PG&E will relinquish control of Potter Valley Project

PG&E will relinquish control of Potter Valley Project

The utility company will relinquish control of the hydro-electrical plant, dam and tunnel which divert water from the Eel River into the Russian River. The company says they will allow a local agency to take it over, or let it go to auction.


MENDOCINO Co., 5/10/18 — Pacific Gas and Electric (PG&E) will relinquish control of the Potter Valley Hydro-electric Project, which diverts water from the Eel River to the Russian River, sending it to Potter Valley, southern Mendo, and Sonoma County, where it is used for agricultural and urban purposes. The decision was announced today in a letter to the Eel-Russian River Commission, and could signal a major shift in water and energy policy on the North Coast. The Project will be put up for auction, though it is possible that a local agency could instead assume control.

The project was constructed over 110 years ago to provide electricity to the area, but over time has become far more important as a source of water for points south of the Eel watershed. The amount of electricity that the project produces is small by modern standards, a reason cited in PG&E’s letter for abandoning the infrastructure.

The decision was announced in a letter to the Eel-Russian River Commission, which is a commission composed of two supervisors each from Sonoma, Mendocino, and Humboldt counties, and one from Lake County, tasked with overseeing water issues between the two river basins. Supervisors Carre Brown and John McCowen currently serve on the commission for Mendocino County — they last met to discuss this issue in Feb. in Eureka.

In the letter PG&E gives two options for what will be done with the project: either the infrastructure will be put up for auction in “the fall,” or PG&E will entertain the idea of “transferring it to a local or regional entity as an alternative to the auction.” The transfer is complicated by the fact that due to its official purpose as a hydro-electric plant, the Project is governed by the Federal Energy Regulatory Commission. What the ballpark price might be for a vital piece of water infrastructure is not indicated in the letter, but we plan to follow up and get some idea.

The project itself consists of a dam and hydro-electric plant, along with a tunnel 8 feet wide and about one mile long, running through the mountain from the Eel River north of Potter Valley, into Potter Valley, where it releases into a series of irrigation of channels and the headwaters of the Russian. That water then flows into Lake Mendocino.

Here is the full letter sent by PG&E to the Eel-Russian River Commission:

Dear Eel-Russian River Commissioners:

During my February 23, 2018 presentation to the Eel-Russian River Commission, I informed you that Pacific Gas and Electric Company (PG&E) was evaluating several options for the Potter Valley Hydroelectric Project. I’m writing to let you know that after very careful consideration, PG&E has decided to put the project up for auction this fall.

This decision to begin the auction process ultimately reflects that continuing to operate the facility is not in the long-term best interests of PG&E’s electric customers. However, PG&E fully realizes that the project has key environmental attributes and provides important regional benefits including recreation opportunities and a significant contribution to the Russian River water supply.

With this in mind, as we prepare for the auction PG&E is open to exploring with local, county and/or state governmental entities that have an interest in the continued operation of the project the possibility of transferring it to a local or regional entity as an alternative to the auction. PG&E will assess the progress of such transfer negotiations as they proceed, and based on meaningful progress, will either continue direct negotiations or proceed with the auction.

Participation in the auction will be open to any qualified entity. Qualifications will include being able to meet the Federal Energy Regulatory Commission’s (FERC) requirements for a hydroelectric project licensee. We anticipate interest in acquiring the project by electric power interests, water supply interests, potential combinations of these two groups and possibly by others. Transfer of the project will require approval of both the FERC and the California Public Utilities Commission. The entire process could take one-and-a-half to two years to complete.

PG&E plans to continue the ongoing FERC relicensing proceeding throughout the auction process with the expectation that the new project owner will “step into PG&E’s shoes” relative to the relicensing once regulatory approval of project transfer has been obtained.

Due to its relatively small electric generation capacity, divesting the Potter Valley Project will not impact PG&E’s delivery of safe, clean, affordable and reliable electricity to our customers. The divesture[sic] is expected to have a negligible impact on PG&E’s overall portfolio of renewable power.

Throughout the divestiture process, PG&E will continue to operate the Potter Valley Project as a hydroelectric facility in full compliance with our FERC license and all applicable environmental laws and regulations.

Best regards,

David Moller Director, Power Generation

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