On August 25, 2010, the Federal Energy Regulatory Commission ("FERC") and the State of Colorado signed a Memorandum of Understanding ("MOU") which could lead to simplified procedures and regulations for authorizing small-scale hydropower development in Colorado. Although traditional hydropower has not seen significant new development in recent years, interest in small, low-impact projects is on the rise across the country.

In Colorado, federal surveys have identified several hundred potential small-scale hydropower projects under five megawatts (5 MW), which could have a combined capacity of more than 1,400 MW. These new projects, if developed, could provide a needed boost for the state: on March 22, 2010, Colorado again increased its Renewable Energy Standard, requiring investor-owned utilities to procure 30% of their total retail sales from renewable resources by 2020.

Under the MOU, "Colorado proposes to implement a pilot program to identify and test opportunities to simplify and streamline procedures and regulations for authorizing small scale hydropower projects in an environmentally sound manner." The pilot process would require the State to prescreen projects to ensure that they qualify for either of the two exemptions from FERC's licensing provisions under Part I of the Federal Power Act: (1) the conduit exemption and (2) the 5 MW exemption. While only facilities being added to existing infrastructure will qualify for the pilot program, the benefits for those projects are marked. So long as Colorado state and federal resource agencies and any affected Indian tribe waive compliance with the consultation requirements of 18 CFR section 4.38(e) for a project prescreened by the State, FERC will waive the first and second stages of consultation in 18 CFR sections 4.38(b) and (c). The pilot program will continue until 20 projects have gone through the program.

While FERC's offer to waive consultation may be considered a symbolic gesture because it is conditioned on a "first move" by the State and other federal agencies, the MOU still represents an effort by the agency to develop innovative ways to streamline new, small-scale hydropower development in Colorado.

NOTE: Nothing in the MOU prevents a developer from proceeding through the traditional FERC licensing and exclusion process outside of the pilot program.