Electrical Power for Valdez and the Copper River Basin-1981

Fuel Cost Escalation:For the base case, the assumptions concerning fuel costs have beenoutlined. Should the prOV1Slons for fuel cost escalation prove too modest,the proposed project would yield greater benefits that anticipated.Conversely, if fuel costs do not increase in real terms, the projectedbenefits of Allison are reduced. This sensitivity test examines the effectsof reduced fuel cost escalation and no fuel cost escalation. Assuming thatCVEAls current diesel costs remain unchanged throughout the project life theresulting costs and benefits are as follows:Average Annual Cost ($1,000)Average Annual Benefits ($1,000)Net Annual Benefits ($1,000)Benefit-Cost Ratio3,2342,812-422.87In the absence of fuel cost escalation project benefits are substantiallyreduced with a BC rati 0 fall i ng belo\,1 uni ty. When fuel costs are escalateduntil the pO''Ier-on-line date and held level thereafter, the feasibility of theproject improves as shown bel 0\'1:Average Annual Costs (1,000)Average Annual Benefits ($1,000)Net Annual Benefits ($1,000)Benefit-Cost Ratio3,3583,2341241. 04Without Pressure Reducing Turbine:Although the selected plan anticipates the presence of the PRT, this is notnecessarily a foregone conclusion. Furthermore, the projected output of thePRT has recently been subject to downward adjustments as a result of moremodest expectati ons concerni ng the rate of oil flow. Thi s uncertai nty coupledwith the unusual nature and performance of the PRT makes its possible absencean appropriate subject for a test of sensitivity. The impact on powerbenefits of this possibility is shown in the summary which follO\~s:Average Annual Benefits ($1,000)Average Annual Costs ($1,000)~et Annual Benefts ($1,000)Benefit-Cost Ratio5,8133,2342,5791.80The preceeding table shows a significant increase in project benefits. Theeffect of the without PRT condition, combined with varing fuel cost escalationrates, is summarized in the matrix table of end of this text.Low-load Growth Assumption:The economic analysis has been based 011 the Alaska Power Administrationlsrevised load growth projection. Based on present knowledge, this isconsidered the most reasonable estimate of future conditions. An economicdownturn and lower growth in power demand are \'tithin the realm of possibilityand woul d affect pm'ler benefits of the proj ect. Lesser demand coul d mean adelayed power-an-line date, or a longer period of underutilization. With the10\ler load growth a ssumpti on proposed by Retherford and Associ ates pri or toALPETCO, an additional 2 years would be required before the projectls firmC-8