Catching Even Insiders ‘Off Guard’, PG&E Decides to Return the Potter Valley Project, Which Diverts Water From the Eel River, to Full Operational Status

Scott Dam which is part of the Potter Valley Project. [Photo cropped by one from PG&E]

PG&E, which owns and operates the project, announced in 2019 that it would not renew its license and was no longer trying to sell it. The coalition, which agreed to prioritize fish passage and water supply, was the only entity to express an interest in taking over the license. But on Monday, the group sent a letter to the Federal Energy Regulatory Commission (FERC), explaining that it will not file an application by the deadline in mid-April, when the current license expires.

The decision has been widely anticipated, since the coalition, consisting of Humboldt County, California Trout, the Round Valley Indian Tribes, the Mendocino County Inland Water and Power Commission, and Sonoma County Water Agency (known collectively as the Notice of Intent, or NOI parties), has been unable to gather the estimated $12-18 million needed to conduct the studies required by various regulatory agencies.

The project has been what PG&E spokesman Paul Moreno calls "non-economic" for years, which is why the company decided to bow out of the ongoing operational and maintenance costs. The water diverted from the Eel River is far more valuable to Russian River water users than the power generated by the project. But that flow, which can get as high as 270 cubic feet per second, has been severely curtailed since a transformer in the Potter Valley powerhouse went offline in July. PG&E estimated that repairing the transformer bank would cost between five and ten million dollars, and could take up to two years.

Then, in a surprising turn of events, on Wednesday, PG&E's director of strategic agreements told the NOI parties that PG&E had "concluded it is beneficial to PG&E's electric generation customers to proceed with the work necessary to return the powerhouse to full operational status." Moreno said in an interview that the company expects to be able to recoup the costs of the repair, which are still unknown, within five years, during which time the company plans to continue operating under annual licenses from FERC. PG&E is not currently under orders to decommission the project, which Moreno described as "kind of a relicensing process in reverse."

Van Arsdale Fisheries Station in Potter Valley, California. [Photo credit: John Heil/USFWS]

Congressman Jared Huffman, who formed an ad hoc committee devoted to developing recommendations for the future of the Potter Valley Project, said while the decision to repair the transformer "caught me off guard," he doesn't think it will have any bearing on what he sees as an inevitable decommissioning process. With no one else taking over the license, PG&E remains responsible for the costs associated with the project. Huffman suspects the company "did a cold-blooded business calculation" by assuming it would be cheaper to continue making power during "the X number of years it takes to decommission." He added that while he thinks the decision "is, in the short term, a sigh of relief for Russian River water interests," even a fully functioning project is not a long-term solution to water woes — and the diversion will be minimal in the two years or so it takes to custom-engineer the broken equipment and install it.

But Alicia Hamann, the Executive Director of Friends of the Eel River, is alert to the possibility that PG&E may seek to recover the costs of replacing the infrastructure "on the backs of ratepayers." She added that Friends of the Eel is urging FERC to fast-track the decommissioning process, saying "it's our last and best chance to protect wild salmon and steelhead in California. And removing the two dams at the headwaters is really the most important move we can make to protect the fisheries."

In a letter to FERC this week, Scott Greacen, the Friends of the Eel's Conservation Director, wrote that "Water supply is not an issue over which FERC has jurisdiction;" but, if the dams are seismically unsound, "an unsafe Potter Valley Project is an unreliable Russian River water supply." He went on to detail the peril of the Eel River fisheries, and lament the lack of publicly available information about dam safety.

Darren Mireau, the North Coast Director of California Trout, says PG&E "has been the black box of this whole thing…They acknowledge what we’re trying to do, but they haven't shed much light if any on what their plans are. They haven't been willing to provide funding for studies to try to help the regional partners determine what paths are the best way forward, so we really need to crack open that dialogue with PG&E and hear what they’re going to say. And I think they’re probably not going to do it until they’re made to say things by FERC." Pondering the year-to-year nature of the future licenses, Mireau added that "maybe conditions can be attached to annual licenses."

But Huffman thinks trying to leverage expensive mitigation requirements is "a wild card…even if they wanted to get out earlier, they can't," he said. "FERC will not let them out of this quickly or cheaply."

The future of the diversion

On Tuesday, Mendocino County First District Supervisor Glenn McGourty told his colleagues that the Mendocino County Inland Water and Power Commission is "still in pursuit of the water rights" associated with the Potter Valley Project. He asked the Board of Supervisors for $50,000 to fund ongoing legal expenses and consulting fees to continue the work. Mendocino County is one of five public entities that are members of the Mendocino County Inland Water and Power Commission. The board approved his request unanimously.

The NOI parties may have gotten an answer to the question of what it would take to continue diverting water without the project. In November, the California Department of Fish and Wildlife funded a study on the group's behalf, exploring three options for continuing diversions under scenarios with various parts of the project dismantled. Mireau, of California Trout, favors a water-pumping option that includes the removal of Cape Horn Dam, which forms the van Arsdale Reservoir in Potter Valley. Unlike Scott Dam, which forms Lake Pillsbury in Lake County, Cape Horn has a fish ladder and a CDFW-operated fish monitoring station. Scott Dam has long been on California Trout's list of dams that are "ripe for removal."

MIreau's favored scenario is estimated to cost around $200,000 a year to run. "Any water management, any water diversion at that location is going to have some operations and maintenance costs, that's unavoidable," he said, shortly after the study was released. "The advantage of the full removal of Cape Horn Dam with that pumped diversion approach is you get all of the obstruction out of the river that might impair fish passage…it does shift the cost, I think, to the water users, instead of the fish side, where it appropriately needs to be. In other words, we’re committed to that water supply reliability, but I think the water users have the obligation to pay for it. And if pumping is the best way to do that for fish passage and fishery recovery in the Eel River, I think that's the best approach."

Janet Pauli, of the Potter Valley Irrigation District and chair of the Mendocino County Inland Water and Power Commission, said that just this week, the Inland Water and Power Commission had started working with a consultant, Brian Godbey and Associates, to poll people who are dependent on project water about their willingness to pay for it, and what it would take to assess a parcel tax or get a special tax on a ballot. Thus far, she noted, all of the legal expenses for pursuing the relicensing have been borne by the five agencies that are members of the Commission. "Protecting the diversion has to be our primary concern," she insisted.

Hamann, of Friends of the Eel River, finds it entirely fitting that water users should pay for the commodity, if it can be diverted in an ecologically appropriate way. The habitat trapped behind Scott Dam is some of the best in the world, she asserts, including cold water refugia that exclude invasive pike minnow.

Recently, community members got an insight into how much science PG&E biologists conduct in the Eel River watershed, during a controversy over an attempt to cut down a tree containing a bald eagles’ nest. Audubon societies around the county know how long that nest has been there; where the alternate nest is and when it was last used; because the company has kept environmental records as part of its licensing agreement for the Potter Valley Project. Asked if anything will be lost to science if PG&E departs, Hamann said the controversy about the project has engendered plenty of ecological research, including the discovery of summer steelhead. "Indirectly, PG&E causing a problem resulted in some really cool knowledge."

Note: an earlier version of this story misspelled Scott Greacen's name. Our apologies for any confusion this may have caused.