Loading...
HomeMy WebLinkAboutItem 4.1 Relicense Hydroelectric Plants (2) • 1an- CITY OF DUBLIN AGENDA STATEMENT Meeting Date: June 14, 1982 SUBJECT: Presentation by Terry Scott, representing PG&E Co. , requesting support for relicensing of hydroelectric power plants. EXHIBITS ATTAHCED: Letter from Terry Scott dated April 20, 1982, background information, sample resolutions RECOMMENDATION: Consider FINANCIAL STATEMENT: DESCRIPTION: Mr. Terry Scott representing PG&E Co. has requested that the City Council consider adopting a resolution in support of PG&E's efforts to re- license their existing hydroelectric plants on the Feather and Mokelumne Rivers. PG&E has indicated that several municipalities are seeking a license to operate PG&E's hydroelectric plants. If these cities are successful , PG&E has indicated that it would have to use higher priced sources of energy, which could result in higher rates for its customers. Mr. Scott will be in attendance at the meeting to make a presentation to the City Council . Copies To: Terry Scott, PG&E Co. ITEM NO. / / 62 53 r PACIFIC GAS AND ELECTRIC COMPANY • t . • April 20, 1982 The Honorable Peter Snyder Mayor of the City of Dublin P. 0. Box 2340 Dublin, CA 94566 Dear Mayor Snyder and City Council Members: I am writing regarding two PGandE hydroelectric projects--the Rock Creek Crests project on the Feather River and the Mokelumne River project. Both projects consist of multiple hydroelectric power plants. The projects' licenses are now up for renewal and we are requesting your support to help us relicense them. Enclosed is additional information which gives a more in-depth argument in favor of our relicensing. Also enclosed are some sample resolutions. In view of the escalating rates, it is imperative that we generate the cheapest form of electricity possible, hydroelectric power. This low cost generation is passed on to PGandE customers in the form of lower rates. For instance, the last two rate decreases since the general rate increase in January of this year have been due to good hydroelectric • conditions. If we cannot generate electricity from hydro plants, we will have to use alternate higher priced sources of energy, i.e. , natural gas or oil. The higher cost of these fuels will be passed on to customers through higher rates. Several municipalities are also seeking the license to operate these PGandE hydroelectric plants. This is because in 1980 the Federal Energy Reg- ulatory Commission (FERC) issued a decision that stated that municipal electric utilities with no prior interest in a hydroelectric project would be given a preference over the projects' developer should the applications otherwise be of equal merit. We feel that granting' of a license renewal to -PGandE will benefit a greater number of people in ' the PGandE service area (approximatelx ,ttt ,ee million customers, including those in the Tri-Valley area) than it will in the municipalities. The City of Santa Clara, for example, serves only 87,000 residents. i. 624(53 •a COPY PACIFIC GAS AND ELECTRIC COMPANY Mayor Snyder s April 20, 1982 Page 2 • • Please consider our request for your support in passing a resolution in favor of the PGandE plant relicensing. If you have any questions concerning this issue, you may call me at - 455-5700. • Sincerely, • Terry M. Scott • Acting Manager • • • TMS:gh • Enclosure • • • • • • • 0 • • l - ' . • • { PACIFIC G.A.S AND ELEC 'T' RIC CCMPANY 1P-)((27?•'41,-> - 998 MURRIETA BOULEVARD • LIVERMORE, CALIFORNIA 94550 Rock Creek-Cresta, Mokelumne Hydroelectric Relicensing Summary In 1980 the Federal Energy Regulatory Commission (FERC) issued a decision concerning relicensing of hydroelectric power plant facilities under the Federal Power Act that could have far reaching effects upon some 3.4 million electric customers served by the Pacific Gas and Electric Company. FERC, originally known as the Federal Power Commission has, under the Federal Water Power Act passed in 1920, the right to issue new licenses and renew existing licenses for the use of federal land and waterways for the development and operation of hydroelectric power plants. These licenses were typically issued for up to a 50-year period, at the end of which time the licensee would apply for a renewal. License renewal would allow the original license holder to continue to provide low-cost electricity to its residential, agricultural, commercial, and industrial customers, customers whose rates had supported creation of the project in the first place. The 1980 FERC decision announced that municipal electric utilities holding no prior interest in a given hydroelectric project would be given a preference over the project's developer should the merits of the applications be otherwise