[Federal Register Volume 60, Number 55 (Wednesday, March 22, 1995)]
[Rules and Regulations]
[Pages 15040-15049]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6979]



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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 11 and 381

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


Charges and Fees for Hydroelectric Projects

    Issued: March 15, 1995.

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY:  The Federal Energy Regulatory Commission (Commission) is 
amending its regulations governing the assessment of annual charges for 
the administration of Part I of the Federal Power Act, 16 U.S.C. 792-
823b. The final rule adopts a maximum charge and makes the assessments 
commence at the same time as the commencement of project construction. 
The final rule eliminates annual charges for minor licensees, and does 
not (as originally proposed) adopt annual charges for existing 
exemptees. The final rule eliminates filing fees for future exemption 
applications, and adopts annual charges with respect to exemptions that 
are issued in the future for projects that are equivalent in size to 
those of major licensed projects. The final rule retains at this time 
the separate allocation of annual charges for administrative costs for 
municipal and non-municipal licensees, and retains as well the existing 
formulae for allocating those costs between the two classes of major 
licensees. The final rule defers consideration of those issues to a 
future proceeding.

EFFECTIVE DATE: April 21, 1995.

FOR FURTHER INFORMATION CONTACT: Barry Smoler, Office of the General 
Counsel, Federal Energy Regulatory Commission, 825 N. Capitol Street 
NE., Washington, DC 20426, (202) 208-1269.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of 
this document in the Federal Register, the Commission also provides all 
interested persons an opportunity to inspect or copy the contents of 
this document during normal business hours in Room 3104, 941 North 
Capitol Street, NE., Washington, DC 20426.
    The Commission Issuance Posting System (CIPS), an electronic 
bulletin board service, provides access to the texts of formal 
documents issued by the Commission. CIPS is available at no charge to 
the user and may be accessed using a personal computer with a modem by 
dialing (202) 208-1397. To access CIPS, set your communications 
software to 19200, 14400, 12000, 9600, 7200, 4800, 2400, 1200 or 
300bps, full duplex, no parity, 8 data bits, and 1 stop bit. The full 
text of this document will be available on CIPS for 60 days from the 
date of issuance in ASCII and WordPerfect 5.1 format. After 60 days the 
document will be archived, but still accessible. The complete text on 
diskette in Wordperfect format may also be purchased from the 
Commission's copy contractor, La Dorn Systems Corporation, located in 
Room 3104, 941 North Capitol Street NE., Washington, DC 20426.

I. Introduction

    The Federal Energy Regulatory Commission (Commission) is amending 
its regulations governing the assessment of annual charges for the 
administration of Part I of the Federal Power Act (FPA).\1\ The final 
rule adopts a maximum charge and makes the assessments commence at the 
same time as the commencement of project construction. The final rule 
eliminates annual charges for minor licensees, and does not (as 
originally proposed) adopt annual charges for existing exemptees.\2\ 
The final rule retains at this time the separate allocation of annual 
charges for administrative costs for municipal and non-municipal 
licensees, and retains as well the existing formulae for allocating 
those costs between the two classes of major licensees. The final rule 
defers consideration of those issues to a future proceeding.

    \1\16 U.S.C. 792-823b.
    \2\As discussed below, the final rule eliminates filing fees for 
future exemption applications, and adopts annual charges with 
respect to exemptions that are issued in the future for projects 
that are equivalent in size to those of major licensed projects.
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II. Public Reporting Burden

    Under the current regulations, major non-municipal licensees file 
annual reports containing data on their electric generation during the 
prior fiscal year. The final rule does not alter that reporting burden.

III. Background

    On January 26, 1994, the Commission issued a Notice of Proposed 
Rulemaking (NOPR) proposing to revise its regulations governing the 
assessment of annual charges under FPA Part I.\3\ As explained in the 
NOPR, the Commission is required by section 10(e)(1) of the FPA\4\ to 
collect annual charges from licensees for the cost of administering 
Part I of the FPA. Part 11 of the Commission's regulations\5\ provides 
the manner in which licensees are charged for such costs. Prior to the 
adoption of the current regulations in 1958 and 1963, administrative 
charges were not based on the actual costs of the government, but were 
in the nature of set fees that were billed for a calendar year.\6\ 
Under the current regulations, the reimbursable costs are determined on 
a fiscal year basis.

    \3\IV FERC Stats. & Regs.  32,505. The NOPR was published in 
the Federal Register on February 3, 1994, 59 FR 5142.
    \4\16 U.S.C. 803(e)(1).
    \5\18 CFR part 11.
    \6\The system of basing the annual charges on actual costs was 
adopted in Order No. 205, 19 F.P.C. 907 (1958) (with respect to 
municipal licensees only), and in Order No. 272, 30 F.P.C. 1333 
(1963) (all other licensees); see also Order No. 272-A, 31 F.P.C. 
1555 (1964).
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    Section 3401 of the Omnibus Budget Reconciliation Act of 1986 
(OBRA) \7\ requires the Commission to recover all of its costs for the 
fiscal year through annual charges and fees.\8\ The annual charges 
assessed pursuant to OBRA are based on an estimate of the Commission's 
current-fiscal-year costs, with subsequent adjustments based on actual 
costs.\9\ Pursuant to OBRA, the Commission collects annual charges to 
recover the costs of administering Parts II and III of the FPA, as well 
as the costs the Commission incurs in administering the Natural Gas 
Act, the Natural Gas Policy Act, and the Interstate Commerce Act. In 
this regard, we note that section 3401(a)(2) of OBRA provides that 
``[t]he provisions of this subtitle shall not affect the authority, 
requirements, exceptions, or limitations in sections 10(e) and 30(e) of 
the Federal Power Act.''

    \7\Pub. L. No. 99-509, Title III, Subtitle E, sec. 3401 (1986) 
(codified at 42 U.S.C. 7178). OBRA is implemented in Part 382 of the 
Commission's Regulations, 18 CFR Part 382.
    \8\See Joint Explanatory Statement of the Committee of 
Conference to Accompany H.R. 5300 (Conference Report), H.R. Rep. No. 
1012, 99th Cong., 2d Sess. 238, reprinted in 1986 U.S.C.C.A.N. 3607, 
3883.
    \9\The former procedures for estimating the costs and later 
adjusting the assessments were described in Order No. 472, 52 FR 
18201 (May 14, 1987), FERC Stats. & Regs. (Regulations Preambles 
1986-1990)  30,746 at pp. 30,612 and 30,616-17.
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    In response to the NOPR, the Commission received 73 comments. The 
[[Page 15041]] commenters are listed in Appendix A of this final rule. 
The proposals in the NOPR, the comments thereon, and the Commission's 
determinations thereon are discussed below on a subject by subject 
basis.

IV. Discussion

    As explained in the NOPR, former Sec. 11.1 of the Commission's 
regulations provided three different allocation formulae for three 
different classes of licensees. For non-municipal licensees of projects 
of more than 2,000 horsepower of installed capacity, former 
Sec. 11.1(a) set forth an allocation formula based on a combination of 
the project's authorized installed capacity and the energy actually 
generated. For municipal licensees of projects of more than 2,000 
horsepower, former Sec. 11.1(b) set forth an allocation formula based 
solely on capacity. For all licensees (both municipal and non-
municipal) of projects of 2,000 horsepower or less of installed 
capacity, former Sec. 11.1(c) specified an annual charge of five cents 
per horsepower, with a minimum charge of $5 per year.
    The NOPR proposed two alternatives. In Alternative A, the 
Commission proposed to base the allocation of all of the annual charges 
among a single class of licensees and exemptees, including all major 
and minor municipal and non-municipal licensees and all exemptees. The 
allocation would be based solely on the respective capacity of each 
hydropower project as measured in kilowatts. Under Alternative B, the 
Commission proposed to retain separate categories and formulae for 
major municipal and non-municipal licensees. Minor licensees and 
exemptees would be classified with the comparable groups of major 
licensees, and their charges would be assessed pursuant to the formulae 
currently used for those groups.

