Prepared Witness Testimony

The House Committee on Energy and Commerce

Comprehensive National Energy Policy

Subcommittee on Energy and Air Quality
March 12, 2003
2:30 PM
2123 Rayburn House Office Building 

Ms. Julie Keil
Director of Hydro Licensing and Water Rights
Portland General Electric
121 SW Salmon Street
3 WTC BRHL
Portland, OR, 97214

Chairman Barton, Ranking Member Boucher, Chairman Tauzin, Ranking Member Dingell, Members of the Subcommittee, thank you very much for giving me the opportunity to appear before you today to discuss the hydropower licensing language contained in the Subcommittee's discussion draft. 

I appear before you today in two capacities.  First and foremost, I am Director of Hydro Licensing and Water Rights for Portland General Electric Company.   PGE is an investor owned utility based in Oregon, serving more than 700,000 customers in the Portland metropolitan area and the Willamette Valley.  PGE owns 5 FERC-licensed hydroelectric projects.  Like most energy companies that possess hydropower assets, the capabilities of these projects form the cornerstone of our ability to provide efficient and economical service to our customers.  They are vital to the successful operation of my company, as indeed hydropower is essential to the entire Western power grid.

I am also here representing a broad cross-section of the hydropower industry.  As a former President of the National Hydropower Association, I have participated over the years in hundreds of discussions with industry colleagues and non-industry stakeholders as to the challenges and opportunities facing hydropower in the 21st century.  At the local level, I have participated in numerous task forces aimed at improving state participation in the hydro relicensing process.  I have also played a lead role in federal efforts to bring about administrative improvements to the relicensing process, as a member of the Federal Advisory Committee that worked with the Interagency Task Force, as a member of the Electric Power Research Institute (EPRI) National Review Group that also explored administrative relicensing process reform, and as a stakeholder in FERC's present hydropower rulemaking.   

As you know, the issue of hydro relicensing improvement is not new to this Subcommittee.  In fact, it's an old issue.  In numerous oversight and legislative hearings held before this Subcommittee during the previous three Congresses, a detailed record has been compiled as to the complexity, costs, delays, and conflicting mandates inherent in the FERC relicensing process.  Committee members have learned that the process is broken and that, more importantly, almost every hydropower stakeholder wants to see it repaired.  The energy issues that continue to impact California and the Pacific Northwest have only underscored the need for, and importance of, Congress acting as soon as possible to reform the relicensing process so we can preserve consumer access to clean, reliable, domestic, and cost-efficient hydropower.

The urgency surrounding this issue has not changed with the passage of time.  In fact, with each passing year the stakes increase considerably.  Today, as we look at the next 15 years, over one-half of all non-federal hydroelectric capacity - over 30,000 MW of power (enough to serve approximately 30 million homes) - must undergo the FERC relicensing process.  This includes 296 projects in 37 states, much of it the West.  PGE alone is in the process of relicensing nearly 600 megawatts, all before 2006.  We are not unusual in this respect.

What has changed, however, is the bipartisanship that now characterizes efforts to improve the relicensing process.  All of us within the hydropower industry are encouraged by this shift towards a bipartisan consensus on this issue.  The fact that last year both the Democratic-controlled Senate and Republican-controlled House passed energy bills with hydro licensing improvement titles is a testament to the important consumer benefits to be gained from relicensing reform.  We are hopeful that this year we can finally see hydro licensing reform legislation enacted into law.  I want to especially thank Congressman Walden of my home state for his commitment to this issue.  The fact is, hydropower has played - and must continue to play - a key role in our nation's energy policy; and absent legislative reform of the FERC relicensing process, that role is in jeopardy.

Hydropower is currently the most abundant and lowest-cost renewable energy technology in the United States.  The benefits of hydropower, and its continued importance to our nation's environmental and energy policy objectives are well documented.  Hydropower is a purely domestic resource and it provides Americans with abundant recreational opportunities, as well as many flood control, water supply and irrigation benefits.  What's more, it is also an emissions-free resource, which cannot be overlooked in a time of ongoing concern over greenhouse gases and other pollutants.   

