For Immediate Release: February 5, 2016

SMUD cancels Iowa Hill project

Pumped-storage project exceeded cost estimates

The SMUD Board of Directors has elected not to build the Iowa Hill pumped-storage project addition to its hydroelectric system due to cost and financial risks. The decision comes at a predetermined cost-based off ramp. The project was to be sited along the Upper American River Project (UARP) at Slab Creek Reservoir in El Dorado County, which is east of Sacramento County where SMUD serves more than 1.4 million people.

Last year, SMUD's engineering contractor provided a construction cost estimate of $1.45 billion. An investment that size would significantly limit the choices SMUD has with regard to future distributed generation technologies and significantly constrains SMUD's future capital investments.

In 2015, SMUD also re-evaluated the need for the energy storage that would have been provided by the 400-megawatt pumped-storage project, determining that less than half of the project's capacity would be needed prior to 2030. After further analysis, SMUD concluded that the project was not financially feasible. And with recent advances in other energy-storage technologies, it is likely there will be more economical alternatives for satisfying Sacramento's energy storage needs in the long term.

The electric utility business is moving away from large, central power plants in favor of wider distribution of energy resources, including battery storage and solar installations. SMUD is constantly evaluating new technologies and the relative merits of potential solutions to meet long-term energy needs. Recently, those options have included compressed-air energy storage, microgrids and small, flexible generating units fueled by natural gas.

The technology for storing electricity in lithium-ion batteries has advanced at a surprising rate recently and could become economical on a larger scale in the next decade. Electric vehicles also could play a significant role in meeting energy storage needs in the future.

In addition, SMUD is working with the Western Area Power Administration to study the feasibility of adding a new transmission line in the Sacramento Valley that would provide a similar boost in its capability to serve peak load and access to more clean renewable energy resources from the Pacific Northwest. The Colusa-Sutter Transmission Line project would help SMUD meet goals to integrate larger supplies of intermittent renewable energy at a projected cost of about $240 million.

The decision to cancel the Iowa Hill project will not affect some planned upgrades to the Slab Creek Dam. Installation of a boating release valve will increase flows for environmental needs required by the current license to operate the UARP and increase the volume of water that can be released to provide whitewater boating flows. Next summer, SMUD will determine whether to build a new small powerhouse below Slab Creek Dam, which is independent of Iowa Hill.

SMUD also remains committed to recreation improvements in the area and will stick to the planned schedule outlined in the hydroelectric operating license. Over the next three years, this work will include improvements to existing campgrounds, hiking trails and roads, expansion of RV camping and the extension of bike trails

SMUD will continue to have a significant presence in El Dorado County with about 80 employees based at its hydroelectric maintenance station at Fresh Pond that services the 688-megawatt UARP.