Riverside County Grand jury report critical of Nevada Hydro partnership

By AARON BURGIN
The Press-Enterprise

The Elsinore Valley Municipal Water District should accept that a proposed hydroelectric facility it co-sponsors is not financially viable and explain to ratepayers how it has used $4 million spent on the project, a Riverside County grand jury said in a report.

The Lake Elsinore Advanced Pumped Storage project includes a pumped storage plant and 30 miles of proposed transmission lines that would link Riverside and San Diego county power grids.

Elsinore Valley and Vista-based Nevada Hydro Corp. are the project's co-partners.

The report casts doubt on the prospect of Elsinore Valley recouping the money it has spent on the project because a 1997 agreement between Elsinore Valley and Nevada Hydro only requires the company to reimburse the district when the project is complete.

Three financial reports that cast doubt on the project's profitability and recent decisions by Nevada Hydro call into question whether the pumped storage portion will ever be built, the grand jury said in its report.

The financial studies, which the district released to the public last year, said the $1.3 billion project would not be profitable or, in a best-case scenario with federal incentives, could turn a small profit.

"Worst-case scenario would be that repayment will never be made, nor will the pump/storage portion of the project ever be built," the jury said..

Elsinore Valley attorney John Brown said the district plans to respond to the report in writing, but said the district believed it had given the grand jury -- and the public -- an accounting of the money spent on the project.

Nevada Hydro project manager David Kates said the report contained several factual errors, including that the project's financier, New York-based Morgan Stanley, is only committed to covering the power lines.

The report also assumes that Nevada Hydro has no intention of developing the pumped storage portion of the project, which is not the case, Kates said.

Critics of the project said the report validates concerns that the district wasted ratepayer money for a project that doesn't make sense financially.

Reach Aaron Burgin at 951-375-3733 or aburgin@PE.com

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