Before the FERC Application for New License for the Annex Creek ...

APPENDIX 0-1
ALTERNATIVE FAIR VALUE CALCLILATION
The fair value of the Annex Creek. and Salmon Creek. Hydroelectric
Project was determined to be the cost of constructing the existing features in
1985, as described in Section 2.1. An alternative method, which yields a different
measure of the fa i r value, is to determi ne the or i gi na 1 va 1 ue of the
Project at a 1985 level less an amount for depreciation. This method, which
is described in detail below, was considered for this Project but not used due
to i ncomp 1 ete records of changes to Project features over the 1 i fe of the
Project.
To determine the Project's original value at a 1985 level in the
alternative fair value analysis, the original cost of each feature is escalated
from its construction completion date to the 1985 level. This escalated
original value is then reduced by an amount for actual depreciation, called
percent condition. Percent condition is defined as the original cost less
book. depreciation (or net investment) divided by the original cost (or total
oj nvestment). The percent condi tion for the Project was ca 1 cul ated by FERC
account for each Component, as shown in Table DS-1.
Several gaps in the property ledgers made it difficult to accurately
determine the original value and year of completion of each Project feature.
Without this information, escalating the original value to a 1985 level 1s
near 1 y i mpos sib 1 e. Therefore, th is method was determi ned as inaccurate and,
thus, the fair value method described in Section 2.1 was used.