Analysis - The Institute for Southern Studies

Before-tax costs:
50-year period:
7% discount rate:
0.73% growth:
Beneficial use:
Offsite disposal:
Baseline disposal costs estimated on a before-tax basis to approximate the overall economic cost (i.e., real resource
allocation for the economy as a whole, rather than on an after-tax basis which would approximate a relatively narrower
financial cost to the electric utility industry because after-tax costs subtract business expense tax deductions and
depreciation of capital expenditures for pollution control equipment.
A 50-year future time horizon (aka period-of-analysis) was applied because new construction for replacement of all
CCR disposal units and end of existing lifespan is estimated to have occurred at least once by that time.
A 7% discount rate was applied for calculating both net present value cost and average annualized cost for the
engineering control unit costs applied in this RIA. Because both the annualized baseline cost and annualized
incremental proposed rule costs estimated in this RIA consist of primarily (i.e., >95%) industry cost rather than
government cost, this RIA applies a 7% discount rate rather than a lower (e.g., 3%, 2%, 1% or 0%) discount rate to
represent the opportunity cost of business capital investment and business expense financing (i.e., the average rate of
return to corporate capital). This is consistent with OMB’s 2003 Circular A-4 47 (page 33) and 1992 Circular A-94 48
(page 8) which indicate that a 7% discount rate base-case should be used for regulatory analyses when regulation is
expected to primarily and directly affect businesses and industries.
Baseline cost estimates increased 0.73% per year over the 50-year future time horizon to reflect a 0.73% annual
growth in coal consumption at electric utility plants (which is a proxy for future annual growth in the annual tonnage of
CCR generation needing disposal from those plants). The 0.73% annual growth factor is based on DOE-EIA's January
2009 "Annual Energy Outlook 2009" forecast change in US coal consumption for electricity generation between year
2010 (22.91 quadrillion Btus) and 2030 (26.41 quadrillion Btus), available at:
http://www.eia.doe.gov/oiaf/aeo/index.html
If reported in the baseline by any particular plant, beneficial use was assumed to continue in the future by that plant
under the baseline projection over the 50-year future period-of-analysis. Section 5C in Chapter 5 of this RIA
evaluates potential changes to this beneficial use baseline under alternative regulatory impact scenarios.
If reported in baseline by any particular plant, offsite disposal was assumed to continue in the future by that plant.
Offsite disposal landfill cost estimated under both baseline and regulatory options using the engineering control cost
model. Truck operating cost estimated separately outside of the model.
Existing unit closure: One set of years for the opening and closure of disposal units are assumed for each facility. If data for initial year of
operation were provided in the 1995 EPRI Comanagement Survey, these data were used. If the plant had more than
47 2003 OMB Circular A-4: http://www.whitehouse.gov/omb/circulars_a004_a-4/
48 1992 OMB Circular A-94: http://www.whitehouse.gov/omb/circulars_a094/
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