equally balanced. This means that facilities constructed, owned, and operated by a public service utility like PGandE have been placed under the threat of being transferred to strangers to the project who played no role in its development, all with resulting severe economic injury to the region and to the customers served by that utility. -2- This decision patently discriminates against both the utility customers, who by their years of historical and continuous use and payment for electric service have earned a completely legitimate expectation that they will continue to benefit from ` their utility's projects; and against the typical investor whose holdings in the company depend for their value on the Company's continued soundness. Two of PGandE's own major hydroelectric projects are now due forrelicensing. These projects now provide a substantial amount of electricity to some 3.4 million metered customers. This equates to over 9 million people served and to the vast bulk of the farms and businesses in Central and Northern California. These projects, each consisting of multiple hydroelectric plants, are the Rock Creek-Cresta power plants on the Feather River and the Mokelumne River power plants. The City of Santa Clara, a city of some 87,000 people, is seeking control of the Mokelumne River project. Northern California Power Agency member cities, Palo Alto, Alameda, Biggs, Gridley, Lompoc, Redding, Roseville, Ukiah and the Plumas-Sierra Rural Electric Cooperative and the five Southern California cities of Anaheim, Azusa, Banning, Colton, and Riverside are seeking control of the Rock Creek-Cr esta Project on the Feather River. Just what are the consequences to our customers if these people succeed in their scheme to take away these projects? The cheapest of power sources in the PGandE system, electricity from falling water, will be lost to our customers and it will have to be replaced with power generated by high priced fuels. PGandE places no mark-up on the costs it incurs to purchase fossil fuel for its power plants and those costs are passed directly into our customers' rates. We have all experienced the rising costs of fuel which have caused utility rates to increase dramatically in the last several years. Because of these increases the hydroelectric plants constructed by PGandE for the benefit of its customers have become increasingly valuable as partial protection against escalating fossil-fuel prices. The fuel cost . t _3_ benefits directly to our customers from the two threatened projects is now on the order of $100,000,000 per year, every year. That is the bait that has Santa Clara . and the other special interest entities trying so eagerly to divert the benefits of our projects from our customers to themselves. Since these fuel cost benefits will, in all probability, increase at least as fast as inflation the potential continuing loss to our customers over the remaining life of the projects will mount up at the rate of $1 billion every 10 years. This threat of losing the benefits of these two hydroelectric projects is very, very real. Most recently the Sacramento Municipal Utility District, a district already receiving a large share of benefits from existing federal hydroelectric projects, indicated that it would join in the NCPA/Southern California scheme to • take over the Feather River Project. With respect to that plan to send the Feather River's hydroelectric benefits out of the PGandE service area, we must point out that in addition to the devastating fuel cost losses, our customers will also have to withstand the economic and environmental costs of constructing new oil or coal- fired generation to replace power sent out of northern California. The same is true for power lost through the inefficient operation of these hydroelectric plants to meet the electrical needs of a few versus their current use as parts of PGandE's highly integrated and efficient system of combined hydroelectric and thermal facilities, a system designed to maximize the efficiency of both. PGandE is seeking in the courts to reverse the FERC's.erroneous reading of the Federal Power Act. Failing that, relief will be sought in Congress. All possible remedies will be pursued. In the meantime, administrative proceedings will be going forward before FERC in which those seeking to take over these projects must try, somehow, to show that their operation of the projects would be as much in the public interest as PGandE's continued operation. We believe that there is no public -4- interest justification for their plan to take from the many and give to the few. Regardless of "preference" we do not feel that FERC, faced with an informed and aroused public, will go along with such-a result and will