Keeping the dream alive10 January 2008
It took 21 years to unleash hydroelectric potential at the Summersville dam in the US. Fierce competition, legislation and stakeholder involvement tested the dedication of the hydro project developers. Report by Sue Pritchard
Summersville dam on the Gauley river in West Virginia was built by the US federal government in 1967 and is operated by the US Army Corps of Engineers (USACE). The impressive hydroelectric potential at this flood control structure caught the imagination of Noah Corporation, which was keen to utilise untapped flow from the lake impounded behind the 119m high dam. The company believed that it would be easy to convert to hydroelectric operation as modifications to the existing rockfill structure would not be necessary.
As the Federal Energy Regulatory Commission (FERC) gave priority to issuing preliminary permits or licences to government entities, Noah Corp proposed to involve the City of Summersville as a partner in the hydro power project. Attracted by the potential for additional power supply and revenues, the city announced its support for the hydroelectric scheme in July 1980. Application for a preliminary permit was filed a few months later.
Other parties were interested in developing power projects at Summersville dam as Noah Corp was aware. At least four other applications were filed during 1980-81, and the USACE was reviewing its own plans for hydroelectric development. In May 1981, FERC stated that no significant differences existed between the competing plans and, as the application by Summersville with Noah Corp was the first to be filed, then it was to be the one approved. A preliminary permit was issued.
But competition for the power potential at Summersville didn’t end there. Following an appeal by a collaboration of Virginia cities wanting to develop their own hydro project, FERC twice suspended Summersville’s preliminary permit only to reverse its decision and uphold its original ruling.
With a permit finally in place in April 1982, Noah Corp began conducting feasibility studies for its co-operative venture with Summersville.
The 80MW project was to include construction of: penstocks to utilise the existing outlet works; a powerhouse with four generating units, three large and one small; a tailrace; and, a new transmission line and switchyard. Approximately 150 energy calculations were made using monthly and daily data to examine different equipment installations. Co-ordination of water releases with the growing whitewater recreation use of the Gauley river would be of utmost importance.
The Summersville-Noah venture filed a licence application with FERC in November 1982. Once an application has been filed any party directly affected can petition for intervention. If such an intervention is granted, FERC is required to consider any opinions before deciding to issue a licence. At Summersville dam, interested parties included the West Virginia Department of Natural Resources (WV DNR) with which representatives of Noah Corp met to discuss project details. It was agreed that US$500,000 (1982 levels) of recreational enhancements would be included in the project.
Others that petitioned successfully for interventions were American Rivers and the American Whitewater Affiliation, which shared concerns over protecting the quality of whitewater available on the Gauley river. The parties worked to gain agreement on various issues, such as local tax revenues, establishing hours for construction to avoid interference with raft launching, use of access roads, and the elimination of a fish passage study.
A licensing rollercoaster
The Department of the Interior (DoI) reviewed the licence application and submitted its comments in January 1984. Although generally supportive of the project, DoI's main concern was that FERC could not legally issue a hydropower licence as the Gauley river was being studied for inclusion in the Wild and Scenic Rivers Act. The study period would end on 30 September 1984, after which a three-year Congressional review period would commence. Consequently, a licence for the project could not be issued until October 1987 at the earliest, which would then be seven years after the application was originally filed to FERC for a preliminary permit.
DoI's draft study recommendations were that the Gauley river would not be designated a wild and scenic river. But, in May 1984, FERC dismissed the Summersville’s licence application. A preliminary permit application was filed again at the first opportunity and appeal was made to FERC to instead issue a time-limited licence – a three year permit that would allow for a licence application to be accepted at the time the legislative action period would expire. FERC agreed but the move was a short-lived success for Summersville.
The original plan to finance the project was to use municipal revenue bonds but this approach became impractical with changes to the federal tax laws in 1985. Financing the project as a West Virginia Limited Partnership would allow private financing and appropriate liability protection for the City. In addition, Summersville would receive an annual royalty payment which was not dependent upon the financial performance of the facility.
