Wednesday, July 30, 2014

Candidates view Proj. 184 differently

From page A1 | October 25, 2013 |

What to do or not do with Project 184 has been one of the hot button issues discussed by candidates running for a spot on the El Dorado Irrigation District Board of Directors.

Purchased from PG&E in 1999 for $1, Project 184 came with 15,080 acre feet of water rights; a 21-megawatt hydroelectric powerhouse; five reservoirs (Echo Lake, Lake Aloha, Caples Lake, Silver Lake and El Dorado Forebay); several dams; and 22.3 miles of flumes, canals, siphons, and tunnels located in the high Sierra.

EID also obtained water rights for an additional 17,000 acre-feet of water.

As part of the deal, PG&E gave EID $15 million toward repairs. An additional $18.8 million came from FEMA (the Federal Emergency Management Agency) after a devastating flood damaged the facilities.

Since acquiring the project, EID has spent approximately $100 million refurbishing it, less the amounts received from PG&E and FEMA. Many of the repairs are mandated by its FERC (Federal Energy Regulatory Commission) license.

According to EID staff, it costs the district approximately $3 million a year to run the entire Project 184 system. Power sold to PG&E brings in between $6.75 and $11.5 million with revenues averaging $8 million a year.

EID currently has a 10-year contract with PG&E to sell it power. That contract expires in 2020.

During forums and in interviews, the project has drawn accolades as well as aspersions from those running for the EID board, with the difference often being that of whether it’s seen as a glass half empty or half full.

A glass half full

Seeing it as half full is EID candidate Dr. Dale Coco who vigorously defends Project 184 as an example of the district acquiring and securing valuable water rights.

“The State Water Resources Control Board is trying to take away individual district’s water rights and control all of them,” said Coco.

One-quarter of EID’s water rights came with the project, he said. “Those are pre-1914 rights. The Water Resources Control Board just issued a letter last month saying that through FERC, they could override those rights. We are facing attempts to take away our water rights. By buying the hydroelectric portion of the project, we got the water rights with it plus PG&E gave EID $17 million to refurbish it (which the PUC reduced to $15 million).”

Criticizing Greg Prada and Jake Flesher for their views on Project 184, Coco alleged that at the first candidate’s forum, Flesher talked about Project 184 as a waste of money with Prada saying the same. “At the second forum, both were videotaped attacking it, saying it was a waste of money and should be shut down. That’s a ridiculous statement. It’s the second highest source of revenue for the district. Project 184 is critical. We can’t risk losing our water rights or the revenue. It pays for water extraction and for power.”

Coco said some mistakes were made in the past, but he believes that using a total quality management or value engineering process to retool the project, EID could be energy self-sufficient in 10 years. “The second highest cost of operation for EID is PG&E after salaries,” said Coco, “With in-line hydro and an efficiently run Project 184, we could be energy self-sufficient. It generates annually $8 million to $11 million in income and supplies about 25 percent of EID’s total budget. It would be costly to shut it down.”

Making Project 184 more efficient would also enable EID to pay off its debt, especially the $80 million of debt spent to improve its infrastructure, said Coco. “I don’t want to walk away from it. Some mistakes were made in the past, but we need to innovate our way out of the mistakes.”

Another of those strongly favoring Project 184 is Richard Englefield. He noted that when it was originally up for bid, one of those bidding on it was the Enron Corp. “If we hadn’t bid on it, we would have lost two major water rights amounting to 32,080 acre feet of water. And those are pre-1914 water rights. They are worth $800 to $1,000 an acre-foot in today’s dollars.”

The board knew when they bought it that it would cost a lot of money to bring it up to snuff, said Englefield. It has to be built out to 50 years of use with most of the expenditures attached to it being mandates.

“It was a good deal but it’s costly to maintain. Water rights are invaluable. The power house generates $8 million to $10 million a year and raising Forebay Dam will give us additional water and power. What it would cost to go after those water rights today would be phenomenal. Some of the money from connection charges (FCC’s) is used for pay for the project. We’ve got it and let’s work with it. We’d be in a world of hurt if we didn’t have it,” Englefield said.

A glass half empty

Those who are more on the glass is half empty side are board candidates Greg Prada and Jake Flesher.

Prada believes Project 184 is a terrific asset, but said the only reason PG&E sold it was because they couldn’t make money off it. Asserting it costs $10 million a year to operate, Prada believes that cost should be split between ratepayers who benefit from the water and the customers of PG&E who benefit from its electrical generation.

“Ratepayers have paid $25 million in subsidies that should have been paid by hydroelectric customers,” claims Prada. “Either PG&E customers should pay more for their electricity or perhaps the district should partner with another entity that receives part of the power in return for helping to pay the cost of operating it.”

Prada is also critical of what it costs to repair and maintain the facilities, saying that 45 percent of next year’s capital improvement budget for EID goes to Project 184, FERC or hydroelectric-related projects.

Like Prada, Jake Flesher believes Project 184 is valuable, but somewhat controversial because of its history and cost. The water rights were critical, said Flesher. “They are a valuable asset and we need to protect and use them. But we need to look at all our options for those parts that are losing money.

“The hydroelectric part is not covering its cost,” he continued. “We need to put it on the table. It’s not a viable option to sell it, but I want to talk to the engineers about why the project is losing money and why we need to spend more on the infrastructure. I want to look at available options, but I’m not a proponent of selling it. When we purchased it we thought it was a terrific opportunity with the hydroelectric and water rights. But we didn’t know it would be as expensive as it turned out to be.”

Asked to comment on the subject, EID staff said the water rights and the hydro plant were a package deal and the district couldn’t take one without the other. It could decommission the power project and operate the facilities as a water-only project, they said, but it would require FERC approval, would take years, and cost millions to remove the facilities and restore the project sites.

“After that was done, the price of water would skyrocket, because the costs of operating the powerhouse are a small fraction of the overall costs of operating the project facilities. In other words, in this scenario EID would spend millions of dollars just to be able to deprive itself of millions per year of power revenues, but EID customers would still have to bear all of the costs of the project facilities from the reservoirs on down to Forebay, just to deliver drinking water,” said Mary Lynn Carlton, EID director of communications.

Contact Dawn Hodson at 530-344-5071 or Follow @DHodsonMtDemo on Twitter.





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