each other. At

the same time, consolidation mergers that bring natural gas and electric companies together could reduce competition. Natural gas companies also may attempt to leverage the value of natural gas by developing the electric power side of their businesses. Part of the

broader trend toward restructuring businesses includes other forms

of diversification, such as joint energy-telecommunications ventures.

Competing Interests in Projects

As environmental issues are more forcefully advocated in the

Commission’s proceedings and as international competition increases, the Commission’s responsibility to accommodate competing interests becomes difficult and highly charged. There is a greater

need for collaborative decision making among all affected parties

and for increased cooperation among involved agencies.

Hydropower Licensing. Because hydropower is economical, clean,

renewable, and flexible, it is a valuable part of the nation’s energy

mix. The Commission strives to maintain sustainable hydropower.

But projects are capital intensive, and the measures needed to bring

them into environmental and safety compliance can be costly.

Projects must be economically viable, and development must be

responsive to environmental needs and sensitive to other water use

demands.

New environmental issues arise whenever projects licensed 30

to 50 years ago come up for license renewal. Interest in the environmental effects of hydropower operations increases every year. The

Commission must share with numerous state and federal agencies

its authority to condition licenses. New licenses tend to include additional requirements as a result of heightened environmental concerns and the need to comply with environmental laws, so each relicensing case leads to an additional, ongoing monitoring effort

throughout the life of the license. Issues arising after licensing can

be contentious, making resolution and decisions difficult.

Natural Gas Pipeline Certification. Growing demand for natural

gas in New England, the Mid-Atlantic, and the Midwest will continue to drive an increase in applications for major pipeline extensions and new pipelines. Meanwhile, wholesale customers have become responsible for their own gas supply acquisition, and they

have demanded more flexible arrangements. The Commission expects more applications for storage development and liquefied natural gas facilities to provide peaking capability and supply flexibility. As the national pipeline grid ages, the Commission anticipates a

significant number of applications for upgrading facilities in the

interests of safety and future growth.

Pipelines are facing increased opposition from landowners as

new projects are proposed in more heavily populated areas. In these

cases, the Commission must balance the benefits of new or competing supplies of natural gas against the environmental impacts of a

project and the potential market impacts of additional capacity. Landowners increasingly question the right of pipelines to use eminent

domain in cases where the market determines the need for the project.

Also, pipelines have concerns about the timely receipt of various

environmental permits. As the certificate cases become more contentious, the Commission must devise ways to issue certificates and

address the intervening parties’ concerns.

Better Processes

Information Technology (IT) and Electronic Filing. In June 1999,

the Commission amended its rules to permit participants in proceedings to voluntarily serve documents on one another electronically. The change was an important step in the Commission’s plan

to convert to a broad-based electronic policy. In the next fiscal year,

the Commission will expand this initiative to allow additional electronic filing under a pilot program.

The Commission is constantly improving the stability and reliability of its local and wide area networks. Increased network reliability increases individual productivity and helps reduce the cost

to those outside the Commission that rely on the Commission’s information technology infrastructure to conduct business.

Revised Complaint Procedures. In FY 1999, the Commission revised its procedures for handling complaints. The changes will ensure that all complaints will be handled in a timely, efficient and

fair manner in light of the significant, market-driven changes occurring in the industries that the Commission regulates. The revised

procedures provide an early warning system for identifying potential market problems and enable the Commission to respond more

effectively to activities in the marketplace. Timely response to complaints also helps protect the interests of aggrieved parties.

FERC VISION AND VALUES STATEMENT

VISION

PROMOTING COMPETITIVE MARKETS

PROTECTING CUSTOMERS

RESPECTING THE ENVIRONMENT

SERVING AND SAFEGUARDING THE PUBLIC

VALUES

EMPLOYEES–PEOPLE ARE OUR MOST VALUED ASSET. WE PROVIDE THE

SUPPORT NEEDED FOR ALL EMPLOYEES TO EXCEL.

INTEGRITY–WE MAINTAIN THE HIGHEST LEVEL OF PROFESSIONALISM

AND AN ENVIRONMENT OF FAIRNESS, TRUST, RESPECT, AND HONESTY.

DIVERSITY–WE VALUE DIVERSITY IN PEOPLE AND IDEAS.

WORKING TOGETHER–WE CLEARLY COMMUNICATE EXPECTATIONS,

ENCOURAGE COOPERATION AND TEAMWORK, AND SHARE

RESPONSIBILITY.

PROGRESS AND INNOVATION–WE ARE CREATIVE AND FLEXIBLE, AND

SEEK OUT OPPORTUNITIES TO IMPROVE.

ACTION–PROMPT AND FAIR RESOLUTION OF MATTERS BEFORE THE

COMMISSION IS ESSENTIAL TO OUR MISSION.

REACHING OUT–TWO-WAY COMMUNICATION WITH THE PUBLIC IS KEY

TO OUR EFFECTIVENESS.

PUBLIC SERVICE–OUR ULTIMATE OBJECTIVE IS TO PROVIDE VALUED

SERVICES TO THE PUBLIC.

5
OVERVIEW

FERC First: Retooling Work Processes

In FY 1997, the Commission leadership acknowledged that it would

need to fundamentally reexamine and, if warranted, change most of

the Commission’s existing work processes if it was going to maintain the value and relevance of its mission, control its costs, and

meet the challenges posed by changes in regulated industries.

Why Reengineer? The Commission was beginning to replace command-and-control regulation with market-responsive approaches.

These approaches increasingly focus on whole natural gas, oil, or

electric markets and regional issues as well as the rates and services

of individual companies. They also will rely more heavily on market monitoring and complaint processes rather than more traditional

casework. The Commission also saw the need for more collaboration with other entities—government agencies, reliability councils,

and market institutions, as well as traditional parties. Greater outreach became essential. These changes required new business processes, new organizational structures, and a new leadership culture.

Nothing short of a complete review and retooling would allow the

Commission to adapt fully to the new challenges.

Review of Existing Processes. FERC First, a comprehensive analysis of how the agency currently does business and how it must change

to meet the demands of the future, was undertaken at the direction

of the Chairman. FERC First reviewed, among other things, process coherence and coordination, priority setting, layers of review,

staff competencies, IT requirements, speed of IT implementation,

and communication.

FERC First also identified broad trends in the external business, technology, and energy use environments. Trends impacting

the Commission’s economic regulation include increasingly competitive markets, greater reliance on market institutions, industry

consolidation, and converging industries. Trends that affect regulation of energy projects are growing environmental accountability,

overlapping responsibilities, and greater reliance on consensual decision making. The Commission also solicited the views of external

constituents.

Planning Phase. An initial response to this comprehensive review

was the development of a coherent vision, mission, and values statement that builds continuous improvement and outreach into what

the Commission intends to achieve in its work with industry, customers, Congress, intervening and other interested entities, and the

general public. Key focuses for the future also were identified: Anticipation of restructuring, focus on market power, development of

new and innovative approaches to traditional regulation, early resolution of disputes, reevaluation of facilities and projects consistent

with the changing market structure, and a focus on markets, not just

companies. Other identified focuses were improving regulations to

encourage competitive markets and renewing the Commission’s

focus on environmental responsibility as part of its regulatory obligation.

FERC First defined seven major process initiatives, covering

most of the Commission’s work. Each of these initiatives is leading

to a key innovation in the way the Commission does its work. Together these innovations represent an integrated package that will

enable the Commission to meet the challenges it faces in the new

century (see box on page 7).

Change Implementation. During FY 1999, the Commission has

been implementing these initiatives. Milestones have included the

creation of the Office of Administrative Litigation, combining legal

and technical staff to handle litigation; creation of the Dispute Resolution Service, a service-oriented center of alternative dispute resolution (ADR) to promote the consensual resolution of disputes; instituting employee and management development plans; and finalizing organization plans for the Office of Strategy and Organizational Management, the Office of Markets, Tariffs, and Rates, and

the Office of Energy Projects.

The new FERC will communicate better with constituents, have

clear strategic direction and technological sophistication, and make

faster decisions. Internal operations will make greater and more effective use of teams, fewer layers of review, and consensus-based

resolution of issues. The Commission will improve staff competencies through strategic planning, improving leadership skills, making use of new methods for encouraging learning and sharing of

knowledge, and giving greater recognition to employee responsibility and empowerment.

The Commission’s reengineering effort will prepare it for the

21st Century and represents a comprehensive response to both the

letter and the spirit of the 1993 National Performance Review and

the Government Performance and Results Act of 1993.

6
OVERVIEW

◆ Initiatives ❖ Key Strategies

◆ Promoting competitive markets ❖ Combining economic regulation of gas, electric, and oil

industries in a new Office of Markets, Tariffs and Rates

to focus on monitoring market activities and identifying

potential competitive problems

◆ Authorizing and monitoring energy projects ❖ Integrating licensing and certification activities,

including coordinated analysis of environmental

impacts, for sustainable energy projects, both gas and

hydropower, in a new Office of Energy Projects

◆ Resolving disputes ❖ Promoting early resolution of contested matters and

complaints by consensual decision making, focusing on

ADR and the imposition of time limits for decisions, in

the new Office of Administrative Litigation and a new

Dispute Resolution Service

◆ Building bridges ❖ Engaging in systematic efforts to build relationships

with Congress, federal and state agencies, and other

stakeholders spearheaded by the Office of External

Affairs

◆ Strategic planning ❖ Employing a more robust process for managing

strategically, developing and updating the Commission’s

strategic plan, and establishing performance

measurements for assessing success in reaching agency

goals in a new Office of Strategy and Organizational

Management

◆ Managing information technology ❖ Implementing a largely paper-free regulatory

environment with electronic filing, workflow

management, and document posting in a strengthened

Office of the Chief Information Officer

◆ Developing employees ❖ Aligning FERC’s human resources efforts, hiring,

promotion, and employee development, with its

strategic plan and objectives, also within the Office of

Strategy and Organizational Management

FERC FIRST INITIATIVES AND INNOVATIONS

7
OVERVIEW

COMMISSIONER COMMISSIONER CHAIRMAN COMMISSIONER COMMISSIONER

FEDERAL ENERGY REGULATORY COMMISSION (FERC)

OFFICE OF THE SECRETARY

DIVISION OF

CONGRESSIONAL,

INTERGOVERNMENTAL

AND PUBLIC AFFAIRS

DIVISION OF PRESS

SERVICES

OFFICE OF FINANCE,

ACCOUNTING AND

OPERATIONS

10/25/98*

OFFICE OF THE CHIEF

INFORMATION OFFICER

3/1/98*

OFFICE OF EXTERNAL

AFFAIRS

OFFICE OF

ADMINISTRATIVE LAW

JUDGES

OFFICE OF

ADMINISTRATIVE

LITIGATION

3/30/99*

DIVISION OF

ELECTRIC AND

HYDROPOWER

OPERATIONS

DIVISION OF GAS

AND OIL

OPERATIONS

DIVISION OF

PLANNING AND

POLICY

DEVELOPMENT

DIVISION OF

OPERATIONS

SUPPORT

DIVISION OF

MANAGEMENT,

ADMINISTRATIVE

AND PAYROLL

SUPPORT

DIVISION OF

INTERNAL

CONTROL AND

EVALUATION

DIVISION OF

BUDGET

DIVISION OF

FINANCIAL POLICY

DIVISION OF

FINANCIAL

SERVICES

DIVISION OF

PROCUREMENT

DIVISION OF

LOGISTICS

MANAGEMENT

DIVISION OF OPINIONS

AND CORPORATE

APPLICATIONS

DIVISION OF POLICY

ANALYSIS AND

ADMINISTRATION

DIVISION OF RATE

APPLICATIONS

FERC REGIONAL

OFFICES

ATLANTA, PORTLAND,

CHICAGO, NEW YORK,

AND SAN FRANCISCO

DIVISION OF DAM

SAFETY AND

INSPECTIONS

DIVISION OF

LICENSING AND

COMPLIANCE

OFFICE OF HYDROPOWER

LICENSING

OFFICE OF ELECTRIC

POWER REGULATION

DATA AND FINANCIAL

ANALYSIS STAFF

DIVISION OF GAS

POLICY

DIVISION OF RATE

DESIGN

DIVISION OF ELECTRIC

POLICY

DIVISION OF

COMPETITION

ANALYSIS

OFFICE OF ECONOMIC

POLICY

DIVISION OF PIPELINE

CERTIFICATES

DIVISION OF PIPELINE

RATES: EAST

DIVISION OF PIPELINE

RATES: WEST

DIVISION OF

ENVIRONMENTAL AND

ENGINEERING REVIEW

DIVISION OF POLICY,

TECHNOLOGY AND

PLANNING

OFFICE OF PIPELINE

REGULATION

ASSOCIATE GENERAL

COUNSEL FOR ENERGY

PROJECTS AND

ENFORCEMENT

DIVISION OF

ADMINISTRATION

ASSOCIATE GENERAL

COUNSEL FOR

MARKETS, TARIFFS

AND RATES

DISPUTE RESOLUTION

SERVICE

OFFICE OF THE GENERAL

COUNSEL

SOLICITOR

FERC FIRST PROJECT

OFFICE

(SUNSETTED SEPT. 1999)

OFFICE OF STRATEGY

AND ORGANIZATIONAL

MANAGEMENT

10/25/98*

DIVISION OF HUMAN

RESOURCES

OFFICE OF STRATEGIC

PLANNING AND

PERFORMANCE

MANAGEMENT

*OFFICES CREATED IN FY98 AND FY99

IN ANTICIPATION OF 2000 ORGANIZATION

8
OVERVIEW

Target 2000 Organization

The Commission began to implement the Target 2000 organization

proposed by FERC First. While the existing organization’s offices

are segregated by industry, the new offices bring together the experts needed to handle each work process from beginning to end.

