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Department of Water Resources seeks statutory clarification to enable sale or transfer of three strategic reliability reserve units
Summary
DWR asked the committee to add language to Water Code 80710(c) to clarify that statutory limits on reserve operation apply to units "constructed by DWR" and would not prevent sale or transfer; DWR gave capital cost and revenue estimates and warned of decommissioning costs if ownership pathways are blocked.
The Department of Water Resources told the Assembly Budget Subcommittee No. 4 that three gas‑fired, ultra‑low‑emissions generators procured under emergency authority are designed to operate as part of the state's Strategic Reliability Reserve, but contractual terms and current Water Code language may limit the department’s ability to transfer ownership.
Delphine Ho, Deputy Director for Statewide Energy at DWR, said the three units were sited with local partners (Modesto Irrigation District, Turlock Irrigation District and the City of Lodi) and were built quickly to respond to near‑term reliability needs after 2020–2022 extreme heat events. Ho told the committee the capital cost for all three resources was approximately $130,000,000 and that the earliest a sale could occur would be 2028 after site owners and counterparties are able to discuss a transfer. She said a sale could produce roughly $40,000,000 in revenue but cautioned that if a sale does not proceed, decommissioning and reconnection could cost about $20,000,000.
The committee raised questions about how any sale revenue would be used and whether retaining the assets in the reserve would change the need for other once‑through‑cooling contracts; DWR said timing and market conditions will determine options and that the department must avoid competing with load‑serving entities in procurement.
Why it matters: DWR’s units were procured rapidly to bolster reliability. Whether the state keeps, sells or transfers those assets affects future reserve composition, market competition and the state’s ability to recover some capital costs.
What’s next: DWR asked the Legislature to amend Water Code 80710(c) to permit clearer pathways for sale and ownership transfers; the department anticipates earliest sale discussions in 2026–2027 with possible transaction in 2028.