A. Charges for Minor Licensees

    As noted above, both Alternative A and Alternative B treated the 
minor licensees in the same manner as the major licensees. In 
Alternative A, all licensees were combined together in a single 
allocation formula. In Alternative B, the minor licensees were included 
in the respective allocation formulae for the major licensees. In other 
words, the minor municipal licensees were included in the same 
allocation formula with the major municipal licensees, and the minor 
non-municipal licensees were included in the same allocation formula 
with the major non-municipal licensees. The NOPR recognized that, under 
either scheme, the charges for minor licensees may increase 
substantially, but expressed the Commission's belief that the existing 
charge of five cents per horsepower had been so heavily eroded by 
inflation since it was adopted in 1963 as to have been rendered 
comparatively meaningless.
    The major licensees favor including the minor licensees in the same 
assessment pool,\10\ while the minor licensees object. The major 
licensees emphasize fairness in broadly spreading the Commission's 
costs, while the minor licensees emphasize the burden on them.

    \10\See, e.g., EEI at 16-17.
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    Water Assn. contends that ``dramatic increases in fees'' would 
cause some economically marginal minor licensees to abandon operation 
of their projects.\11\

    \11\Water Assn. at 3. See also North America.
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    Some minor licensees contend that they cannot afford a minimum 
annual charge of $100. Mackowiak, for instance, has a 37 kilowatt (kW) 
project in his back yard, whose purpose is to provide electricity to 
his home. He proposes that projects smaller than 100 kW in capacity be 
excluded from the assessments.
    We have decided not to assess annual charges on minor projects. As 
a practical matter, excluding minor projects (i.e., projects of 1.5 MW 
or smaller) will have no meaningful impact on the other licensees' 
assessments, but will relieve minor licensees of a potentially onerous 
burden.
    In fiscal year 1993, a total of 1052 licensees were assessed a 
total of $51,399,160 in annual charges for administration of Part I of 
the FPA. Of that total, the 661 major licensees were assessed a total 
of $51,350,699,\12\ while the 391 minor licensees were assessed a total 
of $48,461.\13\ Thus, the major licensees accounted for 99.9 percent of 
the total assessments, while the minor licensees accounted for only 0.1 
percent of the total assessments.

    \12\Of that total, 133 municipal major licensees were assessed a 
total of $11,105,138, while 528 non-municipal major licensees were 
assessed a total of $40,245,561.
    \13\Of that total, 58 municipal minor licensees were assessed a 
total of $3,404, while 333 non-municipal minor licensees were 
assessed a total of $45,057.
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    In other words, no major licensee derives any meaningful financial 
benefit from including the minor licensees in the existing assessment 
and allocation scheme. We believe that substantially increasing the 
minor licensees' annual charges, as proposed in the NOPR, could impose 
unreasonable burdens on many of those licensees, while exclusion of the 
minor licensees from the new assessment and allocation scheme may 
provide meaningful relief to many of those minor licensees. 
Accordingly, we have defined the scope of the assessment process in new 
Sec. 11.1(b)(1) so as to include only licensees whose projects exceed 
1.5 MW in authorized installed capacity. The 1.5 MW is the equivalent 
of the 2,000 horsepower definition of minor projects in former 
Sec. 11.1.

B. Minimum and Maximum Charges

    The NOPR proposed to establish a minimum and maximum annual charge. 
The minimum annual charge would be $100. The maximum charge would set a 
limit on annual charges so that, with respect to costs incurred by the 
Commission, no licensee's project would be required to pay more than 
2.0 percent of the total costs.\14\

    \14\The proposed limit was modelled after the formula in 
Sec. 382.203(b) with respect to annual charges for oil pipelines. 
The maximum annual charge stated therein is 6.339 percent of the 
total charges, but that figure is based on a much smaller number of 
significant entities (interstate oil pipelines) sharing a much 
smaller total cost.
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    The NOPR also invited comment on other potential alternatives. With 
respect to a minimum charge, other alternatives would be to waive 
charges below a fixed dollar amount or below a fixed capacity. With 
respect to a maximum charge, different percentages could be used for 
the ceiling. If the formula were to be based solely on capacity, 
another alternative would be to have a 50 percent discount for all 
authorized capacity above a prescribed ceiling (e.g., 500 megawatts).
    Many of the commenters express approval for a maximum charge, and 
many of these comments come from licensees who would not themselves 
benefit from such a cap. In general, the commenters believe that the 
charges assessed to the largest projects are disproportionate.
    Washington Company proposes a minimum base annual charge of 
$500.\15\ Some smaller exemptees and minor licensees, on the other 
hand, contend that the $100 minimum would be unduly burdensome on them.

    \15\Washington Company at 5.
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    Ogden opposes the two percent maximum charge on grounds that it 
would solely benefit larger, non-municipal projects. Alaskan opposes 
the maximum charge on grounds that, ``[i]f the charges are equitably 
allocated at the outset, the effect of the proposed cap could be to 
unfairly reallocate costs from larger to smaller projects.''\16\ 
Synergics also believes the cap is unfair.

    \16\Alaskan at 5.
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    Consolidated would lower the cap from 2 percent to 1.6 percent. Or, 
using the alternative formula discussed in the [[Page 15042]] NOPR, 
Consolidated would use a 75 percent discount factor for all capacity in 
excess of 500 MW.\17\

    \17\Consolidated at 11-12; see also Storage Council at 9-10; 
Kvaerner at 10-11.
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    Chelan argues that the proposed two percent cap is inequitable. 
Chelan has two large projects each of which would fall beneath the cap, 
while its downstream neighbor, Grant, has two comparable developments 
that are grouped together into a single licensed project large enough 
to benefit from the cap. Therefore, Chelan urges us to apply the cap to 
licensees, not to projects. Chelan offers a further alternative: ``The 
maximum charge per licensee could be 2 percent of the total 
administrative costs, or .5 percent of the number of projects licensed 
to it, whichever is greater.''\18\

    \18\Chelan at 11-13.
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    Grant suggests that the Commission conduct ``a reasonable project-
by-project sample study'' that would ``determine the average 
relationship of administrative costs to project size,'' and thereafter 
adjust the cap ``to reflect the outcome of the study.''\19\ Virginia 
Electric proposes that the minimum charge be indexed to the rates of 
inflation of the Commission's total costs.\20\

    \19\Grant at 6.
    \20\Virginia Power at 2.
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    In light of our determination to assess annual charges only to 
licensees whose projects have a capacity in excess of 1.5 MW, the 
proposed minimum charge has been rendered moot. Accordingly, we have 
not adopted it in the final rule.
    Having considered the comments received, and for the reasons stated 
in the NOPR, we will adopt the two percent maximum charge that was 
proposed in the NOPR. We believe it is a reasonable compromise that 
takes into account the financial capacity of the larger projects as 
well as considerations of fairness in spreading the burden equitably 
among licensees by putting finite limits on the extent of any one 
project's burden.\21\

    \21\We understand Chelan's point, but we believe that basing the 
cap on licensees rather than on projects might result in as many 
distortions as the one Chelan notes. No annual charge allocation 
formula will ever be ``perfect'' or totally free of any distortion. 
We believe that the one we have adopted is reasonable. In any event, 
as noted below, our annual charge program is not predicated on 
collecting from individual projects in proportion to their 
responsibility for administrative costs incurred. For these and 
other reasons, we also believe that no useful purpose would be 
served by conducting the study suggested by Grant.
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C. Commencement of Assessments