Further adaptations to the organizational design may occur as the

recommendations of FERC First reach full implementation in

FY 2000. The new offices include:

Office of Markets, Tariffs and Rates. The Commission is integrating its economic regulation of the natural gas and electric industries to ease resolution of issues arising from the convergence of

the two industries and maximize the realization of economic benefits. A comprehensive energy markets program will consider natural gas and electric industries together and look at short and long

term markets together.

Dispute Resolution Service. This office will lead the effort to increase the use of alternative dispute resolution throughout the Commission and provide ADR services to the industry.

Office of Energy Projects. The energy projects office will bring

together the environmental and engineering resources of both hydropower licensing and natural gas certification to address developmental, nondevelopmental, and safety issues related to energy

projects.

Office of Administrative Litigation. The new Office of Administrative Litigation will consolidate technical and legal trial staff for

more efficient handling of cases set for hearing.

Office of Strategy and Organizational Management. This new

office will coordinate future management review and change initiatives, and will align human resources with strategic planning.

Office of Information and Technology. The office was created to

oversee all Information Technology applications with the express

goal of reducing regulatory burdens, cutting processing times, simplifying filing processes, and generating better information for use

by industries and the public.

New Chapters in This Annual Report

The 1999 Annual Report is organized by energy markets and energy projects rather than according to the

electric, natural gas, oil pipeline and hydroelectric industries, as in the past. The new chapters contain the

following:

◆ Energy Markets: Functions associated with economic regulatory issues of competition, well-functioning

markets, and mitigating market power. This includes regulation of electric and natural gas rates, corporate

mergers, and other aspects of energy markets.

◆ Energy Projects: Functions associated with environmental, cultural, economic, and engineering issues

related to energy projects. This includes hydropower licensing and dam safety, certification of natural gas

pipeline construction, and environmental review of hydropower and natural gas projects.

SECRETARY

CHAIRMAN

STRATEGY AND

ORGANIZATIONAL

MANAGEMENT

COMMISSIONER COMMISSIONER COMMISSIONER COMMISSIONER

ADMINISTRATIVE

LAW JUDGES

FINANCE.

ACCOUNTING AND

OPERATIONS

EXTERNAL

AFFAIRS

INFORMATION

AND

TECHNOLOGY

MARKETS,

TARIFFS

AND RATES

ENERGY

PROJECTS

FERC ORGANIZATION STRUCTURE BY THE YEAR 2000

ADMINISTRATIVE

LITIGATION

DISPUTE

RESOLUTION

SERVICE

GENERAL

COUNSEL

9
ENERGY MARKETS

GOALS

The Commission’s goals are:

◆ To promote competitive, well-functioning markets,

eliminating market power while ensuring reliability

◆ To protect customers

Competitive, Well-Functioning Markets

Where market forces in the electric power, natural gas, and oil pipeline industries can discipline prices and behaviors, market-based

approaches can generally be relied on to fulfill Commission goals.

Not all competitive goals can be met simply by identifying areas where market forces can be allowed to work with little or no

explicit regulatory guidance. As long as some aspects of the industries are insufficiently competitive, regulatory action may be needed

to ensure overall well-functioning markets for electric power, natural gas, and oil. In many cases, regulatory action is necessary to

develop the institutions needed for markets to function competitively. In electric power, a transmission information system, the Open

Access Same-time Information System (OASIS), was designed to

provide information needed to ensure comparable access to transmission. In natural gas, the Commission fostered the development

of a secondary market for pipeline capacity by structuring a program for release of capacity.

As the size of the unregulated portion of competitive energy

markets increases, the Commission must pay increasing attention

to how its own regulations impact on, or are circumvented by, these

changing competitive market forces. This need will be particularly

important in the coming years, as the competitive environment becomes more fully realized. Even in areas that do not yet appear

competitive, it is important to consider how regulation in these areas affects the functions of areas that are competitive. For example,

in examining short-term natural gas markets, the Commission is

exploring how more flexible approaches to regulating short-term

natural gas transmission will enhance the performance of natural

gas markets generally.

Protecting Customers

Although competition has evolved rapidly, key aspects of these industries continue to exhibit monopoly characteristics and may entail disproportionate market power. They therefore require regulation under the Federal Power Act (FPA), the Energy Policy Act of

1992 (EPAct), the Natural Gas Act (NGA), the Wellhead Decontrol

Act (WDA), and the Interstate Commerce Act (ICA).

Constraints on Market Power. The Commission retains responsibility for ensuring just and reasonable rates for oil pipelines and for

transmission and sales for resale of natural gas and electric power.

By continuing to apply traditional regulatory approaches to transmission and monitoring markets where necessary, the Commission

can protect customers from the exercise of market power. However,

the Commission is actively promoting competition, thus rendering

traditional regulation less necessary. In its place, the Commission

will monitor markets to ensure that market-based regulatory strategies remain effective.

Grid Reliability. System reliability is critical to the success of a

competitive electric industry. Currently, no clear federal authority

exists to establish reliability standards for the bulk power transmission grid or to enforce such standards. Regulators and industry participants have relied on voluntary industry organizations such as

the North American Electric Reliability Council (NERC) and its

regional reliability councils to establish rules and standards to maintain the security of the grid. However, compliance with those standards has been neither mandatory nor applicable to all market participants.

As the electric market becomes highly competitive, the number of market participants and the volume of transactions that affect

the operational demands on the system are expanding. This has created a situation where reliability standards need to be mandatory

and enforced to protect the integrity of the bulk power system.

Resolving Disputes. In resolving disputes effectively and fairly, the

Commission uses a variety of processes, including hearings before

administrative law judges, litigation teams to represent the public

interest, orders and rehearings, and appellate advocacy should a case

go to court.

In addition, the Commission’s accounting staff undertakes certain accounting actions and audits. The Commission’s Enforcement

Hotline provides an informal toll-free call-in service, 1-877-303-

4340, to its customers, in an attempt to resolve disputes in the most

cost-effective and timely manner possible.

The Commission has also established a service center of excellence, the Dispute Resolution Service, for alternative dispute resolution to promote an environment in which the affected entities can

achieve consensual resolution of their disputes. The service can be

reached by calling toll-free 1-877-337-2237. In addition, the Office

of Administrative Law Judges has maintained a “settlement judge

on-call” service for two years and appoints judges to serve as settlement judges and mediators to resolve disputes more expeditiously.

Communicating Effectively. The Commission is undertaking a systematic effort through its Ombudsman to build relationships with

Congress, federal and state agencies, and other stakeholders. The

Commission is committed to open and continuous communication

with all interested parties in its formulation of generic policy. For

example, as part of the RTO Notice of Proposed Rulemaking

(NOPR), the Commission moved beyond the normal comment procedures to include staff-level conferences targeted at various segments of the market and the issues they face. These outreach efforts

take many forms, such as Commission conferences, staff technical

conferences, Congressional staff meetings, and prefiling meetings.

Thirteen RTO meetings with Commissioners were held at locations

around the United States. The story is much the same with the natural gas initiative where the Commission has conducted informal

outreach meetings with industry groups. The Commission has also

held a series of industry-wide conferences on topics such as state

unbundling of natural gas services and projected gas and pipeline

capacity demands for the Northeast.

10
ENERGY MARKETS

Working Toward the

Goals Every Day

Electric Issues

Market-Based Rates. Recent new entrants into wholesale electric

markets include nontraditional sellers, such as independent power

producers and power marketers. They are usually permitted to charge

market-based rates because they lack market power in generation

and transmission.

Growing reliance on market-based regulation would place the

Commission in a more responsive, as opposed to command-andcontrol, regulatory posture, making the collection of real-time market data critical for future consumer protection under the FPA and

NGA. Under traditional cost-based regulation, where the Commission establishes a cost-based rate for a particular public utility, the

Commission requires the utility to file periodically cost-based information useful to the rate-setting process. Under market-based

pricing, certain cost-based data may become less important to the

Commission.

However, under market-based pricing, the Commission must

still ensure that market participants do not exercise market power.

The Commission will therefore need to increase its monitoring of

the market for wholesale power and refine its capabilities to handle

complaints of market manipulation. With lighter handed regulation,

there is a need for immediate information to understand markets in

real-time. The Commission is increasing its market surveillance,

and has established an interdisciplinary price monitoring team that

now watches the market.

Pipeline construction. (Photo courtesy of Iroquois Gas Transmission System.)

11
ENERGY MARKETS

Utility Restructuring. The Commission continues to see a significant increase in the number and types of proposed corporate reorganizations. In addition to unprecedented numbers of mergers involving combinations of electric utilities, the Commission is receiving a number of proposals for “convergence mergers” –electric utilities merging with natural gas pipelines and distributors. Convergence mergers raise many new and difficult market power issues.

Some independent system operator (ISO) proposals are developed

as a result of proposed mergers, and others are at the direction of

state public utility commissions’ initiatives on retail choice. Finally,

the Commission expects that the transformation to competitive electric markets may also cause utilities to create separate transmission,

generation, and distribution entities to replace the existing vertically integrated corporate structure. Reorganizations along functional

business lines, in turn, may include further consolidations in each

functional area with new regional organizations.

Mergers. The Commission must ensure that no significant increase

in market dominance will result from a merger or other corporate

restructuring. The Commission must also ensure that ratepayers will

be protected from any negative effects of the merger. When the

merger involves a registered public utility holding company, the

Commission must know that the merged entity will abide by the

Commission’s inter-company policies designed to protect ratepayers from affiliate abuse. The Commission employs the Department

of Justice/Federal Trade Commission’s merger guidelines for these

purposes. The Commission also examines barriers to entry of new

competitors into the market. Such entry is important in mitigating

adverse effects of the corporate mergers.

Merger applications are often contested and extremely complex. For example, competitors who view proposed business combinations as imposing greater barriers to market entry or eroding

their relative market share may vigorously oppose mergers and acquisitions. The Commission expects the number of corporate applications filed, including mergers, to increase sevenfold between FY

1995 and FY 2001. This increase, combined with the complexity of

these cases resulting from the competitive dynamics of electricity

markets, including cases set for hearing, has created a significant

workload burden.

OASIS. Order No. 889 requires electric transmission providers to

use the Internet-based OASIS to inform potential customers of the

price and availability of service and other related information. OASIS works to ensure that transmission providers and their affiliates

do not have an unfair advantage in selling and reserving transmission capacity.

Market Monitoring. Some areas to be monitored are: market failures, shortages, reliability congestion, price spikes, market design,

affiliate/sales function preference and other discrimination issues,

information collection requirements and burdens, and forecast evaluations.

In March 1999, the Commission approved, with modifications,

a market monitoring plan proposed by the Pennsylvania-New JerseyMaryland Interconnection (PJM). Under the plan, PJM will establish a market monitoring unit (MMU) with a broad range of responsibilities to ensure competition and prevent any undue influence by participating members. The MMU will monitor all electric

power transactions to ensure participants’ compliance with PJM’s

standards and procedures.

Qualifying Facilities and Public Utility Regulatory Policies Act

(PURPA) Issues. PURPA authorizes the Commission to certify

small power production and cogeneration facilities as qualifying

facilities (QFs) and, in certain cases, to exempt them from some

federal and state regulations. PURPA regulations require electric

utilities to buy electricity from QFs at a rate that does not exceed

the utility’s cost of producing the electricity itself or acquiring it

elsewhere (i.e., the “avoided cost”).

An on-going issue concerns purchasing utilities challenging

the QF status of generators seeking to invalidate contracts. The Commission expects to see the continued filing of complaints involving

allegations of QF noncompliance. Other PURPA-related workload

will continue at the current level over the next several years.

Natural Gas Issues

Initial Services. To capitalize on economies of scale and to minimize unnecessary, duplicative construction, the Commission regulated natural gas pipeline companies as monopolies. With the restructuring of the natural gas industry, pipelines have shifted from

being commodity merchants and transporters of natural gas to being transporters only. The sale of natural gas has been unbundled

from its transportation, allowing many new and varied competitors

to enter the market. Thus, a market served by a single natural gas

pipeline may be competitive if competitors have access to the pipeline capacity and offer services that compete with those offered by

the pipeline.

The work done by the Commission to authorize initial services

in large part improves the range of suppliers by bringing new services and suppliers to a market. For example, new natural gas pipeline projects, including pipeline expansions, offshore pipelines, and

import projects, can provide competitive alternatives for existing

markets. Storage projects can provide supply flexibility for existing

markets. Many major projects serve both new and existing markets.

