June 4, 2003
The Honorable Patrick Henry Wood III Dear Chairman Wood: I am writing to bring your attention to issues raised in a recent General Accounting Office (GAO) report entitled, "Federal Energy Regulatory Commission: Charges for Hydropower Projects’ Use of Federal Lands Need to Be Reassessed." I have reviewed this report with great interest and believe that it raises a number of rather serious questions on which I would appreciate your perspective. The Federal Energy Regulatory Commission (FERC), under Section 10(e) of the Federal Power Act (FPA), is required to collect charges for hydropower projects on federal lands. The GAO finds that in its administration of this responsibility, the Commission has established a fee schedule that does not recognize the value of hydropower produced on these federal lands. As a result, GAO finds that the charges actually imposed by the Commission were approximately $154 million less than the fair market value for the use of these lands. More disturbing is GAO’s finding that the Commission has performed precious little oversight into the administration of the fee program and as a result, has not determined whether its fee schedule (1) meets the program objectives, (2) contains accurate information on the amount of federal lands used by hydropower projects or (3) includes a billing system that collects all charges due to the Federal government. In addition, I am particularly disturbed by the GAO’s finding that FERC allows hydropower licensees to self-report the amount of federal lands they use and makes no attempt to independently verify the information submitted. This suggests a rather cozy relationship between FERC and the industry that it is charged with regulating. Mr. Chairman, I would note that this disturbing report comes on the heels of two previous GAO reports that call into question the Commission’s ability to discharge its statutory obligations under the Federal Power Act ("Hydropower Relicensing: Federal Costs Are Not Being Recovered" June 2000 and "Licensing Hydropower Projects: Better Time and Cost Data Needed to Reach Informed Decisions About Process Reforms" May 2001). At a time when some are actually advocating expanding the Commission’s authority over the nation’s hydropower projects, these reports identify a pattern of lax oversight in the administration of the hydropower program and point to an agency ill-equipped to handle its current responsibilities, much less additional duties. I would appreciate your response to the attached questions no later than June 16, 2003. Sincerely, JOHN D. DINGELL Attachment cc: The Honorable W. J. "Billy"
Tauzin, Chairman The
Honorable Joe Barton, Chairman The
Honorable Rick Boucher, Ranking Member 1. According to the GAO report, FERC established regulations governing annual charges for hydropower projects in 1987. Since that time, the Commission has yet to perform "any research or analysis to assess whether its fee schedule results in annual charges that are proportionate to the benefits conferred." (p. 5) Why hasn’t such an analysis been performed? 2. GAO finds that "federal internal control standards also require agencies to establish and implement policies and procedures that reasonable ensure that valid and reliable data are obtained on the operations of the programs they manage." (p. 15) Does the Commission believe that its current method of allowing licensees to self-report the amount of Federal acreage used to produce hydropower is consistent with these criteria? 3. GAO finds that "FERC allows licensees to self-report the total federal acreage that they use to produce hydropower and makes no attempt to verify this information." (p. 15) Can the Commission cite another federal agency or federal program in which the regulated entity, in this case the hydropower licensee, is allowed to self-report the facts that determine the amount that it will be regulated AND such reports are not audited or verified by the agency charged with such regulation? 4. In responding to the assertion contained in the previous question, FERC staff – through comments included in the GAO report – asserts the following: The draft report states that the Commission does not verify the federal acreage within the project boundary reported by licensees in their applications. Federal land management agencies are active participants, and sometimes cooperating agencies in our licensing/relicensing and NEPA processes. Public notices are issued giving the agencies the opportunity to review the reported acreage figures and location of these lands. Any disagreements are worked out by the agency and applicant before the Commission establishes the charges. (p. 92) This response seems to both confirm the charge that the Commission does not verify self-reported data from licensees, and imply that other federal agencies are responsible for performing what are clearly the Commission’s 10(e) responsibilities. Has the Commission established, through a Memorandum of Understanding or any other formal administrative method, the delegation of these responsibilities to other federal agencies? If so, please provide a copy of such communication. If not, please explain the apparent lack of oversight on the Commission’s part. 5. Section 10(e) of the Federal Power Act requires FERC to collect fees in part to cover "any reasonable and necessary costs incurred by Federal and State fish and wildlife agencies and other natural and cultural resource agencies in connection with studies or other reviews carried out by such agencies for purposes of administering their responsibilities under this part." Please provide data for the last three fiscal years of the cost incurred by Federal and State fish and wildlife agencies to administer their responsibilities under Part I of the FPA. Please outline the Commission’s methods for collecting such costs as well as the method for reimbursing these agencies under Section 10(e). 6. Please provide an accounting of fees collected under Section 10(e) for the last three fiscal years, including a description of how such fees, once collected, were dispersed. 7. The National Hydropower Association, in its comments to the GAO report, asserts the following:
This statement implies that the Commission’s charges should place a premium on such "public gains" in the form of discounted fees. With regard to this matter the GAO report states the following:
Does the Commission continue to hold this position? Why or why not? 8. What actions, if any, does the Commission plan to take to implement the recommendations of the GAO contained in the report?
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