Commissioner James Danly Statement
November 18, 2021
Project Nos. 2310-227, 2784-006, 14530-001
I concur with today’s order granting the application jointly filed by Pacific Gas and Electric Company and Nevada Irrigation District. I write separately to express my concern about the response that will be occasioned by Article 45 of the Drum-Spaulding Hydroelectric Project No. 2310 and the new Deer Creek Hydroelectric Project No. 14530,[1] and Article 406 of the Rollins Transmission Line Project No. 2784.[2] These articles reserve the Commission’s authority to impose financial assurance mechanisms without limiting principle.[3]
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.[4] 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.[5]
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 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 Pac. Gas & Elec. Co., 177 FERC ¶ 61,111, at Ordering Para. (K) (2021).
[2] See id. Ordering Para. (DD).
[3] See, e.g., id. Ordering Para. (K) (“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). The lack of limiting principle is most apparent by the oddity of reserving the Commission’s authority in a license that only authorizes a project’s transmission line facilities and no dam structures. Id. P 48. In my view, transmission line facilities extend beyond the concerns raised in the Notice of Inquiry which was focused on impacts from dam breaches. See Fin. Assurance Measures for Hydroelectric Projects, 174 FERC ¶ 61,039, at P 8 (2021) (Notice of Inquiry) (“Non-operational or non-compliant projects can pose public safety hazards in the event of a dam failure or breach, as demonstrated by the failure of the Edenville and Sanford dams near Midland, Michigan, on May 19, 2020.”) (emphasis added); id. P 9 (“While significant dam failures have fortunately been very rare, the Commission has seen increasing numbers of projects that are non-operational or out of compliance with their license conditions, where licensees have stated that they cannot afford to operate or maintain the projects or implement required environmental or safety measures.”) (emphasis added).
[4] See id.; see also Boyce Hydro Power, LLC, 175 FERC ¶ 61,049 (2021) (Danly, Comm’r, concurring at P 3).
[5] 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.”).