CAP secures replacement power capacity as Hoover Dam output plummets 70%

CAP secures replacement power capacity as Hoover Dam output plummets 70%Declining water levels at Lake Mead have drastically reduced Hoover Dam's power generation, prompting the Central Arizona Project to procure replacement capacity and pivot its long-term energy strategy to protect water delivery operations.

Hoover Dam's capacity estimate has been reduced from 1,304 MW to 382 MW due to Lake Mead elevations dropping below 1,035 feet.

CAP is finalizing a replacement capacity contract with AEPCO for approximately $400,000, well below initial estimates of $1.5 million to $3 million.

The utility's 2026 energy rate is projected to finish at $80 per acre-foot, while the 2027 rate is set at $88 per acre-foot.

CAP is considering a shift away from purchasing cheap midday solar energy in favor of standard, long-term energy products to ensure price stability amidst changes in Western energy markets.

The Central Arizona Project (CAP) is moving to secure replacement power capacity following a drastic reduction in output from the Hoover Dam, a critical energy source for the massive water conveyance system. Recent reviews by the Bureau of Reclamation have lowered Hoover Dam's capacity estimate from 1,304 MW to just 382 MW—an approximate 70% reduction—triggered by Lake Mead's elevation dropping to 1,035 feet or below. Power Program Manager Jeff Ritter told the Finance, Audit and Power Committee on August 20 that the capacity loss threatens CAP's member services agreement with the Arizona Electric Power Cooperative (AEPCO), which requires the utility to hold capacity in reserve for contingency events and flexible pumping loads. To maintain its contractual obligations and operational flexibility, CAP has sought replacement capacity from AEPCO's existing portfolio of solar, battery, and natural gas resources. Ritter announced that the utility recently received indicative pricing from AEPCO of approximately $400,000 for the replacement capacity. This figure is substantially lower than staff's initial estimates of $1.5 million to $3 million annually, largely because CAP shapes its energy usage to avoid requiring capacity during peak summer months when power is most expensive. Despite the challenges at Hoover Dam and a leak in Pool 1 that delayed spring water diversions, CAP's overall energy costs for 2026 have remained under control. The 2026 energy rate is currently projected to finish at $80 per acre-foot (AF), down from the published rate of $85/AF. Looking ahead to 2027, the published energy rate is $88/AF, based on an estimated delivery volume of 825,000 AF. CAP has acquired 27% of its required energy for 2027 to date and aims to secure 50% by the end of the year through upcoming auctions and new contracts, including a potential supply agreement with Capital Power. Beyond the immediate capacity shortfall, CAP is preparing for broader structural shifts in Western energy markets. With the launch of the California Independent System Operator's Extended Day-Ahead Market (EDAM) and the impending 2027 launch of the Southwest Power Pool's Markets+, CAP is re-evaluating its daily energy procurement profile. In recent years, CAP has capitalized on the "duck curve" by concentrating its pumping energy usage during peak midday solar hours to purchase cheap, day-ahead power. However, as major Arizona utilities commit to organized markets, Ritter warned that this excess midday supply could diminish. To mitigate this risk, CAP is considering a transition toward a flatter pumping profile powered by standard on-peak and off-peak energy products secured well in advance. Sacrificing the duck-curve opportunity for energy security from standard products could be a prudent step, Ritter noted, emphasizing the utility's obligation to provide reliable service and rate stability to its water customers.