    The NOPR recognized that, in the case of major construction 
projects, the license may be in effect for several years before project 
construction is commenced and before the project commences operation 
and goes into service. With respect to non-municipal licensees, annual 
charges are payable each year from the date of issuance of the license, 
but there is no incoming stream of revenue during those years, because 
no power is being generated. Municipal licensees, on the other hand, do 
obtain an exemption from annual charges prior to and during the 
construction period. This is because Sec. 11.6(g) of the regulations 
provides a complete exemption from certain annual charges when a 
municipal project is under construction and not generating power, on 
the theory that the project is operating without profit within the 
meaning of the municipal exemption in FPA section 10(e).
    Under the various regulatory regimes discussed in the NOPR, the 
Commission would maintain the above-described exemption from annual 
charges with respect to municipal projects that have not yet commenced 
commercial operation. In addition, the NOPR proposed to include in the 
assessment formula (whatever it may be) only licensed and exempted 
projects that have already been constructed or whose construction has 
commenced. Although framed in terms of all projects, as a practical 
matter, because of the exemption for municipal projects, the change 
would primarily affect non-municipal projects.\22\

    \22\The NOPR expressed the Commission's belief that commencement 
of construction is a more appropriate determinant than completion of 
construction, for two reasons. First, of all, the date on which 
construction commenced is a legally precise, documented date, 
whereas the date on which construction is completed is not defined 
with the same precision. This is because section 13 of the FPA 
requires that the licensee commence construction of the project 
within fixed time periods after issuance of the license, as 
specified in section 13 and the license. Thus, the Commission has 
evolved standards for determining the precise date of commencement 
of construction, and the hydropower industry is familiar with those 
standards. Secondly, the NOPR expressed the Commission's 
understanding that licensees of projects under construction can draw 
on construction loan funds to pay the annual charges, whereas such 
funds may not be available prior to the commencement of 
construction.
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    Some commenters advocate commencement of annual charge assessments 
upon issuance of the license or even earlier. Some prefer to delay 
commencement of charges until the project commences operating. And some 
prefer the middle ground proposed in the NOPR--commencement of charges 
after commencement of construction.
    EEI opposes deferring commencement of billing until commencement of 
construction, contending that it would give a ``free ride'' to 
licensees whose pre-construction planning activities consume Commission 
staff time. EEI would, instead, assess the charges during the pre-
construction period but defer their payment until after construction, 
has commenced. Otherwise, according to EEI, the existing licensees 
would be ``subsidizing'' the new licensees; it would be unfair to the 
existing licensees, who all paid annual charges from the inception of 
their licenses.<SUP>23

    \23\EEI at 12-14. EEI goes on to advocate filing fees for 
applications for a preliminary permit or an original license. Those 
proposals go beyond the scope of the NOPR and will not be considered 
here.
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    Consolidated states that large pumped storage projects require 
substantial lead time for design and financing prior to commencement of 
construction, and that during this period pumped storage developers 
typically have limited funds available.<SUP>24 Consolidated also points 
out that the existing regulations based annual charges for non-
municipal pumped storage projects entirely on capacity, so that such 
projects did not receive the partial or complete relief accorded to 
non-municipal conventional projects and municipal projects, both of 
whose charges were based in part or in whole on generation; charges 
based on generation do not commence until after construction, because 
nothing is generated until the project has been built. Thus, 
Consolidated favors the NOPR's commencement proposal as a more 
equitable solution.<SUP>25 Consolidated also asserts that pumped 
storage projects, because of their large scale, bear a disproportionate 
share of the annual charges. According to Consolidated, in 1993 pumped 
storage projects comprised three percent of the total number of 
licensed projects but paid 32 percent of the total annual charges for 
administrative costs.<SUP>26

    \24\Consolidated at 3-4.
    \25\Id. at 4-5.
    \26\Id. at 6.
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    Storage Council points out that pumped storage projects typically 
require two to four years of lead time after licensing before 
construction commences; that the annual charges for those projects are 
quite large; and that private developers of these projects need to 
concentrate their available finances on project design and power 
marketing.<SUP>27

    \27\Storage Council at 4-5.
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    Noah Corp. states that ``(t)he elimination of annual charges until 
construction start * * * is the most important part of this rulemaking. 
It will make more projects happen, because it [[Page 15043]] will 
encourage development by reducing risk cost.''<SUP>28

    \28\Noah Corp. at 1.
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    Adirondack argues that it is unfair for non-municipal licensees to 
have to pay annual charges during the construction period when 
municipal licensees do not. Adirondack favors commencing all annual 
charges at the commencement of project operation, i.e., the day on 
which the project first generates electricity.<SUP>29

    \29\Adirondack at 2.
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    Storage Partners also advocates the date of commencement of 
commercial operations as the appropriate date of commencement of annual 
charges. Storage Partners would define the commencement of commercial 
operations in terms of the contractually defined date of that type 
specified in construction contracts, financing commitments, and power 
sales contracts.<SUP>30

    \30\Storage Partners at 4.
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    PG&E contends that the intent of Congress in FPA section 10(e) was 
to require annual licensees to pay annual charges throughout the term 
of the license, including the years immediately after its issuance, 
even if construction hasn't commenced.<SUP>31 PG&E points out that this 
is a period of significant Commission staff involvement in the 
licensee's activities, as the staff monitors and approves various 
aspects of design and construction.<SUP>32

    \31\PG&E's comments, however, do not provide convincing 
documentation of such Congressional intent.
    \32\PG&E at 6-8.
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    Consumers Power contends that the Commission can provide adequate 
relief to project-financed projects by authorizing deferred payment of 
annual charges on a case-by-case basis.<SUP>33 Duke advocates a system 
of direct billing for actual services rendered, starting with the 
Commission's initial involvement with the applicant/licensee.<SUP>34

    \33\Consumers Power at 6.
    \34\Duke at 2.
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    In light of all of the comments, and for the reasons stated in the 
NOPR, we believe that the annual charges commencement date proposed in 
the NOPR strikes a reasonable balance and compromise among the 
financial concerns of the different licensees. Licenses are issued for 
terms of as long as 50 years, and the projects themselves are often 
designed and constructed to last much longer than the license. Thus, 
over time, providing a modest level of relief to licensees of projects 
that haven't yet commenced construction imposes a very small burden on 
the existing licensees, because the licensees of newly constructed 
projects will be sharing the total annual charges burden long after the 
expiration of the short pre-construction period. Moreover, if a few 
years of pre-construction relief from annual charges enables one or 
more licensees of new projects to bring their projects to fruition, 
these new projects will help share the existing licensees' burden.
    As we explained in the NOPR, we prefer to use the date of 
commencement of construction as the benchmark for commencement of 
annual charge assessments, as opposed to the date of commencement of 
operation, because the former has come to be defined (for other 
purposes) with considerably greater precision in the case law. It also 
marks the point in time at which funding is available from construction 
loans.

D. From Horsepower to Kilowatts

    As discussed above and in the NOPR, former Sec. 11.1 provided 
different allocation formulae for municipal and non-municipal projects 
of more than 2,000 horsepower of installed capacity. Both formulae, 
however, took into account a project's authorized installed capacity 
defined in terms of horsepower.
    In the NOPR, the Commission proposed to revise former Sec. 11.1 to 
substitute kilowatts for horsepower in stating a project's authorized 
installed capacity. This change was designed to reflect modern usage in 
the rating of equipment used in hydropower projects. For the few 
licensed hydromechanical projects, all of which are quite small, the 
Commission would impute a kilowatt figure by multiplying these 
projects' existing horsepower capacity by three-fourths.
    All of the comments received on this proposal were in favor of it. 
Accordingly, for the reasons discussed in the NOPR, this proposal has 
been adopted in the final rule.

