Targeting the need for action to slash greenhouse gas emissions, Gov. Jerry Brown pointed to the drought in his “State of the State” address. “We do not know how much our current problem derives from the build-up of heat-trapping gasses, but we can take this drought as a stark warning of things to come,” Brown said in his Jan. 22 speech to the California Legislature. High levels of greenhouse gases not only “mean more droughts and more extreme weather events,” according to Brown, but also “more forest fires and less snowpack” in California. All of these impact the flow of power into and across the electricity grid, raising concerns for state private and public power utilities that rely on hydropower. The record-breaking precipitation shortfalls the last two years and the lack to date this year affect utility electricity supplies to varying degrees. It’s too early to estimate the drought’s impact on electricity prices. But according to Fitch Ratings, prices will be affected. “While the financial impact is expected to be manageable, utilities with a greater reliance on hydroelectric generation may be forced to use more expensive generation and purchase power to replace the potential shortfall in hydropower output for the third year in a row,” it warned. Hydropower is the cheapest power, said Dennis Pidherny, Fitch managing director. At the same time, there are many variables that affect the price of power, the most significant being the price of natural gas, he added. Most utilities though, are not ready to throw in the hydropower towel because it typically rains through April and another “miracle March” could fill reservoirs. But, they are weighing supply options. The Sacramento Municipal Utility District reservoirs are at about half their normal levels. Hydropower from the muni’s projects in the Upper American River Watershed and the Western Area Power Administration represent 25 percent of Sacramento’s power supplies, according to Jennifer Davidson, SMUD manager of budget and enterprise development. If the dry conditions persist, the Sacramento agency is set to tap into other supplies. But, filling in possible hydropower gaps with additional power purchases this coming summer is not expected to lead to higher rates for Sacramento. The muni can tap into $27 million from its hydropower ratepayer stabilization fund, which was created as a financial cushion in drought years. In addition, the muni can access another insurance fund to cover the cost of additional supplies. Possible replacement resources—the choice of which is driven by price—includes cogeneration and hydro imported from the Pacific Northwest, said Davidson. Pacific Gas & Electric likely will increase its imports of hydro from the Pacific Northwest and British Columbia if the drought continues, said Paul Moreno, PG&E spokesperson. The utility has 4,000 MW of hydropower that meets 10-15 percent of its electricity supplies. PG&E’s large reservoirs, including Lake Almanor in Plumas County and Lake Britton in Shasta County, are about at “90 percent of normal levels,” said Moreno. PG&E’s smaller reservoirs, including ones in Lake and Tuolumne Counties, however, are at “lower levels,” but no percentage was given. “We are holding back as much as we can so we are in a good position at the beginning of summer to meet peak power demands and emergency power situations,” Moreno said. The utility does not expect the drought to impact its 1,200 MW Helms pumped storage project, which sends water uphill when demand is low and releases it at peak times. Although some California utilities plan to tap into Pacific Northwest hydro imports, that region also is experiencing a drought. “To date, it is the early makings of a low water year,” said Michael Hansen, Bonneville Power Administration spokesperson. He declined to estimate price impacts, saying the agency “doesn’t forecast what sales may or may not be.” Reservoirs that feed BPA hydro are at 82 percent of capacity, which is considered a low level. Hansen noted, however, "The past few years, we have had slow starts and miracle finishes.” Hydropower supplies make up 5 percent of Southern California Edison’s portfolio. “The company continues to monitor water levels as they affect its hydroelectric operations,” stated Paul Klein, Edison spokesperson. He said the utility was working with state and federal agencies “to maximize available water to generate hydropower.” San Diego Gas & Electric electricity supplies won’t be noticeably impacted by the drought because hydropower makes up less than 1 percent of its portfolio. “The very small amount of small hydro comes from pipeline hydro from water districts, which are not influenced by rain,” said Jennifer Ramp, SDG&E spokesperson, The utility also has a small pumped hydro storage unit in San Diego County but the drought is not expected to impact it, she added.
