Court affirms municipal preference in WMMPA hydro permitting case

A federal appeals court unanimously ruled that Western Minnesota Municipal Power Agency (Western Minnesota) is entitled to a statutory preference for a permit to develop a hydroelectric project. The U.S. Circuit Court of Appeals for the District of Columbia ruled that the Federal Energy Regulatory Commission (FERC) incorrectly disregarded municipal preference when it granted a preliminary permit for an Iowa hydroelectric project to a private company. The Court filed its order on Friday, November 20, 2015.

The case began in 2013 when Western Minnesota and a private developer simultaneously filed applications for a preliminary permit to study the feasibility of a hydro project in Polk County, Iowa. FERC found both applications to be “equally well adapted for development of the region’s water resources.” FERC then held a random drawing, granting the permit to the private developer. Western Minnesota objected to the drawing because the Federal Power Act requires FERC to give preference to the preliminary permit applications of municipalities over those of competitors if both applications are “equally well adapted.” Because of the importance of this case to public power, the American Public Power Association (APPA), and the Public Power Council (PPC) also intervened at this stage.

FERC rejected Western Minnesota’s claim to municipal preference on the basis that the preference applies only to municipalities that are located “in the vicinity” of the proposed hydropower project. FERC said that since Western Minnesota’s headquarters is almost 400 miles from the proposed project, it is located too far from the project site to be entitled to municipal preference. FERC granted APPA and PPC the right to intervene in the case, but then denied the requests of Western Minnesota, APPA, and PPC for rehearing.  

Western Minnesota, APPA and PPC jointly sought judicial review. Several other public power organizations provided financial support for this litigation, including the Minnesota Municipal Utilities Association, AMP, Snohomish County PUD, and Douglas County PUD.  

After hearing oral arguments in October, the Court held that the Federal Power Act plainly creates a municipal preference and the statute places no geographic limit on that municipal preference. Section 7(a) clearly requires FERC to give preference to States and municipalities, subject to the “equally well adapted” requirement, and FERC’s holding that the section provides no guidance with regard to the scope of the preference was a “manufactured ambiguity” put forth to support FERC’s own policy decision that the public interest was not served by applying the preference to a municipality located distant from the site. The Court also said FERC could not claim that Congress—which said nothing about geographic location in the municipal preference statute – had intended to delegate to FERC authority regarding proximity to “pick and choose favored municipalities to advance the Commission’s policy.”  

The Court vacated both FERC’s Permit Order and its Rehearing Order. FERC has 45 days to seek rehearing, and 90 days to seek Supreme Court review. 

“Western Minnesota is very pleased with the Court’s decision,” said Tom Heller, CEO of Missouri River Energy Services (MRES). “The ruling is an affirmation of the municipal preference principal that is so important to public power entities.” 

Western Minnesota Municipal Power Agency provides financing for power supply and transmission projects operated by Missouri River Energy Services, a joint-action agency that provides power supply and energy services to 60 municipal utilities in Iowa, Minnesota, North Dakota and South Dakota. Western Minnesota is currently constructing an unrelated hydroelectric power project at the Red Rock Dam near Pella, Iowa.