A PROFESSIONAL CORPORATION
`1050 Thomas Jefferson Street N.W.
`Washington, D.C. 20007-3877
`(202) 298-1800 Telephone
`(202) 338-2416 Facsimile
`www.vnf.com
`
`Seattle, Washington
`(206) 623-9372
`
`Charles R. Sensiba
`(202) 298-1801
`crs@vnf.com
`
`Vanl\Tess
`Feldman
`
`ATTORNEYS AT LAW
`
`BY HAND DELIVERY
`
`September 17, 2012
`
`Anton Porter
`Chief Financial Officer
`Office of the Executive Director
`Federal Energy Regulatory Commission
`888 First Street, N.E.
`Washington, DC 20426
`
`Re: (cid:9)
`
`Appeal of 2012 Administrative Annual Charges Bills of
`City of Idaho Falls, Idaho, et al., Project No. 2842, et al.
`
`Dear Mr. Porter:
`
`Pursuant to 18 C.F.R. § 11.20 (2012), enclosed please find a consolidated Appeal of
`2012 Administrative Annual Charges Bills of City of Idaho Falls, Idaho, et aL("Appeal")
`filed by the City of Idaho Falls, Idaho; The City of Seattle, Washington; Public Utility District
`No. 1 of Chelan County, Washington; Sacramento Municipal Utility District; South Sutter Water
`District; New York Power Authority; Consumers Energy; Louisville Gas and Electric Company;
`FPL Energy Maine Hydro, LLC; and Merimil Limited Partnership (collectively "Licensees").
`
`If you have any questions regarding this matter, please contact the undersigned immediately.
`
`Sincerely,
`
`Charles Sensib
`Counsel to Lice
`
`Enclosure
`
`cc: (cid:9)
`
`Kimberly D. Bose, Secretary (via electronic filing)
`
`

`

`UNITED STATES OF AMERICA
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
`
`Project Nos. 2842, 2952
`
`Project Nos. 553, 2144, 2705, 2959
`
`Project Nos. 943, 2145
`
`Project Nos. 2101
`
`Project No. 2997
`
`Project Nos. 2000, 2216, 2685
`
`Project Nos. 785, 2436, 2447, 2448,
`2449, 2450, 2451, 2452, 2453, 2468,
`2566, 2580, 2599, 2680
`
`Project No. 289
`
`Project Nos. 2142, 2194, 2283, 2284,
`2302, 2322, 2325, 2329, 2335, 2519,
`2527, 2528, 2529, 2530, 2531, 2615,
`3133
`
`Project No. 2547
`
`)
`)
`)
`)
`)
`
`))
`
`)
`
`))
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`City of Idaho Falls, Idaho
`
`The City of Seattle, Washington
`
`Public Utility District No. 1 of Chelan
`County, Washington
`
`Sacramento Municipal Utility
`District
`
`South Sutter Water District
`
`New York Power Authority
`
`Consumers Energy Company
`
`Louisville Gas and Electric Company
`
`FPL Energy Maine Hydro, LLC
`
`Merimil Limited Partnership
`
`APPEAL OF 2012 ADMINISTRATIVE ANNUAL CHARGES BILLS
`OF CITY OF IDAHO FALLS, IDAHO, ET AL.
`
`I.
`
`INTRODUCTION
`
`Pursuant to Section 11.20 of the regulations of the Federal Energy Regulatory
`
`Commission (“Commission”),1 this action is a consolidated appeal of the Commission’s
`
`2012 administrative annual charges bills brought on behalf of the City of Idaho Falls,
`
`18 C.F.R. § 11.20.
`1
`
`- 1 -
`
`

