River Gonguskardsa is a run off river, which spills into the Skaga Bay, just north of town Saudarkrokur.  Its average flow is 3-5 m³/sec, and the drainage area is close to 167 km³.  The demand for electricity increased according to the growth of the community, and in 1922 a diesel generator was installed in 1922.

The town’s people were highly interested in harnessing their river, and a law was passed in the Parliament (Althing) to consign The National Electric Power Works (RARIK) to build a 1,500 Hp power station on the river.  RARIK subcontracted a construction company to build it, but the staff of RARIK designed the generators and the grid.  The construction work went on during the years 1947-49.  A steel reinforced concrete dam was built 2 km northwest of the town, and a 2,3 km long water pipeline (2,2 km of wood) was connected to the power station.  Its diameter is 1,350 mm and 1,200 mm.

The power station itself was built in the northern part of town, and a 1,000 Hp generator was installed.  Below it, a 29 m long discharge channel directs the outlet to the sea.  The power station was inaugurated on December 8^th 1949.  At the same time, the much smaller River Sauda Plover Station was closed.town, and a 1,000 Hp generator was installed.  Below it, a 29 m long discharge channel directs the outlet to the sea.  The power station was inaugurated on December 8^th 1949.  At the same time, the much smaller River Sauda Plover Station was closed.

Above the dam, a small reservoir was created.  It was too small to ensure the winter operation of the power station and sometimes it is out of operation for months on end.  In 1961, the power plant was enlarged by two 1,000 Hp MAK diesel generators.