FERC Issues Rules Enabling Tax Credits for Hydropower Expansions

December 21, 2005

The Federal Energy Regulatory Commission (FERC) issued new instructions on December 16th for hydropower facilities to earn tax credits for increasing their power output. The Energy Policy Act of 2005 allows tax credits for the incremental production gains from efficiency improvements or capacity additions to existing hydropower facilities. The act also allows FERC-licensed dams that do not generate power to earn the tax credit for a hydropower installation, but only if the installation requires no significant modifications to the dam. To earn the tax credit, the facilities must be placed in service after August 8th of this year and by the end of 2007, and FERC must certify both the historic and increased power production at the facility for the Internal Revenue Service. See the FERC guidelines (PDF 193 KB). Download Adobe Reader.

FERC also approved a project that will likely qualify for the tax credit. The Public Utility District (PUD) No. 2 of Grant County, Washington, plans to install nine new advanced hydropower turbines at the Priest Rapids hydroelectric project on the Columbia River. The so-called "fish-friendly" turbines, developed by DOE, will increase power production at the plant while improving the survival of juvenile salmon migrating downstream. The utility has already installed one of the new turbines at the site, and found that the average survival of juvenile Chinook salmon through the new turbine was at least as good as that of the existing turbines. The new turbine also produced 14 percent more electricity. The utility plans to replace one turbine at the facility every nine months. See the FERC press release and order (PDF 151 KB) and the related press release from Grant County PUD.