What is the Potter Valley Project?

The Project is a hydroelectric and water diversion system located on the Eel River and the East Branch Russian River in Mendocino and Lake Counties. It includes Scott Dam, Cape Horn Dam, a diversion tunnel, and a powerhouse.

Originally built in 1908 for hydroelectric generation, the Project diverts water from the Eel River into the Russian River watershed. Because the Eel River intake sits about 500 feet higher than the outlet, the downhill flow generated electricity before being released into the Russian River—effectively creating a long-standing interbasin water transfer.

Over time, the Project has become increasingly uneconomical and difficult to operate. Aging infrastructure, equipment failures, sediment buildup, and seismic risks—combined with declining hydropower value—have made it costly to maintain. PG&E has reported annual losses of $5–10 million and sought to exit the Project.

In 2017, PG&E attempted to auction the Project but received no viable bids, largely due to the high costs and long-term liabilities associated with the aging dams. Following that effort, regional partners—including Sonoma Water and the Mendocino County Inland Water and Power Commission—explored whether they could take over and operate the Project. That option was ultimately deemed infeasible due to the significant financial risks and potential costs, estimated in the hundreds of millions of dollars, associated with maintaining or upgrading the dams.

At the same time, the Project has had significant ecological impacts, blocking access to critical habitat for Eel River salmon and steelhead and affecting Tribal fisheries.

In 2019, PG&E announced it would not renew its federal license and would instead pursue decommissioning. This process would remove the dams and end existing diversions unless a replacement facility is developed.

The Two Basin Solution is a collaborative effort launched in 2017 to plan for the future of both the Eel and Russian River watersheds. It is guided by two co-equal goals:

• Restore fish passage and habitat in the Eel River
• Maintain water supply reliability in the Russian River

As PG&E moved toward decommissioning, stakeholders evaluated alternatives such as maintaining the dams or adding fish passage. These options proved financially and technically infeasible.

The focus has shifted to a more practical path forward: removing the dams while developing a modern, fish-friendly diversion facility that operates primarily during the wet season.

This approach reflects a key reality—dam removal is moving forward, and the priority is now building a more resilient, climate-adapted water system.

Diversions have declined significantly over time due to regulatory changes, infrastructure limitations, and climate pressures:

• Pre-2006: ~150,000 acre-feet/year
• 2007–2020: ~60,000 acre-feet/year
• Since 2021: ~30,000–40,000 acre-feet/year

Recent reductions reflect dam safety constraints (including seismic risks requiring lower reservoir levels), aging infrastructure, and reduced water availability during drought conditions.

These trends highlight that historical diversion levels are no longer reliable and that future water management must account for reduced and more variable supply.

Dam removal will end existing diversions unless a replacement facility is developed. This change will affect water supply, particularly in the upper Russian River and Lake Mendocino.

The upper Russian River—especially in Mendocino County—relies heavily on Eel River imports during dry periods. Reduced inflows could affect agriculture, small municipal systems, groundwater recharge, recreation, and habitat conditions.

However, many of these challenges are already occurring due to climate change. Warmer temperatures, reduced snowpack, and more frequent droughts are already limiting water availability.

Dam removal therefore reinforces the need for proactive, resilience-focused solutions such as improved storage, groundwater recharge, water-use efficiency, and better water management.

NERF is a proposed modern diversion facility that would replace the existing system after dam removal. It would allow seasonal (primarily wet-season) diversions from the Eel River while enabling a free-flowing river at the current dam site.

The project includes fish-friendly infrastructure such as screens, a pump station, and a reconfigured connection to the existing tunnel system.

NERF represents a shift from a year-round, dam-based system to a more flexible, climate-adapted approach aligned with fish recovery and changing hydrology.

ERPA is a joint powers authority formed in 2023 by Sonoma Water, the Mendocino County Inland Water and Power Commission, and the County of Sonoma, with participation from the Round Valley Indian Tribes.

Its primary role is to plan, develop, and operate NERF and help coordinate the transition to a new water management approach that balances ecosystem restoration with water supply needs.

