Electricity Regulation:

Issues Concerning the Hydroelectric Project Licensing Process

RCED-91-120: Published: May 10, 1991. Publicly Released: Jun 17, 1991.

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Pursuant to a congressional request, GAO examined the: (1) Federal Energy Regulatory Commission's (FERC) review of the financial and economic feasibility of proposed hydroelectric projects during its licensing process; (2) extent of speculation on potential hydropower sites; and (3) possible need to amend the Federal Power Act to allow licensees more time to arrange financing and commence construction of licensed projects.

GAO found that: (1) the FERC analysis was not intended to guarantee that a licensed project will prove to be economically or financially feasible; (2) the Federal Power Act allows licensees an initial 2 years to commence construction and then allowed FERC to grant one 2-year extension, if requested by the licensee and warranted by circumstances; (3) nonfederal hydroelectric projects affecting the nation's navigable waterways required a license from FERC; (4) FERC must give equal consideration to such nondevelopmental aspects as conserving energy and preserving environmental quality; (5) between fiscal years 1980 and 1985, FERC issued 430 hydroelectric licenses for new projects, and 93 percent began construction within 4 years of receiving a license; and (6) the Federal Power Act established a 4-year limit for beginning construction of licensed hydropower sites to discourage speculation.