California PUC to consider okay for sale of Pacific Gas and Electric hydro facility

On the agenda for the Oct. 27 meeting of the California Public Utilities Commission is the question of whether to approve Pacific Gas and Electric‘s April 2015 application to sell the Merced Falls Hydroelectric Project to the Merced Irrigation District.

This hydro plant will remain in operation after the sale and will not be replaced by natural gas generation, the agenda for the Oct. 27 meeting noted. This asset will be sold at a loss to Pacific Gas and Electric’s ratepayers of $5,492,656. A settlement between the parties reduces the loss on sale by $1,000,000 compared to the terms of the original application.

The Merced Falls facility is located on the Merced River on the border of Merced and Mariposa counties, California. It generally consists of a 3.5-MW hydroelectric powerhouse presently generating approximately 14.4 gigawatt hours (GWh) per year, a 575-foot long by 34-foot high concrete gravity dam containing three radial gates, a 65- acre reservoir with approximately 900 acre-feet of storage, related equipment, approximately 20.5 acres of land, Federal Energy Regulatory Commission license, easements, and water rights. It is operated as a base-load run-of-the-river facility. The existing generating unit was installed in 1930, and the project has been providing electric service for the last 85 years.

The Merced Irrigation District (MID) provides irrigation water for agricultural purposes and local flood control. Additionally, MID is a local publicly-owned utility providing non-exclusive electric service to retail customers in eastern Merced County. The Merced Falls facility is immediately downstream from MID’s Merced River Hydroelectric Project, and is approximately three river miles upstream from MID’s Crocker-Huffman Diversion Dam. While PG&E owns the Merced Falls facility, MID operates it on behalf and at the direction of PG&E.

There are a couple of key reasons why PG&E said it pursued a sale of the project to MID. First, there are logistical challenges associated with owning and operating the project. It is geographically isolated from PG&E’s other hydroelectric operations, and PG&E currently has no full-time hydro operations personnel stationed at or near the project. Additionally, based on current operating costs and expected new license conditions, compared to the value of the generation from the project, it is not cost-effective for PG&E’s customers if PG&E continues to own and operate it.

From MID’s perspective, purchase of the project makes sense. It already operates the project and also owns a hydroelectric plant immediately upstream and a dam three miles downstream from it. Also, MID owns an irrigation canal that diverts water directly from the project impoundment. The sale will provide MID with integrated control of several facilities located along the Merced River, as well as the opportunity to utilize project generation at a valuation that may exceed PG&E’s valuation.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.