`

`Idaho; The City of Seattle, Washington; Public Utility District No. 1 of Chelan County,
`
`Washington; Sacramento Municipal Utility District; South Sutter Water District; New
`
`York Power Authority; Consumers Energy Company; Louisville Gas and Electric
`
`Company; FPL Energy Maine Hydro, LLC; and Merimil Limited Partnership
`
`(collectively “Licensees”). The appeal challenges a portion of the “Other Federal
`
`Agencies Administrative Charge (FY11)” included in the bills issued to the above-
`
`captioned licensed hydropower projects. This component of the bills consists of fiscal
`
`year (“FY”) 2011 costs reported by several Other Federal Agencies (“OFAs”), and this
`
`appeal contests: (1) the entire $1.91 million of the National Marine Fisheries Service’s
`
`(“NMFS”) reported costs included in the 2012 bills; and (2) $443,000 of costs reported
`
`by the U.S. Fish and Wildlife Service (“FWS”). In total, Licensees contest $2.35 million
`
`of the $11.54 million (approximately 20 percent) in FY 2011 OFA costs included in the
`
`Commission’s 2012 administrative annual charges bills.
`
`II.
`
`BACKGROUND
`
`A.
`
`The Commission’s Standards and Procedures for Determining
`“Reasonable” OFA Costs
`
`Under Section 10(e)(1) of the Federal Power Act (“FPA”), the Commission is
`
`responsible for recovering the costs incurred by the United States in administering Part I
`
`of the FPA.2 However, the Commission’s authority is limited to recovering “reasonable”
`
`annual charges for the United States’ administration of Part I of the FPA, including the
`
`reasonable and necessary costs of studies and other reviews incurred by the OFAs.3 The
`
`Commission has a non-delegable and exclusive responsibility to determine the
`
`
`16 U.S.C. § 803(e)(1).
`2
`Id.
`
`3
`
`- 2 -
`
`

`

`reasonableness of costs to be collected under the annual charges program,4 and is
`
`obligated to ensure that each cost included in annual charges to hydropower licensees—
`
`on an individual basis—is reasonable.5 Costs that cannot be demonstrated as having been
`
`incurred in the United States’ administration of FPA Part I are per se unreasonable.6
`
`Consequently, if the Commission cannot determine, based on evidence in the record, that
`
`a cost reported by an OFA was incurred in the United States’ administration of FPA Part
`
`I, the Commission cannot make the statutorily required finding of reasonableness and
`
`must not include such cost in annual charges bills.7
`
`To discharge its statutory responsibility to limit annual charges assessments to
`
`“reasonable” costs incurred by the OFAs in their administration of Part I of the FPA, the
`
`Commission has promulgated a systematic and exacting reporting standard for the OFAs,
`
`as well as an open and transparent annual public process to inform the Commission in its
`
`assessment of which reported OFA costs are reasonable, and therefore eligible for
`
`inclusion in administrative annual charges bills.8 The Commission-required reporting
`
`standard mandates each OFA to complete a form, developed by the Commission, which
`
`“provide[s] for the reporting by each OFA of its actual direct and indirect costs for the
`
`
`City of Tacoma v. FERC, 331 F.3d 106, 115 (D.C. Cir. 2003); E. Columbia Basin Irrigation Dist. v.
`4
`FERC, 946 F.2d 1550, 1557-58 (D.C. Cir. 1991).
`City of Tacoma, 331 F.3d at 115-16 (rejecting the Commission’s argument that Section 10(e)(1)
`5
`requires only a reasonable “rate design” methodology, and holding that “[b]ecause section 10(e) plainly
`commands the Commission to assess annual charges under the FPA, including a review of OFA cost
`reports on which the charges are based, . . . the Commission, by failing to conduct that review, has acted
`contrary to the ‘unambiguously expressed intent of Congress’ and therefore contrary to law”).
`16 U.S.C. § 803(e)(1) (limiting the Commission’s cost recovery authority to annual charges “for the
`6
`purpose of reimbursing the United States for the costs of the administration of this subchapter,” i.e., Part I
`of the FPA) (emphasis added); City of Idaho Falls, 107 FERC ¶ 61,277 at P 18 (2004).
`City of Tacoma, 331 F.3d at 115-16; 16 U.S.C. § 825l(b) (requiring the Commission’s factual findings
`7
`to be supported by substantial evidence); City of Idaho Falls, 107 FERC ¶ 61,277 at PP 13-19.
`See generally City of Idaho Falls, 107 FERC ¶ 61,277; City of Idaho Falls, 109 FERC ¶ 61,040
`8
`(2004).
`
`- 3 -
`
`

