In 1933 an auxiliary power station was built on Lake Laxarvatn a short distance from the town Blonduos.  Its generators were bought second hand from Norway and they were tested late in 1933.  This power station was situated on the outlet of River Laxa by the lake.  In 1937, a dam was built on its inlet of Lake Svinavatn, which delivers most oft its volume to Lake Laxarvatn.  The size of the reservoir was about 28 Gl.  In 1951, The Blonduos Electric Society sent a request to The National Electric Power Works (RARIK) to take over the operation.  At that time the machinery of the power plant was almost worn out.

Shortly after RARIK overtook the operation, restoration started and a new 480 kW generators were installed in 1953.  The dam, pipeline and other structures were restored and strengthened.  The new generators use 3,36 m³/sec. during the peak periods, which means that the water supplies last for 96 days without any additional volume.  Some water flow disruptions have disturbed the production, especially during the autumn, when it snows on the ice free lake.  The consequent ice barriers in the entrance and discharge channels cause the overflow of the reservoir and the river and its is a difficult task to clear them.

In 1954, a grid was constructed to connect the villages Skagastrond and Hvammstangi.  The power station was connected to the River Gonguskardsa Power Station two years later.  This connection improved the utilization of the water supplies considerably.