In addition, the Commission expects to continue to receive filings in response to its policy allowing natural gas pipelines to acquire capacity on other pipelines under certain circumstances. Where

the costs of new construction and the related environmental impact

render construction uneconomic, the policy makes available capacity on upstream or downstream pipelines attractive to markets.

Negotiated Rates. Under the negotiated/recourse rate program, the

Commission allows a pipeline and shipper to negotiate mutually

acceptable rates. If a shipper prefers, however, it will still be entitled to continue with service under the existing cost-of-service rate

(the recourse rate). Negotiating different rates for individual shippers allows individually tailored seasonal rates or short-term transactions to meet customers’ special needs. The resulting array of rate

options offers the potential to increase market responsiveness in

pipeline services without protracted disputes regarding pipelines’

market power.

Open Access and State Restructuring. The Commission has encouraged an environment that will allow state commissions and local distribution companies to implement retail unbundling in a manner that also accommodates the Commission’s goals for the pipeline grid. An example of this policy involves Atlanta Gas Light Company. The Commission has issued the authorizations necessary to

12
ENERGY MARKETS

enable Atlanta Gas Light Company to implement the interstate capacity assignment provisions of its retail customer choice program.

The Commission also fosters communication with state and industry participants regarding the relationship between the federal regulation of interstate natural gas pipelines and the unbundling of retail

natural gas service at the state level.

Natural Gas Industry Standardization. The Commission’s ongoing work with the Gas Industry Standards Board (GISB) is a prime

example of how the Commission has encouraged a healthy gas market by implementing standardized business practices. As a voluntary organization composed of representatives of many segments of

the industry, GISB developed and adopted standardized business

practices aimed at simplifying the process of transacting business

across the interstate natural gas pipeline grid. The Commission reviews and adopts those standards and subsequently reviews individual filings by natural gas pipeline companies to comply with

those standards. By standardizing business practices, transacting

business with multiple pipelines and suppliers should be easier for

customers. If transactions are easier and less costly, customers should

also have more flexibility. As part of its effort to make business

transactions easier and less costly, the Commission requires, by June

1, 2000, that natural gas pipelines conduct all business transactions

over the public Internet through a dual communication system using standardized interactive web sites and computer-to-computer

file transfers.

Flexible Service Regulation. The Commission also authorizes pipeline-specific proposals to implement many new, innovative services.

The Commission is receiving and approving pipeline filings for flexible services and negotiated rates to increase capacity use and to

meet individual customer needs. For example, the Commission has

Power house on the Pit River in California. (Photo courtesy of Pacific Gas and Electric Company.)

13
ENERGY MARKETS

ELECTRIC CORPORATE APPLICATIONS

NUMBER OF FILINGS RECEIVED

0

50

100

150

1996 1997 1998 1999 2000 2001

200

FY 1999 through FY 2001 are estimated.

Corporate Applications Include Mergers;

Acquisitions and Sales of Facilities;

Interlocking Directorates; and Securities.

NATURAL GAS CONSUMPTION

IN BILLIONS OF CUBIC FEET

17000

19000

91 92 93 94 95 96

23000

Source: Energy Information Administration.

Data for 1999 and 2000 are estimates.

97

21000

98 99 2000

authorized an hourly firm transportation rate schedule, limited availability services for niche markets, and volumetric and seasonal rates.

In particular, specialized tariff services are enabling natural gas pipelines to serve electric generation markets. The Commission also

authorizes an increasing array of new services such as parking and

lending and market hub services that meet the needs of individual

customers.

Monitoring the Natural Gas Industry. To learn how well the natural gas market is functioning, the Commission has increased its monitoring effort as an integral part of its market-oriented approach to

regulating the market. While the Commission monitors the marketplace to fulfill its statutory obligations to protect against undue discrimination and the exercise of market power, monitoring is also

important to foster competition. The Commission requires pipelines

to file various reports and to post information on Internet sites. Current data collections provide the Commission and the public with

an array of financial, accounting and other data that helps the public, other market participants, and the Commission monitor the

market.

Gas Research Institute. The funding for research, development,

and demonstration in the natural gas industry has been obtained

through traditional regulated rates. However, it became a contentious issue after open access and competition hampered the pipelines’ ability to collect the current Gas Research Institute (GRI) surcharge. After exploring long-term funding issues including the funding for a voluntary noncore program with GRI and industry participants, the Commission approved a settlement agreement in FY1998

that results in the continued funding of GRI for a core program that

would provide for research and development for the general benefit

of the gas-consuming public. The settlement provides for the phasein to fully voluntary funding as opposed to a mandatory surcharge

on pipeline rates by the end of its seven-year term.

Service Terms and Conditions. Another important aspect of the

Commission’s traditional workload is service terms and conditions.

The Commission reviews proposals to implement or modify natural

gas and oil pipeline services to ensure that those services contribute

to a competitive, well-functioning market. The Commission limits

service discrimination against captive customers by ensuring that

certain customers not receive special services and that all services

are published in rate schedules.

Cost-Based Rates. In the natural gas commodity market, prices are

set by the market. However, in transportation services, where the

markets are not fully competitive, the Commission ensures that rates

reasonably reflect the cost of providing the service. By maintaining

a price cap on pipeline capacity, cost-based rates restrain a natural

gas pipeline’s ability to charge monopoly prices during peak periods. By permitting discounting, the Commission’s cost-based rate

regulation also supports a competitive market by allowing efficient

allocation of capacity at rates below the maximum tariff-based rate.

Oil Pipelines

Since the Commission began more market-driven regulation for the

oil pipeline industry, regulations have established filing requirements

for market-based studies to guide the industry in using this methodology as an alternative to traditional cost-of-service based regulation. While still relatively more burdensome than the light-handed

indexing methodology, several oil pipelines have chosen this alternative for charging rates, to enable them to respond to market forces.

The number of oil pipelines requesting market-based determinations annually is some 70% greater than the total for the entire previous ten-year period.

14
ENERGY MARKETS

MAJOR

ACHIEVEMENTS

FOR 1999

Electric Issues

Regional Transmission Organizations (RTOs). In September

1998, the Secretary of Energy delegated to the Commission authority to act under Section 202(a) of the FPA. This section grants authority to delineate regional districts across the country to promote

interconnection and coordination within and between regions.

The Commission is encouraging pricing and operational innovations in regional market arrangements. In May 1999, the Commission issued a NOPR on RTOs. RTOs would address competitive

market issues in the open access environment of Order No. 888,

while stressing the need to enhance the reliability of the transmission grid. The proposed rule suggests at least four characteristics

for successful RTOs:

◆ independence;

◆ appropriate scope and regional configurations;

◆ adequate operational authority; and

◆ responsibility for short-term reliability.

In addition, the NOPR prescribes several RTO functions, such

as tariff administration and design, that would allow a single transaction tariff for an entire regional grid. The proposed rule relies on

flexibility and open architecture rather than specific boundaries or

organizational formats. Through its electric policy initiative, the

Commission is promoting innovations that will foster well-functioning markets. Regionally, markets will enable the industry to price

and plan better, ensure reliability, remove opportunities for discriminatory practices, and reduce residual market power.

Over the past year, the Commission has issued orders authorizing the establishment of the Midwest ISO and the restructuring of

the New York Power Pool, the New England Power Pool, and the

Pennsylvania-New Jersey-Maryland Interconnection. A major concern with each of these proposals is that both members and nonmembers are treated comparably and pancaked rates are eliminated.

The Commission also approved various market rules for ISOs, including rules on how ISOs will determine market prices for various

products.

Utility Combinations with Foreign Companies. In June 1999, the

Commission cleared the way for the first utility combinations with

foreign companies. ScottishPower received permission to acquire

PacificCorp. PacificCorp is a public utility serving about 1.4 million customers in six western states. The Commission also approved

the purchase of the New England Electric System (NEES) by NGG

(part of Britain’s National Grid Group). NEES is made up of 6 companies in the New England area and serves about 1.3 million customers in Massachusetts, New Hampshire and Rhode Island. The

NGG is the owner and operator of the electric transmission network

in England and Wales.

Ancillary Services. In May 1999, the Commission developed a new

policy to balance the advantages of a competitive market with the

need to guard against potential anticompetitive behavior. The policy

allows companies with market-based rate authority for power (and

for energy) also to sell ancillary services at flexible rates, if they

establish an Internet-based site. The Commission believes that the

market for ancillary services – the back-up and support services for

reliable operation of the electric transmission grid – is just beginning to develop. Thus it is sometimes difficult for companies to

obtain the information necessary for a complete market analysis for

ancillary service markets. The Internet site, which would include

such information as service availability and prices, would help guard

against potential anticompetitive behavior through market monitoring.

Technical Conference on Capacity Benefit Margins. In May 1999,

the Commission held a technical conference on capacity benefit

margins (CBM). The North American Electric Reliability Council

(NERC) defines CBM as “that amount of transmission transfer capability reserved by load serving entities to ensure access to generation from interconnected systems to meet generation reliability

requirements.” Variations in defining and calculating CBM, and its

impact on available transmission capacity for open access transmission, prompted the Commission to hold the conference. This matter

has been raised in several individual filings at the Commission. Some

customers are concerned that some utilities may be manipulating

CBM to disadvantage competitors. Utilities generally support recognition of CBM as necessary to maintain service to customers in

case of emergencies.

In July 1999, the Commission issued an order which provides

much needed clarification on the computation of Available Transmission Capacity (ATC) and its critical component, CBM, and goes

a long way to ensuring that ATC calculations are clear, transparent,

understandable and verifiable. The order requires transmission providers to post their CBM figures; provide clear explanations as to

their CBM practices; update their CBM set-asides to capture the

benefit of better information as to load, temperature and contingencies; identify precisely what entities can use CBM during generation emergencies; and clarify that CBM is available to any transmission customer on a nonfirm basis. The order also directs transmission providers, working through NERC, to develop a standardized CBM methodology.

Open Access Transmission. The Commission continues to administer the open access transmission tariff. This entails reviewing and

analyzing numerous requests for new service and monitoring the

rates, terms and conditions for the requested services. Among the

requests for new service are an increasing number of filings to revise the open access tariff to accommodate retail access programs

and to place retail suppliers under the tariff. Throughout the year,

the Commission has acted on numerous complaints concerning (1)

allegations of excessive open access transmission rates, (2) violations of the functional unbundling requirements under Order No.

888 and standards of conduct under Order No. 889, (3) refusal to

offer interconnections, and (4) denial of transmission service. Also,

an increasing number of filings involve requests for waiver of Order Nos. 888 and 889 and the filing of new reciprocity and authority

over open access tariffs.

15
ENERGY MARKETS

Reliability and Congestion Management. The Commission’s historical responsibility for system reliability has been negligible. Over

the past year, however, the Commission was asked by the industry

to become more involved. It issued several orders that implement

the framework for transmission reliability in response to the NERC

initiatives. In an order dated December 16, 1998, the Commission

reviewed NERC’s transmission line loading relief (TLR) procedures

and directed each transmission operating public utility in the Eastern Interconnection to file revised, interim TLR procedures to address parallel flows associated with native load transactions and

network service as well as with point-to-point services. Also in that

order, the Commission directed those transmission operating public utilities in the Eastern Interconnection that had not already developed regional congestion management programs through their

power pools to identify and file interim redispatch solutions, with

particular emphasis on solutions that could be implemented by the

1999 summer period. Subsequently, on May 12, 1999, the Commission accepted NERC’s interim TLR procedures along with a proposal to modify NERC’s procedures to include a transaction contribution factor to separate flows on constrained transmission facilities between point-to-point uses and network uses. Finally, in an

order issued May 17, 1999, the Commission approved a Mid-Continent Area Power Pool (MAPP) redispatch proposal similar to the

NERC redispatch program. MAPP’s redispatch program provides

for redispatch of generating units in lieu of curtailment due to constraints of approved firm point-to-point transmission transactions

and approved firm network transmission transactions.

In April 1999, the Commission accepted the Western Systems

Coordinating Council’s (WSCC’s) proposed Reliability Management System. The Commission agreed to participate on a limited

experimental basis in WSCC’s reliability standards by enforcing

those standards. The Commission agreed that ADR processes should

be used before any disputes are sent to the Commission. The Commission also agreed to assume a role in resolving disputes about

violations of the WSCC standards

OASIS Phase 1-A. In January 1999, the Commission issued OASIS Phase 1-A, a NOPR that would establish standardized business

practices. The NOPR proposes a set of uniform business practices,

implementing the Commission’s policies on transmission service

price negotiation. It also improves interactions between transmission providers and customers over OASIS nodes, and proposes to

revise the Commission’s current regulations to require compliance

with these practices.

Market Surveillance. The Commission established an interdisciplinary price monitoring team, a proactive initiative for market surveillance. The team’s work will provide information that will help

the Commission, state public utility commissions, and other public

policy makers make informed decisions on the necessity for any

immediate preventative measures or long-term policy initiatives as

wholesale power markets complete their move from cost-based rate

regulation to market-based competitive pricing.

