Commissioner James Danly Statement
December 16, 2021
Project No. 2042-191
Order H-2
I concur with today’s order amending the license for the Box Canyon Project to incorporate the terms of an amended settlement agreement. I write separately to express my concern about the response that will be occasioned by new Article 204, which reserves the Commission’s authority to impose financial assurance mechanisms without limiting principle.[1]
I am convinced that the Commission must take a hard look at our financial assurance requirements and deliberately determine what, if any, changes or improvements should be adopted. It is imperative that licensees have the financial wherewithal to physically maintain their facilities and I have been gravely concerned about this subject for some time.[2] But how to go about achieving that goal is a complicated question and requires a great deal of thought. It is especially difficult for the Commission to chart a clear path based on the record we have compiled so far in our Notice of Inquiry, many of the submissions in which have raised compelling complexities.[3]
In my view, this reservation may have the unfortunate effect of reinforcing the uncertainty faced by licensees in light of what is nevertheless the necessary inquiry the Commission is conducting into financial assurance. Licensees do not know whether or when we will promulgate new financial assurance requirements, whether imposition of those requirements will require a hearing, what form they will take, or how much they will cost. This uncertainty may further chill investment and drive up risk premiums—limiting licensees’ access to the very financing we should seek to encourage.
My hope is that, when we move forward from the Notice of Inquiry, we will convene one or more technical conferences to offer more structured fora in which to explore these questions. It is my further hope that everyone with an interest will participate in the Commission’s generic proceedings on financial assurance, to help us improve the record we have already begun compiling in the Notice of Inquiry and to offer the best analysis they can regarding the extent of the Commission’s powers and the most responsible means by which to employ them.
For these reasons, I respectfully concur.
[1] See Pub. Util. Dist. No. 1 of Pend Oreille County, 177 FERC ¶ 61,183, at Ordering Para. (G) (2021) (amending license to add Article 204 which provides “The Commission reserves the right to require future measures to ensure that the licensee maintains sufficient financial reserves to carry out the terms of the license and Commission orders pertaining thereto.”) (emphasis added).
[2] See Fin. Assurance Measures for Hydroelectric Projects, 174 FERC ¶ 61,039 (2021) (Notice of Inquiry); see also Boyce Hydro Power, LLC, 175 FERC ¶ 61,049 (2021) (Danly, Comm’r, concurring at P 3).
[3] See, e.g., South Carolina Department of Natural Resources (SCDNR) March 29, 2021 Comments in Notice of Inquiry Docket No. RM21-9 at 4 (“The SCDNR finds that bonds would only be appropriate for a term limited construction project or renovation associated with a FERC hydroelectric project.”); Public Power Licensee Group March 29, 2021 Comments in Notice of Inquiry Docket No. RM21-9 at 15 (“FPA section 10(e) does not authorize FERC to collect for costs that may be incurred by other licensees . . . .”) (footnote omitted); Four Lakes Task Force February 12, 2021 Comments in Notice of Inquiry Docket No. RM21-9 at 2 (“Four Lakes Task Force’s direct experience is this type of [insurance] coverage may not be available . . . .”) (emphasis omitted); United States Society on Dams March 26, 2021 Comments in Notice of Inquiry Docket No. RM21-9 at 6 of 9 (“Dam property insurance is prohibitively expensive and rare to find on the market.”); Kodiak Electric Association, Inc. February 9, 2021 Comments in Notice of Inquiry Docket No. RM21-9 at 2 (“The high administration cost needed to establish, manage, and distribute such funds would deplete the fund’s net value and diminish its purpose.”).