E. The Determination of Authorized Installed Capacity

    The NOPR explained that questions have occasionally arisen as to 
how to define ``authorized installed capacity.'' The Commission 
proposed to clarify the concept of ``authorized installed capacity'' by 
defining it in the proposed new Sec. 11.1(i). The authorized installed 
capacity would be expressed in kilowatts, and would be the lesser of 
the capacity of the generator or the turbine. Thus, if the capacity of 
the generator exceeded the capacity of the turbine, then the capacity 
of the turbine would apply, and vice-versa. The availability of stream 
flow, however, would not be considered.<SUP>35

    \35\The NOPR stated that the proposed rule would codify the 
policy articulated in Public Utility District No. 2 of Grant County, 
Washington, 62 FERC  61,229 (1993).
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    The capacity would be based on the actual power of the equipment in 
question without regard to whatever ``nameplate'' rating might be 
physically affixed to the unit (although, with respect to a new or 
unmodified unit, the ``nameplate rating'' may well coincide with the 
definition proposed herein). If the generator or turbine are 
subsequently modified, such as by rewinding the generator, the capacity 
would be recalculated accordingly.
    This proposal drew a variety of comments. EEI, for instance, 
proposes convening a technical conference to discuss the matter.<SUP>36

    \36\EEI at 16.
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    Central Maine suggests that the Commission ``take into account 
actual performance limitations such as age, wear, and cavitation limits 
when determining authorized capacity.''<SUP>37

    \37\Central Maine at 4.
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    Independent contends that turbine and generator nameplate ratings 
may be less than accurate as a determinant of actual capacity. 
Independent states that turbine ratings vary according to gate or head, 
and that the total capacity of a multi-unit powerhouse may well be less 
than the sum of the individual generator nameplate ratings because of 
the hydraulics of a multi-unit site.<SUP>38 Washington Company and 
Westinghouse make the same points.<SUP>39

    \38\Independent at 2-3. See also National Hydro at 2.
    \39\Washington Company at 7; Westinghouse at 2.
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    Portland Co. would base the determination of capacity solely on the 
manufacturer's nameplate rating, contending that this method ``is 
simple, fair and predictable.'' Portland Co. claims that the formula 
proposed in the NOPR is unreasonable because hydro turbines have ``a 
unique gate position (water flow) vs. megawatt output efficiency 
curve'' that has ``established upper and lower cavitation limits.'' Use 
of the maximum head gate opening is unrealistic, because the turbine 
runner might be damaged at that point on the curve. Portland Co. would 
use, instead, ``the design upper cavitation limit as defined by the 
turbine manufacturer at the rated head.''<SUP>40

    \40\Portland Co. at 3.
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    PG&E advocates measuring capacity in kilovolt-amperes (kVA), 
because manufacturers rate their generators' capacity in kVA.\41\

    \41\PG&E at 5-6. We note that the portion of the definition in 
Sec. 11.1(i) that deals with the capacity of generators is framed in 
part in kVA. It is then converted to kilowatts for purposes of 
comparison with the capacity of the turbine. [[Page 15044]] 
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    Westinghouse points out that profitability hinges in significant 
measure on the price and other terms of a company's power sales 
contracts, rather than on the raw capacity of the company's equipment. 
Therefore, Westinghouse suggests utilizing financial data on operating 
income and profitability in allocating annual charges. Westinghouse 
would also adjust the annual charges to reflect the extent to which 
poor management on the part of the regulated entity increases the level 
of the Commission staff's regulatory activities with respect to that 
entity.\42\

    \42\Westinghouse at 3.
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    The most efficient use of the water resource is at ``best gate'' 
rather than at ``maximum gate.'' Therefore, in response to the 
comments, we have substituted ``best gate (maximum efficiency point)'' 
for ``maximum head gate'' in the turbine portion of the definition in 
Sec. 11.1(i). We will not, however, adjust the total capacity of the 
turbines at a multi-unit powerhouse to reflect the peculiar hydraulics 
of the site. That is precisely the sort of potentially contentious 
complexity we seek to avoid.
    We will also clarify the NOPR's reference to the generator's 
``nameplate'' rating. The rating on the generator's nameplate at 
licensing will be deemed to be the capacity of the generator unless the 
generator has been modified or rewound subsequent to licensing such 
that the nameplate no longer accurately describes the generator's 
actual capacity.
    We are unwilling, however, to inject into the calculation such 
subjective and extraneous factors as the efficiency of the licensee's 
management or the profitability of the licensee's operation. Moreover, 
our annual charge program is not predicated on collecting from 
individual projects in proportion to their responsibility for 
administrative costs incurred.

F. The Five Megawatt and Conduit Exemption Costs

    As explained in the NOPR, section 30 of the FP\43\ provides that 
the Commission may exempt from the FPA's licensing provisions any 
facility (other than a dam, and within certain megawatt limits) which 
is constructed or operated to generate electric power, if the facility 
is located on non-federal land and ``utilizes for such generation only 
the hydroelectric potential of a manmade conduit, which is operated for 
the distribution of water for agricultural, municipal, or industrial 
consumption and not primarily for the generation of electricity.''

    \43\18 U.S.C. 823a.
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    Sections 405 and 408 of the Public Utility Regulatory Policies Act 
of 1978 (PURPA), as amended by section 408 of the Energy Security Act 
of 1980,\44\ provide that the Commission may exempt from the FPA's 
licensing requirements small hydroelectric power projects that are 
located at the site of an existing dam (or utilize natural water 
features without the need for a dam) and that have a proposed installed 
capacity of five megawatts (MW) or less.

    \44\16 U.S.C. 2705 and 2708.
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    In the NOPR, the Commission expressed its belief that it has the 
legal authority under OBRA to assess annual charges to exemptees,\45\ 
and proposed to do so with respect to both the 5 MW and the conduit 
exemptions.\46\

    \45\Section 3401(a) of OBRA provides as follows:
    \46\Holders of 5 MW and conduit exemptions would, however, be 
able to apply for exemption from annual charges based on their 
municipal status.
    (a) In General.--(1) Except as provided in paragraph (2) and 
beginning in fiscal year 1987 and in each fiscal year thereafter, 
the Federal Energy Regulatory Commission shall, using the provisions 
of this subtitle and authority provided by other laws, assess and 
collect fees and annual charges in any fiscal year in amounts equal 
to all of the costs incurred by the Commission in that fiscal year.
    (2) The provisions of this subtitle shall not affect the 
authority, requirements, exceptions, or limitations in sections 
10(e) and 30(e) of the Federal Power Act.
    Whereas this provision makes clear that OBRA does not authorize 
the collection of annual charges from, e.g., municipal licensees who 
qualify for an exemption under the terms of section 10(e) of the 
Federal Power Act, projects under exemptions from licensing are not 
subject to section 10(e), and therefore charging them under OBRA 
does not affect any provision of section 10(e).
    Section 30(e) of the Federal Power Act requires the Commission 
to collect from exemption applicants and certain license applicants, 
on behalf of the U.S. Fish and Wildlife Service, the National Marine 
Fisheries Service, and state fish and wildlife agencies, these 
agencies' project-specific costs under section 30(c) (establishment 
of mandatory conditions with respect to fish and wildlife 
resources). These agencies are required to subtract from their 
section 10(e) claims the money they recover under section 30(e). 5 
MW and the conduit exemptions.
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    Finally, pursuant to former Sec. 381.601, the Commission imposed a 
filing fee for applications for a 5 MW exemption. As a part of its 
proposal to assess annual charges on 5 MW exemptees, the NOPR proposed 
to delete Sec. 381.601 from the regulations.\47\

    \47\As noted in the NOPR, the Commission does not impose a 
filing fee for applications for conduit exemptions.
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    EEI supports the proposal in the NOPR for the same reasons that it 
supports inclusion of minor licensees in the same pool with major 
licensees.\48\
      

    \48\EEI at 17.
    Humboldt contends that OBRA does not confer any legal authority to 
assess annual charges independent of the authority conferred by section 
10(e) of the FPA, which (as the NOPR noted) applies to licensees. Thus, 
Humboldt contends that the Commission lacks legal authority to assess 
annual charges to exemptees.
    Humboldt further contends that the assessment of annual charges 
against exemptees violates the Congressional purpose and spirit of 
PURPA, which was to encourage certain small power projects by freeing 
them from regulatory requirements and costs.\49\