In September 1986, Summersville’s city council decided to amend the permit application from a single municipal applicant to a joint application between the City and Noah Corp. To accomplish this, the City had to surrender its permit and reapply – again. Once surrendered, it would be 30 days before a new permit application would be accepted by FERC, in January 1987. This strategic move, however, opened the door for competition once again.
Another potential hydro developer, the City of Manassas, filed an application for a permit with FERC. The competing submissions, an application for a preliminary permit from the City of Manassas and a licence application from Summersville with Noah Corp, rested with FERC for the next two years. FERC noted, in May 1991, that Summersville and Manassas had known of each other’s interest in developing the site since 1980 and had been competing with each other ever since. Finally, on 25 September 1992 and after a 12-year effort, Summersville was issued with a licence.
Power to the people
Finding a buyer for the hydroelectric output was the next critical step. The Appalachian Power Company (APCo) was interested in the project’s low cost, renewable power. In September 1995 representatives of Noah Corp, APCo and Catamount (a firm being contracted by the City and Noah Corp to finance, construct and operate the facility for its first 25 years) met and discussed power sales. The power purchase agreement (PPA) was approved in early May 1996.
Funding for the project was to be a combination of commercial debt and equity investment. Securing the PPA helped to make the hydropower development attractive to potential investors and financiers. American Tractebel, a subsidiary of the Belgian utility group Tractebel, was interested in providing equity and visited the site to begin feasibility studies. Another interested party was Catamount Energy Corp.
Law firm Jackson & Kelly helped to develop a simple financing structure that would allow beneficial ownership to the investor and provide more cash flow to the City, which itself provided no equity and took no credit risk.
By July 1995, the equity partner was chosen to be Catamount, which would finance and construct the project. It submitted an independent contract to the Summersville and Noah Corp to provide US$7M as equity to the project and arrange a commercial loan for the balance of costs, which were estimated at US$28M. Catamount would finance, construct, operate and receive all revenues for the first 25 years. It would be the beneficial owner with all tax benefits and net profits, and after the 25 year period would exit the project with no further interest or income due. Under the project financing arrangement, Summersville would own title to the project and both it and Noah Corp were to receive royalty payments over the quarter century.
Design and engineering
French company Sogreah Engineering was working closely with the USACE to finalise details of a plan to use a temporary plug in an existing tunnel during construction of the power house. Details of a concrete tunnel plug were submitted to the USACE in March 1992.
The plan would give a simpler powerhouse but later was abandoned in favour of using one of the three outlets from the dam to which a new penstock would be attached just downstream of the closure valve. The penstock would convey water to a surface powerhouse on the riverbank. The existing Howell-Bunger valve on the pipe would be relocated to a new pipe that ended beside the powerhouse. The new design, with two turbines instead of four, reduced the 1993 estimated construction costs substantially.
However, changing the transmission line route was more involved. The route had to connect to the APCo substation about 16km south of the dam, so the route proceeded south from the dam rather than north. It needed to avoid the National Recreation Area (NRA), as required by the National Parks Service, while the West Virginia Division of Transportation would not allow use of its right of way along Route 19 south of the dam.
The amended application was filed with FERC in September 1995 with new plans for the powerhouse, equipment and transmission line route. Letters showing the proposed transmission route were sent to all affected landowners and the users and stakeholders of the waters.
When the draft licence amendment application was circulated for comments, whitewater rafting interests were concerned about changing from four to two larger generating units. They believed it would reduce the amount of flexibility in flow released for power production. Potentially, they stated, placing more importance on power profitability might be at the expense of recreational interests. Their concern was unfounded because the licence required the project to operate with the flow normally released by the USACE. The amount and timing of flow releases is chosen solely by the USACE and not the licensee.
The most contentious issue was the change in transmission line route, caused by the need to deliver power to APCo. The revised transmission line was almost 3km longer than – and ran in a different direction from – the original plan, which was to connect with the Monongahela Power Company, the closest potential energy buyer. To answer questions of affected property owners, Catamount and Noah Corp held a public meeting in the spring of 1996 to discuss the expected location and impact of the transmission line. It was attended by about 30 residents, including some parties interested in whitewater rafting.