In 1999, hydro displaced the emissions of 77 million metric tons of carbon; that is the equivalent of removing 62.2 million passenger cars, nearly 50% of the current fleet, from our nation's roadways.  In addition, hydropower generation helps us avoid significant amounts of Nitrogen Oxide, Sulfur Dioxide, and Mercury, which are all major contributors to decreased air, river and lake quality.  The importance of hydropower to our nation's clean air goals cannot be overstated.  We must prevent issues, such as a broken licensing process, from weakening hydropower's ability to contribute to air quality for us and for future generations.

  Another major benefit of hydropower, its reliability, has taken on increased importance over the past few years.  The management of the nation's electric grid depends upon fast, flexible generation sources like hydropower to meet peak power demands to maintain level system voltages and to restore service after a blackout.  Hydropower's ability to go from zero power to maximum output quickly and predictably makes it exceptionally good at meeting changing loads and providing ancillary electrical services.   

Despite these multiple benefits, our supply of hydropower is waning and America is in danger of losing substantial hydropower capacity and operational flexibility at a time when we feel it is most needed.  As we face uncertainty in energy markets, increased levels of pollution, reliability concerns, and a real need for more domestic and renewable resources, we must consider ways to counter these trends.  In short, now is the time for policymakers at the federal level to fix the hydro relicensing process, for it is this process that poses the greatest threat to the future viability of this important, renewable resource.  

As documented in Congressional hearings and by FERC in its May, 2001 Section 603 Report, the relicensing process suffers from dispersed decision-making authority and an inability to balance competing values.  The bottom line is that costs, delays, and conflicting mandates greatly undermine this process. 

How did we get to this point?  Why such a dysfunctional process?  While there is no shortage of explanations, most of it can be boiled down to one unfortunate reality: the relicensing process fails to properly balance the environmental impacts of hydro projects with the crucial energy and non-energy values of the resource.

Since 1986, FERC has been required, under the Federal Power Act, to give "equal consideration" to a variety of factors when issuing hydro project licenses and relicenses.  This balancing authority requires FERC not only to consider the power, economic, and development benefits of a particular hydro project, but also to consider energy conservation and the protection, mitigation of damage to, and enhancement of fish and wildlife.  In other words, under Federal law, FERC has the responsibility and authority to strike a balance between power and environmental values. 

If this were the provision of the Federal Power Act that governed in this situation, relicensing might have a chance to succeed.  The courts, however, have interpreted the Federal Power Act so as to prevent any balancing from taking place.  The courts, in effect, have given Federal resource agencies unilateral authority to set "mandatory" conditions on FERC relicenses.  FERC has no opportunity to question the basis of mandatory conditions set by the agencies, or to fit those conditions into the final license.

This would not be as much of a problem if federal resource agencies, when imposing a mandatory condition, considered the many factors that FERC is required to examine pursuant to the Federal Power Act.  However, this is simply not done.  While all of the agency personnel with whom I have worked over the years have been intelligent, well-intentioned people, their statutory mandates simply do not require them to look beyond the narrow resource areas they are charged to protect.  The net result is that no one is balancing.  No one has the authority to look at the big picture of how hydro fits into our national energy policy.  I go back to my earlier observation: in today's uncertain energy climate, where every megawatt counts, this is a situation that must be remedied, and remedied soon. 

Some have suggested that the problems with the FERC relicensing process can be solved solely through administrative, rather than legislative means.  I disagree.  And I draw that conclusion after having invested considerable time and energy in recent years in search of substantive administrative remedies. 

While I am 100% committed to exploring and securing administrative reform, I have come to the following conclusion: properly developed and implemented administrative remedies can certainly help on a number of fronts and should be encouraged.  But taken alone, administrative reforms can not fully address the fundamental and substantive problem with the process: the fact that federal resource agencies mandate restrictive conditions on the operations of hydropower projects without either comprehensive analysis of their impacts or an independent review of the conditions. 