Diversions are expected to be lower and more seasonal than historical levels:

• ~30,000 acre-feet/year typical
• Up to ~50,000 acre-feet in wetter years

Under the Water Diversion Agreement, diversions would occur primarily during the wet season and follow flow-based rules, including minimum flow thresholds, diversion limits, and seasonal protections for fish.

Because water will be captured during a shorter window, storage—especially in Lake Mendocino—will be critical to meet summer and fall demand.

PG&E submitted its Final Surrender Application to FERC on July 28, 2025.

Stakeholders have also developed a Water Diversion Agreement that outlines future diversion parameters, including environmental protections, monitoring, and adaptive management. The agreement also includes financial contributions to the Round Valley Indian Tribes tied to continued diversions.

ERPA is advancing design and permitting for NERF and coordinating closely with PG&E to align development of the new diversion facility with the broader dam decommissioning process. The goal is to coordinate construction and transition planning with dam removal in order to maintain water supply continuity while minimizing environmental disruption.

NERF is currently estimated at approximately $50 million.

Funding is expected to include:

• Russian River water users (operations and maintenance)
• State and federal funding for design and construction
• Contributions supporting restoration and Tribal priorities

The total cost of decommissioning has not yet been finalized but is expected to be substantial.

PG&E is responsible for all decommissioning costs, including dam removal, sediment management, mitigation, and restoration. This responsibility remains until FERC determines the process is complete.

These costs are separate from the development of NERF.

• 1908 – Project constructed
• 1930 – PG&E acquires Project

• 2017–2019 – PG&E explores selling the Potter Valley Project, including an auction process, but no viable buyers emerge due to high operating costs, aging infrastructure, seismic risks, and long-term liabilities. Regional agencies and stakeholders also evaluate whether local ownership is feasible.
• 2019 – PG&E announces it will not renew its federal license and will instead pursue decommissioning of the Potter Valley Project.
• 2019–2021 – Regional agencies, Tribes, and stakeholders continue evaluating alternatives, eventually concluding that maintaining the existing Project is financially and operationally infeasible, leading to development of the Two Basin Solution framework.

• 2022 – Draft surrender plan submitted
• 2023 – ERPA formed
• 2024–2025 – Water Diversion Agreement developed
• July 28, 2025 – Final surrender application submitted

The Federal Energy Regulatory Commission (FERC) regulates hydroelectric dams and energy infrastructure. It oversees licensing, operation, and decommissioning.

FERC must approve PG&E’s license surrender and dam removal and will also review proposals for new facilities like NERF.

Scott Dam blocks access to a large, high-quality headwater watershed that is critical for salmon and steelhead recovery. The habitat above the dams includes cold, clean tributaries and extensive spawning and rearing areas that are especially important as climate change increases water temperatures in lower river reaches.

Restoring access to these areas would improve spawning success, juvenile survival, and cold-water refuge—key factors for rebuilding fish populations and supporting Tribal fisheries. Dam removal is widely considered one of the single most important actions that can be taken to improve long-term recovery of native salmonids in the Eel River.

Dam removal and construction of a new diversion facility are expected to generate regional economic activity, including jobs, engineering and construction work, and infrastructure investment. These projects are expected to bring economic benefits to communities in Mendocino, Lake, and Sonoma counties over many years.

At the same time, maintaining water supply reliability will require continued investment in infrastructure, storage, groundwater recharge, and water management. Improving long-term resilience to drought and climate change is expected to support agriculture, recreation, local businesses, and communities that depend on the Russian River watershed.

Dam removal is also expected to improve the long-term health of the Eel River fishery by restoring access to critical salmon and steelhead habitat. Over time, a healthier and more resilient salmonid population could improve recreational, commercial, and Tribal fishing opportunities while supporting broader ecological recovery throughout the watershed. This is especially significant given that commercial salmon fisheries along much of California’s coast have faced repeated closures in recent years due to declining fish populations, while many Tribal communities have also been unable to fully meet traditional subsistence and cultural fishing needs.

Keeping the dams in place would require addressing significant financial, safety, and operational challenges. The Potter Valley Project is aging, costly to maintain, and no longer economically viable, and PG&E has determined it cannot continue operating the Project or find a buyer willing to take on its liabilities.