The amendment application was originally published by FERC in October 1995 with comments due by December. No adverse comments were filed. An agreement on the transmission line route was resolved with the National Parks Service and FERC prepared an environmental impact assessment, which was announced in April 1996. Comments on the assessment were due by the end of May that year.
As FERC prepared a final environmental assessment it began to receive questions from residents along and around the transmission line route who were concerned about whether their comments were being heard. Numerous comments were filed. In an effort to be fair, the commission held a public meeting in Summersville to allow public comments to become part of the record.
A firestorm of public protest was made at this meeting. Several landowners along the transmission line route presumably did not realise their properties would be affected until notice of the public meeting was delivered. More than 35 letters of protest were filed at FERC – including a petition with more than 250 signatures. Consequently, Summersville, Noah Corp and Catamount had to address many of the concerns expressed by property owners.
Oral arguments were presented to the Court of Appeals in January 1998 but it upheld FERC’s decision approving Summersville’s licence amendment. On 1 June, FERC removed its stay of construction and on 2 July approved the final transmission line design. Finally, FERC authorised the project to start and, finally, ground breaking could commence and did so in December 1998.
The long delays created by continuous appeals caused project costs to rise by US$5M. Not only did the costs of materials, equipment and labour rise, there were also costs that resulted from having to renegotiate strategic contracts, additional mitigation requirements and legal fees, all of which put the project at financial risk.
Catamount told Simmersville and Noah Corp that it had found a new lender, New York Life Insurance Company, but to make the project feasible it was necessary to extend the debt term to 26 years. But it was due to exit the project after 25 years and so the new debt term was a problem, unless there was change to agreement, such as an extension of its independent contract by five years to 30 years. It requested such an extension to allow sufficient returns in the extra period to make the project financially feasible.
In July 1998, Summersville, Noah Corp and Catamount renegotiated the independent contract and participation agreements, which kept the project financially viable and attractive for each to participate. The new financing agreement was made in Janaury 1999.
After 19 years, it was time to start building. Black and Veatch Construction (B&V) was selected to construct the powerhouse and transmission line, and began work on site in January 1999.
Design revisions and construction were a collaborative effort. Each portion of the project required the review and approval of both the USACE and FERC prior to construction.
Project construction remained close to the projected schedule until early 2000 when pouring concrete and installing embedded turbine parts were delayed by poor weather. By April 2000, clearing was completed in preparation for construction of the transmission line.
The powerhouse and transmission line were finished by February 2001. In mid-May 2001 the concrete work and most of the new piping had been completed. Final testing and commissioning of the generating equipment were carried out in June. One structural part failed during testing and had to be replaced.
Catamount generated the first energy required by the PPA on 29 July 2001, which was about a month later than allowed in the agreement and incurred a penalty. However, to the pleasure of all concerned, the plant was operating commercially, at last.
The Summersville hydro power plant became fully operational in July 2001. Generating about 220M kWh annually, it provides enough energy to power 22,000 homes. It also avoids the emission of approximately 221,000 tons of carbon dioxide and to date has secured the federal government over US$2M in annual fees.
The dream of developing power at this site sustained the City of Summersville and Noah Corp through a 21-year battle. Jim Price, Noah Corp’s president, says that at the time the company did not know how difficult, expensive and time consuming the development would be. But the potential of the scheme had captured the imagination and enthusiasm of those involved, which helped to make the dream a reality, finally.
For more information on the long evolution of the Summersville dam power project, contact President, Noah Corp. His email is: [email protected]
|The power of PURPA|
In the Federal Power Act of 1928, US Congress authorised the private development of hydro power at federal dams. Such activity was rare until the 1978 Public Utilities Regulatory Policy Act (PURPA) helped to stimulate renewable resources and cogeneration.
Over a period of 11 years fierce competition raged amongst those who wanted to utilise SummervilleÃ¢€â„¢s hydroelectric power. Interested parties included:
1. Summersville Files Preliminary Permit Application, September 22, 1980