`

`prior fiscal year, allocated to municipal and non-municipal hydropower development.”9
`
`The form must be “accompanied by a certification from the agency’s Chief Financial
`
`Officer that the costs are correct and accurate.”10 In addition, the OFAs must submit
`
`“detailed cost accounting reports or cost allocation analyses which support each cost
`
`category listed on the form.”11 In meeting this reporting standard, the Commission has
`
`directed the OFAs, among other things, to:
`
` Ensure that “[c]osts reported . . . be related to the licensing of hydropower
`projects having applications pending before or granted by the [Commission]”;
`
`
`
`
`
`
`
`“Segregate costs based on the cost categories listed on the form,” i.e., “by
`license category (municipal vs. non-municipal),” and for each license category
`report salaries, benefits, travel, other direct costs, and overhead;
`
`“[S]ubmit cost accounting reports, supplemental analyses which support all
`reported costs, and a detailed explanation of the time reporting and
`management review process”;
`
`“Include cost codes (explanation of code structure) and a detailed description
`of work performed”; and
`
` Submit data reports “from automated information systems which detail
`reported costs; [o]ther accounting reports from agency financial management
`systems which detail reported costs; or [o]ther written analyses which explain
`how costs were allocated to the individual cost categories listed on the
`form.”12
`
`In providing these reports to the Commission, the OFAs must use accurate and
`
`reliable cost accounting data. Commission staff has explained:
`
`We are looking for something that allows us to review the summary
`figures that are submitted on the cover sheet forms . . . and looking for the
`
`10
`
`
`City of Idaho Falls, 107 FERC ¶ 61,277 at P 24.
`9
`Id. at P 25.
`Id. at P 24.
`12 Guidance to Other Federal Agencies on the Reporting of Costs of Administrating Part I of the Federal
`Power Act (enclosed in Letter Requesting Department of Interior to Submit its FY 2011 Cost Reports,
`Docket No. AD12-3-000 (issued Oct. 20, 2011)).
`
`11
`
`- 4 -
`
`

`

`detail in the form of accounting system reports, queries, or descriptions of
`a process that will get back to the summary figures that are included, and
`then support not only for everything but broken down in those categories
`so we can verify the categories.13
`
`The OFAs also must demonstrate that their accounting systems or processes have been
`
`“subject to internal controls, management review and certification, and external audit.”14
`
`With regard to the submission of these annual cost reports, the Commission has
`
`directed that the OFAs must submit this information to the Commission by the end of
`
`each calendar year. The Commission has explained:
`
`The fiscal year for federal agencies closes on September 30th each year.
`New federal accelerated timelines require agencies to submit audited
`financial statements to the Office of Management and Budget two months
`later, by November 30th. At this point, most agencies close their
`accounting systems for the prior fiscal year. Since the FPA Part I related
`costs of the OFAs are likely to be a very small part of their total annual
`expenditures, the agencies should be able to provide the Commission with
`their Part I expenditures by December 31 of each year.15
`
`Within two weeks of receipt, Commission staff is required to make the OFAs’
`
`forms, reports, and certifications publicly available, and to issue notice of a technical
`
`conference.16 To provide hydropower licensees a full opportunity to review and analyze
`
`the OFAs’ cost reports prior to the technical conference, the Commission directed that the
`
`conference be convened approximately six weeks after the OFAs’ cost reports are made
`
`publicly available.17 The Commission explained that this opportunity for meaningful
`
`
`13 Transcript of Technical Conference on Other Agency Cost Submissions for Fiscal Year 2006 at 8-9,
`Docket No. AD07-3-008 (issued Mar. 29, 2007).
`Id. at 9.
`14
`15 City of Idaho Falls, 109 FERC ¶ 61,040 at P 24.
`Id. at P 25.
`16
`17 The Commission explained that, following the December 31 OFA submission deadline, “it seems
`reasonable for the Commission to provide licensees with the OFA submissions within two weeks of
`receiving them, and to simultaneously give notice of a technical conference, to be held approximately the
`first of March.” Id.
`
`- 5 -
`
`