Water rights in the Eel River basin are also an important and evolving consideration. The Round Valley Indian Tribes have asserted senior water rights claims that are expected to play a key role in future water management, while Russian River users do not hold a direct, independent water right to Eel River water. Historically, diversions have occurred under the Project’s federal license, with downstream users relying on water made available through Project operations rather than a separate water right. As a result, maintaining the dams would not guarantee continued diversions, and any future water transfers would need to be newly authorized within current legal and regulatory frameworks.

Even if the dams remained, water diversions to the Russian River would likely continue to decline. Recent reductions—driven by safety constraints, infrastructure limitations, and climate-related changes—demonstrate that historic diversion levels are no longer achievable. At the same time, the dams would continue to block access to high-quality habitat in the Eel River, limiting recovery of salmon, steelhead, and other native species, and prolonging impacts to Tribal fisheries and ecosystem health.

In practice, most stakeholders have concluded that maintaining the existing system is not a realistic long-term option. As a result, the focus has shifted toward planning for dam removal while developing a modern, more flexible approach to water management that can better adapt to changing conditions.

Russian Riverkeeper, Friends of the Eel River, and the Redwood Chapter of the Sierra Club jointly submitted a California Public Records Act (PRA) request to Elsinore Valley Municipal Water District after reports and social media posts suggested the Southern California water district may be interested in purchasing or operating the Potter Valley Project on the Eel River. Congressman Jared Huffman also issued his own letter and Public Records Act request seeking additional disclosure.

The organizations submitted the request because decisions involving the Potter Valley Project could have major implications for communities, Tribes, fisheries, water management, and the future of both the Eel and Russian River watersheds. The request sought information about communications, studies, agreements, and planning efforts related to the district’s reported interest in the Project.

The goal was to ensure transparency and public accountability around any potential proposals that could permanently affect regional water resources. Communities in the Eel and Russian River watersheds deserve clear information and open public discussion before major decisions are made about the future of these rivers and the water systems that depend on them.

In recent months, rumors and reports have circulated suggesting that Elsinore Valley Municipal Water District—a Southern California water agency—is exploring the possibility of purchasing or operating the Potter Valley Project. Public details remain limited, which is why Russian Riverkeeper, Friends of the Eel River, and the Redwood Chapter of the Sierra Club submitted a Public Records Act request seeking greater transparency about any discussions, studies, or proposals related to the Project. Congressman Jared Huffman also requested additional disclosure.

At this point, there is no publicly approved proposal for Elsinore Valley or another outside agency to acquire the Project. However, the reports raise concern because any effort to keep the dams in place or continue long-term diversions could significantly affect ongoing regional planning efforts.

The Two Basin Solution has emerged over several years through negotiations among Tribes, water agencies, conservation groups, fisheries experts, and local stakeholders. That process is based on a broad recognition that the existing Potter Valley Project is no longer economically or operationally sustainable and that future water management must adapt to climate change, aging infrastructure, ecological needs, and evolving legal realities. The current direction focuses on dam removal paired with a smaller, modern, fish-friendly diversion facility that can continue seasonal water transfers to the Russian River.

A new outside entity pursuing continued operation of the existing dams could complicate or delay that transition. It could also create uncertainty around dam removal timelines, water rights negotiations, environmental review, and investments already being made toward a new diversion framework. Some stakeholders are also concerned that outside ownership could reduce local control over future water management decisions or create pressure for water to be transferred outside the region rather than prioritized for local communities and watershed needs. In addition, continued operation of the existing Project could undermine or delay development of the proposed New Eel-Russian Facility, which is intended to provide a more modern and environmentally protective approach to future diversions.

At the same time, any proposal to acquire or operate the Project at this late in the game would still face major financial, regulatory, engineering, and legal challenges—including the high costs and liabilities that previously led PG&E and regional agencies to conclude the existing Project was not a viable long-term option.

Ultimately, the concern is less about any single agency and more about ensuring that decisions affecting the future of the Eel and Russian River watersheds remain transparent, publicly accountable, locally-controlled, and aligned with long-term ecological and water supply resilience goals.