From the Sonoma Water 2025 Urban Water Management Plan:

 

Potter Valley Project The Potter Valley Hydroelectric Project (PVP) is located on the Eel and Russian rivers in northwestern California. The Eel River Power and Irrigation Company began construction of the PVP in 1905 and completed Cape Horn Dam and Van Arsdale Diversion in 1908. In 1920, the Snow Mountain Water and Power Company began construction of Scott Dam, completed the dam in 1921, and obtained the PVP’s first operational license in 1922. Pacific Gas and Electric Company (PG&E) acquired the PVP and operating license in 1930 and has owned and operated the PVP since its acquisition. Natural flows of Eel River water and water released from Lake Pillsbury storage are diverted 12 miles downstream from Scott Dam at Cape Horn Dam and then are conveyed through a diversion tunnel, conduits, and penstocks to the Potter Valley Powerhouse, which is located in the Russian River watershed. Some of the water discharged from the powerhouse is diverted into canals from which the Potter Valley Irrigation District (PVID) receives water under a water supply agreement with PG&E and its own appropriative water rights license. The remaining water discharged from the powerhouse not consumptively used by PVID flows down the East Fork Russian River into Lake Mendocino. The average annual transfer of Eel River water through PVP between 1922 and 2006 was approximately 150,000 ac-ft. In 2004, the Federal Energy Regulatory Commission (FERC) issued an order amending PG&E’s operating license for the PVP in response to a Biological Opinion issued by the National Marine Fisheries Service (NMFS).

As a result of the license amendment, the average annual transfer of Eel River water through PVP after 2006 declined to approximately 60,000 ac-ft. Since 2021, a transformer bank failure at the PVP powerhouse has resulted in additional reductions in Eel River transfers into the Russian River watershed. This failure caused PVP hydropower generation to cease and, with it, all associated discretionary transfers of Eel River water to the East Branch Russian River. In March 2023, PG&E announced that the transformer would not be replaced, permanently ending hydropower operations. Additionally, new information indicates there is greater seismic risk at Scott Dam than previously understood. Accordingly, PG&E, with concurrence from dam safety engineers at FERC and the Division of Safety of Dams has made the decision to no longer close the spillway gates as a mitigation to reduce seismic risk. This has resulted in the water storage capacity in Lake Pillsbury being reduced by approximately 20,000 ac-ft. PG&E asserts that Lake Pillsbury can no longer sustain normal operations under the current license terms due to the reduced storage capacity. Consequently, PG&E has been submitting flow variance requests annually to FERC requesting modifications to flow requirements under the current operating license. As a result of the transformer failure and the decision to no longer close the spillway gates, Eel River transfers have been further reduced to less than 40,000 ac-ft on average annually. On January 30, 2025, PG&E submitted to FERC a request for a non-capacity license amendment to formalize the changes implemented through the temporary flow variance requests.

On January 25, 2019, PG&E filed a notice of withdrawal of its Notice of Intent to relicense the project and discontinuation of the Integrated Licensing Process. PG&E’s withdrawal from the relicensing process became effective on February 11, 2019. On April 14, 2022, PG&E’s license to operate PVP expired. Since that time, PG&E has operated the project under annual licenses. As a result, local agencies recognizing the urgent need to protect the regional water supply, formed the Eel-Russian Project Authority (ERPA) in 2023 to lead the development of a viable solution for maintaining a continued Eel River diversion into the Russian River watershed following the decommissioning of PVP. ERPA is a joint powers authority comprised of three member agencies: Sonoma Water, Sonoma County, and the Mendocino County Inland Water and Power Commission (IWPC). The IWPC members include: the County of Mendocino, the City of Ukiah, the Redwood Valley County Water District, the Potter Valley Irrigation District and the Mendocino County Russian River Flood Control and Water Conservation District. The Round Valley Indian Tribes have a representative who sits on the ERPA Board.

The primary focus of ERPA is to develop a reconfigured water diversion facility concurrent with PG&E’s removal of Cape Horn Dam (which will occur following FERC issuing a surrender order). The New Eel-Russian Facility (NERF) is designed to divert water from a new facility at the existing Cape Horn Dam site, and will utilize some of the existing PVP infrastructure, including the tunnel now connecting the project to the Russian River. The NERF will allow for continued water diversions from the Eel to the Russian after decommissioning, creating significantly more water supply resiliency in the Russian River watershed than there would be if the PVP was entirely removed. The NERF is anticipated to divert water from the Eel River during fall, winter, and spring for storage and use in the Russian River during the dry season. Diversions would be undertaken in accordance with the terms and conditions of the Water Diversion Agreement for the New Eel Russian Facility (Eel-Russian Project Authority, 2025) that is protective of the Eel River’s ecosystem.

In 2024, ERPA submitted a proposal to PG&E to allow for the construction of the NERF. The plan contemplates that after Cape Horn Dam and a fish barrier are removed, the reservoir (Van Arsdale Reservoir) is drained, resulting in a free-flowing Eel River. The preliminary concept of the New EelRussian Facility is that a mechanical pump station would be constructed simultaneously with the demolition of Cape Horn Dam, utilizing the existing water diversion tunnel, with a reconfigured diversion tunnel entrance.

In July 2025, several entities expressed their support for the NERF and its seasonal diversions of water, by signing the Water Diversion Agreement. The parties to that agreement include California Department of Fish & Wildlife, Round Valley Indian Tribes, Sonoma Water, IWPC, Cal-Trout, Humboldt County, Sonoma County, and Trout Unlimited.

PG&E filed its Final Surrender Application with FERC on July 25, 2025, along with an application for non-project use of project lands. If approved by FERC, non-project use of project lands will authorize PG&E to allow ERPA to construct the NERF within the project boundary. While FERC considers PG&E’s license surrender application and application for non-project use of project lands, ERPA will complete engineering designs and prepare the California Environmental Quality Act (CEQA) requirements for constructing and operating the new facility and work with other state and federal regulatory agencies to secure the permissions necessary to construct the facility. Like FERC’s processing of PG&E’s application, the design and permitting phase of the NERF is expected to last several years.

At this time, because of the significant uncertainty regarding the timing of FERC issuing a surrender order, the schedule for decommissioning of PVP, and the construction of the NERF, Sonoma Water is assuming that PVP will operate under annual licenses issued by FERC with flow conditions modified either by annual flow variance requests or by a non-capacity license amendment until 2035. After 2035, Sonoma Water assumes PG&E will have completed removal of Scott and Cape Horn dams and that ERPA will have completed construction of the NERF and will be operating the facility in accordance with the Water Diversion Agreement.