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FERC Trumps State Laws on Headwater Benefits

(CN) - The Federal Energy Regulatory Commission overrides state laws regulating the costs that an upstream dam operator can recoup from a downstream hydropower plant operator, the D.C. Circuit ruled.

Downstream plants must pay the upstream operators, because they allow the downstream plants to enjoy a more predictable flow of water. These are called headwater benefits.

Albany Engineering Corp. filed a complaint with FERC, claiming it was being improperly charged for headwater benefits.

The commission argued that federal law pre-empted state law only for interest, maintenance and depreciation.

The federal appeals court in Washington, D.C., disagreed, ruling that all state laws that allow recovery costs are pre-empted, because Congress deliberately limited the amount of costs that would be charged to downstream operators.

"FERC advances no argument for why FERC would be less well-suited than the state to determine equitable operating expenses," Judge Williams wrote. "Nor does FERC offer any reason Congress would be concerned that FERC set only charges that it deemed equitable, yet would leave the states free to collect charges regardless of whether they met FERC's judgment of their equity."

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