`

`review prior to the technical conference—which the Commission adopted in direct
`
`response to licensees’ rehearing request18—is to “give the licensees and OFAs a
`
`mechanism to raise and resolve issues pertaining to the OFA’s expenditures before the
`
`annual charge bills are issued.”19 The Commission indicated that this process “should
`
`ensure that many, if not most, of the issues are resolved before the bills are issued.”20
`
`Following the technical conference, the Commission’s procedures require
`
`Commission staff to complete final review of the OFAs’ cost submissions, together with
`
`information gathered in the technical conference,21 and decide which costs reported by
`
`the OFAs meet the “reasonableness” standard. The Commission has directed:
`
`If an agency does not timely complete the form and provide the necessary
`documentation and certification, or files a certification that does not
`conform to the reporting requirements, or states that it cannot provide
`certification, then that agency’s costs (if any are submitted) will be
`deemed to lack substantiation and will not be included as Part I costs.22
`
`When an OFA timely submits the form, together with the required certification
`
`and detailed cost accounting reports, such costs “will be deemed to be presumptively
`
`reasonable.”23 In such circumstances, a challenging licensee overcomes the
`
`reasonableness presumption by “coming forward with some plausible evidence or
`
`argument that the particular cost was not reasonably incurred.”24 If the challenging
`
`20
`
`19
`
`licensee carries this burden, “the agency will bear the burden to show the expense was
`
`See id. at PP 20-21.
`18
`Id. at P 25.
`Id. at P 26.
`21 The Commission’s procedures also contemplate resolution of issues “through written submissions,” id.
`at P 38, and each year the Commission issues a notice following the technical conference, allowing
`licensees to raise questions and concerns that were not resolved during the technical conference.
`22 City of Idaho Falls, 107 FERC ¶ 61,277 at P 25.
`Id. at P 26.
`23
`24 City of Idaho Falls, 109 FERC ¶ 61,040 at P 36.
`
`- 6 -
`
`

`

`reasonably incurred. If the agency cannot make such a showing, the cost will be
`
`disallowed.”25
`
`B.
`
`Commission Staff’s Implementation of the Required Process for OFA
`Costs Included in the 2012 Administrative Annual Charges Bills
`
`When implementing these required standards and procedures in its preparation of
`
`the 2012 administrative annual charges bills, Commission staff issued letters on October
`
`11, 2011, requesting that the OFAs submit a report of the costs they incurred in
`
`administering Part I of the FPA during FY 2011.26 In response, FWS prepared its form
`
`and cost report, which its Chief Financial Officer (“CFO”) certified on December 31,
`
`2011.27 These materials were made publicly available for Licensees’ review on January
`
`27, 2012.28
`
`With regard to NMFS, its CFO did not certify its costs to the Commission until
`
`January 11, 2012—nearly two weeks after the Commission’s mandated deadline.29 The
`
`CFO’s certification, together with several summary computer printouts, was made
`
`publicly available on January 27, 2012.30 NMFS’s summary information, however, did
`
`not meet the Commission’s requirement for “detailed cost accounting reports or cost
`
`
`Id.
`25
`26 E.g., Letter Requesting Department of Interior to Submit its FY 2011 Cost Reports, Docket No. AD12-
`3-000 (issued Oct. 20, 2011).
`See The Department of the Interior (FWS) FY2011 FPA Related Cost Reports and Required
`27
`Certification of Cost Incurred in Compliance to Section 10(e) of the Federal Power Act, Docket No. AD12-
`3-007 (filed Jan. 27, 2012).
`See id. While, technically, this violated the Commission’s directive for OFA cost reports to be made
`28
`publicly available by January 14 each year, this appeal does not challenge the FWS’s reported costs based
`on timeliness. Licensees recognize that, because the 2012 technical conference was held later in March,
`they had sufficient time to review and analyze FWS’s cost report prior to the technical conference.
`See Department of Commerce (NMFS) FY 2011 Related Cost Reports and Required Certification
`29
`Incurred in Compliance to Section 10(e) of the Federal Power Act, Docket No. AD12-3-014 (filed Jan. 27,
`2012).
`See id.
`30
`
`- 7 -
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`

