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Unclear surrender process likely for Potter Valley Project

November 4, 2021 —  Time is running out for a regional entity to take over the license for the Potter Valley Project. The Two-Basin Partnership, a coalition of local government and conservation groups seeking to take over the license from PG&E, is unlikely to meet the deadline to submit its application. And funding sources for a costly study plan have not materialized. FERC (the Federal Energy Regulatory Commission) recently refused the Partnership’s request for a little more time. 

On top of all that, a five or ten million dollar transformer at the powerhouse in Potter Valley is now defunct, causing further uncertainty. The inoperable transformer means that the powerhouse can no longer produce electricity, though a diversion of about 135 cubic feet per second is still possible, using a bypass structure. 

In a recent letter to the Farm Bureau, Congressman Jared Huffman wrote that “With FERC denying the extension and with no near-term prospects for funding the $18 million study plan, the prospects for securing a FERC license are not good.”

Huffman wrote that without money for the studies, “FERC would terminate the license application process and the Potter Valley Project will default to surrender and decommissioning.” He added that in that scenario, “PG&E, rather than the Partnership, would have to pay for the necessary studies and infrastructure changes, including removing Scott Dam.”

But Janet Pauli, the chair of the Inland Water and Power Commission and a director on the board of the Potter Valley Irrigation District, says the surrender process is a black box. The IWPC is itself a coalition that is part of the Two-Basin Partnership.

“The licensing process is pretty cut and dried,” she said. “But with surrender, you assume that the power production part of the project would no longer exist. But as far as what remains of that existing infrastructure, at this point in time, we really don’t know.” 

Redgie Collins is the legal and policy director for California Trout, a conservation group which is also a member of the Partnership. CalTrout has advocated for the removal of Scott Dam for  years. Collins suspects that PG&E will choose not to repair the transformer. Opinions differ on whether the project would continue to come under the purview of FERC if it can’t generate electricity. But Collins thinks the water diversion from the Eel to the Russian River could continue without the power.``The reality is that in all likelihood we’re moving to a surrender proceeding, which means that the powerhouse is coming out anyway,” he said. “We think that the water rights that PG&E holds right now are sufficient to continue the diversion regardless of power production...and those water rights, we think, will be adequate to move that water over without power generation.”

Pauli emphasized that there are still a lot of unknowns. “We don’t understand how any of the diversion structures that exist or are potentially going to be changed would function if Scott Dam is removed, and then the sediments behind Scott Dam would be released into the Eel River. It’s a tremendous amount of sediment that would have to make its way down the Eel River over time and certainly would impact our ability to divert water from the Eel into the Russian. And we have to look at which option is the best for fish passage, too. And I don’t think that that is clear yet. But the issue of diverting water through the project is not just the amount of water. Partly it’s when the water is diverted and when it’s available and how much we would be allowed to divert under certain hydrologic conditions and also with regards to the life cycles of migrating fish.”

Collins says that CalTrout has worked with the California Department of Fish and Wildlife to engineer three possibilities for a diversion without the powerhouse, which he expects will be publicly available next month. Any plan will take successful negotiations at multiple levels. Rough estimates for the costs of the potential diversion structure range from $35-66 million, he said, depending at least in part on the outcome of settlement negotiations he hopes will take place between the Partnership and PG&E. Collins is optimistic that federal funding from federal infrastructure negotiations will be available to help ensure the Partnership’s two goals of water supply for the Russian River end of the diversion, and fish passage and habitat restoration for the Eel. “We’re hoping to tap into that growing zeitgeist, and actually fund this project through that work,” he said.

But using public money does not quite fulfill Huffman’s assurance that PG&E would pay for infrastructure changes. And there’s no guarantee that the company wouldn’t pass the costs along to ratepayers. “PG&E deserves to pay for every cent of this solution,” Collins agreed.``They’ve been obstinate...so they’re going to have to pay for the $15-18 million that ratepayers could have avoided through an earlier payment to the Partnership. And frankly, their bad operation of this dam as well as other dams across the state has led them to a position where they’re going to rely on both their rate base and public and federal funding. I’ll be the first to say that PG&E is not a well-run company in this regard, and we’re extremely disappointed in their lack of leadership in this.”


Audio version of "Unclear surrender process likely for Potter Valley Project"


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