The Plavinas run-off river scheme in Latvia is founded on fine-grained deposits with artesian aquifers. These aquifers are drained with free flowing wells to assure the stability of the structures. In March 1979, one of these wells suddenly discharged high amounts of solids together with the drainage water. After a few days the water discharge stopped, the artesian pressures in the foundation increased and dirty water flew from the bottom of the tailrace channel area. Foundation failure could be mitigated by turning piezometers into free flowing relief wells. However, it was a critical situation for the powerhouse and caused significant permanent displacements of the concrete structures. A root-cause analysis was performed which is presented in this paper. It was found that caverns at the interface of alluvial and fine-grained deposits formed due to erosion of the fine fractions of the alluvium through the drainage wells. Such a cavern collapsed which caused the well blowout and the plugging of the drainage well resulting in increasing pore water pressures and local liquefaction of the powerhouse foundation.