rule that since there is no quality of public,benefit. there is no occasion to use any "preference". We need your help! Letters to your congressman and senators and to those in decision making positions in the Federal energy agencies, and especially letters to the FERC in the context of relicensing hearings will be most helpful. If appropriate, supporting letters and resolutions from your locally elected city, county, and state officials will also aid in this struggle to maintain our ability to continue to provide for the lowest priced electricity possible. The intent of this letter is to inform you of the critical nature of the relicensing issue. While we will do everything possible to protect our rights, and the rights of our customers, we respectively request that you make an individual effort to make your own thoughts on this matter known to the decision makers. If we can offer any assistance, provide you with further information, or answer any of your questions, please contact us. • • SAMPLE RESOLUTION #1 Resolution of the Opposing Those Seeking To Takeover Pacific Gas and Electric H droelectric Pro 'ects_ WHEREAS, the Pacific Gas and Electric Company and its cus- tomers throughout northern and central California have, over the years, developed dependable and reliable hydroelectric generation facilities on the Mokelu'nne and the Feather River; and, WHEREAS, the City of Santa Clara has filed an application Regulatory G Federal Energy Reg Y ommission (FERC) to take with h the I'ede g over the four powerhouses making up PGandE' s Mokelumne River Project (FERC Project No. 137) , and a series of special interests (including Anaheim, Riverside, Sacramento, Azusa, Colton, Banning and the "Northern California Power Agency") have filed an application with FERC to take over PGandE' s Rock Creek and Cresta plants (Project No. 1922) on the Feather River; and, WHEREAS, PGandE' s hydroelectric projects provide the benefits of low-cost water generated power for use by more than 9 million people in northern and central California; and, • WHEREAS, if these takeover attempts succeed, PGandE's customers would be forced to pay increased costs for electricity from Attachment 4-A oil or gas fired generating facilities in amounts ranging up to $100, 000,000 each and every year; and, WHEREAS, continued operation, maintenance and improvement of these projects by PGandE is essential to the best and most comprehensive utilization of these resources in the public interest. NOW, THEREFORE, BE IT RESOLVED that hereby goes on record as opposing the efforts of the Santa Clara, Anaheim, Azusa, Banning, Colton, Riverside, Sacramento and NCPA to take away PGandE's Rock Creek-Cresta and Mokelumne Projects; and, • • I BE IT FURTHER RESOLVED that firmly supports ' and endorses PGandE' s efforts to relicense its hydroelectric projects, specifically including the Mokelumne and Rock Creek-Cresta Projects; and, - BE IT FURTHER RESOLVED that copies of this resolution be provided to: Federal Energy Regulatory Commission U. S. Senators (Appropriate U. S. Congressmen) (Appropriate State Senators) • ' (Appropriate State Assemblymen) California Public Utility Commission Pacific Gas and Electric Company ►r • SAMPLE RESOLUTION #2 Resolution of the In Support of Relicensing of I �,. Hydroelectric Projects to the Pacific. Gas and Electric Company. WHEREAS, the Pacific Gas and Electric Company has over the past 100 years developed a safe, reliable, and economic system of hydroelectric generating facilities for the bene- fit of its customers living throughout central and northern . • California; and, • WHEREAS, PGandE' s 2 . 4 million customers represent an area population of over 9 million people who now enjoy the benefits of this power PGandE generates without the use of • fossil fuels; and, WHEREAS, certain of these hydroelectric facilities , con- sisting of projects licensed by the Federal Power Commission, now known as the Federal Energy Regulatory Commission (FERC) are subject to consideration for relicense by FERC; and, WHEREAS, efforts are being made by certain municipal en- tities to secure for themselves. six PGandE powerhouses on the Mokelumne and Feather Rivers through application to FERC; efforts which, if successful, would transfer ownership and operation of these hydroelectric facilities away from • PGandE and divert the low cost power away from PGandE's Attachment 4-B s #0 customers and into their hands; and, WHEREAS, it would be directly contrary to the best interests of the [citizens of ] [the members of j and to the best interests of the millions of PGandE customers throughout northern and central California whose rates have supported PGandE's ownership and operation of these facili ties, if the Rock Creek