Wednesday, October 27, 2021
President Marybel Batjer
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102
via electronic mail as feasible
RE: Potter Valley Project Equipment Failure
Dear President Batjer,
This letter is meant to apprise you of important developments regarding PG&E’s Potter Valley Project (Project). The Project is a hydroelectric complex consisting of two dams on the upper mainstem Eel River and diversion works that transfer Eel River water to a powerplant in Potter Valley at the headwaters of the East Branch Russian River. PG&E operates the Project under a license from the Federal Energy Regulatory Commission (FERC).
The main transformer bank at the Potter Valley Powerhouse has failed. PG&E’s current estimate is that it would take 18-24 months to replace the equipment, at a cost of $5-10 million. But the whole facility will soon inevitably cease to operate. PG&E will begin FERC-mandated proceedings to surrender the Project license no later than next April. PG&E’s ratepayers cannot fairly be asked to bear the cost of replacing equipment that would only be torn out within years of its installation.
PG&E’s license to operate the Project expires April 14, 2022. PG&E began the process of relicensing the Project in 2017, but withdrew its Notice of Intent to relicense in early 2019. PG&E’s withdrawal means it cannot relicense the Project. FERC then offered the Project to any potential operators who might complete the relicensing process PG&E had begun.
The only response came from the five parties1 of the Two Basin Partnership (Partners). The Partners’ plan, as outlined in Rep. Huffman’s letter to the CPUC of Nov. 19, 2020, was for PG&E to finance the Partners’ relicensing costs. However, PG&E declined to fund the Partners’ relicensing effort. Without funding, the Partners have failed to complete required Study Plans and otherwise failed to make progress toward relicensing. They now face a final deadline to submit a draft license application by the expiration of PG&E’s license, which they cannot meet.
Upon withdrawal of the Partners’ Notice of Intent to relicense the Project, FERC will require PG&E to begin the process of surrendering its license to operate the Project. Surrender is an irrevocable process: under no circumstances will the Project be operated as a hydroelectric project again. As part of those proceedings, FERC will determine how PG&E must decommission, and to what extent the utility must remove, Project facilities, especially the two Eel River dams.
The Potter Valley Project had ceased decades ago to be an economically useful source of electricity. PG&E has explained that its costs to operate the Project range from $5-10 million annually, exceeding its revenues from electric power sales by a factor of more than 20:1. Despite the fact that the amount of electrical power the Project ever generated at its peak was quite small (9.2 MW faceplate rating), and that any future outputs must be even further reduced, that power came, and still comes, at very significant cost to the fisheries of the Eel River.
It is now clear that PG&E and FERC understand that the Eel River dams cause continuing significant harms to critically imperiled Chinook salmon and steelhead, both listed as Threatened under the federal Endangered Species Act. Removal of both Scott and Cape Horn dams is necessary and urgent. We have every reason to expect PG&E to propose full removal of the Eel River dams.
Because the Project jeopardizes the survival and recovery of ESA-listed Eel River fisheries, any operations during the surrender process will have to be conducted under an Annual License more protective of Eel River salmonids than current rules. Providing the spring and fall flows and cold water temperatures required by Eel River fisheries will further reduce diversions to the Russian River and the Project’s potential power production.
Thus, to the extent PG&E’s ratepayers would receive any electrons from a new transformer bank at the Project powerhouse, they would be few, at prices far in excess of competing sources, and only for a brief window of time. It would not seem appropriate for PG&E’s ratepayers to be made to bear an increased cost to install equipment to produce power at a loss.
Thank you for your attention to these important matters.
Commissioner Martha Guzman Aceves
Commissioner Clifford Rechtschaffen
Commissioner Genevieve Shiroma
Commissioner Darcie L. Houck
Public Advocates Office, Amy Yip-Kikugawa, Acting Director
Public Advisor’s Office
Congressman Jared Huffman
1The five parties consist of the Mendocino County Inland Water and Power Commission, Sonoma Water, California Trout, Humboldt County, and the Round Valley Indian Tribes.