    \49\Humboldt at 3-4. See also Westinghouse at 3-4.
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    Howard contends that ``(l)umping exempted and licensed projects 
into a single administrative framework defeats the spirit'' of PURPA, 
``which put small projects with minimal environmental impacts in a 
separate category to facilitate their development and 
operation.''<SUP>50

    \50\Howard at 2.
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    Water Assn. states that many of its exemptee members ``are facing 
dramatic reductions'' in their revenues and ``are reevaluating the 
continued operation'' of their projects. Water Assn. believes that the 
imposition of annual charges ``could easily tip the balance against 
continued operation.''<SUP>51

    \51\Water Assn. at 2.
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    Ann Arbor states that it relied in part on the absence of charges 
when it redeveloped its two small (900 kW and 540 kW) exempted 
projects, and that the assessment of annual charges might contribute to 
a decision to sell or decommission one or both projects.<SUP>52 Desert 
also states that it relied, in part, on freedom from annual charges 
when it decided to invest in its two small exempted conduit projects; 
the two projects are operated on a not-for-profit basis to reduce water 
rates.<SUP>53

    \52\Ann Arbor at 1.
    \53\Desert at 1-2. See also Michiana.
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    Columbus states that its exempted project ``was conceived to 
demonstrate the feasibility of a municipality operating a low head 
generator in Central Ohio at a water supply reservoir.''<SUP>54

    \54\Columbus at 1.
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    Falls Creek contends that, by virtue of its exemption, the level of 
regulatory services it receives is lower than those received by 
licensees.<SUP>55

    \55\Falls Creek at 2.
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    Haemmig states that his 1.4 kW project ``only produces 
approximately $20 per year revenue for us.'' Adkins' project is located 
in a national forest and is used solely to supply electricity 
[[Page 15045]] to his ranch, whose alternate source of power is a 
diesel generator. Lassen states that his 30 kW conduit exemption 
project has a small positive cash flow but a negative rate of return, 
and that the $100 minimum charge proposed in the NOPR would constitute 
three percent of his gross revenue.
    The Commission is persuaded by the comments that it should not 
extend the annual charges scheme to the existing exemptees. We believe 
that the statutory scheme by which the exemptions were authorized was 
designed to induce the development of small projects, and that many of 
the existing exemptees reasonably relied on freedom from annual charges 
when they invested in their projects. We also note that many of the 
existing exemptees paid a substantial filing fee at the time they filed 
their applications for exemption. For all of these reasons, we will not 
extend the scope of the annual charges scheme to encompass existing 
exemptees.
    As discussed in the NOPR, the filing fee for exemption applications 
generates very little revenue but is so substantial as to likely deter 
applicants from filing new applications. No comments were received on 
the proposal to eliminate that filing fee. For the reasons stated in 
the NOPR, we will delete it from the regulations.
    We will, however, include in the annual charges allocation scheme 
all exemptees whose projects exceed 1.5 MW in authorized installed 
capacity and whose exemptions are issued subsequent to the effective 
date of this final rule. Most of those exemptees will not have paid the 
application filing fee, and they will be on notice of the annual 
charges obligation at the time they choose to accept the exemption and 
invest in the exempted project. The exemption will be conditioned on 
knowing, voluntary acceptance of the obligation to participate in the 
annual charges scheme. We will exclude from the annual charges all 
projects of 1.5 MW capacity or less for the same reasons, explained 
above, that we excluded all such projects that are licensed instead of 
exempted. As a transition matter, we will allow any future exemptees 
who paid the application filing fee prior to the effective date of this 
final rule to credit that fee against their annual charge assessments 
to the full extent of the fee that was paid.

G. Other Revisions to Annual Charges

    Former Sec. 11.1(d) stated that the minimum annual charge for 
projects involving transmission lines was $5. The NOPR noted that the 
Commission's current practice is to state that charge in the articles 
of the individual licenses, as appropriate. Therefore, the NOPR 
proposed to conform the text of former Sec. 11.1(d) (renumbered as 
proposed new Sec. 11.1(e)) to that practice. No comments were received 
on this proposal, and the change has been made.
    Former Sec. 11.20 provided two separate deadlines for payment of 
bills for annual charges: 30 days for headwater benefits bills and 45 
days for other annual charges bills. The NOPR proposed to make all such 
bills payable upon 30 days of their rendition.
    Many commenters express strenuous objection to this proposed 
change,<SUP>56 and no commenter supports it. Some commenters discuss 
their experience with the time elapsed during mail transmissions 
between themselves and the Commission. They also discuss the time 
elapsed during mail transmissions within corporate or governmental 
entities; the added delays and complexities of licensees who are 
structured as corporate affiliates; and the layers of authority whose 
prior approval is needed before issuing checks for large sums of money. 
They discuss these matters in the context of the five percent per month 
penalty for late payment of the annual charges bill.<SUP>57

    \56\See, e.g., EEI at 17-18; Central Maine at 4; Consumers at 7-
8; PG&E at 9. PG&E favors extending the period to 60 days.
    \57\See section 17(b) of the FPA, 18 U.S.C. 810(b).
---------------------------------------------------------------------------

    Without endorsing any particular reason advanced by the commenters, 
the Commission is persuaded by their collective response that the 
present 45-day period should be retained. Therefore, the Commission 
will conform the divergent deadlines in Sec. 11.20 by making both of 
them 45 days.
    The NOPR proposed a new Sec. 11.20, which would provide for 
licensees to file an appeal of the bill to the Commission's Chief 
Financial Officer. All decisions of the Chief Financial Officer on 
appeals would be subject to rehearing by the Commission pursuant to 
Sec. 385.713. This would essentially codify the current informal 
practice. The NOPR noted that most billing disputes involve 
mathematical calculations that can be readily resolved by discussion 
with the Commission's staff without the need for a formal request to 
the Commission for rehearing. The bill would still have to be paid 
within 45 days of its rendition in order to avoid the assessment of 
penalty payments under Sec. 11.21, but if a timely appeal or request 
for rehearing were filed the bill could be paid under protest and 
subject to refund. This provision would codify the Commission's current 
practice. No comments were received on these proposals. They will be 
adopted, for the reasons stated in the NOPR.
    Former Sec. 11.6(i) required that applications for exemptions from 
payment of annual charges ``shall be prepared on forms prescribed by 
the Commission * * *'' Inasmuch as the Commission does not currently 
prescribe such forms, the NOPR announced the Commission's intention to 
delete the reference to such forms. No comments were received on this, 
and the reference has been deleted.
    The NOPR also proposed to add a sentence at the end of Sec. 11.6(i) 
to clarify that bills for annual charges can be paid under protest and 
subject to refund in the event that an application for an exemption 
from payment is pending when the bill becomes payable. The NOPR 
explained that this provision would codify the Commission's current 
practice. No comments were received on this proposal, and we have 
adopted it, for the reasons stated in the NOPR.\58\

    \58\Snohomish suggests that the Commission pay interest on 
annual charges paid in protest that are later refunded when the 
protest is upheld. Snohomish argues that this would be fair and 
equitable in light of the penalties for late payment of the charges. 
Snohomish also suggests an escrow arrangement. The short answer is 
that the penalties are mandated by the FPA, but the Commission has 
no statutory authority to pay interest.
---------------------------------------------------------------------------

    The Washington State Energy Office and the U.S. Forest Service note 
that the NOPR did not propose new regulations to implement section 
1701(a) of the Energy Policy Act of 1992.\59\ That legislation involves 
recovery through annual charges of certain costs incurred by federal 
and state fish and wildlife agencies and other natural and cultural 
resource agencies in connection with studies they perform pursuant to 
Part I of the FPA. They urge us to propose new regulations to implement 
section 1701(a). Citing section 504(g) of the Federal Land Policy 
Management Act, the Forest Service also argues that ``any land use fees 
charged by the Commission for hydropower projects should be based on 
the fair market value of these lands for hydropower purposes.''\60\

    \59\Pub. L. 102-486, 106 Stat. 2776-3133 (Oct. 24, 1992).
    \60\Forest Service comments at 1.
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    None of these matters was addressed in the NOPR, and they fall 
beyond the scope of this rulemaking proceeding. Accordingly, they will 
not be discussed or resolved in this final rule.