These thoughts were echoed by FERC in its aforementioned Section 603 Report:

".changes in regulations, policies, and procedures, while expected to alleviate the situation, are no substitute for legislative action.  They are, at best, partial mitigation for the unorthodox legislative scheme." [1]  

Let me say once again: legislative fixes are necessary if we are to truly reform the hydroelectric relicensing process.

So, what legislative fixes are needed?  For the hydro industry, the number one priority is to re-inject balance into the relicensing process - a balance between important environmental protection and the valuable energy and non-power benefits of hydro projects.   I believe that the language in Title III of Chairman Barton's discussion draft, which echoes that of the Radanovich, Walden, Towns bill (H.R. 1013), successfully addresses this priority in a reasonable and environmentally responsible manner.  And as you heard from Commissioners Brownell and Massey last week, they agree as well.  

As mentioned earlier, the FERC licensing process suffers from dispersed decision making authority.  The process is splintered among multiple federal and state agency decision makers, ranging from the U.S. Departments of Interior and Agriculture under Federal Power Act section 4(e), the U.S. Departments of Interior and Commerce under Federal Power Act section 18, and state water quality agencies under Clean Water Act section 401, among others.  This fractured license decision-making authority essentially prevents FERC from being an ultimate arbiter of how well individual license conditions fit into an overall license and from being able to ensure that the end result of the licensing process is reasonable.  It also makes FERC's ability to manage the licensing process a real challenge.  

Many would argue that the most effective solution to this fundamental problem would be to bring the ultimate decision-making authority back to FERC, where it originally resided under the Federal Power Act.  While such a solution has merit, the Barton discussion draft offers an alternative approach, one that would restore balance, certainty and accountability to the licensing process while leaving federal resource agency conditioning authority fully intact.  The idea behind the Barton discussion draft is to ensure that at least the federal agencies involved in setting license conditions under sections 4(e) and 18 of the Federal Power Act take a broader perspective in setting those conditions, as FERC itself must do in setting license conditions under Part I of the Federal Power Act.    

Title III of the Barton discussion draft would allow a licensee to propose a cost and/or energy-saving alternative condition - an alternative that the federal resource agency would have to accept if the agency - and the agency alone - determined that it met its existing statutory requirements for environmental protection.  While this concept is similar to the provisions of the House-passed H.R. 4 from the 107th Congress, there are some significant differences.   

Last Year's Bill Too Restrictive to Allow for Acceptance of Reasonable Alternatives  

For mandatory conditions having to do with management of federal lands (Section 4(e) conditions), last year's bill would have created a new environmental standard for alternative conditions, to be set on a case-by-case basis by agency personnel exercising delegated authority.  This, in turn, would bind the hands of the Secretary to consider reasonable alternatives.   

By contrast, the Barton discussion draft simply mirrors the existing environmental protection standard found in Section 4(e) of the Federal Power Act, and upon which federal land management agencies base their environmental conditions.  This language would ensure the protection of environmental resources while giving an applicant some added flexibility to save water or power, or keep costs down.  

For mandatory prescriptions for fish passage (Section 18 prescriptions), last year's bill would have restricted the Secretary's consideration to a narrow range of prescribed alternatives.  By contrast, the Barton discussion draft takes a more goal-oriented approach that permits the Secretary to determine and set a protective goal and decide whether the licensee's alternative meets that goal.  

In both cases (4e and 18 conditions), the Barton language ensures that the decision-making authority remains with the Secretaries of the federal resource agencies.  

