We conduct a benefit-cost analysis of a relicensing agreement for two hydroelectric dams in Michigan. The agreement changed daily conditions from peaking to run-of-river flows. We consider three categories of costs and benefits: producer costs of adapting electricity production to the new time profile of hydroelectric output; benefits
of reductions in air pollution and greenhouse gas emissions; and benefits of improved recreational fishing. The best estimates suggest that the aggregate benefits are more than twice as large as the producer costs. The conceptual and empirical methods provide a template for investigating the effects of an environmental constraint on hydroelectric dams. (JEL Q43, Q57)

We conduct a benefit-cost analysis of a relicensing agreement for two hydroelectric dams in Michigan. The agreement changed daily conditions from peaking to run-of-river flows. We consider three categories of costs and benefits: producer costs of adapting electricity production to the new time profile of hydroelectric output; benefits of reductions in air pollution and greenhouse gas emissions; and benefits of improved recreational fishing. The best estimates suggest that the aggregate benefits are more than twice as large as the producer costs. The conceptual and empirical methods provide a template for investigating the effects of an environmental constraint on hydroelectric dams.

This report is intended to help Fish and Wildlife Service (FWS) staff become more effective participants in the hydropower relicensing process through a better understanding of the economic analysis used to evaluate hydropower projects. Specifically, the report seeks to accomplish the following goals:

• Explain the Federal Energy Regulatory Commission's (FERC's) current approach to the economic analysis of relicensing alternatives;
• Review potential methodological refinements and why they are important; and
• Introduce a variety of approaches for assessing non-power values, helping FWS staff recognize when more advanced analyses are applicable.

The purpose of this document is not to provide a step-by-step guide for the conduct of primary economic analysis, i.e., the reader is not expected to become an expert in the implementation of the analyses described here. Rather, the document seeks to attune non-experts to the role of economics in relicensing and the diversity of techniques available.

The contribution of nonmarket valuation studies to decisions about the operation of nonfederal hydroelectric facilities is examined. Hydropower licensing reforms by the Federal Energy Regulatory Commission to better weigh market and nonmarket tradeoffs did not require or use nonmarket valuation. License negotiation processes are interpreted as a substitute for valuation.

This paper investigates the sources for regulatory delay in bureaucratic decision making, testing regulatory capture, congressional dominance, and bureaucratic discretion theories of agency behavior.

The empirical context concerns relicenses issued by the Federal Energy Regulatory Commission (FERC) for hydroelectric dams, which have taken anywhere from just ten months to over sixteen years to be issued. The reasons for this heterogeneity in regulatory processing times can be expected to be varied and numerous and indeed we find evidence that outside interest groups, the legislature, and bureaucratic discretion are all significant in affecting regulatory processing times. Our most intriguing results concern the effects of environmental interest groups, which, despite their apparent benefit/cost motivation to hasten the relicensing process (independent of relicensing outcomes), overall end up slowing it down.

In two waves of proposed penalty notices, FERC has affirmed its readiness to enforce its new strict hydropower license compliance policy. Failure to take notice of this trend could have dire consequences for the industry. FERC's new compliance ethic is based on the threat of two penalties which can be imposed on non-compliant licensees, exemptees or permit holders. First is the civil penalties provision inserted into the Federal Power Act by enactment of the Electric Consumers Protection Act of 1986. Second, FERC can terminate licenses, exemptions, permits and fail to relicense projects with a history of non-compliance. According to FERC, the existence of a positive compliance record will be a major consideration in relicensing hydroelectric projects in the future.
NOTE: this article from 1990!

We investigated the "need to negotiate" in a comparative case study of multi-agency negotiations in the FERC licensing process. Researchers interviewed participants in tow cases involving environmental consultations and asked about parties' level of need to negotiate throughout the process. Participants identified a need to negotiate, and when this need was strongly felt, there was an increased opportunity for an agreement to be reached. An intense need to negotiate by all parties is not a prerequisite to successful agreements. When key participants have a strong need to negotiate, they can instigate negotiations and encourage the involvement of other parties.

In advance of FERC’s December 2001 workshop, the Hydropower Reform Coalition compiled this report to take a closer look at the 51 oldest pending hydropower dam license applications and analyze the causes and impacts of delay, followed by a series of solutions that will enable us to pass on a legacy of healthy rivers and provide a reliable energy supply to future generations.