`

`allocation analyses which support each cost category listed on the form.”31 In stark
`
`contrast to the itemized and voluminous cost reports submitted by the other larger
`
`OFAs,32 NMFS’s filing consisted only of 17 pages of annual total cost summaries from
`
`each of NMFS’s various regional and other offices. Unlike the other OFAs and contrary
`
`to Commission requirements,33 NMFS provided no explanation of the cost codes used for
`
`reporting these annual total costs, i.e., whether cost codes have been established in
`
`NMFS’s accounting system for exclusively capturing FPA Part I administration costs,
`
`whether FPA Part I costs are segregated between municipal and non-municipal projects,
`
`and whether NMFS personnel accurately use these codes. While NMFS did provide a
`
`
`31 City of Idaho Falls, 107 FERC ¶ 61,277 at P 24.
`32 E.g., The Department of Interior’s (FWS) FY2011 FPA Related Cost Reports and Required
`Certification of Cost Incurred in Compliance to Section 10(e) of the Federal Power Act (providing 110
`pages of cost reports in addition to a summary report and description of program costs and methodologies,
`and with each line entry logged to a specific program code); The Department of Interior’s (BOR) FY2011
`FPA Related Cost Reports and Required Certification of Cost Incurred in Compliance to Section 10(e) of
`the Federal Power Act, Docket No. AD12-3-006 (filed Jan. 19, 2012) (providing 86 pages of cost reports in
`addition to its summary, with each line entry logged to a specific and clearly defined municipal, non-
`municipal or non-specific cost code); The Department of Interior’s (BIA) FY2011 FPA Related Cost
`Reports and Required Certification of Cost Incurred in Compliance to Section 10(e) of the Federal Power
`Act, Docket No. AD12-3-004 (filed Jan. 19, 2012) (providing an 82 page report with each expenditure
`itemized using FFS codes, codes specifically set up to record FERC municipal, non-municipal and non-
`specific costs, and divided by budget object class codes).
`33 Licensees note that several years ago, upon the Commission’s establishment of the current annual
`charges reporting and review process, the other OFAs, at the Commission’s direction, provided a detailed
`description of their cost codes, accounting systems, and cost recording practices. See, e.g., Notice
`Reporting Costs for Other Federal Agencies’ Administrative Annual Charges for Fiscal Year 2006,
`Appendix at 3, Docket No. AD07-3-000 (issued Aug. 17, 2007) (“The Forest Service provided detailed cost
`accounting reports generated from their financial accounting system which captured FPA Part I related
`costs for FY 2006. The detailed cost reports were organized by region and differentiated municipal and
`non-municipal costs through clearly defined budget cost codes.”); id. at 1 (The Bureau of Land
`Management “provided financial accounting reports from [its] financial accounting system that clearly
`tracked FPA Part I related costs through specific job and activity based codes. [It] also provided further
`clarification of how FPA Part I related costs were being recorded and classified, including job cost code
`tables to support [its] municipal and non-municipal distinctions.”); Notice Reporting Costs for Other
`Federal Agencies’ Administrative Annual Charges for Fiscal Year 2008, Docket AD09-1-012 at 6 (issued
`Aug. 6, 2009) (BIA “provided financial accounting reports from [its] financial accounting system that
`clearly tracked FPA Part I related costs through specific job and activity based codes. [It] also provided
`further clarification of how FPA Part I related costs were being recorded and classified, including job cost
`code tables to support [its] municipal and non-municipal distinctions.”). NMFS has never done this,
`resulting in the rejection of nearly all of its reported costs each year.
`
`- 8 -
`
`