H. Separate Classes of Licensees; Capacity or Generation

    Many commenters expressed their views on the choice between 
[[Page 15046]] Alternatives A and B in the NOPR, i.e., whether to 
maintain separate pools of costs attributable to municipal and non-
municipal licensees or to combine them into a single common pool of 
costs for allocation among all licensees regardless of class. The non-
municipal licensees prefer to establish a combined pool, while the 
municipal licensees prefer to maintain separate pools. The NOPR also 
considered what formula to use to allocate costs among the licensees. 
Within Alternative A, the NOPR discussed several potential variations: 
(1) Base the allocation formula entirely on authorized installed 
capacity; (2) base the formula entirely on generation; or (3) base it 
on a combination of capacity and generation. Within Alternative B, the 
NOPR retained the existing formulae (as described above) whereby the 
allocation of costs for municipal licensees is based entirely on 
capacity while the allocation for non-municipal licensees is based on a 
combination of both capacity and generation.
    Many commenters addressed this issue. The comments diverged widely, 
cutting across municipal and non-municipal lines. Some commenters 
preferred capacity, some preferred generation, and some preferred a 
combination.
    The Commission has decided to defer consideration of these issues 
to a future proceeding. Because the Commission has not reached any 
decision on whether to revise these aspects of the current regulations, 
and if so, how, the final rule retains the separate pools of costs for 
municipal and non-municipal licensees, and retains the distinctions in 
the present formulae with respect to use of capacity and generation in 
the respective allocations.

I. Transition Arrangements

    In the NOPR, the Commission proposed a three-year transition period 
for phasing in the changes described in the ``Alternative A'' 
regulatory text.
    Many commenters supported use of a transition period in the event 
that the Commission adopted significant changes in the annual charges 
formulae. One commenter opposed having a transition period.\61\ Several 
commenters suggested extending the transition period to five years, or 
even to ten years.\62\

    \61\Noah Corp. (at 2) contends that the phased-in transition 
provisions are unnecessary and would further complicate the changes.
    \62\APPA at 17; No. Cal. Power at 4; Okla. Authority; Public 
Pool at 8-9; Westinghouse at 4-5.
---------------------------------------------------------------------------

    As discussed above, the transition period in the NOPR was proposed 
to alleviate the dislocations attributable to adoption of the 
Alternative A formula. The proposed regulatory text for Alternative B 
did not include a transition period. Our decision to defer 
consideration of the allocation formulae renders the proposed 
transition period moot, and it will not be adopted. Thus, the maximum 
charge, the exclusion of minor licensees, and the commencement of 
assessments only after commencement of construction will all become 
effective immediately.\63\

    \63\We are, however, adopting a minor transition provision with 
respect to the change from horsepower to kilowatts, discussed above.
---------------------------------------------------------------------------

V. Regulatory Flexibility Certification

    The Regulatory Flexibility Act of 1980 (RFA)\64\ generally requires 
a description and analysis of proposed regulations that will have a 
significant economic impact on a substantial number of small 
entities.\65\ In the NOPR, we certified that the proposed regulations 
would not have a significant economic impact on a substantial number of 
small entities.

    \64\5 U.S.C. 601-612.
    \65\Section 601(c) of the RFA defines a ``small entity'' as a 
small business, a small not-for-profit enterprise, or a small 
governmental jurisdiction. A ``small business'' is defined by 
reference to section 3 of the Small Business Act as an enterprise 
which is ``independently owned and operated and which is not 
dominant in its field of operation.'' 15 U.S.C. 632(a).
---------------------------------------------------------------------------

    The U.S. Small Business Administration, in its comments, asserts 
that there are approximately 900 licensees and exemptees whose projects 
have a rated capacity of less than 80 megawatts, and that section 
3(17)(A) of the FPA uses that standard to define a ``small power 
production facility.''\66\ The Association of California Water Agencies 
(Water Assn.) contends that ``[a]dditional FERC fees for hydroelectric 
licenses will be a major impact on already strained local water agency 
budgets, and will additionally compromise the ability of the water 
agencies to meet their mandate of providing essential services of 
adequate water at reasonable costs.''\67\ Therefore, the Small Business 
Administration and the Water Assn. urge the Commission to perform a 
regulatory flexibility analysis. Several other exemptees also raised 
this issue.<SUP>68

    \66\We note that the regulations previously in effect, as 
discussed above, treated as ``minor'' for annual charge purposes 
only those projects whose capacity did not exceed 2,000 horsepower, 
which equates to 1.5 megawatts, not 80 megawatts.
    \67\Water Assn. at 3-4.
    \68\Conn. Producers; Desert.
---------------------------------------------------------------------------

    As discussed above, the Commission received numerous comments from 
exemptees and minor licensees urging us to provide a measure of relief 
from the proposed new regulations. In response to these comments, the 
Commission has decided not to impose annual charges on either licensees 
or exemptees whose projects have a capacity of 1.5 MW or less. This 
encompasses all of the minor licensees and all of the exemptees of 
comparable size. We have also excluded all of the existing exemptees 
regardless of size. Accordingly, pursuant to section 605(b) of the RFA, 
the Commission hereby certifies that the final rule adopted herein will 
not have a significant economic impact on a substantial number of small 
entities.

VI. Environmental Statement

    Issuance of this final rule does not constitute a major federal 
action having a significant adverse impact on the quality of the human 
environment under the Commission's regulations implementing the 
National Environmental Policy Act.\69\ The final rule adopted herein is 
procedural in nature and therefore falls within the categorical 
exemptions provided in the Commission's regulations. Consequently, 
neither an environmental impact statement nor an environmental 
assessment is required.\70\

    \69\See Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. 
& Regs. (Regulations Preambles 1986-1990)  30,783 (Dec. 10, 1987) 
(codified at 18 CFR part 380).
    \70\See 18 CFR 380.4(a)(1). Water Assn. (at 4) contends that we 
should prepare an environmental impact statement because, in its 
view, the proposed revision of the annual charges allocation will 
result in some projects ceasing to operate, thereby increasing the 
burning of fossil fuels, thereby increasing air pollution. Putting 
aside the procedural nature of the regulatory revisions, Water 
Assn.'s assertions are purely speculative, relying on a tenuous 
series of causal connections and a minute percentage of total 
hydroelectric generation. Moreover, as discussed above, in response 
to the comments received we have significantly modified the proposal 
to relieve the potential burden on all existing exemptees and all 
minor licensees.
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VII. Information Collection Statement

    The Office of Management and Budget's (OMB) regulations at 5 CFR 
part 1320 require that OMB approve certain information and 
recordkeeping requirements imposed by an agency. The information 
collection requirements pertinent to the existing regulations that are 
retained by this final rule are contained in FERC-583 ``Annual Kilowatt 
Generating Report (Annual Charges)'' (1902-0136). The Commission's 
Financial Services Division uses the data for determination of the 
amount of annual charges to be assessed licensees for reimbursable 
government administrative costs. The Commission will submit to the OMB 
a notification that these collections of information have been 
modified. [[Page 15047]] 
    Interested persons may obtain information on these reporting 
requirements by contacting the Federal Energy Regulatory Commission, 
941 North Capitol Street NE., Washington, DC 20426 (Attention: Michael 
Miller, Information Services Division, (202) 208-1415). Comments on the 
requirements of this rule can be sent to the Office of Information and 
Regulatory Affairs of OMB (Attention: Desk Officer for Federal Energy 
Regulatory Commission).

