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SMUD board of directors’ vote signals intent to purchase PG&E’s Chili Bar hydroelectric project

In a joint announcement made by Pacific Gas and Electric Company (PG&E) and the Sacramento Municipal Utility District, the SMUD board of directors voted late last week at its regular meeting to approve a resolution signaling intent by SMUD to purchase a PG&E hydroelectric powerhouse and reservoir on the South Fork of the American River.

The resolution authorizes SMUD’s chief executive officer and general manager to execute an agreement for the purchase of PG&E’s Chili Bar Project, including the 7-MW 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 (FERC) and California Public Utilities Commission (CPUC).

The Chili Bar facilities are north of Placerville, Calif., and began operating in 1965.

The Chili Bar hydropower operations are already tightly coordinated with SMUD’s Upper American River Project (UARP), which is immediately upstream of Chili Bar Reservoir. UARP features 11 dams and eight powerhouses. In a normal water year, UARP can provide about 20% of SMUD customers’ power needs. The UARP generation resource is a significant factor in why more than 50% of SMUD’s power supply is non-carbon-emitting.

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. 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 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.

The proposed purchase would increase SMUD’s hydroelectric generation portfolio to 695 MW and add to SMUD’s renewable portfolio standard (RPS) 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.

Both parties expect the sale to close in 2020. While the transaction is under regulatory review, PG&E will continue to safely operate the project in compliance with its FERC license.

Pacific Gas and Electric Company, a subsidiary of PG&E Corporation, is one of the largest combined natural gas and electric energy companies in the U.S., with nearly 16 million customers in Northern and Central California.

SMUD is the sixth-largest community-owned, not-for-profit electric service provider in the U.S. and has been providing low-cost, reliable electricity for more than 70 years to Sacramento County and small adjoining portions of Placer and Yolo counties.