`

`listing and brief “definition” of accounting codes used in its summary report,34 some of
`
`which appear to be related to FPA Part I administration, the majority are broad and
`
`generic and could be used for other programs, such as work associated with federal
`
`hydropower facilities and other energy projects.
`
`Because NMFS’s summary report failed to meet the Commission’s reporting
`
`requirements, Commission staff by letter dated February 22, 2012, notified NMFS that it
`
`needed additional information to support NMFS’s reported costs, and that “absent this
`
`information, the Commission could deny certification of an agency’s Other Federal Cost
`
`Submission (in part or in whole).”35 Specifically, staff requested that NMFS:
`
` Provide a written description on how data is captured and reported
`(include how FPA-related costs are distinguished from non FPA-
`related costs and municipal project costs from non-municipal project
`costs);
` Provide an explanation of overhead rates; and
` Provide an explanation for “Other” costs to include a written
`description of contract costs.36
`
`By letter dated March 13, 2012, NMFS provided a one-page response to Commission
`
`staff, which provided the exact same listing and abbreviated definitions of cost codes it
`
`included in its January 2012 summary report, without any further explanation of what
`
`costs these codes are intended to capture or how NMFS uses them.37 NMFS also
`
`provided detailed information related to some of its reported contract costs.38 Nowhere in
`
`
`34 NMFS’s listing of accounting codes and definitions, as reported in its January 27 summary report,
`appears at attachment A.
`35 Letter from W. Doug Foster, Federal Energy Regulatory Commission, to Dawn DiFiore, National
`Marine Fisheries Service, Docket No. AD12-3-017 (issued Feb. 22, 2012). NMFS’s listing of accounting
`codes and definitions, as reported in its March 13 response to Commission staff, appears in Attachment B.
`Id.
`36
`37 Letter from Gary Reisner, National Marine Fisheries Service, to Raven Rodriguez, Federal Energy
`Regulatory Commission, Docket No. AD12-3-017 (filed Mar. 15, 2012).
`Id.
`38
`
`- 9 -
`
`

`

`this response did NMFS respond to Commission staff’s request to describe—as required
`
`by the Commission—how cost data is captured and reported, including an explanation of
`
`how FPA-related costs are distinguished from non FPA-related costs, and how municipal
`
`project costs are segregated from non-municipal project costs.39 Absent from its March
`
`13 response, moreover, was any cost accounting report supporting NMFS’s FY 2011
`
`reported costs—much less the “detailed cost accounting reports or cost allocation
`
`analyses which support each cost category listed on the form” required by the
`
`Commission.40
`
`On March 22, 2012—the day of the Commission’s annual technical conference on
`
`reported OFA costs—a more detailed report of NMFS’s FY 2011 costs was made
`
`publicly available on the Commission’s eLibrary system.41 While this report shows
`
`numerous costs recorded to different cost-accounting codes, once again it did not meet
`
`Commission requirements. Unlike what the Commission has required other OFAs to
`
`demonstrate,42 NMFS’s report failed to include a description how the reported data were
`
`captured and entered to the codes used in the reports. It did not explain whether these
`
`codes are used exclusively for costs incurred in administering FPA Part I. It did not
`
`confirm whether these codes segregate municipal project costs from non-municipal
`
`project costs. Also absent from this report is an explanation of any quality control
`
`measures implemented by NMFS to ensure the accuracy and reliability of these costs—as
`
`other OFAs have provided and as requested by Commission staff in its February 22 letter
`
`39 The Commission’s requirements regarding the OFAs’ cost accounting systems and reporting
`requirements are discussed in Section II.A., above.
`40 City of Idaho Falls, 107 FERC ¶ 61,277 at P 24.
`41 National Marine Fisheries Submits Additional Information Regarding the FY2011 FPA Related Cost
`Reports and Required Certification of Cost, Docket No. AD12-3-017 (filed Mar. 22, 2012).
`See supra note 33.
`42
`
`- 10 -
`
`

