A Deeper Look at PG&E’s Auctioning of the Potter Valley Project
PG&E has now announced it is accepting proposals from entities interested in assuming responsibility for the Potter Valley Project. The PVP produces 9mw of hydropower and transfers tens of thousands of acre-feet of water to the Russian River from the Eel River. PG&E’s plans to divest itself of the small power generation station have Russian River water suppliers flummoxed because they have come to rely on the diversion.
Back on the 22nd of August, PG&E’s plan-to-sell dominated the most recent Eel-Russian River Commission meeting in Upper Lake, Ca. With the aroma of recently extinguished fire hanging in the air, the meeting began with an update from the CDF Chief overseeing the Mendocino Complex, moved through reports on the ongoing FERC relicensing procedure, to PG&E’s progress toward auctioning the project, and then the heart of the Eel Russian River Commission meeting really began pounding at the end of the meeting when Commissioner Carre Brown of Mendocino County laid down the gauntlet most of the rest of the room, especially Commissioner Estelle Fennell, had, until then, been unaware of: the Mendocino County Board of Supervisors resolution 18-131 Regarding the Future of the Potter Valley Project which supports the acquisition of the Potter Valley Project by the Mendocino County Inland Power and Water Commission.
Mendocino Resolution 18-131
The ‘Whereas’ sections of Mendocino County’s resolution focus on the water rights beginning in 1905 for the purpose of energy production and “irrigating Potter Valley and places downstream within the Russian River Watershed” and the resulting wealth created, estimated at $775 million, and population supported, estimated at a half million people, by the water transfer caused by the Potter Valley Project.
The resolution also notes the 50% reduction in the water transfer from the Eel River to the Russian River caused by the 2004 FERC (Federal Energy Regulatory Commission) adoption of the 2002 National Marine Fisheries Service (NMFS) Reasonable and Prudent Alternative (RPA) to its Biological Opinion to protect the endangered species being affected by the dam and the water transfer.
And it notes the degraded condition of the Eel River from the economic activities in its watershed including logging, roads, commercial fishing and “illegal diversions;” while pointing out the benefit of Lake Pillsbury to release water in low flow conditions to help offset these degradations when needed.
The Mendocino County Board of Supervisors, therefore, resolved that it prefers to maintain the reservoir and the water transfer for the health of both rivers and that it supports the Mendocino County Inland Water and Power Commission’s (IWPC) proposal to acquire the Potter Valley Project from PG&E. On its website, the IWPC website describes itself as “a Joint Powers Authority representing the County of Mendocino, City of Ukiah, Redwood Valley County Water District, Potter Valley Irrigation District and the Mendocino County Russian River Flood Control and Water Conservation Improvement District.”
Mendocino County Inland Water and Power Commission
PGE almost sold off the project during its Chapter 11 Bankruptcy back in 2001. In anticipation of that possibility, according to Commissioner Carre Brown at the August Commission meeting, the IWPC was formed for the purpose of acquiring and maintaining the Potter Valley Project. Brown said, “This is an entity that was set up, and has continued ever since, and is in the position to do this.”
David Moller, PG&E’s Director of Power Generation noted in his report during the Commission meeting, that he had met with IWPC the preceding Friday and said only, “We talked about their interest, but no agreements were reached. [PG&E] intends to proceed with auction as planned.”
Moller also mentioned the auction is receiving a lot of attention, and that, “It’s a seller’s market.” Moller said, “We’ve had many expressions of interest in this project including all of the sectors we thought might have an interest in it.” Moller listed these as “power supply interests, water interests, tribal interests and possibly also conservation interests.”
Commissioner Steele of Lake County speculated the power interests likely seek hydropower because it can be generated at night and in the winter when solar is offline. Moller neither confirmed nor countered Steele.
Mendocino seeks the diversion
Back on the topic of Mendocino County’s resolution to support the IWPC effort to acquire the Potter Valley Project, Brown said,
We are moving forward with the auction process…. We did meet with PG&E to discuss their letter, and the processes they described. Basically the Inland Water and Power Commission and its member agencies are moving forward.
When asked why the IWPC would not be seeking the transfer option offered by PG&E to government entities instead of the auction process, Brown said
We have had no discussion, there is not much time. PG&E is moving forward with the auction process. I believe Mr. Moller stated that they are going forward as of September [4th.]
And when asked for clarification that the IWPC was opting for the auction process ‘because it provides a little more time for the IWPC to act,” Brown answered crisply, “I didn’t say that. I said that is the process we will be going into.”
Who Gets the Short End of the Stick?
A man who lives in Mendocino County, but in the Eel River watershed said he feels the Eel River “has gotten the short end of the stick for a very long time.”
He went on to say that he thinks,
In a truly just world, not only would the diversions be stopped, but people on the Russian River side would be paying reparations to the people on the Eel River side on all the profits they’ve been making.
The County of Mendocino depends very much on the diversion. It’s one that started occurring, the conception of it, back in 1905. Back then it was Eel River Irrigation and Power. It was conceived back then, with the first dam, that water would go through to create electricity….but those original owners of that company were also looking at irrigation. And the original water rights filed also include irrigation water for Potter Valley and beyond. That is what was applied for, through the state, in 1905.
PG&E began its national marketing campaign requesting offers this past week. Interested parties must sign a non-disclosure agreement and then submit what Moller called “an indicative proposal.” The indicative proposal spells out how the interested party will be able to meet the requirements of FERC and all environmental regulations. Moller said that in the auction the bid price is not the most important factor and that there is no minimum bid requirement.
As the auction process goes forward, the re-licensing process also continues. Moller said there is no easy way for PG&E or anyone else to simply shut down the PVP. All options require detailed environmental analysis.
At this time, the precise study questions for the continuation of the PVP are being released for public comment. One of the most closely watched elements is fish passage to the spawning grounds above Scott Dam. Designing and installing a fish ladder that actually works sufficiently seems nearly as daunting as removing the dam and finding a reliable source of water for the Russian River.
The auction should have an identified buyer within about a year and that buyer will “step into PG&E’s shoes” in the re-licensing process, according to Moller. He also said that Licenses almost never finish on time and that projects often operate on annual license extensions for up to 20 years.
While Scott Dam is deemed “high hazard” due to the likelihood that people may die if it fails, Moller said the dam shows no sign of damage or other safety concerns. Moller also said that the Bartlett Springs fault that runs under the upper end of Lake Pillsbury is unlikely to shake hard enough to cause the dam to fail.