QF Re-certifications. As an increasing number of non-traditional

utility entities (e.g., independent power developers) combine with

or acquire generating facilities from electric companies, questions

arise regarding qualifying facility status of the projects owned by

these entities. In December 1998, the Commission addressed its regulations as they apply to situations where an owner of a qualifying

facility changes its status from a non-electric utility to an electric

utility. In a series of applications, the Commission reiterated that an

entity that changes its status to that of an electric utility cannot hold

more than a 50 percent equity interest in a QF on a forward-looking

basis.

Natural Gas Issues

Gas Policy Initiative. The Commission is undertaking a natural

gas policy initiative to improve the efficiency, transparency, and competitiveness of natural gas markets. The growth of vibrant natural

gas commodity markets has posed challenges for the Commission’s

regulation of natural gas transportation. Short-term natural gas markets now offer prices at many points around the grid that imply a

value for gas transportation that is independent of traditional regulation. The natural gas initiative recognizes the changing structure

of the market and offers a new regulatory strategy for transportation

to promote competitive commodity markets and protect customers.

The Commission issued a NOPR as part of the natural gas initiative, designed to maximize competition in short-term natural gas

transportation markets, while continuing to mitigate market power.

The NOPR proposed:

◆ removal of the rate cap for all short-term

transportation services;

◆ auctions for all short-term transportation capacity; and

◆ negotiation of terms and conditions of services.

The Commission simultaneously issued a Notice of Inquiry

(NOI) requesting comments on a variety of long-term transportation issues in light of market changes and the regulatory changes

proposed in the NOPR. The NOI sought comments on whether the

Commission should modify its long-term market pricing policies

by moving away from traditional cost-of-service ratemaking or by

modifying the current ratemaking methods.

The initiative seeks to foster competitive markets and mitigate

residual market power. In selecting regulatory strategies to achieve

these goals, subsidiary objectives to be considered are:

◆ providing appropriate incentives for pipeline operations,

customer choices, and optimal level of construction;

◆ monitoring for discrimination and the exercise of market power;

◆ minimizing any adverse financial impact from regulatory

changes; and

◆ using fair and administratively efficient regulatory approaches.

Natural Gas Industry Outreach. With the natural gas initiative,

the Commission staff has, in FY 1999, conducted about 30 informal

outreach meetings with all industry groups to explore issues relating to visions of the future and the regulatory changes that would be

required to meet those visions. The Commission has held a series of

industry-wide conferences on the following topics: (1) issues relat16
ENERGY MARKETS

ing to state unbundling of natural gas services and how current regulations facilitate or hinder those efforts; (2) projected gas pipeline

capacity demands for the northeastern portion of the United States;

and (3) issues relating to revisions to electronic filing requirements.

Service Terms and Conditions. The Commission continued to receive and approve pipeline filings for flexible services and negotiated rates to increase capacity utilization and to meet individual

customer needs. In FY 1999, these included hourly firm transportation rate schedules, semi-firm rate schedules, limited availability

services for niche markets, and volumetric and seasonal rates.

Gas Industry Standardization. In FY 1999, the Commission

adopted additional standards proposed by GISB. These rules will

increase coordination and standardization of gas industry business

practices and communications to facilitate natural gas transportation of the interstate pipeline grid.

Conference on Federal and State Regulation of Natural Gas Services. The Commission held a conference to discuss the relationship between the federal regulation of interstate natural gas pipelines and the unbundling of retail natural gas service at the state

level. The Commission recognized that the relationship between state

Painting transmission tower on San Francisco Bay, California. (Photo courtesy of Pacific Gas and Electric Company.)

17
ENERGY MARKETS

retail unbundling and federal regulation of the pipeline system has

important implications for the smooth functioning of the natural

gas pipeline grid. The dialogue among the Commission, state regulatory commissions, and industry representatives helped further the

Commission’s goal of encouraging an environment that will allow

state commissions and local distribution companies to implement

retail unbundling in a manner that also accommodates the

Commission’s goals for the pipeline grid.

Oil Pipelines

Oil Pipeline Dispute Resolution and Outreach. In FY 1999, the

Commission promoted the use of alternative dispute resolution procedures by setting four contested oil pipeline tariff disputes for settlement judge procedures rather than sending them directly to hearing.

In the area of outreach, Commission staff has provided expert assistance to other governmental agencies, industry groups, private concerns, and foreign governments in resolving oil pipeline related

matters. Staff has been involved in many meetings between Russian

government officials and members of the Department of Energy; an

interagency governmental group concerning crude oil pricing; presentations to the Association of Oil Pipelines to relate information

on Commission oil pipeline requirements; and discussions with

Congressional staff concerning the possible alternatives for legislation concerning outer continental shelf oil pipeline regulation.

Indexing Methodology. The oil pipeline industry continues to face

significant change in areas as basic as locations of supply and delivery, as traditional supply sources are replaced by new origin markets. These changes require both construction of new facilities and

more innovative use of existing plant to respond to the market’s

needs. A prime example of this change is the increased use of Canadian crude oil to feed refineries traditionally served by local area

indigenous production.

To allow the oil pipeline industry to cope with rapidly changing circumstances, the Commission has established a generally applicable indexing methodology that allows for greater efficiency and

ease in filing rate changes while protecting users of the pipelines’

services. It has also delineated three alternatives to that methodology: traditional cost-of-service rates; market-based rates; and negotiated or settlement rates. Most pipelines have taken advantage of

the new relaxed regulations when filing rate changes under the simplified indexing program. The pipelines are also using the other

modified procedures, such as waiver requests for short-notice filings, to streamline filing procedures. Several pipelines also have

obtained market-based rates for certain areas of their systems upon

showing a lack of market power. As an integral part of the generally

applicable indexing methodology, the Commission will conduct a

review of the selected index after five years of experience, after

July 1, 2000.

18
ENERGY PROJECTS

GOALS

The Commission’s goals for hydroelectric and natural gas pipeline

projects are:

◆ To protect and enhance environmental and public benefits,

including hydropower development

◆ To balance interests of natural gas customers, applicants,

landowners, and the environment

◆ To achieve timely, optimal pipeline project construction

◆ To ensure the safety of hydropower projects

Environmental and Public Benefits

Electricity generated from the power of falling water is economic,

renewable, available for peak demand, and without emissions – a

valuable contribution to, and a significant component of, the nation’s

energy mix. But because hydropower projects use and affect a variety of important natural resources, they must adjust to increasing

concern for the environment and shared jurisdictional authorities,

while competing in rapidly changing energy markets.

The public’s and congressional concern about the environmental impacts of hydropower operations continues to increase. This

heightened concern, reflected in a host of environmental laws, results in many additional requirements in new licenses. The Commission is focusing on resolving the many conflicts over licensing

that arise before the filing of an application and is continuing staff

involvement through post-licensing. Early and sustained collaboration among diverse participants is effective in finding solutions.

While the Commission’s responsibility under the FPA is to strike

a balance among the many competing power and nonpower interests, various statutory requirements give other agencies a powerful

role in the licensing of projects. The Commission must share its

licensing conditioning authority with numerous state and federal

agencies. Shared jurisdiction poses unique challenges to the Commission in issuing timely and balanced licenses. The potential for

conflicts is reduced by having everyone at the table early in the

process and having better communication among agencies.

Balancing Natural Gas Interests

One area of the natural gas industry that has remained regulated in

a traditional way is the authorization of interstate gas pipeline construction projects. Even there, the Commission is looking at significantly different approaches for meeting the time-sensitive needs of

the competitive market while properly addressing environmental and

landowner concerns.

The Commission expects to respond to a continuing need to

construct new pipelines or expand existing facilities to serve growing markets or to compete in existing markets. New market potential is expanding due to higher demand for gas. Getting gas to market will require expansions in the pipeline transportation and storage grid to handle new supplies and changes in the geographic mixes

of production and consumption. The Commission will encourage

efficient gas pipeline construction to provide individual customers

and market entrants with increased choice and reliability of service

by giving them multiple supply and delivery options.

At the same time, the Commission will continue to balance

and protect the competing interests of pipelines, individuals, organizations, and resources affected by the application of eminent domain for new and replacement construction of natural gas pipeline

infrastructures. Greater participation by landowners will require

increased efforts by the Commission to address their concerns adequately. The Commission has designed its certificate policies to

avoid unnecessary environmental and community impacts and to

mitigate necessary ones.

Optimal Project Construction

The Commission is implementing changes in its regulations and

processes to respond more quickly to anticipated market need for

additional pipeline facilities. For example, Order No. 603 streamlined the certificate process and clarified filing requirements. This

helps applicants to make complete filings, thereby reducing processing time and allowing faster decisions on proposed projects.

Safety of Hydropower Projects

The Commission’s internationally recognized dam safety program

ensures that the dams under its jurisdiction are properly constructed,

operated and maintained. Because of the increasing number of older

dams under the Commission’s jurisdiction, continued vigilance is

particularly necessary. As engineering technology, tools, and procedures improve, the Commission conscientiously facilitates sharing of knowledge, and it works with licensees, the engineering community, and federal and state agencies to maintain its outstanding

dam safety record.

WORKING TOWARD THE

GOALS EVERY DAY

Hydropower Issues

Project Licenses. The Commission’s hydropower licensing and

post-licensing processes have the multiple intents of maintaining

power generation, enhancing and protecting the environment, and

enhancing recreational assets of water resources. Integral to these

processes is the participation of a myriad of stakeholders, including

local citizen groups, power users, Native Americans, environmental

organizations, fish and wildlife agencies, and the hydropower companies. Through this participation, the Commission’s authorizations

address the needs of the stakeholders affected by the hydropower

facilities.

Over the next 10 years, more than 220 project licenses will

expire. Many of these projects significantly affect regionally important environmental resources. In the relicensing process, the

Commission will facilitate participation by the many stakeholders

to ensure that the outcome protects and enhances the environment

while maintaining project generating capacity. To meet these challenges, the Commission will use the alternative licensing process

and monitor benefits to environmental and recreational resources.

19
ENERGY PROJECTS

Project Authorizations. Nonfederal hydropower projects must obtain Commission authorization if they are on lands or waters subject to Congressional authority. The Commission issues licenses for

terms up to 50 years for projects “best adapted to a comprehensive

plan” for improving a waterway for beneficial public purposes. Benefits include power generation, irrigation, flood control, navigation,

fish and wildlife, municipal water supply, and recreation. Preliminary permits, issued for three years, reserve rights to study the feasibility of hydropower development at a specific site, but do not

authorize construction of any hydropower facilities. Exemptions

(from licensing), issued in perpetuity, are limited to sites involving

existing dams or natural water features, for projects of less than five

megawatts. The Commission also issues conduit exemptions for

small hydropower facilities on conduits that are not used primarily

for generation of electricity.

Preliminary Permits. The number of applications for preliminary

permits has risen dramatically in the past year. The number of preliminary permit applications filed in FY 1999 is more than 20 times

the number filed in FY 1998. These applications are for projects at

Army Corps of Engineers or other existing lock and dams and employ new design technology.

The new design involves a faster, cheaper, more environmentally friendly method for installing turbine generators at existing

dams. Instead of the conventional design, where the turbine generator is inside the dam or powerhouse, this design installs a turbine

generator unit externally, on the face of an existing dam or on a slab

built on a river bank next to the discharge area. Using siphons and

existing gates and water conduits keeps costs down by minimizing

disruption to land and water resources. Installation can take less

than eight weeks and construction can be as little as one half of the

cost of conventionally designed facilities.

Alternative Licensing Procedure (ALP). The number of applications using this alternative approach is increasing each year. The

resulting licenses have been issued in less than half the time required for applications that did not use the collaborative approach,

and have demonstrated increased consideration for the environment.

The ALP gives potential licensees the option of filing a preliminary

draft National Environmental Policy Act (NEPA) document with

their application. The ALP also promotes early identification of issues, and cooperation and collaboration to resolve issues during the

prefiling consultation phase of hydro licensing.

Working collaboratively with the full range of hydro interests

has these benefits:

◆ Enhanced opportunities for stakeholder input in shaping the

relicensing process;

◆ Increased regulatory efficiency through state and federal agency

cooperation;

◆ Reduction or elimination of unresolved issues at the time

license applications are filed; and

◆ Early implementation of environmental enhancement measures.

License Surrenders. Licensees and exemptees may decide to surrender their hydropower authorizations because a project is no longer

economical or because natural catastrophes have damaged or destroyed project facilities. To protect the environment and the public,

a license or exemption may be surrendered only upon agreement

between the licensee or exemptee and the Commission. In recent

years, the surrender review process has become more complex, with

a corresponding increase in staff involvement, because of increased

sensitivity to the environmental implications of ending Commission jurisdiction.

If construction of a licensed project has commenced, the Commission consults resource agencies that provided the original terms

and conditions. It seeks input from the public to ensure that local

environmental issues are considered in the surrender proceeding. It

also prepares an environmental assessment of any need for restoration for public safety and environmental integrity. These measures

may range from simply locking a perimeter gate to removing a dam.

License Transfers. Electric restructuring is prompting many licensees to reevaluate their generating assets. As a result, the Commission is receiving more applications to transfer hydropower project

licenses. For example, Niagara Mohawk Power Corporation plans

to sell its 38 jurisdictional projects in FY 2001. Before approving a

transfer, the Commission reviews the proposed transferee’s eligibility and considers potential compliance problems. The Commission also works with transferees to ensure they understand their responsibilities under the license or exemption.