`

`to NMFS.43 In addition, the report is devoid of any explanation as to whether and how
`
`these cost codes segregate costs incurred in NMFS’s administration under FPA Part I (as
`
`distinguished, for example, from NMFS’s work related to the federal hydropower
`
`system), and whether and how it segregates costs associated with municipal projects from
`
`non-municipal projects.
`
`On March 22, the Commission held its annual technical conference. Although
`
`Licensees had been given no opportunity to analyze, or even review, NMFS’s cost report
`
`prior to the technical conference (as the report was not made publicly available until the
`
`day of the technical conference), during the technical conference Commission staff
`
`announced its preliminary finding that nearly all of the $2.1 million reported by NMFS
`
`should be passed through to hydropower licensees in the Commission’s 2012
`
`administrative annual charges bills.44 Staff also preliminarily found that $4.6 million of
`
`the $4.9 million reported by FWS should be recovered in annual charges bills.45
`
`Following the technical conference, the Commission issued a notice soliciting
`
`public comments on the OFA cost reports.46 The notice stated that “[o]nce filed, the
`
`Commission will forward the questions and comments to the OFAs for response.”47
`
`Licensees filed detailed comments and questions in response to the Commission’s
`
`notice,48 raising several concerns with both NMFS’s and FWS’s reported costs.49
`
`43 Letter from W. Doug Foster, Federal Energy Regulatory Commission, to Dawn DiFiore, National
`Marine Fisheries Service, Docket No. AD12-3-017 (issued Feb. 22, 2012) (requesting NMFS, inter alia, to
`explain “how data is captured and reported,” including “how FPA-related costs are distinguished from non
`FPA-related costs and municipal project costs from non-municipal project costs”).
`See Slideshow Presentation from March 22, 2012 Technical Conference – Other Federal Agency Cost
`44
`Submissions for Fiscal Year 2011, Docket No. AD12-3-018 (issued Apr. 5, 2012).
`Id.
`45
`46 Notice Requesting Questions and Comments on Fiscal Year 2011 Other Federal Agency Cost
`Submissions, Docket No. AD12-3-019 (issued Apr. 5, 2012).
`Id.
`47
`
`- 11 -
`
`

