SMUD board advances purchase of PG&E hydroelectric project

The Board of Directors for the Sacramento Municipal Utility District on Aug. 15 voted to approve a resolution signaling intent by SMUD to purchase a Pacific Gas & Electric hydroelectric powerhouse and reservoir on the South Fork of the American River.

The resolution authorizes SMUD’s CEO and general manager to execute an agreement for the purchase of PG&E’s Chili Bar Project, including the powerhouse and reservoir, for up to $10.4 million.

Under this approval, PG&E and SMUD will work to finalize the transaction agreements and seek formal approvals from the Federal Energy Regulatory Commission and the California Public Utilities Commission.

The Chili Bar facilities are north of Placerville and began operating in 1965. The powerhouse has a generating capacity of seven megawatts.

The Chili Bar hydropower operations are already tightly coordinated with SMUD’s Upper American River Project, which is immediately upstream of Chili Bar Reservoir. The UARP is SMUD’s “Stairway of Power” that currently features 11 dams and eight powerhouses. PG&E and SMUD have a long history of partnership and collaboration between the two projects, a news release from PG&E and SMUD noted.

“Over the past few years, with power values declining and demand on PG&E’s grid for generation decreasing, PG&E has been strategically removing certain small hydroelectric projects from its generation portfolio, including ones that are geographically remote,” the utilities noted in their joint announcement.

In some cases, the utility has transferred such projects to regional entities for a better fit. The Chili Bar Project provides marginal economic electric generation benefits for PG&E customers and is PG&E’s only hydro project in the American River watershed.

PG&E has sold smaller hydroelectric facilities such as its Merced Falls Project to the Merced Irrigation District and the Narrows Project to the Yuba County Water Agency, with the latter acquisition effort expected to close this year.

Last year, PG&E also reached a sale agreement for its Deer Creek powerhouse and part of a canal to the Nevada Irrigation District. That sale is awaiting CPUC and FERC approval before it becomes final.

The UARP is a major power producer for SMUD. In a normal water year, the UARP can provide about 20 percent of SMUD customers’ power needs, which is especially valuable in hot summer months.

The proposed purchase would increase SMUD’s hydroelectric generation portfolio to 695 MW and add to SMUD’s renewable portfolio standard numbers as Chili Bar’s generating capacity is under the state’s 30 MW maximum capacity, qualifying it as renewable.

It would also help SMUD realize its carbon reduction goals. The UARP generation resource is a significant factor in why more than 50 percent of SMUD’s power supply is non-carbon-emitting, the joint announcement pointed out.

While it is not known when the sale of Chili Bar will be final and ownership formally transferred, both parties expect the sale to close in 2020.