Land Use Issues. Amendment proposals requesting authorization

for commercial development create opportunities for the public to

enjoy these reservoirs and enhance local economies. They also

present challenges for the Commission to provide for a reasonable

balance between developmental interests and wildlife and fishery

values of the water resources.

One way to reach this balance is to develop shoreline management plans that consider both economic and environmental resource

values. The Commission encourages licensees and, in some circumstances, requires them, to develop shoreline management plans, in

cooperation with resources agencies, property owners, local governments, and other interested entities. Licensees typically revise

these plans periodically, with the Commission’s approval, to accommodate changes to environmental and economic circumstances.

Compliance with Authorizations. The Commission’s post-licensing compliance program includes monitoring, compliance assistance,

and penalty assessment under Section 31 of the FPA. The compliance program ensures that licensees observe the terms and conditions of licenses, which are designed to protect and enhance the

environment and provide benefits to the public.

Post-Licensing Monitoring. Most licenses issued today require

post-licensing monitoring. Monitoring the hydropower project provides data on the performance of mitigative measures, such as fish

passage facilities, fishery habitat improvements, wildlife benefits,

recreational enhancements, and cultural resource protection. It ensures that the measures are implemented, and also determines

whether the measures are sufficient for the level of environmental

benefits envisioned at the time of licensing. New licenses frequently

incorporate performance measures. These licenses identify goals

20
ENERGY PROJECTS

Pipe strung out along right-of-way in Ontario, Canada. (Photo courtesy of TransCanada PipeLines.)

for environmental resource protection or enhancement and create a

mechanism for measuring whether the goal is achieved.

Cooperative procedures have been helpful in achieving postlicensing monitoring objectives. More performance-based conditions are being developed through the collaborative licensing efforts, as parties to the licensing process recognize the importance

and necessity of their role to fine tune environmental conditions

and ensure their success.

The Commission will continue to help licensees meet their postlicensing monitoring obligations in partnership with other agencies

and participants. Early efforts focused on helping project owners

with small projects or recently issued licenses and exemptions.

Compliance Audits. In general, compliance audits are on-site field

investigations by multi-disciplinary teams. Part of the effort is to

anticipate, identify, and solve compliance problems, to focus attention and resources where they are needed most. Compliance audits

also provide an opportunity for the licensee’s personnel to ask questions of Commission staff and to get to know the people who handle

their problems. These face-to-face meetings always improve communications.

Small projects benefit most from audits, because their financial and personnel resources are often limited. Compliance staff

provides them valuable expertise and advice. Most important, compliance assistance can spot problem areas before they become safety

and environmental concerns.

Civil Penalties. The primary goal of the civil penalty program is to

achieve compliance with the terms and conditions in each license,

exemption, or permit that protect and enhance environmental resources. The Commission offers technical guidance and support,

including several outreach programs. In addition, technical staff

meets with industry members and other interested parties to forge

solutions to new or complex compliance issues. If all else fails, however, the Commission may initiate a civil penalty proceeding, either

to obtain compliance or to penalize for violations having serious

public safety or environmental implications.

21
ENERGY PROJECTS

Unexpected Contingencies. Throughout a license term, events occur that require immediate Commission action to arrest environmental problems. These events may be construction problems resulting in fish kills, dam repairs resulting in environmental problems, or project operation endangering recently listed threatened

and endangered fish. In each habitat conservation case, the Commission must implement measures to protect affected environmental resources.

With a dramatic increase in the numbers of salmon species on

the threatened and endangered species list, conflicts are increasing

between operation of existing hydropower facilities and protection

of listed species. In this regard, the Commission is currently consulting with the National Marine Fisheries Service and the U.S. Fish

and Wildlife Service on operations of several projects in four river

basins.

Other Elements of Hydropower Authorization. Other hydropower

work includes the following.

Headwater Benefits. Section 10(f) of the FPA directs that the owners of nonfederal hydropower projects who receive energy benefits

from upstream federal storage reservoirs must reimburse the upstream project owners for part of their capital costs. The Commission conducts river basin studies and determines the assessments,

which are returned to the U.S. Treasury. Approximately $6 million

is collected annually for benefits received from 116 federal headwater projects throughout the country.

Federal Lands. When federal lands are reserved for waterpower

purposes, the Commission must review any applications for other

uses of those lands. Other uses may include mining claims, oil and

gas leases, mineral leases, rights-of-way and revocations under the

FPA. The review allows the Commission and the Bureau of Land

Management to protect existing licensed projects from adverse impacts from outside parties. It also allows for federal lands not affected by a project to be opened for other beneficial public uses.

Safety of Hydropower Projects

The Commission is charged with statutory responsibility for the

safety of nonfederal hydroelectric projects. Through inspections and

studies, the Commission ensures that dams are kept in good shape

and monitors them to help prevent unanticipated dam safety incidents. As a second line of defense, emergency action plans make

sure that the dam owner and community know how to deal with

potential emergencies. Elements of the dam safety program are

project inspections, engineering and environmental analyses, safety

reviews, and emergency action plan tests.

Project Inspections. Inspections verify the structural integrity of

dams and compliance with engineering, environmental, and public

safety conditions and regulations. They also identify necessary maintenance and remedial modifications. The Commission is responsible for inspecting more than 2,600 dams and related water retention structures. It conducts periodic inspections starting from the

receipt of an application for a proposed jurisdictional project,

throughout the term of a license. Types of inspections are prelicense, construction, operation, instrumentation, exemption, environmental and public use, safety, and special. The Commission’s

five regional offices conduct the inspections.

Inspections during project construction ensure that the constructed project complies with the approved design. They also ensure that project construction complies with all applicable federal

and state environmental regulations and includes appropriate environmental protection measures, such as erosion control plans and

flow monitoring systems. Construction inspections can uncover

unexpected conditions (such as unknown foundation features) and

any need for design changes.

When the project begins operation, focus shifts to ensuring safe

operation and maintenance of the dams. Periodic, on-site operation

inspections ensure that dams are maintained for long-term structural integrity of the project works and are repaired if necessary.

They also ensure that licensees comply with license provisions. These

inspections safeguard the continued operation of projects, as well

as downstream lives, property, and environment.

Special inspections occur when special issues arise. These may

involve potential dam safety problems, unauthorized projects, complaints about the construction or operation of projects, potential

environmental problems, safety concerns, or compliance issues.

The Commission conducts environmental and public use inspections to confirm that licensees comply with the environmental

and public use requirements of the license, and to ensure that the

licensee appropriately protects the environmental resources. Commission environmental specialists also periodically review construction activities to ensure that dam safety and maintenance-related

construction activities are environmentally responsible. In addition,

the Commission makes special environmental inspections to investigate environmental compliance problems and environmental damage after flooding or earth or rock slides, and to determine appropriate protective measures.

Engineering and Environmental Analyses. The Commission keeps

abreast of technological advances in field and laboratory investigative and analytical procedures, including innovative designs for proposed remedial modifications. Keeping abreast of advances in analytical techniques and dam technology is an important prerequisite

to analyzing data and recommending modifications. The Commission requires licensees to use these new techniques for quality control. These efforts have typically resulted in cost savings associated

with remediation and have sometimes eliminated the need for dam

safety modification work.

To provide guidance to its engineering staff, dam owners, their

consultants, and the rest of the dam safety community, the Commission publishes Engineering Guidelines for the Evaluation of

Hydropower Projects. These guidelines specify the criteria, analytical methods, engineering parameters, and other engineering aspects

related to the design, construction, monitoring, and operation of safe

dams. The dam safety community widely requests and relies on these

guidelines. The Commission updates and expands the guidelines as

necessary to ensure consistency with state-of-the-art technology.

As dams age and undergo various stress conditions, such as

floods and earthquakes, the Commission increases its monitoring

and use of instrumentation data to decide whether the condition of

the dams and their appurtenant facilities are changing. This procedure is the key to detecting potential problems before they become

serious and deciding whether new remediation is necessary. With

monitoring data available, the Commission will require licensees

and their consultants to continually evaluate the condition and performance of their dams.

22
ENERGY PROJECTS

Safety Reviews. The Commission’s dam safety program must ensure consistently high safety standards at high and significant hazard potential dams to maintain the lowest probability of failure. In

addition to its own periodic visual inspections and evaluations, the

Commission requires periodic independent consultant inspections

of dams with high hazard potential. These inspections include a

complete engineering assessment and inspection of the project works,

with a detailed review of the project design and a thorough inspection of project structures. For quality control, Commission dam

safety experts approve qualifications of independent consultants.

They also thoroughly review all independent consultant inspection

reports for validity of the analysis and conclusions and the need for

additional studies or remedial measures.

Emergency Action Plan (EAP) Tests. All of the inspections, evaluations, remediation, and monitoring, however, cannot guarantee that

emergencies will not occur. Therefore, a second line of defense to

protect life, property, and the environment is the development, maintenance, and periodic testing of EAPs. These plans specify actions

that owners must take, in coordination with federal, state and local

preparedness agencies, in case of flood, earthquake, or project facility failure. The Commission is recognized as a national leader in

EAPs and regularly shares its expertise with many other federal and

state agencies.

Natural Gas Pipeline Issues

The Commission addresses multiple competing interests and timeliness issues concerning natural gas certificates on an ongoing basis

through its casework.

Pipeline Expansion. The pipeline industry is aggressively pursuing serving new markets for gas. In the new competitive environment, pipelines are proposing to serve markets already served by

other pipelines. Competing pipelines and landowners who question

the need for the new projects vigorously contest many of these proposals. Processing these contested proposals requires significant resources.

Increasing availability of Canadian supplies, new deep-water

production in the Gulf of Mexico, and the growing market for natural gas in the Northeast will continue to result in large construction

projects. The Commission also expects that Canadian gas and oil

suppliers will seek additional markets for their products in the U.S.,

and that producers will explore options to export gas to Canadian

and Mexican markets, which may require pipeline construction.

Increased competition in these markets and customers’ desires for

multiple, competing sources of supply will generate more NGA

Section 3 filings and related requests for Presidential permits for

importing and exporting gas and oil. The Commission will also continue to see projects related to the extensive exploration effort on

the offshore outer continental shelf and construction of pipelines to

reach significant new gas supplies.

Growing demand in the New England, Mid-Atlantic, Midwest,

and Southeast regions of the country will continue to lead to applications for major pipeline extensions and new pipelines to serve

these regions. Meeting construction and service time frames will

require analyzing contractual arrangements between parties and

monitoring interconnection policies to ensure that competing pipelines may obtain access to markets, and that customers have choices

for their gas supply needs. Processing of major construction projects

will entail technical conferences and public meetings for environmental scoping and comments on draft documents, as well as the

analysis of data responses, comments, protests, and other filings.

Where multiple pipelines propose to construct facilities in the same

area, either for the same or discrete markets, the Commission may

explore options for reducing the cost and environmental impact of

the facilities by considering joint facility construction, such as Portland Natural Gas Transmission System and Maritimes and Northeast Pipeline, L.L.C.

Storage Development. The Commission expects to continue to receive applications for storage development for peaking capacity and

supply flexibility, since customers will continue to be responsible

for their own gas supply acquisition. Anticipated storage facilities

include depleted gas fields, new leached-salt caverns, and liquefied

natural gas (LNG) tanks. Commission review and approval of these

projects, many of which will be located near market areas, is likely

to generate significant public interest regarding competition, need,

and environmental impact. As a result, the Commission may hold

technical conferences and public meetings before making decisions

about whether these proposals are in the public interest.

Replacing and Upgrading Facilities. The Commission anticipates

many replacement facilities because of the aging of the national

pipeline grid. Replacing aging facilities is necessary for safe pipeline operations. A replacement project may be straightforward, with

the pipeline proposing to merely remove old pipe and replace it

with new pipe of the same diameter in the old right-of-way. Replacement projects can become much more difficult if the pipeline

proposes to replace the old pipe with new pipe of a larger diameter,

or to leave the old pipe in place, seal it off, and install new parallel

pipe. Order No. 603 has streamlined the procedures for pipelines

seeking to replace aging facilities by allowing many replacements

to be done under the blanket construction certificate. Some of these

projects may be done automatically, and some may require prior

notice to the Commission before replacement can commence, but

all are subject to the environmental conditions required by the blanket certificate.

Environmental Analysis. Protection of the environment remains a

top consideration in the processing of certificate applications. Under NEPA, the Commission will continue to perform required environmental analysis of all gas pipeline construction proposals. The

purpose of this analysis is to avoid or mitigate adverse effects on

water quality, vegetation and wildlife, historic and cultural resources,

soils and geological resources, land use, and air and noise quality.

The Commission conducts a thorough analysis of each of these areas before any certificate project can proceed.

The Commission will balance the need for thorough analysis

with the need to improve processing time. The Commission continues to encourage the use of third-party contractors and applicantprepared environmental documents. These alternatives have reduced

the resources required for this workload area, and they offer the

potential for accelerating the review process. However, Commission resources are still required to review the contractors’ work to

ensure accuracy and compliance with Commission policies.