`

`Specifically, Licensees pointed out that NMFS’s cost report—as in every prior year—is
`
`replete with errors, as it included in its reports costs incurred in non-FPA Part I activities
`
`(such as costs associated with federal hydropower projects, gas pipelines, and liquid
`
`natural gas facilities) and mistakenly reported non-municipal project costs as municipal
`
`project expenses, and vice versa.50 This year, for example, NMFS included costs for
`
`investigations and studies for the removal and notching of Englebright and Daguerre
`
`Point Dams—which are federal facilities not subject to FPA Part I administration.51
`
`Licensees expressed concern that, although NMFS’s FY 2011 report used the same cost-
`
`accounting codes as in prior years, NMFS has never explained—as the Commission has
`
`required all other OFAs to do52—what costs are captured in these codes, how it
`
`distinguishes FPA Part I administration costs from other program costs, and how it
`
`segregates municipal and non-municipal project costs. Moreover, Licensees expressed
`
`concern that NMFS’s cost report for FY 2011 once again clearly lacked quality assurance
`
`controls to ensure that costs are actually assigned to the correct code.53 Licensees also
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`objected to Commission staff’s decision to preliminarily accept NMFS’s untimely
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`certified and reported costs, which stripped them of the opportunity to review and analyze
`
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`48 Comments of Idaho Falls Group on Other Federal Agencies’ FY 2011 Cost Reports, Docket No.
`AD12-3-019 (filed May 4, 2012). Licensees’ comments are incorporated herein by reference.
`49 Licensees raised other questions and concerns in their comment letter, but the OFAs’ subsequent
`responses, as well as Commission staff’s final billing decisions, addressed these issues. Accordingly,
`Licensees do not object to the inclusion of these other costs in the Commission’s 2012 administrative
`annual charges bills.
`50 Comments of Idaho Falls Group on Other Federal Agencies’ FY 2011 Cost Reports at 10-11.
`Id. at 5-6.
`51
`See supra note 33. The Commission’s requirements regarding the OFAs’ cost accounting systems and
`52
`reporting requirements are discussed in Section II.A., above.
`53 Comments of Idaho Falls Group on Other Federal Agencies’ FY 2011 Cost Reports at 11-13.
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`these reported costs prior to the technical conference.54 With regard to FWS, Licensees
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`expressed concern that some of its reported costs may not have segregate municipal and
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`non-municipal project costs.55
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`In its response to Licensees’ comments and questions, NMFS stated that it uses
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`appropriate codes, but made no effort to reconcile these statements with the consistently
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`unreliable and error-prone cost reports it has submitted to the Commission for years. For
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`example, in direct contradiction of its own cost reports in the record—including its most
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`recent FY 2011 report—NMFS incorrectly stated that its various cost reports capture only
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`FPA Part I costs, and properly segregate costs between municipal and non-municipal
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`projects.56 In addition, in response to Licensees’ specific request that NMFS detail its
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`quality control standards and procedures for ensuring that incurred costs are assigned to
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`the proper code in its cost accounting system, NMFS only provided a generic statement
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`that reported costs are “validated” by the originator of the charge and a supervisor.
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`NMFS’s response again failed to acknowledge that its cost reports for FY 2011 and prior
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`years have been replete with errors, or even to claim that it has attempted to improve its
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`quality controls in response to Commission staff’s decisions over the years to annually
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`reject NMFS’s error-ridden cost reports.57
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`In its response comment, FWS confirmed Licensees’ concerns related to costs
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`included in one of its cost-accounting codes. FWS confirmed Licensees’ suspicion that,
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`55
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`inconsistent with FWS’s established process of assigning costs to its PUB, COM, and
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`Id. at 13-14.
`54
`Id. at 18.
`See Response to Questions of the Idaho Falls Group to the US Department of Commerce National
`56
`Marine Fisheries Service, Docket No. AD12-3-000 (filed July 27, 2012).
`57 Obviously, any such statement also would have been inaccurate and inconsistent with the record, as
`NMFS’s most recent cost report contains the same errors as in prior years.
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`MUN project codes in its accounting system to segregate municipal, non-municipal and
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`non-project specific costs, numerous costs recorded to the “E4” code were not segregated
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`according to municipal and non-municipal projects. Instead of assigning these costs to a
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`project-level code when incurred, FWS conducted an ad hoc “manual review,” after the
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`close of the year.58
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`Less than a week after Commission staff made these OFA responses available on
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`eLibrary, it issued 2012 administrative annual charges bills. Although the agencies’
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`responses confirmed and validated Licensees concerns, staff nonetheless included all of
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`these disputed and objectionable costs in the bills. Despite Licensees’ objections related
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`to the timeliness and integrity of NMFS’s cost report, Commission staff billed
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`hydropower licensees $1.91 million in costs reported by NMFS. Although Licensees’
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`comments and questions, supported by years of record evidence in this matter, shifted the
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`burden to NMFS to justify its costs, staff summarily found that “NMFS sufficiently
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`provided further explanation regarding the agency’s accounting codes and quality
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`assurance practices.”59 Staff did not address at all Licensees’ objections related to the
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`untimeliness of NMFS’s cost report. As to FWS, staff seemed to ignore Licensees’
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`concerns related to $443,000 in costs coded to E4 in the bills and finding—in
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`contradiction to FWS’s own response to Licensees’ questions—that “FWS sufficiently
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`explained the cost codes and its ability to exclusively capture FPA Part