PG&E Begins Auction of the Potter Valley Project Which Diverts Some Water From the Main Stem of the Eel River
Pacific Gas and Electric Company (PG&E) today began the auction process for soliciting proposals from parties interested in purchasing its Potter Valley Project, a hydroelectric facility in Mendocino and Lake counties.
The Potter Valley Project consists of two dams along the upper Main Stem Eel River, a powerhouse in Potter Valley, and about 5,600 acres of land, including Lake Pillsbury in Lake County.
PG&E is in the second year of the minimum five-year process of obtaining a new operating license from the Federal Energy Regulatory Commission (FERC) for the project. PG&E will continue to own, operate and relicense the project throughout the auction process.
The new owner will take over the relicensing process after the project sale and transfer is complete. The current FERC license expires in 2022, but Potter Valley Project will continue to operate on annual licenses if the relicensing process goes beyond the current license expiration date.
PG&E announced it would auction the project last May, and today’s action begins the marketing phase of the auction process. PG&E is using a “request for offers” type of auction process that is intended to meet the needs of both seller and buyer – and considers other factors in addition to price.
“PG&E wants to find a new owner with the appropriate qualifications and experience to operate the project in a safe and compliant fashion. The project has unique characteristics and we believe they have the potential to yield significant value for the right owner,” said Alvin Thoma, Senior Director of Power Generation at PG&E.
The project diverts about one-fifth of the average annual flow of the upper Main Stem Eel River at Van Arsdale Reservoir through a tunnel and penstock to a powerhouse located in Potter Valley where it is used to generate electricity. The amount of water diverted by the project represents only 2 percent of the total flow of the Eel River at its mouth. Before it is diverted, some of the water is collected during the wet season and stored in Lake Pillsbury for later release – also providing lake-based recreation opportunities.
After the diverted water leaves the Potter Valley Powerhouse, it enters a canal and the East Branch of the Russian River, where it provides water to farms and communities in southern Mendocino and northern Sonoma counties as well as improving fish habitat in the Russian River. Per the conditions of the project’s operating license, water flows in the upper Main Stem Eel River below the Van Arsdale Reservoir are managed to closely mimic the upper Main Stem Eel River’s natural flow.
PG&E is seeking a new owner for the project as it no longer serves as an economical source of electricity generation for its customers. Potter Valley Project is far from PG&E’s other hydroelectric facilities and regional headquarters, making it especially costly for PG&E to operate. An increasingly competitive energy market, lower generation needs forecasted on PG&E’s system, and the increasing cost of operating the facilities were all factors in PG&E’s decision.
Depending on how many proposals are received and need to be evaluated, PG&E expects to select proposals and begin formal negotiations with a buyer by mid-2019. If all goes well, the sale and transfer of the project could be completed within one-and-a-half to two years.
Approval by FERC and the California Public Utilities Commission (CPUC) will be needed prior to transfer of ownership.