Concerns reignite over Lake Elsinore power project 

Recent moves to split approval of a proposed Lake Elsinore hydroelectric plant and a power-lines project have reignited criticism and worries that the plant plan will be abandoned.

Vista-based Nevada Hydro Company is seeking approval for the power lines portion of the Lake Elsinore Advanced Pumped Storage project, commonly known as LEAPS, with the state Public Utilities Commission, after years of going through one federal agency for approval of both portions of the project.

This move stemmed from a decision by the California Independent Service Operator that recommended splitting the project so Nevada Hydro could be reimbursed by ratepayers for the power lines. Originally, Nevada Hydro wanted to recover the cost of the entire project from ratepayers.

Numerous local agencies, including the project co-applicant, oppose a power-lines-only project because they believe the 30 miles of lines that would run through the Cleveland National Forest would create fire hazards, disturb schools and the nearby community and affect groundwater quality, but bring only minimal benefits to residents without the pumped storage.

Nevada Hydro spokesman Chris Wysocki said the moves were made to navigate the entire project through a maze of red tape. The company’s viewpoint is that the project has not changed.

The company, he said, has no plans to move forward with the power lines if the pumped-storage plant is killed.

He admitted, however, the maneuvering could be misinterpreted by critics.

“The problem for us has been how you communicate this to the public, because it doesn’t lend itself to a simple answer,” Wysocki said.

Two Projects in One

LEAPS is a joint effort of Nevada Hydro and the Elsinore Valley Municipal Water District, and comprises a pumped-storage facility above Lake Elsinore that would generate hydroelectricity to be transmitted to the state’s power grid along the proposed power lines. It would also store electricity produced during off-peak hours that could be used during the height of the day, when electricity demand peaks.

The power lines would also connect the Southern California Edison and San Diego Gas and Electric Company’s portions of the grid.

Don Kondoleon, an official with the California Energy Commission, said the state needs both projects, whether independent of one another or combined.

Pumped storage will help the state better capture electricity produced by solar or wind farms during off-peak hours. The transmission lines will increase the reliability of San Diego’s power supply, which it imports from Arizona and from a connection to the Edison grid that runs alongside the San Onofre nuclear power station.

The state energy commission listed LEAPS as its second-most-important project statewide in a recent report, but recommended the approval process for the power lines be expedited and treated separately from the pumped storage.

Subtle Changes

Nevada Hydro last month submitted a permit request and environmental review to the state Public Utilities Commission for just the power lines – a move utilities officials said should have happened two years ago, when they applied for project licensing with the Federal Energy Regulatory Commission. The state utilities commission will assess the environmental impacts of the pumped-storage facility in its review, agency spokeswoman Susan Carothers said.

Elsinore Valley water district officials oppose reviewing the lines by themselves and are fighting for control of the environmental-review process with the state utilities commission. They argue that the lines and pumped-storage facility are a single project, and aside from federal energy regulators, they alone are equipped to review its environmental effects.

“The PUC should not be getting involved with the project because it is not a power-lines project,” water district spokesman Greg Morrison said.

Elsinore Valley water supports the project as a single unit because of its stabilizing effect on lake levels and water quality and the potential for increased power supply to residents in the event of a shortage, Morrison said.

According to the 1997 development agreement between Nevada Hydro and Elsinore Valley water, the partners would secure licensing from the federal commission for both the pumped storage and the power lines, and the water district would perform the state environmental studies.

Officials in the energy community, however, said the project should have been handled differently because the components of LEAPS are usually licensed by two different agencies: Pumped-storage facilities are licensed by federal energy regulators, while power lines are approved by the state utilities commission.

Nicholas Sher, an attorney for the utilities commission, said the proper process would have been for the project applicants to come to both the federal and state regulators at the same time.

The federal and state agencies would then have jointly produced an environmental document and the approvals for both the power lines and the pumped storage would have happened at the same time.

“The problem is the process may have been backward from the start,” Sher said. “I think they (Nevada Hydro officials) have realized this.”

Nevada Hydro’s change of course began when the California Independent Service Operator earlier this year advised against the company’s request to recover costs for the power plant and lines from ratepayers. The rate-based recovery must be approved by the federal energy commission.

Officials from the Independent Service Operator, which administers the state’s power grid, said they denied the request because the agency would then be generating electricity, which is beyond its scope.

Wysocki and ISO officials said negotiations are under way between the two entities for rate-based reimbursement for the power lines.

Charges of Bait-and-Switch

Longtime critics of the project, who have argued the pumped-storage portion of LEAPS is financially unfeasible, said the split project application is a confirmation of their suspicions that Nevada Hydro’s interest was only in the power lines, not the pumped storage.

These critics, who include former Elsinore Valley water board member Christine Hyland, current board member John Lloyd and Lake Elsinore Treasurer Pete Weber, said the local water board has thrown between $3 million and $4 million into LEAPS. If LEAPS is split, they said, Elsinore Valley water will not be reimbursed for the money.

They point to a power-line permit request filed in 2005 with the U.S. Forest Service, done at the same time as the federal license application was filed, as the smoking gun.

Wysocki said the pending request would be pursued only in the worst-case scenario that federal energy regulators deny its license request, which he believes will not happen.

The special-use permit, critics said, appears more like a carefully planned exit strategy than a worst-case scenario.

“The handwriting was on the wall, no one wanted to pay attention to it,” said Lloyd, who was elected to the board in 2006.

Money, Weber said, is at the heart of the matter.

Depending on the federal energy commission’s approved rate recovery, Nevada Hydro stands to make an 11 percent to 13 percent return on its $350 million investment in the power lines, Sher said.

“The lines are cheaper to construct and they are lucrative because of the rate-based recovery,” Weber said. “The pumped storage is a money pit.”

These concerns reached the Riverside County Board of Supervisors on Tuesday, when the board voted unanimously to send a letter to the utilities commission opposing the power lines being considered separately.

While taking a neutral position on the LEAPS project, Supervisor Bob Buster said a power-lines-only project would closely mirror an earlier proposal for a connection between the two grids that would have run through the Rainbow area. The Valley-Rainbow interconnection was shot down by the state utilities commission in 2002.

“It appears as if Nevada Hydro is hedging their bets,” Buster said. “It is my hope that this is not the case.”

Nevada Hydro, Wysocki said, is committed to LEAPS, both financially and philosophically.

The project, he said, is closer than ever before to completion. He anticipates state and federal approval of the project within a year, with the power lines operational by 2009 and the pumped-storage plant to follow in 2012.

State utilities commission officials, however, foresee a completion date well into 2013.

Nevada Hydro founders Rex Wait and Peter Lewandowski, Wysocki said, have invested $10 million to $15 million of their own money into the project. In addition, the recent financial commitment of Morgan Stanley, which on Oct. 11 agreed to finance, own and operate the project, proves Nevada Hydro’s commitment to LEAPS.

“These men would not have put up that type of money for a bait-and-switch,” Wysocki said. “All we can do is to speak publicly about our intentions.”

By Aaron Burgin

The Press-Enterprise

9 November 2007