and Cresta plants on the Feather River (Project No. 1922) and the Mokelumne River Project (Project No. 137) were cut out of the hydroelectric genera- . ting system PGandE uses to serve them; and, WHEREAS, if these projects were to be transferred to the municipalities seeking them, PGandE' s customers will be forced to pay, every year, increased costs for electricity from oil or gas fired generating facilities in amounts up 'to $100,000 , 000 ; and, • WHEREAS, the continued ownership, operation and improvement of its hydroelectric generating facilities by PGandE is essential to the social and economic well being of the people of northern and central California; and, WHEREAS, retention of these projects by PGandE is the only course providing for the fullest improvement and utilization of these resources in the public interest. -2- I NOW, THEREFORE, BE IT RESOLVED that hereby urges and requests that the Federal Energy Regulatory Com- mission promptly grant Pacific Gas and Electric- Company's relicensing applications and to reject the applications of the municipalities and associations seeking to take these projects away from PGandE and its customers. BE IT FURTHER RESOLVED, that copies of this resolution be provided to Federal Energy Regulatory Commission U. S. Senators (Appropriate U. S. Congressmen) (Appropriate State Senators) (Appropriate State Assemblymen) • California Public Utility Commission Pacific Gas and Electric Company • • • . ..3- ■ t 2 tiarch 4, 1982 Apq•ruv(J .,'. to FI•rm • ...IMAGE. • . .. WHAM)jI1UJltl:, G,un,y Counsel • • lty. .. .. f)eiuttl THE BOARD OF SUPERVISORS OF THE COUNTY or ALAMEDA, •I'A'I.IE LW CALIFORNIA • On warn)of Supervisor Chairman Bort Excel' and.I)proved by the following vote, .Seconded by Supervisor. ........»-. Ayes: Sul• rvuors.. Excell...i:earse.-anal..Chairman Bort • • Nncv Supervisors -. ............--.......•.......•..... 1 Cooper r..1 . .�........ • Excused ontA.. omx: Supervisor/ Santana ..l .._......_.................. .. ..........».»..»•.• cc THE FOI1 O WING RFSOI.UT10N1 WAS ADOPTED: NU1,fBIR 1 9,2 4'4 4 • . . SUPPORT PC&E RELICENSINC OF • • ROCK CREEK/CfESTA AND HOKELU`ir. PROJECTS - • WHEREAS, Pacific Cas and Electric Company and its customers have over . •!:•..`: the years developed dependable and reliable hydroelectric facilities on the • ' ' Hokeluume and North Fork Feather Rivers; and • WHEREAS, the City of Santa Clara has filed to take over PC&E's Mokelumne River Project, and the Cities of Anaheim, Azusa, Banning, Colton and Riverside, s together with the Northern California Power Agency have filed to take over PC&E's • Rock Creek/Cresta Project on the North Fork Feather River; and • WHEREAS, PC&E has an efficiently integrated hydroelectric system which distributes the benefits of low-cost hydroelectric power among all of its 3.5 million customers in northern and central California; and • • WHEREAS, PG&E's customers would be forced to pay increased costs for • replacement oil fuel that could easily exceed $100,000,000 each year if these projects are not licensed to PG&E; and i WHEREAS, continued operation of these projects by PC&E is essential to . the fullest possible utilization of these resources in the public interest; t . NOW, THEREFORE, BE IT RESOLVED that the Board of Supervisors of the County of Alameda, State of California vigorously opposes the efforts of Santa Clara, Anaheim, Azusa, Banning, Colton, Riverside and NCPA to take over • • Rock Creek/Creeata and Mokelumne Projects; and BE IT FURTHER RESOLVED that the Board of Supervisors of the County of' •• Alameda, State of California strongly supports PG&E's efforts to relicense its ' hydroelectric plants including the Mokelumne and Rock Creek/Cresta Projects. t 2 . ti' • $CERTtiv THAT Tf1£FORSOOINO IS A con H£CT COPY OF A I.E!:CLUTtON ADOPT f 0 U INE DOARO OF SUPERVISONS A AMII C) • • • { � 1' C COUNTY.CALIFORNIA.3 �q mum T: .•�.! WIUTAM MltWWIIN,[Lttic OI•• • • • nn • March 19832 ' �t, \\ WesternCity� e • Li i 1 1 .,1„„1 . ......... is ' • , . - . : 17' i ,f.-.7N 4187!\r.'Ir4:"'Yfr. du. L.Lc I I 1 I-' '1- . aeiar•sia•-%. . tip . : .a. ......,-..,..„:......•vinyl%VT....rris..r.,•.f...."■-• Pr. . ,e r-r.------7-7,,,,,,,,.,,•. -7,:,===.1 • ...0 ., The 1978 National Energy Act has \ 1 s .