VIII. Effective Date

    This final rule is effective April 21, 1995.

List of Subjects

18 CFR Part 11

    Electric power, Reporting and recordkeeping requirements.

18 CFR Part 381

    Electric power plants, Electric utilities, Natural gas, Reporting 
and recordkeeping requirements.
Lois D. Cashell,
Secretary.

    In consideration of the foregoing, the Commission amends parts 11 
and 381 of chapter I, title 18, Code of Federal Regulations, as set 
forth below.

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

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

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

    2. Section 11.1 is revised to read as follows:


Sec. 11.1  Costs of administration.

    (a) Authority. Pursuant to section 10(e) of the Federal Power Act 
and section 3401 of the Omnibus Budget Reconciliation Act of 1986, the 
Commission will assess reasonable annual charges against licensees and 
exemptees to reimburse the United States for the costs of 
administration of the Commission's hydropower regulatory program.
    (b) Scope. The annual charges under this section will be charged to 
and allocated among:
    (1) All licensees of projects of more than 1.5 megawatts of 
installed capacity; and
    (2) All holders of exemptions under either section 30 of the 
Federal Power Act or sections 405 and 408 of the Public Utility 
Regulatory Policies Act of 1978, as amended by section 408 of the 
Energy Security Act of 1980, but only if the exemption was issued 
subsequent to April 21, 1995 and is for a project of more than 1.5 
megawatts of installed capacity.
    (3) If the exemption for a project of more than 1.5 megawatts of 
installed capacity was issued subsequent to April 21, 1995 but pursuant 
to an application filed prior to that date, the exemptee may credit 
against its annual charge any filing fee paid pursuant to Sec. 381.601 
of this chapter, which was removed effective April 21, 1995, 18 CFR 
381.601 (1994), until the total of all such credits equals the filing 
fee that was paid.
    (c) Licenses and exemptions other than State or municipal. For 
licensees and exemptees, other than State or municipal:
    (1) A determination shall be made for each fiscal year of the costs 
of administration of Part I of the Federal Power Act chargeable to such 
licensees or exemptees, from which shall be deducted any administrative 
costs that are stated in the license or exemption or fixed by the 
Commission in determining headwater benefit payments.
    (2) For each fiscal year the costs of administration determined 
under paragraph (c)(1) of this section will be assessed against such 
licenses or exemptee in the proportion that the annual charge factor 
for each such project bears to the total of the annual charge factors 
under all such outstanding licenses and exemptions.
    (3) The annual charge factor for each such project shall be found 
as follows:
    (i) For a conventional project the factor is its authorized 
installed capacity plus 150 times its annual energy output in millions 
of kilowatt-hours.
    (ii) For a pure pumped storage project the factor is its authorized 
installed capacity.
    (iii) For a mixed conventional-pumped storage project the factor is 
its authorized installed capacity plus 150 times its gross annual 
energy output in millions of kilowatt-hours less 100 times the annual 
energy used for pumped storage pumping in million of kilowatt-hours.
    (iv) For purposes of determining their annual charges factor, 
projects that are operated pursuant to an exemption will be deemed to 
have an annual energy output of zero.
    (4) To enable the Commission to determine such charges annually, 
each licensee whose authorized installed capacity exceeds 1.5 megawatts 
must file with the Commission, on or before November 1 of each year, a 
statement under oath showing the gross amount of power generated (or 
produced by nonelectrical equipment) and the amount of power used for 
pumped storage pumping by the project during the preceding fiscal year, 
expressed in kilowatt hours. If any licensee does not report the gross 
energy output of its project within the time specified above, the 
Commission's staff will estimate the energy output and this estimate 
may be used in lieu of the filings required by this section made by 
such licensee after November 1.
    (5) For unconstructed projects, the assessments start on the date 
of commencement of project construction. For constructed projects, the 
assessments start on the effective date of the license or exemption, 
except for any new capacity authorized therein. The assessments for new 
authorized capacity start on the date of commencement of construction 
of such new capacity. In the event that construction commences during a 
fiscal year, the charges will be prorated based on the date on which 
construction commenced.
    (d) State and municipal licensees and exemptees. For State or 
municipal licensees and exemptees:
    (1) A determination shall be made for each fiscal year of the cost 
of administration under Part I of the Federal Power Act chargeable to 
such licensees and exemptees, from which shall be deducted any 
administrative costs that are stated in the license or exemption or 
that are fixed by the Commission in determining headwater benefit 
payments.
    (2) An exemption will be granted to a licensee or exemptee to the 
extent, if any, to which it may be entitled under section 10(e) of the 
Act provided the data is submitted as requested in paragraphs (d) (4) 
and (5) of this section.
    (3) For each fiscal year the total actual cost of administration as 
determined under paragraph (d)(1) of this section will be assessed 
against each such licensee or exemptee (except to the extent of the 
exemptions granted pursuant to paragraph (d)(2) of this section) in the 
proportion that the authorized installed capacity of each such project 
bears to the total such capacity under all such outstanding licenses or 
exemptions.
    (4) To enable the Commission to compute on the bill for annual 
charges the exemption to which State and municipal licensees and 
exemptees are entitled because of the use of power by the licensee or 
exemptee for State or municipal purposes, each such licensee or 
exemptee must file with the Commission, on or before November 1 of each 
year, a statement under oath showing the following information with 
respect to the power generated by the project and the disposition 
thereof during the preceding fiscal year, expressed in kilowatt-hours: 
[[Page 15048]] 
    (i) Gross amount of power generated by the project.
    (ii) Amount of power used for station purposes and lost in 
transmission, etc.
    (iii) Net amount of power available for sale or use by licensee or 
exemptee, classified as follows:
    (A) Used by licensee or exemptee.
    (B) Sold by licensee or exemptee.
    (5) When the power from a licensed or exempted project owned by a 
State or municipality enters into its electric system, making it 
impracticable to meet the requirements of this section with respect to 
the disposition of project power, such licensee or exemptee may, in 
lieu thereof, furnish similar information with respect to the 
disposition of the available power of the entire electric system of the 
licensee or exemptee.
    (6) The assessments commence on the date of commencement of project 
operation. In the event that project operation commences during a 
fiscal year, the charges will be prorated based on the date on which 
operation commenced.
    (e) Transmission lines. For projects involving transmission lines 
only, the administrative charge will be stated in the license.
    (f) Maximum charge. No licensed or exempted project's annual charge 
may exceed a maximum charge established each year by the Commission to 
equal 2.0 percent of the adjusted Commission costs of administration of 
the hydropower regulatory program. For every project with an annual 
charge determined to be above the maximum charge, that project's annual 
charge will be set at the maximum charge, and any amount above the 
maximum charge will be reapportioned to the remaining projects. The 
reapportionment will be computed using the method outlined in 
paragraphs (c) and (d) of this section (but excluding any project whose 
annual charge is already set at the maximum amount). This procedure 
will be repeated until no project's annual charge exceeds the maximum 
charge.
    (g) Commission's costs. (1) With respect to costs incurred by the 
Commission, the assessment of annual charges will be based on an 
estimate of the costs of administration of Part I of the Federal Power 
Act that will be incurred during the fiscal year in which the annual 
charges are assessed. After the end of the fiscal year, the assessment 
will be recalculated based on the costs of administration that were 
actually incurred during that fiscal year; the actual costs will be 
compared to the estimated costs; and the difference between the actual 
and estimated costs will be carried over as an adjustment to the 
assessment for the subsequent fiscal year.
    (2) The issuance of bills based on the administrative costs 
incurred by the Commission during the year in which the bill is issued 
will commence in 1993. The annual charge for the administrative costs 
that were incurred in fiscal year 1992 will be billed in 1994. At the 
licensee's option, the charge may be paid in three equal annual 
installments in fiscal years 1994, 1995, and 1996, plus any accrued 
interest. If the licensee elects the three-year installment plan, the 
Commission will accrue interest (at the most recent yield of two-year 
Treasury securities) on the unpaid charges and add the accrued interest 
to the installments billed in fiscal years 1995 and 1996.
    (h) In making their annual reports to the Commission on their costs 
in administering Part I of the Federal Power Act, the United States 
Fish and Wildlife Service and the National Marine Fisheries Service are 
to deduct any amounts that were deposited into their Treasury accounts 
during that year as reimbursements for conducting studies and reviews 
pursuant to section 30(e) of the Federal Power Act.
    (i) Definition. As used in paragraph (c) of this section, 
authorized installed capacity means the lesser of the ratings of the 
generator or turbine units. The rating of a generator is the product of 
the continuous-load capacity rating of the generator in kilovolt-
amperes (kVA) and the system power factor in kW/kVA. If the licensee or 
exemptee does not know its power factor, a factor of 1.0 kW/kVA will be 
used. The rating of a turbine is the product of the turbine's capacity 
in horsepower (hp) at best gate (maximum efficiency point) opening 
under the manufacturer's rated head times a conversion factor of 0.75 
kW/hp. If the generator or turbine installed has a rating different 
from that authorized in the license or exemption, or the installed 
generator is rewound or otherwise modified to change its rating, or the 
turbine is modified to change its rating, the licensee or exemptee must 
apply to the Commission to amend its authorized installed capacity to 
reflect the change.
    (j) Transition. For a license having the capacity of the project 
for annual charge purposes stated in horsepower, that capacity shall be 
deemed to be the capacity stated in kilowatts elsewhere in the license, 
including any amendments thereto.