23
ENERGY PROJECTS

Competing Interests. Environmental concerns play a significant

role in the review of certificate construction applications. Pipelines

are facing increased opposition from landowners as new projects

are proposed in more heavily populated areas. When new pipelines

propose to serve markets currently served by existing pipelines, the

Commission must balance the benefits of alternative supplies of

natural gas with the environmental impact of a new project. Landowners increasingly question the right of pipelines to use eminent

domain in cases where the market determines the need for the project.

Also, pipelines face timing concerns based on various environmental permitting requirements.

Other Environmental Considerations. The Commission will continue its field compliance inspections of projects under construction. The Commission expects this work to increase substantially as

the major pipelines discussed above are certificated and built. The

Commission will also monitor restoration of rights-of-way on pipelines greater than two miles in length, which were built under the

automatic blanket authority, and projects completed under Sections

2.55(b) and 284 of the Commission’s regulations. Safety and operational integrity inspections of jurisdictional LNG plants will continue biennially according to an agreement with the Department of

Transportation.

MAJOR

ACHIEVEMENTS

FOR 1999

Hydropower Issues

Interagency Task Force. To improve relations with federal and state

agencies, the Commission is participating in the Interagency Task

Force. It consists of five work groups: federal agency coordination;

state agency coordination; ex parte; collaborative process; and economics. The goals of these work groups are to improve routine communication, reduce duplication, and find practical ways to work together more efficiently. Thus far, the federal mandates working group

has agreed on ways of improving the Commission’s noticing procedures and the NEPA process. In addition, the collaborative process

work group has developed a set of guidelines for participating in

the Commission’s alternative licensing process.

The work of the Interagency Task Force will be of significant

interest to non-federal participants in the licensing process, such as

licensees, Indian Tribes, and non-governmental groups. Accordingly,

an advisory committee, sponsored by Chairman Hoecker and Secretary of the Interior Bruce Babbitt, was formed under the Federal

Advisory Committee Act to provide a forum for non-federal entities to review and provide comments on the deliberations of the task

force.

Some efficiencies have already begun. For example, an immediate benefit is that agencies get involved early in the process. By

modifying Commission notices to indicate the involvement of federal or tribal lands and to specify license expiration dates, agencies

are better aware of their responsibilities. This will help ensure full

agency participation early in the process.

Ensuring Safe Projects: Focus on Aging Hydraulic Components.

The proper functioning of the hydraulic components of dams is critical to ensuring dam safety. Without proper functioning of the hydraulic machinery, penstocks, conduits, gates, and spillways, the

necessary control of reservoirs can be lost, resulting in dam failure.

While the Commission’s role and responsibility regarding dam safety

are quite different from those of other agencies such as the Corps of

Engineers, the Bureau of Reclamation, and the Federal Emergency

Management Agency (FEMA), all have common technical dam

safety concerns. In addition, the rest of the dam safety community,

including dam owners, state dam safety agencies, and engineering

consultants, has expertise and a vested interest in technical dam safety

issues. The Commission is coordinating within the dam safety community to focus attention on hydraulic component safety problems.

The goal is to develop the proper technical approach to assuring the

safety and adequacy of aging hydraulic components of dams.

Alternative Licensing Process. ALP is an alternative to the traditional licensing process designed to improve communication among

affected entities and to be flexible and tailored to the facts and circumstances of a particular proceeding. With ALP successes building on each other, interest in the ALP has continued to increase. The

Commission expects that nearly 40 percent of license applications

between FY 2000 and FY 2003 will use the ALP.

Recent examples of the benefits of ALP include the collaborative process used for International Paper’s Riley-Jay-Livermore and

Otis Projects on the Androscoggin River, Maine. There, a collaborative team addressed and resolved a host of complex issues. In addition, members of the collaborative team requested, and the Commission issued, 50-year licenses for these projects, virtually unheardof in relicensing–a direct result of undertaking and successfully

completing an ALP.

Another successfully completed ALP is the Avista Corporation

(formerly Washington Water Power) application to relicense the

existing Cabinet Gorge and Noxon Rapids projects on the Clark

Fork River in Montana and Idaho. Avista’s application includes a

27-party settlement agreement, including early implementation of

protection, mitigation, and enhancement measures, and adaptive

management of project-affected resources.

Recreational Fishing. As a member of the National Recreational

Fisheries Coordination Council, the Commission developed a plan

for enhancing recreational fishing opportunities at its licensed

projects, to be implemented by the end of FY 2000. Implementation is ahead of schedule. In FY 1999, the Commission promoted

recreational fishing at licensed projects through a brochure and a

“Fishing Net” page on the Worldwide Web. In addition, the Commission approved or amended 20 recreation plans in FY 1999. These

plans typically require the construction or improvement of facilities

that provide fishing access to project waters.

Guidebook on Preferred Practices. Commission staff played a

key role in developing a hydro licensing “best practices” document.

The effort began when the Electric Power Research Institute (EPRI)

recognized that common practices and issues could be shared to

avoid the necessity for rediscovery with each licensing effort.

24
ENERGY PROJECTS

Hells Canyon Dam on the Snake River in the Pacific Northwest. (Photo courtesy of Idaho Power Company.)

Tainter Gate Initiative. This first endeavor in the Commission’s

initiative to jointly address the aging hydraulic components of dams,

required owners of significant and high hazard potential dams to

perform comprehensive design review and physical inspection of

tainter gates. Owner response to the initiative has been positive.

The concerns identified have included needed remediation and modification to routine operation and maintenance procedures.

Electronic Filing of Inspection Reports. The Commission has developed and is implementing procedures for electronic submission

of all regional office inspection reports, which include digitized

photographs. This procedure will allow all parties, public and private, to readily obtain copies of Commission inspection reports

through the Internet. An additional benefit is the ability for Commission engineers, using digital cameras in the field during project

safety-related incidents, to promptly submit photographs of on-theground conditions for review by engineering teams and supervisors

in the office.

Actions Taken to Improve States’ Dam Safety Programs. Congress established the National Dam Safety Program Review Board

to advise the Director of FEMA on implementation of the National

Dam Safety Program. The Commission’s dam safety expertise was

influential in the Board’s accomplishments in FY 1999. Accomplishments include establishing procedures for the approval and

distribution of federal grants to individual state dam safety offices

and distribution of grants. The Board is now concentrating its efforts on its leadership role, and is developing a vision and strategy

for successfully accomplishing its mission.

25
ENERGY PROJECTS

Federal Dam Safety Guidelines. In FY 1999 the Commission

helped develop new engineering guidelines as a member of the Interagency Committee on Dam Safety, which advises FEMA on issues affecting dam safety. The following publications were issued

in FY 1999: Emergency Action Planning for Dam Owners, Hazard

Potential Classification Systems for Dams, and Selecting and Accommodating Inflow Design Floods for Dams. Active participation

in the development of these guidelines promotes open communication between the federal and state agencies responsible for dam

safety.

Seismicity in the Southeast. In FY 1999 the Commission staff reviewed several site-specific seismicity studies and seismic stability

analyses for projects in the Southeastern part of the United States.

The impact of earthquakes on the safety and stability of FERC licensed dams is an area of concern and requires detailed engineering

evaluation. Current studies have focused on earth dams constructed

in the 1930’s, sometimes over loose foundation materials, or constructed with techniques of that era that produced a loose embankment dam susceptible to drastic strength reductions during seismic

shaking. These evaluations indicate significant modifications are

required at several projects.

Three projects in the southeast where detailed engineering

evaluations have shown that the embankment dam structures will

perform poorly during the Maximum Credible Earthquake are: P516, Saluda Dam, P-2232, Wateree Dam, and P-199, Santee Cooper. All of these structures have a high hazard potential classification, and if they failed they could cause significant loss of life, property damage, and environmental harm. The Commission is considering mitigation measures to minimize any potential problem.

Seismicity in the Northwest. In FY l999, engineering consultants

to the Commission conducted several seismicity studies in the Northwest. These studies stem from investigations by federal and state

agencies that have revealed that, historically, the Pacific Northwest

has been far more seismically active than previously believed. The

Commission is requiring that dam owners have their independent

consultants perform site-specific seismic evaluations for some Part

12 Reports and revise stability analyses when loading conditions

change significantly or when previous methods of analysis are no

longer acceptable.

1999* 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1000

2000

3000

4000

5000

6000

7000

0

TOTAL MEGAWATTS AT HYDRO PROJECTS UP FOR RELICENSING

FISCAL YEAR

*Fiscal Year 1999 is actual megawatts filed

26
ENERGY PROJECTS

Outreach. In December 1998, the Commission began its second

round of outreach sessions in Sacramento, California to provide information on alternative licensing processes and other aspects of

the Commission’s licensing and post-licensing programs. Earlier

outreach efforts informed stakeholders of the availability of the alternative licensing process and other licensing and post-licensing

programs. In this round, staff provided 165 federal and state agency

representatives, industry representatives, non-governmental organizations, and the public with detailed information on the next step

of how to implement a collaborative licensing process. The session

resulted in two utilities and one municipality deciding to use the

collaborative approach to licensing.

Another result was the formation of the California Hydropower

Relicensing Roundtable, consisting of electric utilities, federal agencies, tribal governments, nonprofit organizations, water utilities, local

governments, and state agencies. The Roundtable will provide a

forum for discussing problems and opportunities associated with

California relicensings.

The Commission held issue-focused outreach sessions with the

American Fisheries Society, U.S. Forest Service, and stakeholders

in Alaska. The objective was to provide the outreach participants

with the knowledge necessary to begin to implement the alternative

licensing process. The Alaska meeting focused on lessons learned

by the Commission and stakeholders, problem-solving, and better

coordination between licensing and the coastal zone consistency

process.

Interagency Training. To provide training for those participating

in the Commission’s hydropower licensing processes, the Commission has helped develop an Interagency Hydropower Licensing

Workshop. Other agencies helping to develop the workshop are the

U.S. Forest Service, U.S. Fish and Wildlife Service, Bureau of Land

Management, National Park Service, and National Marine Fisheries Service. Participants in the workshop include federal and state

resource agency personnel and anyone involved with the hydroelectric relicensing process. While attending the workshop, participants

work through a fictional case study as interagency team members

and discuss issues, based on presentations by staff from the Commission, other federal and state resource agencies, Indian Tribes,

hydroelectric industry, and non-governmental organizations. Thus

far, three 5-day workshops have been held in West Virginia, Washington, and California, for more than 100 participants. Future workshops are planned for South Carolina and Alaska.

Expanded Emergency Action Plan Cooperation. The Commission has made improvements to its Emergency Action Plan Exercise Design Course. The primary objective of the course is to help

Commission licensees better prepare for the testing of their emergency action planning process. In this latest improvement, Commission staff emphasizes the importance of the emergency management personnel working closely with the dam owner to complete

the emergency action plan test. Strengthening the relationship between the emergency management personnel and the dam owner

ensures that their roles mesh and that each function is coordinated

with the other.

Natural Gas Issues

Streamlining Certification. Order No. 603 streamlined the gas pipeline certificate process to better fit the unbundled nature of today’s

pipeline sales and open access transportation services. The order

allows better response to changes in competitive market forces by,

among other things, expanding the scope of blanket certificates to

let pipelines construct, operate, rearrange, replace, and abandon more

facilities automatically. Order No. 603 helps protect both customers and the environment by clarifying the specific information needed

for a complete application, and expedites the certification process

by establishing procedures to reject patently deficient applications

for proposed projects before the Commission spends significant resources unnecessarily. The order requires pipelines to file more complete applications and sets a time limit of 10 days for the Commission to issue a notice of the application or reject patently deficient

applications.

The Certificate Policy Statement. The Certificate Policy Statement, approved by the Commission in September 1999, sets forth

the steps the Commission will use to balance the public benefits

against the potential adverse consequences of an application for new

pipeline construction. The Commission will approve an application

for a certificate only if the public benefits from the project outweigh any adverse effects. Under this policy, pipelines are encouraged to submit applications designed to avoid or minimize adverse

effects on relevant interests including effects on existing customers

of the applicant, existing pipelines serving the market and their captive customers, and affected landowners and communities.

TOTAL CUMULATIVE

MILES APPROVED

PIPELINE CONSTRUCTION PROJECTS

0

2000

1995

1996

5000 1997

1998

4000

3000

1000

1999

6000

7000

8000

9000

SOURCE: CERTRACK

27
ENERGY PROJECTS

Key to this policy is the preference of incremental pricing in

which construction costs are recovered only from customers that

benefit from the new project, over rolled-in-pricing. A threshold

requirement for approval, that project sponsors must be prepared to

develop the project without relying on subsidization by the sponsor’s

existing customers, protects all of the relevant interests.

Collaborative Process. The Commission has also offered natural

gas pipelines the option of engaging in a voluntary collaborative

process with the public and Commission staff before filing an application for a certificate to construct and abandon new facilities.

The goal is to improve communication, expand public participation, and resolve potential conflicts earlier in the filing process. Under

the new option, applicants notify the Commission, the public, including landowners, and state and local government officials of their

intention to start pre-filing consultations. In addition to resolving

disputes at an early stage of the process, applicants also have the

option of working with Commission staff and other interested parties to complete environmental studies in advance of a formal filing.