► _ a special interest in the preference provi- ltelped create new interest in mall scale ` �`� sions. A number of hydro licenses held by hydroekctricprojects:The legislatso►t.requires private utilities will expire in the next decade, electric utilities to pay top dollar for any lower „" and many California cities and other public small suppliers may want to sell. In the 1980 Crude • agencies are applying for the new licenses. Among Oil Windfall Profit Tax Act, an extra investment tax projects soon to be relicensed are those on the Feather, credit for small hydro raised the standard credit oat 10 to �" Mokelumne and Tule Rivers, in the Crane Valley and the 21.percent,a sizeable offset of the cost of a facility. A Fed- Phoenix and other projects in Tuolumne county. The era! Energy Regulatory Commission rule, based on the efforts of some cities to assume operations of projects on 1920 Federal Power Act, gives state and local govern- the Feather River have drawn much attention and are now . ments "preference" among comparable applications for before the courts. The case, which may require years of t • rights to develop hydro sites on public waterways. This litigation, will set important precedents in the field of- . . : - local government preference also applies to the re licensing , energy ownership.Following are brief statements by Pact- of existing power facilities on public waterways. Cali- a Gas and Electric and the Northern California Power fornia, with many hydro projects built during he 1920's f and 1930's wilh licenses running as long as 50 years, has preference►in►h on the question ydroelectric lie nsinf local government, ' g PG&E Cities . . Sees Threat • Seek Licenses "Wc'►nusl all hang together,or assuredly we shall all hang The Northern California Power Agency is a joint- separate'ly" powers authority, established in the late 1960s for Ben Franklin the purpose of developing alternative energy F— sources and to provide a broader base from which to That is what PG&E has been telling its customers respond to PG&E rate increases.Members of NCPA about attempts to take away the company's hydro- ' include the cities of Alameda, Biggs, Gridley, electric projects. Healdshurg, Lodi, Lompoc, Palo Alto, Redding, PG&E saves oil by making electricity with water. Roseville,Santa Clara,and Ukiah;the twelfth mem- Its hydroelectric plants generate electricity without beris Plumas-Sierra Cooperative located in Portola, • creating air emissions, without producing waste California. products,and without using oil.That last feature is of paramount importance to the company's 3.4 million NCPA has filed a joint application with the Sacra- customers, who have seen their electric bills mount mento Municipal Utility District and the Southern at a frightening pace because of enormous increases California cities of Anaheim, Azusa, Banning, Col- in fossil fuel prices. ton, and Riverside for a license to operate a hy- The value of that conserved oil is passed on to droelectric plant on a public waterway at a location PG&E's customers. Since 147.1 the amount PG&E where the Pacific Gas & Electric Company (PG&E) has held the license for over thirt • years. t as must pay each year for the fuel used in generating } } electricity has increased 400 percent. As of October, PG&E now owns and operates two small hp. 1981, 62 percent of the average electric residential droelectric facilities on the Feather River under bill in northern California went, not to compensate license issued approximately thirty years ago. Th 5 PG&E for its work and equipment, but just to pay license expires in the fall of 1982. The law alloH for fuel. PG&E to reapply for this license; and allows f c• Just as fuel costs pass through to the customer, competing applications from other utilities or agen- the benefits of any fuel savings also pass directly des. The law further provides that the determinal through. PG&E's hydro facilities, even in the lion of who shall receive the license will he made by poorer than average 1980-1981 water year, saved the Federal Energy Regulatory Commission(FERC) on the basis of which application demonstrates our customers the equivalent of some 17.5 demonstrates the (continued on next pip') • (continued on next pager. • • . - &E; NCPA must demstrate to the FERC that our ' >P (continued) l- operation of this f ,ity will be in the public in- barrels of oil. At current average costs, that comes terest.Our application will cost nearly$1 million to • to about $506,000,000. prepare and will deal in depth with the operation of Nearly all of PG&E's hydro plants were built the facility, fish and wildlife management, resource under federal license. Many of them were begun so development, land management, and many other long ago that their first license term, typically fifty issues. We feel that our application will compare t years,is expiring.Under the Federal Power Act,the favorably with the applications filed by PG&E and project's owner must apply for a new license and others, and that FERC's decision will be made in • the government can, and frequently does with re- the public interest, whatever that decision is. ' spect to environmental matters, require new terms - • PG&E has argued that