The Placer County Board of Supervisors on Tuesday heard a presentation from County staff regarding the development of policies and priorities for the Middle Fork Project. The Project, a water storage and electric generation system on the Middle Fork of the American River in Placer County, is currently under relicensing. The Placer County Water Agency (PCWA) and Placer County have a Joint Powers Agreement (JPA) for relicensing and power sales from the project. Proceeds derived from any sales from the Project will be used to benefit regional infrastructure in Placer County.

The Project, built in the 1960s, is operated under contract by Pacific Gas & Electric. In 2013, that license will expire. At that point, PG&E will convey the project to the Placer County/PCWA JPA, which formed in 2006 to manage relicensing and power sales. The JPA will be responsible for financing and expenditure plans for proceeds that are expected to become available from the project in the next several years. PCWA and the County are financial partners and will be bound together once the present PG&E contract expires. At that point, revenues are expected to be in excess of operating costs.

The priorities set by the JPA are to:

• Provide a reliable water supply for Placer County while generating revenues from electrical sales that are sufficient to pay debt service on the project;
• Maximize revenue from the sale of electricity; and
• Sell water to customers outside Placer County.

The relicensing of the Project is moving forward. Financing of the relicensing is from the County Treasury through bond proceeds. In February, PCWA submitted an application for a new license for the Project to the Federal Energy Regulatory Commission (FERC) for a 50-year license. FERC accepted the application and set a schedule to issue the license.

Spending priorities for funds received from the sale of electricity after 2013 are:

• Operation and maintenance of the MFP and repayment of debt;
• Major replacement and betterment projects that are necessary for the long-term operation and financial stability of the MFP; and
• Equal distribution to the County and PCWA of all remaining power revenues.

Due to volatility of the markets for both electricity and water, estimates of revenue from the Project are speculative. However, a conservative annual estimate is $44 million. Of that amount, approximately $3-4 million would be available annually in the first few years after:

• payment of operations;
• maintenance costs;
• repayment of debt;
• major projects necessary for the long-term operation of the Project; and
• equal distribution to the county and PCWA of all remaining power revenues.

Staff also asked the Supervisors to consider the use of future Middle Fork funds for regional sewer infrastructure, whether through an upgrade to existing facilities or dedicating a portion of Middle Fork Project proceeds to a regional project. Placer County is considering two options for wastewater treatment: upgrading existing facilities so they can meet more stringent water quality standards, or building infrastructure to pump waste to a regional treatment facility in Lincoln.

The discussions at Tuesday’s meeting included a range of policies and priorities for developing a policy for spending Middle Fork Project proceeds. The Board asked staff to return in August with additional detail on potential financing scenarios and associated costs.