Barton Discussion Draft Provides Reasonable Treatment of Applicant and Third Party Alternatives  

The Barton discussion draft allows any party to propose alternative conditions or prescriptions; but a license applicant's "least-cost" or "more power" alternative would have to be accepted if the Secretary determines that it satisfies the environmental protection standard.  Given that the licensee and the electric consumer ultimately bear the cost of license conditions, it is appropriate and reasonable that a Secretary be required to accept a licensee's alternative if the Secretary determines that it satisfies the environmental protection standard.  

By contrast, last year's bill would have invited conflict, confusion and further delay.  It would have required resource agencies to accept any and all alternative conditions or prescriptions (regardless of who proposes them) if they were found to meet the specified criteria, and without providing a mechanism for resolving competing alternative proposals.

Barton Discussion Draft H.R. 1013 Contains Sunshine Provisions; Holds Government Agencies Accountable  

The Barton discussion draft contains a number of "good government" provisions  aimed at providing accountability in agency decisions and returning balance to the licensing process through the recognition of the many public benefits served by hydropower projects, such as water supply, flood control, irrigation, pollution-free energy, and recreation.  Specifically, the Barton discussion draft would:  

• provide an opportunity - once mandatory conditions are drafted - for an agency hearing on the record on any disputed issues of material fact; 

• require agencies to document that they gave "equal consideration" to the economic, environmental and other public impacts, to the extent the information is available, of their mandatory conditions before imposing them on licensees and/or rejecting alternative mandatory conditions - something that agencies are not doing now; 

• require agencies to submit into the public record all studies and data that are available and relevant to their decisions; and

• provide for a non-binding dispute resolution process should FERC find a final mandatory condition to be inconsistent with its requirements under the Federal Power Act.  

By contrast, last year's bill had no such sunshine provisions.  

Over the last decade, Portland General Electric and - indeed - the entire hydropower industry, has devoted significant time and energy to finding the appropriate, legislative fix to the ills of the current FERC hydro licensing process.  In that time, I have witnessed a steady evolution; an evolution both of the industry's increasing dedication to the issue as well an evolution of the legislative vehicle that would best solve the problem at hand.     

In the 106th Congress, the Towns bill laid out a comprehensive blueprint for reform.  In the 107th Congress, this subcommittee led the way in putting forth a new approach, that of an alternative mandatory condition; an approach that the Senate last year built upon and that has been further refined this year with introduction of the Radanovich, Walden, Towns bill (H.R. 1013), whose language mirrors that of Title III of the Barton discussion draft.   

From the industry perspective, this evolution came about through careful consideration, deliberation and compromise.  The result is a bill (H.R. 1013) and a discussion draft that we believe achieves the admittedly difficult and delicate balance between clean energy needs and environmental protection.   

In conclusion, I would like to offer the following thoughts on the relationship between energy priorities and natural resources.  The river and fisheries resources administered by hydro project operators are very important ones, and essential and long-lasting commitments are being made in relicensing processes.  Portland General and the hydropower industry as a whole take seriously their role as stewards of the rivers we are privileged to use.  Licensees go to great lengths to involve stakeholders and members of the public in licensing and relicensing processes.  These consultations take years and, without question, natural resource issues constitute the bulk of those discussions.  Ultimately, the majority of direct and indirect expenditures made by licensees are spent on environmental protection, mitigation and enhancement measures. 

Some rhetorically argue that the hydropower industry wants to "roll back" environmental regulations in this process.  That is absurd.  With hydropower process improvements, resource enhancement and protection will continue.   But they must continue in a process that also recognizes and protects the value of the product that is the subject of the relicensing in the first place.  We can and must achieve balance in this arena.  We strongly believe that healthy rivers and hydropower can coexist and we continue to work toward that end.   

Time is short.  As we look to self-sustaining energy strategies, now is the time for policymakers to better incorporate hydropower into the nation's energy mix.  We urge you to pass Title III of the Barton discussion draft.  The language will bring efficiency, certainty, accountability and transparency to the licensing process.  Its provisions will benefit hydro producers, the environment and energy consumers, and, as such, is public policy that all Americans should support.  

Thank you.