At the electrical generating station of the Niagara Falls Power Company in 1900, mechanics make final adjustments to the armature of a generator. (Photo courtesy of the Smithsonian Institution.)

28
ENERGY PROJECTS

Landowner Notification Rule. In September 1999, the Commission issued a final rule requiring the early notification of landowners who may be affected by the construction of natural gas pipeline

projects. The goal is to ensure that landowners have sufficient opportunity to participate in the Commission’s certificate process. The

timely participation of landowners can result in the resolution of

issues and in a more comprehensive record, allowing a faster Commission decision. The Commission offers an easy-to-understand

brochure that addresses landowner issues.

Certification of Major Facilities Construction. The Commission

authorized many major projects, including system expansions of

such pipelines as Algonquin Gas Transmission Company, Columbia Gulf Transmission Company, Mississippi Canyon Gas Pipeline

L.L.C., Northwest Pipeline Corporation, Southern Natural Gas Company, Tennessee Gas Pipeline Company, Texas Eastern Transmission Corporation, Transcontinental Gas Pipe Line Corporation, and

Viking Gas Transmission Company.

The Commission issued a certificate for Phase II of the

Maritimes & Northeast Pipeline, L.L.C.’s project authorizing an

additional 205 miles of pipeline with a capacity of 360 Mmcfd. The

project will provide natural gas service to consumers in Maine, New

Hampshire, Massachusetts and other parts of the Northeast through

interconnecting pipelines. The Commission also issued a certificate

to Vector Pipeline L.P. for 328 miles of pipeline and a capacity of

1,000 Mmcfd. This project will provide service to consumers in the

eastern United States and Canada.

The Commission granted a certificate of public convenience

and necessity to Wyoming Interstate Company, Ltd., for a 150-mile

lateral pipeline and compressor station. The pipeline will connect

new sources of coalbed gas from the Powder River basin in Wyoming to the pipeline in Colorado.

The Commission approved a settlement involving Pacific Interstate Transmission Company (PITCO), Northwest Alaska Pipeline Company, PG&E Gas Transmission, Northwest Corporation,

Transwestern Pipeline Company, Pan-Alberta Gas (U.S.), Inc., and

Northwest Pipeline Company. The order allowed the abandonment

of all of PITCO’s facilities and services, with the other parties acquiring facilities, capacity, and transportation and sales obligations.

The Commission issued Presidential Permits and approved exports and imports for San Diego Gas and Electric Company, Tennessee Gas Pipeline Company, and Canadian-Montana Pipeline

Corporation.

The Commission issued certificates for the expansion, establishment of storage boundaries, or modification of wells and facilities for storage fields of Columbia Gas Transmission Corporation,

ANR Pipeline Company, CNG Transmission Corporation, and Texas

Eastern Transmission Corporation. The Commission also issued a

certificate to Transcontinental Gas Pipe Line Corporation for 53

miles of pipeline and compression in the offshore Louisiana area.

This project will provide firm transportation capacity for producers

and other shippers who want the assurance of firm service for their

offshore supplies.

Initiative for Offshore Facilities. A NOPR issued in early summer

1999 seeks to impose a more light-handed regulatory approach on

the transportation of natural gas from the outer continental shelf to

the mainland. The NOPR proposes to implement a regulatory structure for such transportation under the Outer Continental Shelf Lands

Act to equalize competition and balance the interests of the marketplace and the consuming public.

Gas Demand Conference. As part of its gas industry review, the

Commission held a conference on the anticipated demand for natural gas in the Northeast United States. The conference solicited information on growth projections in natural gas markets in the northeast United States over the next one to two decades and on correlations between these projections and existing pipeline capacity. The

conference and comments will help shape future Commission policy

on pipeline construction.

Environmental Compliance Monitoring. The Commission has

started a pilot program on third party, independent environmental

compliance monitoring and reporting. This pilot program allows

more frequent construction inspections and fosters quicker decisions on variances from Commission environmental conditions.

Third party compliance monitors, hired by the pipeline but under

Commission direction, will perform weekly inspections of each

construction spread. The monitors will allow minor variances within

3 days, and variances including expanded work areas within 6 days,

with the time duration dependent on supervisory review by the contractors and the Commission. This should speed the construction

process and result in more frequent compliance inspections, to the

benefit of the environment. To ensure compliance with environmental

regulations, the Commission monitored pipeline construction and

right-of-way restoration activities on almost 400 compliance trips

in FY 1999.

The Commission completed substantial construction compliance work on Portland Natural Gas Transmission System, Northern

Border Pipeline Company, and Columbia Gas Transmission Corporation, to allow the start of new natural gas service in the Midwest

and Northeast.

On a case-specific basis, the Commission also is implementing

a landowner compliance resolution process to improve communication and responsiveness, and to decrease tension related to construction impacts. Also, the Commission is issuing compliance inspection reports, rather than the more time-consuming notification

letters, to speed correction of construction problems observed by

field inspectors.

Interagency Agreements. The Commission has executed Memoranda of Understanding (MOUs) with the Department of Transportation on LNG and natural gas transportation facilities, and with the

Environmental Protection Agency on pipeline facilities contaminated

with polychlorinated biphenals (PCBs). MOUs with other agencies

are under consideration. The Commission will also reach agreements

with other agencies and state historic preservation offices to evaluate the impact of specific natural gas facilities on cultural resources.

These agreements will ensure the Commission’s compliance with

Section 106 of the National Historic Preservation Act.

29
(Projects For Which Licenses Will Expire Between January 1, 2000, and December 31, 2005)

License FERC Facilities Period

Expiration Project Installation Under of Subj.

Date Licensee No. State County River (KW) License (years) Fed.

