This article was posted by Lynn Doan and Naureen S. Malik:
An unwelcome sign for electricity users is emerging from the waters of Folsom Lake: the remnants of a Gold Rush mining town 
submerged for almost 60 years has resurfaced amid California’s record dry spell.
Just west of the stone ruins, Folsom Power plant is silent, its six-story-high columns without enough water to propel their turbines. It’s one of dozens of hydroelectric stations shut or running at reduced rates because of the worst drought in the state’s history.
“Seeing this town is intriguing and at the same time so scary,” said Heidi Anderson, a 55-year-old registered nurse who drove from Sacramento to explore the crumbling remnants of the 19th century town known as Mormon Island. “That power plant there obviously isn’t making power because there isn’t any water. Where has it all gone? What’s happening?”
California had the least rain and snow water in data going back to 1895 last year and faces an even drier 2014 as reservoir supplies dwindle and snowpacks shrink, cutting flows to hydropower plants that supply as much as a third of the state. That’s threatening to raise power prices in the third quarter to the highest in six years as plants that use more costly natural gas make up the difference and nuclear power leaves the grid.
Wholesale electricity prices at Northern California’s NP15 hub for July through September, the months of strongest demand, have jumped 36 percent this year to the highest seasonal level since 2008. Spot power at the hub fell 11 percent to $51.22 a megawatt-hour at 4:18 p.m. New York time today.
Gas Demand
Natural-gas-fueled power plants in California will have to absorb the shortfalls of hydro, Biliana Pehlivanova, a New York-based analyst with Barclays Plc (BARC), said in a research note Feb. 7. Gas demand this year will rise by about 300 million cubic feet a day in California, or 19 percent more than the five-year average, and 100 million in Washington and Oregon, a gain of 23 percent, she said.
Spot gas at hubs in California surged to records earlier this month as cold weather boosted demand for heating and power generation. The fuel at the Southern California Border hub jumped $10.205 per million British thermal units on Feb. 5 to $12.2526 above the U.S. benchmark Henry Hub, its highest ever.
Visitors from as far as Utah came on a recent afternoon to walk among Mormon Island’s crumbling walls, stone well and trails of glass, clay and metal. The town, the site of California’s first major gold strike in 1848, was submerged in 1955 when the federal government built a dam and power plant on the American River to leverage another one of the region’s fortunes, the water flowing from the Sierra Nevada mountains.
Tourist Attraction
Now families and couples with picnic baskets pay a $12 fee to trek through mud at Browns Ravine in search of Mormon Lake, which was once home to five general stores, four hotels and three dry-goods shops.
Across the lake, the Folsom Dam was releasing about 500 cubic feet, roughly the volume of 500 basketballs, a second, the lowest rate since 1993, said Drew Lessard, manager of the bureau’s Central California area, including Folsom. It usually manages flows of “several thousand” cubic feet a second at this time of year, he said.
Looking at three columns, each connecting a generator to a turbine at Folsom’s power plant, Lessard said: “We’ll probably have to go lower in the summer, maybe 250 to 300.”
The amount of frozen water that will eventually trickle into streams, reservoirs and aquifers when snow in the mountains starts melting was 88 percent below average on Jan. 30, the lowest since at least 1960. Supplies stored in reservoirs were 40 percent below normal, state data show.
The 210-megawatt Folsom power station was built on the north side of the dam, where water flows through three 560-foot-long pipes known as “penstocks” to propel the turbine blades that drive the generators. A power line coming out of the side of the dam feeds electricity to the statewide grid.
‘Optimistic Estimate’
Altogether, hydro makes up about 15 percent of California’s generation and demand for the water-sourced power about doubles in the California summer, said Alvin Thoma, director of power generation at the state’s largest utility, Pacific Gas & Electric Co.
Hydropower plants in the Bureau’s Central Valley region, extending from the Cascade range in the north to the Tehachapi mountains in the south, are expected to generate 2.2 million megawatt-hours this year, about half the 10-year average, Lessard said.
“That’s our optimistic estimate, we hope we can meet that,” he said. “We’re going to go through something I haven’t experienced myself, and obviously someone else is going to have to make up for that.”
‘Quite Dire’
Hydropower levels are “quite dire,” Steve Berberich, chief executive officer of state power grid operator California ISO, said during a meeting of the agency’s board of governors Feb. 6 that was broadcast online. He said an unprecedented period of wildfires, another manifestation of the drought, will pose a “very significant” threat to power lines.
Two major transmission corridors can deliver about 6,600 megawatts to California from the U.S. Pacific Northwest, according to Genscape Inc., a Louisville, Kentucky-based energy data provider. Other states supply about a third of California’s power demand, state data show.
Capacity on these lines to California “may be completely used up,” said Dennis Lucey, a Boston-based analyst with Genscape. “We are not certain the Pacific Northwest can bail them out.”
In Auburn, 18 miles north of Mormon Island, PG&E’s Wise hydropower plant was reduced to making a single megawatt of power, running off water levels so low that the company may shut the entire unit down, Chris Brewster, a generation supervisor at the station, said while watching a trickle of water leave the power house.
‘March Miracle’
“It should be four times this flow,” he said. “We’re hoping for a March miracle.”
PG&E has taken some hydropower plants out of service and is cutting rates at others so it can stash water to use for the summer, said Paul Moreno, a Chico-based spokesman for the utility.
California is also heading for a third summer without Edison International (EIX)’s 2,200-megawatt San Onofre nuclear generating station, known as Songs. Retirements at the 2,040-megawatt Four Corners power complex in New Mexico will further cut supplies.
“This year, you are looking at the Four Corner units offline and Songs won’t be there,” said Todd DeCook, director of power market fundamentals at Iberdrola Renewables LLC in Portland. “Things are going to be much tighter.”
Fuel Storage
Spot gas at Southern California Gas Co.’s Citygate reached a record $11.9394 per million British thermal units on Feb. 5 as frigid air swept through the region. The Sempra Energy (SRE) utility cut flows to power generators as customers rushed to pull fuel out of storage.
“The market is saying it’s so cold right now it can never be warm again,” said Eric Bickel, a commodity analyst at Schneider Electric (SU) in Louisville, Kentucky.
California’s cap-and-trade system regulating greenhouse-gas emissions will further add to power prices. The program, designed to cut carbon to 1990 levels by 2020, raised wholesale electricity $6 per megawatt-hour in 2013, the ISO said.
Futures based on California carbon allowances, traded as part of the cap-and-trade market, have climbed 1.7 percent this year, data compiled by CME Group Inc. (CME) show.
Back at Mormon Island, Anderson looked at pictures on her mobile phone of snow blanketing the eastern half of the U.S., trying to make sense of the lake drying up in front of her.
“This is crazy,” she said. “I think I’m going have to turn the water off when I’m showering.”
