Electrical Power for Valdez and the Copper River Basin-1981

Total Average Annual System Costs:The average annual costs for the various plans of development arebased on a 7-3/8 percent annual interest rate and a 100-year economiclife. These costs also reflect transmission facilities, access, landacquisition, replacement costs, annual operation and maintenance, andother associated project costs.PROJECT BE~EFITSThe benefit value of hydroelectric power is measured by the cost ofproviding the equivalent power from the most likely alternative source.The types of alternative power sources appropriate for the Valdez-CopperValley area and the annual unit costs for those alternatives have beendetennined by the Federal Energy Regulatory Commission and updated forcurrent fuel costs by this organization. For derivation of benefits theenergy and capacity-producing capabilities of these projects will beadjusted to account for transmission losses and marketabilityconsiderations.Updating of FERC Power Values:Escalating prices of petroleum products have made it necessary toinclude the effects of recent increases on project feasibility. TheFederal Energy Regulatory Commission provided the Corps of Engineers withenergy and capacity values for the most likely alternative (diesel) to beimplemented if hydropower were not developed (see 1 February 1980 letter,Appendix H). These values were based on 1 July 1979 fuel prices of 58.8and 57.1 cents per gallon at Glennallen and Valdez respectively. As ofSeptember 1980 these prices had increased to nearly 90 cents per gallon.In order to account for these increases and to bring them up to datewith the Ocotber 1980 cost estimate for hydropower development, certainadjustments were made.The values given for capacity were assumed to remain the same, themajority of these costs are fixed, with fuel cost escalation havinglittle effect. For the economic analysis the capacity values (Federalfinancing) of 93.86$/kW-yr and 97. 52$/kW-yr for Valdez and Glennallenwere ~i ghted accordi ng to energy use in the respecti ve porti ons of thestudy area. A weighted value of 95.43$/kW-yr has been used.The energy values provided by FERC include the cost of fuel andoperation and maintenance costs. Based on heat rates of 138,000BTU/gallon and 9,370 BTU/kWh the proposed diesel units would produce14.73 kWh/gallon. By subtracting the weighted cost of fuel from theweighted energy value, a weighted value for O&M of 5.82 mills/kWh wasdetermined. This value was assumed to remain constant.To determine the updated energy values the projected cost of dieselfuel (90.0i/gallon / 14.73 kWh/gallon = 6.11¢/kWh or 61.10 mills/kWh) wasadded to the O&M cost (5.82 mi 11 s/kWh) to arri ve at an updated energyC-2