 20000228 PACIFICORP 2659 OR HOOD HOOD RIVER 6000 DM PH 20 N

 20000229 OCONTO ELECTRIC COOP 1981 WI OCONTO OCONTO RIVER 1690 DM PH 50 Y

 20000331 LOCKHART POWER CO 2620 SC UNION BROAD RIVER 12300 DM PH 20 N

 20000331 STURGIS CITY OF 2964 MI ST JOSEPH ST JOSEPH RIVER 2720 DM PH 20 N

 20000430 INTERNATIONAL PAPER CO 2609 NY SARATOGA HUDSON RIVER 58300 DM PH 20 N

 20000430 GREAT NORTHERN PAPER INC. 2634 ME PISCATAQUIS PENOBSCOT 0 RS 20 N

 20000430 DENVER CITY & COUNTY OF 2035 CO BOULDER S BOULDER CREEK 0 RS 50 N

 20000531 INDIANA MICHIGAN POWER CO 2651 IN ELKHART ST JOSEPH RIVER 3440 DM PH 20 N

 20000531 CENTRAL VERMONT PUB SERV CORP 2731 VT ADDISON OTTER CREEK 3000 DM PH 20 N

 20000531 NIAGARA MOHAWK POWER CORP 2047 NY SARATOGA SACANDAGA RIVER 30000 DM PH 50 N

 20000614 SOUTHERN CALIFORNIA EDISON CO 372 CA TULUARE TULE RIVER 2520 DM PH 22 Y

 20000630 KETCHIKAN CITY OF 420 AK KETCHIKAN KETCHIKAN CREEK 4200 DM PH 18 N

 20000630 RHINELANDER PAPER CO 2161 WI ONEIDA WISCONSIN RIVER 2120 DM PH 19 Y

 20000630 S. CAROLINA ELECTRIC&GAS CO 1895 SC RICHLAND BROAD RIVER 10600 DM PH 20 Y

 20000630 CONSOLIDATED WATER POWER CO 2192 WI WOOD WISCONSIN R 6620 DM PH 20 Y

 20000630 NORTHERN STATES POWER CO 2567 WI CHIPPEWA CHIPPEWA RIVER 35280 DM PH 20 N

 20000630 CENTRAL VERMONT PUB SERV CORP 2737 VT ADDISON OTTER CREEK 2250 DM PH 20 N

 20000630 PACIFICORP 597 UT SALT LAKE BIG COTTONWOOD 1000 DM PH 23 Y

 20000630 CONSOLIDATED WATER POWER CO 2110 WI PORTAGE WISCONSIN RIVER 3840 DM PH 23 Y

 20000731 NORTHBROOK CAROLINA HYDRO L.L.C. 2585 NC FORSYTHE YADKIN RIVER 1410 DM PH 20 Y

 20000731 KAUKAUNA CITY OF 2588 WI OUTAGAMIE FOX RIVER 3300 DM PH 20 N

 20000831 GEORGIA-PACIFIC CORP 2660 ME WASHINGTON E BRANCH ST. CROIX 0 RS 20 N

 20000831 PACIFICORP 2722 UT WEBER OGDEN RIVER 5000 DM PH 20 N

 20000901 WISCONSIN ELECTRIC POWER CO 2670 WI CHIPPEWA CHIPPEWA RIVER 9500 DM PH 20 N

 20000929 GEORGIA-PACIFIC CORP 2618 ME WASHINGTON ST. CROIX RIVER 0 RS 20 N

 20000930 BANGOR HYDRO-ELECTRIC CO 2721 ME PENOBSCOT PISCATAQUIS RIVER 1875 DM PH 20 Y

 20000930 PACIFIC GAS & ELECTRIC CO 2661 CA SHASTA HAT CREEK 20000 DM PH 25 N

 20001031 PACIFICORP 696 UT UTAH AMERICAN FORK CREEK 950 DM PH 25 N

 20001130 IDAHO POWER CO 2055 ID OWYHEE SNAKE RIVER 82800 DM PH 50 Y

 20001231 NEKOOSA PACKAGING CORP 2902 VA AMHERST JAMES RIVER 512 DM PH 20 N

 20001231 NORTHERN STATES POWER CO 2056 MN HENNEPIN MISSISSIPPI RIVER 28400 DM PH 50 Y

 20010125 S D WARREN CO 2942 ME CUMBERLAND PRESUMPSCOT RIVER 2400 DM PH 20 N

 20010125 S D WARREN CO 2931 ME CUMBERLAND PRESUMPSCOT RIVER 1900 DM PH 21 N

 20010125 S D WARREN CO 2932 ME CUMBERLAND PRESUMPSCOT RIVER 800 DM PH 21 N

 20010125 S D WARREN CO 2941 ME CUMBERLAND PRESUMPSCOT RIVER 1000 DM PH 21 N

 20010125 S D WARREN CO 2897 ME CUMBERLAND PRESUMPSCOT RIVER 1350 DM PH 22 Y

 20010131 CONNECTICUT LIGHT & POWER CO 2597 CT LITCHFIELD HOUSATONIC RIVER 9000 DM PH 20 N

 20010131 NEKOOSA PACKAGING CORP 2901 VA AMHERST,BEDFORD JAMES RIVER 1875 DM PH 20 Y

 20010131 LYNDONVILLE VILLAGE OF 3090 VT CALEDONIA PASSUMPSIC RIVER 350 DM PH 20 N

 20010131 VIRGINIA ELECTRIC & POWER CO 2009 NC HALIFAX ROANOKE RIVER 278000 DM PH 50 Y

 20010131 NIAGARA MOHAWK POWER CORP 2060 NY TOWN OF COLTON RAQUETTE RIVER 0 RS 50 Y

 20010228 ANTRIM COUNTY 3030 MI ANTRIM ELK RIVER 700 DM PH 20 N

 20010228 AVISTA 2075 MT SANDERS CLARK FORK 466200 DM PH 46 N

 20010228 DAIRYLAND POWER COOP 1960 WI RUSK FLAMBEAU RIVER 15000 DM PH 50 Y

 20010228 AVISTA 2058 ID BONNER CLARK FORK RIVER 224550 DM PH 50 Y

 20010330 CONSUMERS ENERGY CO 2566 MI IONIA GRAND RIVER 3250 DM PH 20 Y

 20010430 PACIFICORP 2071 WA CLARK LEWIS 134000 DM PH 50 Y

 20010731 MARQUETTE CITY OF 2589 MI MARQUETTE DEAD RIVER 3900 DM PH 20 Y

 20010731 NEW ENGLAND POWER CO 2077 NH GRAFTON CONNECTICUT RIVER 291360 DM PH 50 Y

 20010830 BLACK RIVER FALLS CITY OF 3052 WI JACKSON BLACK RIVER 920 DM PH 20 N

 20010831 PACIFICORP 2652 MT FLATHEAD SWAN RIVER 4150 DM PH 25 Y

 20010831 GREEN MOUNTAIN POWER CORP 2090 VT WASHINGTON WATERBURY RIVER 5520 DM PH 47 Y

 20010901 INTERNATIONAL PAPER CO 2631 MA HAMPDEN WESTFIELD RIVER 2690 DM PH 20 Y

 20010930 HAMILTON CITY OF 2724 OH BUTLER MIAMI RIVER 1500 DM PH 20 N

 20010930 ENTERPRISE MILL, LLC 2935 GA RICHMOND AUGUSTA CANAL 1200 DM PH 20 N

 20010930 GEORGIA POWER CO 1218 GA DOUGHERTY FLINT RIVER 5400 DM PH 22 Y

 20010930 AQUENERGY SYSTEMS INC 2416 SC GREENWOOD SALUDA RIVER 6200 DM PH 25 Y

 20010930 NANTAHALA POWER & LIGHT CO 2694 NC MACON QUEENS CREEK 1440 DM PH 25 N

 20011001 PACIFICORP 472 ID FRANKLIN BEAR RIVER 30000 DM PH 20 Y

 20011001 CONNECTICUT LIGHT & POWER CO 2576 CT FAIRFIELD HOUSATONIC RIVER 105900 DM PH 20 N

 20011001 PACIFICORP 20 ID CARIBOU BEAR RIVER 14000 DM PH 23 Y

 20011001 PACIFICORP 2401 ID CARIBOU BEAR RIVER 40500 DM PH 25 Y

 20011031 WISCONSIN ELECTRIC POWER CO 2131 MI DICKINSON MENOMINEE RIVER 7200 DM PH 22 Y

 20011031 WISCONSIN ELECTRIC POWER CO 2073 MI IRON MICHIGAMME RIVER 9600 DM PH 50 Y

 20011031 WISCONSIN ELECTRIC POWER CO 2074 MI IRON MICHIGAMME RIVER 2800 DM PH 50 Y

 20011130 METROPANITAN WATER 2866 IL WILL CHICAGO SANITARY 13500 DM PH 20 Y

 20011130 NORTH CENTRAL POWER CO INC 2064 WI SAWYER CHIPPEWA RIVER 600 DM PH 50 Y

 20011231 WISCONSIN ELECTRIC POWER CO 1759 MI IRON MICHIGAMME RIVER 19944 DM PH 27 Y

 20011231 CENTRAL MAINE POWER CO 2142 ME SOMERSET KENNEBEC RIVER 76400 DM PH 47 Y

 20011231 TACOMA CITY OF 2016 WA LEWIS COWLITZ RIVER 460000 DM PH 50 Y

 20011231 PORTLAND GENERAL ELECTRIC CO 2030 OR JEFFERSON DESCHUTES RIVER 416100 DM PH 50 Y

 20011231 WISCONSIN ELECTRIC POWER CO 2072 MI IRON PAINT RIVER 100 DM PH 50 Y

 20020131 PUD NO 1 OF PEND OREILLE CNTY 2042 WA PEND OREILLE PEND OREILLE 60000 DM PH 50 N

 20020131 NIAGARA MOHAWK POWER CORP 2084 NY ST LAWRENCE RAQUETTE RIVER 101250 DM PH 50 Y

 20020223 PACIFIC GAS & ELECTRIC CO 184 CA EL DORADO S FORK AMERICAN 20000 DM PH 22 Y

HYDROELECTRIC POWER TABLE

30
License FERC Facilities Period

Expiration Project Installation Under of Subj.

Date Licensee No. State County River (KW) License (years) Fed.

 20020331 FORT JAMES OPERATING COMPANY 2312 ME PENOBSCOT PENOBSCOT RIVER 7655 DM PH 39 Y

 20020731 COMINCO AMERICAN INC 2103 WA PEND O’REILLE CEDAR CREEK 0 RS 50 N

 20020903 SPRINGVILLE CITY OF 2031 UT UTAH BARTHOLOMEW CR 2000 DM PH 50 N

 20020930 HART CITY OF 3516 MI OCEANA PENTWATER RIVER 352 DM PH 20 N

 20021012 GPU GENERATION, INC. 309 PA CLARION CLARION RIVER 28800 DM PH 23 Y

 20021031 HYDRO DEVELOPMENT GROUP INC 6059 NY ST LAWRENCE OSWEGATCHIE RIVER 900 DM PH 20 N

 20021101 TRINITY CONSERVANCY INC 719 WA CHELAN PHELPS CREEK 240 DM PH 23 N

 20021201 NEW YORK STATE ELEC & GAS CORP 2835 NY CLINTON AUSABLE RIVER 2640 DM PH 20 Y

 20021231 HYDRO DEVELOPMENT GROUP INC 6058 NY ST LAWRENCE OSWEGATCHIE RIVER 1490 DM PH 20 N

 20030131 WOODS LAKE HYDRO CO 3410 CO EAGLE LIME CREEK 45 DM PH 20 N

 20030228 NEW YORK STATE ELEC & GAS CORP 2852 NY STEUBEN MUD CREEK 2000 DM PH 20 Y

 20030228 ENTERGY, ARKANSAS, INC. 271 AR HOT SPRINGS OUACHITA 65300 DM PH 23 Y

 20030331 AVONDALE MILLS INC 5044 GA RICHMOND AUGUSTA CANAL 2475 DM PH 20 N

 20030426 SOUTHERN CALIFORNIA EDISON CO 344 CA SAN BERNARDINO SAN GORGONIO RIVER 2250 DM PH 20 Y

 20030430 PAROWAN CITY CORP 2782 UT IRON RED CREEK 500 DM PH 25 N

 20030606 FORD MOTOR CO 362 MN RAMSEY MISSISSIPPI RIVER 17920 DM PH 23 Y

 20030630 PCA HYDRO INC 2180 WI LINCOLN WISCONSIN RIVER 3000 DM PH 26 Y

 20030731 BURFORD JUDITH A 6418 CO EAGLE EAST BRUSH CREEK 11 DM PH 20 N

 20030824 MINNESOTA POWER & LIGHT CO 346 MN MORRISON MISSISSIPPI RIVER 18000 DM PH 23 Y

 20030831 SOUTHERN CALIFORNIA EDISON CO 2086 CA FRESNO MONO CREEK 0 RS 50 N

 20030918 INDIANA MICHIGAN POWER CO 401 MI ST. JOSEPH ST JOSEPH RIVER 1750 DM PH 25 Y

 20030930 CHARTER TOWNSHIP OF YPSILANTI 5334 MI WASHTENAW HURON RIVER 3413 DM PH 20 N

 20030930 PACIFIC GAS & ELECTRIC CO 2107 CA BUTTE NORTH FORK FEATHER 142830 DM PH 50 N

 20031031 PACIFIC GAS & ELECTRIC CO 233 CA SHASTA PIT RIVER 317000 DM PH 22 Y

 20031031 MINNESOTA POWER & LIGHT CO 469 MN LAKE KAWISHIWI 4000 DM PH 22 Y

 20031031 NEW YORK POWER AUTHORITY 2000 NY ST LAWRENCE ST LAWRENCE RIVER 912000 DM PH 50 N

 20031231 POTOMAC EDISON CO 2516 WV BERKELY POTOMAC RIVER 1900 DM PH 27 N

 20031231 POTOMAC EDISON CO 2517 WV BERKELY POTOMAC RIVER 1210 DM PH 27 N

 20040131 NEWTON FALLS INC. 7000 NY ST LAWRENCE OSWEGATCHIE RIVER 2220 DM PH 20 Y

 20040331 S D WARREN CO 2984 ME CUMBERLAND PRESUMPSCOT 1800 DM PH 20 Y

 20040331 PUD NO 1 OF CHELAN COUNTY 637 WA CHELAN CHELAN RIVER 48000 DM PH 30 Y

 20040410 MIDWEST HYDRO, INC 287 IL LASALLE FOX RIVER 3680 DM PH 24 Y

 20040430 MADISON PAPER INDUSTRIES 2364 ME SOMERSET KENNEBEC RIVER 16977 DM PH 40 Y

 20040430 MADISON PAPER INDUSTRIES 2365 ME SOMERSET KENNEBEC RIVER 9000 DM PH 40 Y

 20040430 MERIMIL LTD PARTNERSHIP 2574 ME KENNEBEC KENNEBEC RIVER 6770 DM PH 40 Y

 20040430 UNITED WATER CONSERVATION DIST 2153 CA VENTURA PIRU CREEK 1420 DM PH 50 Y

 20040630 WISCONSIN PUBLIC SERVICE CORP 1979 WI LINCOLN WISCONSIN RIVER 4200 DM PH 30 Y

 20040731 NORWAY CITY OF 2720 MI DICKINSON MENOMINEE RIVER 5636 DM PH 20 Y

 20040731 IDAHO POWER CO 2726 ID GOODING BIG WOOD RIVER 21770 DM PH 25 Y

 20040930 BARTON VILLAGE INC 7725 VT ORLEANS CLYDE RIVER 1300 DM PH 20 N

 20040930 PENNSYLVANIA POWER & LIGHT CO 487 PA WAYNE LACKAWAXEN RIVER 40000 DM PH 30 Y

 20041031 BUFFALO HYDRO L.C. 1413 ID FREMONT BUFFALO RIVER 250 DM PH 25 N

 20041031 PACIFIC GAS & ELECTRIC CO 2105 CA PLUMAS NORTH FORK FEATHER 342628 DM PH 50 Y

 20041112 PETERSBURG CITY OF 201 AK WRANGELL CRYSTAL CREEK 2000 DM PH 30 Y

 20041116 PORTLAND GENERAL ELECTRIC CO 477 OR CLACKAMAS SANDY RIVER 21000 DM PH 25 Y

 20041130 INTERNATIONAL PAPER CO 4914 WI BROWN FOX RIVER 1078 DM PH 20 N

 20041230 PAROWAN CITY CORP 1273 UT IRON CENTER CREEK 600 DM PH 30 N

 20041231 MOSINEE PAPER CORP 2207 WI MARATHON WISCONSIN RIVER 3050 DM PH 30 Y

 20041231 MONTANA POWER CO 2543 MT MISSOULA CLARK FORK 3200 DM PH 40 Y

 20041231 OAKDALE & SAN JOAQUIN IRR DIST 2005 CA TUOLUMNE MID FORK STANISLAUS 63990 DM PH 50 Y

 20041231 OAKDALE & SAN JOAQUIN IRR DIST 2067 CA TUOLUMNE STANISLAUS RIVER 17100 DM PH 50 Y

 20041231 PACIFIC GAS & ELECTRIC CO 2130 CA TUOLUMNE STANISLAUS 87900 DM PH 50 Y

 20041231 GEORGIA POWER CO 2177 GA HARRIS CHATTAHOOCHEE RIVER 115600 DM PH 50 Y

 20041231 PORTLAND GENERAL ELECTRIC CO 2233 OR CLACKAMAS WILLAMETTE RIVER 16800 DM PH 50 Y

 20050228 SOUTHERN CALIF EDISON CO 382 CA KERN KERN RIVER 12,000 DM PH 25 Y

 20050228 TAPOCO INC 2169 TN MONROE LITTLE TENNESSEE R 326,500 DM PH 50 Y

 20050331 WISCONSIN ELECTRIC POWER 2697 WI DUNN RED CEDAR RIVER 6,000 DM PH 25 Y

 20050331 SOUTHERN CALIF EDISON CO 2174 CA FRESNO RANCHERIA CR,BIG CR 10,800 DM PH 50 Y

 20050331 WISCONSIN ELECTRIC POWER 2181 WI DUNN RED CEDAR RIVER 5,400 DM PH 50 Y

 20050430 PACIFIC GAS & ELECTRIC CO 178 CA KERN KERN RIVER 11,500 DM PH 25 Y

 20050430 ALABAMA ELECTRIC COOP INC 2586 AL CRENSHAW CONECUH RRIVER 8,250 DM PH 25 N

 20050531 MARSHALL, CITY OF 6514 MI CALHOUN KALAMAZOO RRIVER 319 DM PH 20 N

 20050531 GRAND RIVER DAM AUTH 2183 OK MAYES NEOSHO RIVER 100,000 DM PH 50 Y

 20050630 N. E. W. HYDRO INC ET AL 7264 WI OUTAGAMIE FOX RIVER 1,390 DM PH 20 Y

 20050630 PACIFICORP 2630 OR JACKSON N FK ROGUE RIVR 36,760 DM PH 25 Y

 20050630 FPL ENERGY MAINE HYDRO LLC 2194 ME YORK SACO RIVER 4,000 DM PH 50 Y

 20050730 NANTAHALA PWR AND LT CO 2601 NC SWAIN OCONALUFTEE RIVER 980 DM PH 25 Y

 20050730 NANTAHALA PWR AND LT CO 2602 NC JACKSON TUCKASEGEE RIVER 225 DM PH 25 Y

 20050730 NANTAHALA PWR AND LT CO 2603 NC MACON LITTLE TENNESSEE R 1,040 DM PH 25 Y

 20050731 NANTAHALA PWR AND LT CO 2619 NC CLAY HIWASSEE RIVER 1,800 DM PH 25 Y

 20050731 IDAHO POWER CO 1971 OR BAKER SNAKE RIVER 1,166,500 DM PH 50 Y

*Includes types of facilities at each project, but not total number of each type (e.g. A project may consist of multiple powerhouses or dams.). DM Dam, RS Reservoir, CL Canal,

TU Tunnel, FM Flume, PI Pipeline, PK Penstock, PH Powerhouse, TR Turbine, GN Generator(s), TC Tailrace, TL Transmission Line or connection thereto.

HYDROELECTRIC POWER TABLE

31
For Additional Information Contact:

Federal Energy Regulatory Commission

Office of External Affairs

888 First Street, NE

Washington, DC 20426

202/208-0004

Printed 2000

32