    3. In Sec. 11.6, the heading, the introductory text of paragraph 
(a), and paragraph (i), are revised, and the cross-reference at the end 
of the section is removed, to read as follows:


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

    (a) Bases for exemption. A State or municipal licensee or exemptee 
may claim total or partial exemption from the assessment of annual 
charges upon one or more of the following grounds:
* * * * *
    (i) Application for exemption. Applications for exemption from 
payment of annual charges shall be signed by an authorized executive 
officer or chief accounting officer of the licensee or exemptee and 
verified under oath. An original and three copies of such application 
shall be filed with the Commission within the time allowed (by 
Sec. 11.28) for the payment of the annual charges. If the licensee or 
exemptee, within the time allowed for the payment of the annual 
charges, files notice that it intends to file an application for 
exemption, an additional period of 30 days is allowed within which to 
complete and file the application for exemption. The filing of an 
application for exemption does not by itself alleviate the requirement 
to pay the annual charges, nor does it exonerate the licensee or 
exemptee from the assessment of penalties under Sec. 11.21. If a bill 
for annual charges becomes payable after an application for an 
exemption has been filed and while the application is still pending for 
decision, the bill may be paid under protest and subject to refund.

    4. Section 11.20 is revised to read as follows:


Sec. 11.20  Time for payment.

    Annual charges must be paid no later than 45 days after rendition 
of a bill by the Commission. If the licensee or exemptee believes that 
the bill is incorrect, no later than 45 days after its rendition the 
licensee or exemptee may file an appeal of the bill with the Chief 
Financial Officer. No later than 30 days after the date of issuance of 
the Chief Financial Officer's decision on the appeal, the licensee or 
exemptee may file a request for rehearing of that decision pursuant to 
Sec. 385.713 of this chapter. In the event that a timely appeal to the 
Chief Financial Officer or a timely request to the Commission for 
rehearing is filed, the payment of the bill may be made under protest, 
and subject to refund pending the outcome of the appeal or rehearing.

PART 381--FEES

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

    Authority: 15 U.S.C. 717-717w; 16 U.S.C. 791-828c, 2601-2645; 31 
U.S.C. 9701; 42 [[Page 15049]] U.S.C. 7101-7352; 49 U.S.C. 60502; 49 
App. U.S.C. 1-85.

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

Appendix A

    (Note: This Appendix will not be published in the Code of 
Federal Regulations.)

Commenters

Adirondack Hydro Development Corp. (Adirondack)
Adrian Haemmig (Haemmig)
Alabama Power Company (Alabama Power)
Alaskan Utilities (Alaskan)
Allegheny Power System (Allegheny)
American Public Power Association (APPA)
Association of California Water Agencies (Water Assn.)
Calaveras County Water District (Calaveras)
California Department of Water Resources (Cal. Water)
Calleguas Municipal Water District (Calleguas)
Central Maine Power (Central Maine)
City of Ann Arbor, Michigan (Ann Arbor)
City of Spokane, Washington (Spokane)
City of Tallahassee, Florida (Tallahassee)
Columbus Department of Public Utilities (Columbus)
Connecticut Small Power Producers Association (Conn. Producers)
Consolidated Pumped Storage, Inc. (Consolidated)
Consumers Power Company (Consumers Power)
Desert Water Agency (Desert)
Duke Power Company (Duke)
Eagle Mountain Energy (Eagle)
Edison Electric Institute (EEI)
Energy Storage Partners (Storage Partners)
Fairfax County Water Authority (Fairfax)
Falls Creek H.P.
Friant Power Authority (Friant)
Georgia Power Company (Georgia)
Great Bear Hydropower, Inc. (Bear)
Humboldt Bay Municipal Water District, Kaweah River Power Authority, 
and Nevada Irrigation District (Humboldt)
Hydro Energy Storage Council (Storage Council)
Idaho Power Company (Idaho Power)
Independent Hydro Developers, Inc. (Independent)
James B. Adkins (Adkins)
James C. Katsekas (Katsekas)
John E. Howard (Howard)
Kvaerner Energy Development and Halecrest Company (Kvaerner)
Lassen Research (Lassen)
McCallum Enterprises Limited Partnership (McCallum)
Michiana Hydroelectric Company (Michiana)
Montecito Water District (Montecito)
National Hydro
Noah Corp.
North American Hydro, Inc. (North American)
Northern California Power Agency and the City of Santa Clara, 
California (No. Cal. Power)
Ogden Environmental and Energy Services (Ogden)
Oklahoma Municipal Power Authority (Okl. Authority)
Otter Tail Power Company (Otter Tail)
Pacific Gas and Electric Company (PG&E)
Pennsylvania Power & Light Company (Pennsylvania Power)
Portland General Electric Company (Portland Co.)
Potlatch Corporation (Potlatch)
Power Authority of the State of New York (PASNY)
Public Generating Pool (Public Pool)
Public Utility District No. 1 of Chelan County, Washington (Chelan)
Public Utility District No. 1 of Douglas County, Washington 
(Douglas)
Public Utility District No. 2 of Grant County, Washington (Grant)
Richard G. Mackowiak (Mackowiak)
Sabine River Authority of Texas and Sabine River Authority, State of 
Louisiana (Sabine)
Sacramento Municipal Utility District (SMUD)
Seattle City Light (Seattle Light)
Snohomish County, Washington, Public Utility District No. 1 
(Snohomish)
South Carolina Electric & Gas Company (Carolina Electric)
Summit Hydropower (Summit)
Susquehanna Power Company and Peco Energy Power Company 
(Susquehanna)
Synergics Energy Development, Inc. (Synergics)
Tacoma Public Utilities (Tacoma)
U.S. Forest Service
U.S. Small Business Administration
Virginia Electric and Power Company (Virginia Electric)
Washington State Energy Office (Washington Office)
Washington Water Power Company (Washington Company)
Westinghouse Electric Company (Westinghouse)
Zoes J. Dimos (Dimos)

[FR Doc. 95-6979 Filed 3-21-95; 8:45 am]
BILLING CODE 6717-01-P