the loss of this hydro and conditions when relicensing the plant. power must be replaced with more expensive elec- " The Federal Power Act, adopted when utility tricity from fossil fuel plants. In fact, NCPA mem- regulation was in its infancy, also provides that bers participating in this effort currently purchase in appropriate circumstances the Federal Regu- - ,their power from PG&E. Any power we would t !story Commission can select a new licensee for receive from the Feather River would result the project. • • in a corresponding decrease in the amount we particular fire by an- would need to purchase from PG&E. The "net" FERC added fuel to this p Y transaction would not have an effect on PG&E's pouncing a year ago that if the proposals made by overall demand. the original licensee and by some outside munici- • PG&E has stated they would be required to sell pality were"equal," it would apply a "preference" the plant to us at a "bargain basement" price. In in favor of the municipality to break the "tie." All fact, the question of price is far from resolved. We this was based; PG&E feels, on a completely erro- would definitely be required to pay PG&E for their neous reading of the Federal Power Act. FERC's facilities, and the price would most likely relate to decision is now on appeal in the U.S.Circuit Court the present depreciated value, or the amount on • of Appeals. • which PG&E currently pays taxes. Keep in mind A few northern and southern California cities, that PG&E has amortized the cost of the original singly and in combination,are attempting to pull off facilities and has recovered that cost through rates one of the biggest power grabs in the history of the charged to customers. industry. They are seeking to divert to themselves • PG&E has stated that the county in which the projects whose combined fuel cost value to PG&E's plant is located will lose substantial property taxes if customers amounts to some$100,000,000 every year. the public agencies take over. NCPA and the other The City of Santa Clara is after the Company's public power interests would not be exempt from Mokelumne River Project. NCPA, SMUD, River- property taxes, and would likely pay more than side, et O. are currently vying to take over PG&E's PG&E presently pays since the facilities would be Rock Creek-Crests Project on the Feather River. - ' assessed at current market value upon sale in actor- Under the most optimistic of assumptions, the im- dance with Proposition 13. mediate consequences would be rate increases on . ‘. the order of 570 million per year. • PG&E has stated that if they lose this facility,. While the primary issue is fuel cost, there are their customers will pay substantially more for elec- others. Tearing these projects out of PG&E's corn- tricity. Our calculations show this increase may be plex balance of hydro and thermal resources would as high as a penny per day for an average customer. create terrific waste and inefficiency. Since these This does not, however, take into account the re sults of the competition for this license. PG&E will, individual cities owe no obligation to the area as a whole, their incentive to continually upgrade and out of necessity, consider ways of improving the improve installations will be measured only by their efficiency of this facility. Whichever agency is own limited. needs. successful, the result will be a more efficient utiliza- Dozens of counties,cities, towns and individuals lion of the resource, something which would not necessarily have occurred without this relicensrng in northern California are already on record with the FERC as opposing this take-over scheme. requirement. Sooner or later PG&E feels that every community • The original operating license for the Feather threatened must stand up and be counted, if this River project specified the terms of the agreement threat to them and their constituents is to be safely between PG&E and the federal government. The contained and avoided. fact that the license would expire, and would then, •,f • • be subject to relicense, either to PG&E or some. Cities • other applicant, was known to all parties at that (continued) time.To suggest that NCPA is somehow acting"ex- tra-legally;" or outside the bounds of sound busi-,' best utiliiation of the resource. Finally, the law ness practice, is unsupported.The extensive public h. includes what is referred to as the "preference hearing process, conducted by the Federal Energy a' clause," which provides that if two or more appli- Regulatory Commission, will ensure that any reli- cations are equal, licensing preference will be given tensing decision will be in the public interest — to municipal applicants. according to law. _ .. .. . . . ••• .• . r; I • 1: