Lesher S. Wing, Federal Power Commission W. E. Bullard, Department of Agriculture (alternate) H. G. West, navigation representative Jack D. Stevens, Puget Sound Utilities Council Col. Allen F. Clark, Jr., division engineer, United States Army Engineer Division, North Pacific, chairman 2. Following brief introductory remarks by Colonel Clark and Mr. Brown outlining the purpose of the meeting and expressing appreciation for the valued service of the advisory committee, Mr. Noble Bosley of the Seattle district office summarized the proposals for storage on the Clark Fork. The highlight of his presentation was introducing the possibility of a storage reservoir at the Knowles site on the Flathead River just above its mouth at mile 2.7. He reviewed the desirability of further studies of the Knowles project as a possible alternate to Paradise Dam on the Clark Fork. The engineering problem of designing an earth-fill structure at the Knowles site to the height of the proposed Paradise Dam is concerned primarily with foundation materials. On the basis of preliminary examinations, solution is considered feasible with recent advances in design and constructon procedures. The primary advantages of the Knowles site is the saving of the cost of major railroad and highway relocations along the Clark Fork which would be required for Paradise Dam. The following tabulation lists preliminary coparative data for each site: 1 Based on 30-percent load factor. Ultimate would be 660,000 kilowatts on basis 25-percent load factor assumed for Paradise. Mr. Bosley emphasized that no conclusions have been drawn on any Clark Fork projects. Subsequent discussions brought out several important considerations in developing storage in this reach of the Clark Fork. Flood-control utility would be approximately in proportion to the usable storage at Knowles and Paradise sites for the control of the 1894 flood. The corps does not intend to make detailed studies of run-of-river projects, but it was recognized that the power head on the Clark Fork in the Paradise reach could probably be developed economically by low-head plants if upstream storage were provided by Ninemile Prairie Dam. It was the consensus that with Knowles Dam, the Ninemile Prairie project would assume a position of increased importance as a part of the development in the Clark Fork Basin. The group generally agreed that Knowles project appears to be a promising project in the proposed development of the Clark Fork, and it should be given further study. It was suggested that the Indian Service and Fish and Wildlife agencies as well as the Montana congressional delegation be notified of the investigations of this project. No public hearing will be held on the project, but a brief descriptive leaflet will be sent to persons or groups which would be affected. 3. Mr. Ray Bracelin of the Seattle district office outlined the latest developments pertaining to Ben Franklin Dam site, on the Columbia River at the head of the McNary pool. Inasmuch as the Washington public power supply system may not proceed immediately under its anticipated permit by the Federal Power Commission to investigate development of this project, there may be a delay in its planning and construction. The Corps of Engineers, therefore, will restudy the project in connection with the proposed navigation channel to Priest Rapids Dam. It was the consensus that study of Ben Franklin site should be continued, and that it would be desirable to have it finalized in the review report. 4. Mr. Wing outlined the basis and development of values for new power developments for the Columbia River Basin. His report is attached hereto. 5. Mr. Howard Preston of the Walla Walla district outlined present studies of projects in the Snake River, particularly in the so-called Middle Snake reach. Alternate plans of development being studied for this reach include the following: 1 Storage partially replaced by upstream storage in Crevice project. The studies are being undertaken to provide comparable estimates of costs as well as benefits to be derived from each plan. It is recognized that timing is a factor for consideration in the development of this reach. Crevice and Freedom are assumed to be added last for either plan. It is well known that fish passage is the major problem involved in the development of this reach, particularly for the Salmon River. Mr. Preston outlined present knowledge and probable future accomplishments in the field of passing migrant fish over dams. At present, there is no sure method known for passing downstream migrants over high dams. Further research on light or electrical devices may eventually lead to solution of this problem. Also, experience gained at Brownlee, Pelton, and Baker projects may aid in the solution. The question of timing becomes an important factor in analysis of projects in this reach, with regard to solution of the fish passage problem. 6. Mr. Brown posed for consideration of the board the question of whether a restudy of a high Mountain Sheep project located on the Snake River just above the mouth of the Salmon would be worthy of further consideration in pointing toward the best development in the Snake River area. It would provide 2,200,000 acre-feet of storage, together with diversion of water from Salmon River. Although this project would not block fish runs on the Salmon River, the Imnaha would be blocked. Mr. Norwood felt that this plan may confuse the solution of problems involved in analysis of this reach, but Mr. Davis expressed interest in knowledge of the facts concerning the proposal. A brief office analysis may be undertaken if time and funds are available. 7. Mr. Gordon Fernald of the North Pacific division office presented a résumé of plans for Canadian development being studied by the International Columbia River Engineering Committee, for the International Columbia River Engineering Board. He first reviewed plans studied under sequences VII and VIII, which were previously described to the group. He then described sequence IX, which was proposed for study in October 1957 by General MacNaughton. Under this plan, the Copper Creek-Luxor project was replaced by Bull River: Luxor project and the Dorr project on Kootenay River. The effect of such a scheme would `be to negate benefits from the proposed Libby project in this country. Libby and other projects on Kootenai River in the United States are therefore omitted in sequence IX. In general, sequence IX would result in greater benefit to Canada, although the total storage is slightly less than in sequences VII and VIII. The work of the engineering committee will be completed this fall. 8. The meeting adjourned at 12: 45 p. m. VALUE OF POWER FROM FEDERAL HYDROELECTRIC DEVELOPMENTS, PACIFIC NORTHWEST (Report Submitted by Mr. Lesher S. Wing) 1. INTRODUCTION In studies of power values throughout the Nation it is common practice to base the value on the cost to the purchaser of obtaining an equivalent amount of power from the cheapest alternative source. In most parts of the Nation, power value studies are not particularly complex since they are made for an individual hydroelectric project, serving a particular market, and the alternative supply is generally a steam-electric plant. In the Pacific Northwest however values must be determined for many projects; constructed over a long period of years; serving many widely scattered markets; and further complicated by the fact that there are still large blocks of hydro power that could be developed at costs considerably below those of steam-electric power. Consequently, power value studies for this area have in the past been quite involved and the results obtained have of necessity been based on many factors besides the cost of power from alteraative fuel-electric sources. The purpose of this report is to review briefly the results of past studies and trace the development of the power values which are herein presented. II. PAST STUDIES The first attempt to determine an areawide value for hydroelectric power produced from Federal plants in the Pacific Northwest was made in connection with the preparation of the 308 Review Report of 1948. Studies were made by the staffs of the Bonneville Power Administration, Corps of Engineers, and the Federal Power Commission; and a "value," based in part on the cost of an alternative supply and in part on the rate that large industrial customers could afford to pay, was agreed upon. This value was 4.46 mills per kilowatt-hour at 75 percent load factor-its capacity and energy components were estimated respectively at $16.16 per kilowatt-year plus 2 mills per kilowatt-hour. This value was based on deliveries to all major and minor load centers served by the Bonneville Power Administration system. Consequently, in economic feasibility studies hydroelectric costs included all primary and secondary transmission facilities required to make deliveries to the same points. In 1952, at the request of the Corps of Engineers, the previous studies were reviewed and it was concluded that, owing to higher construction and operating costs, the value of these same load centers should be increased to 5.85 mills per kilowatt-hour at 75 percent load factor-the corresponding capacity and energy values were estimated at $16.50 per kilowatt-year plus 3.34 mills per kilowatthour. This was a "present worth" value based on estimates indicating that power values at 75 percent load factor would increase from 5.12 mills per kilowatthour in 1952 (which was the 4.46 mills of the 1948 study adjusted for differences in price levels) to the cost of 6.23 mills per kilowatt-hour in 1980 (the estimated cost of steam-electric power). In 1953 the Walla Walla District, Corps of Engineers, requested that the problem will be reviewed to determine whether the 1952 value was still applicable. After further study of the factors affecting the value, it was concluded that the changes were not of sufficient magnitude to justify a revision at that time of the previously determined value. In March of 1954, following the issuance of Circular A-47 by the Bureau of the Budget, the Departments of the Army and the Interior and the Federal Power Commission agreed that, in economic feasibility studies, the annual cost of hydroelectric facilities would be increased by an amount equal to the amount of taxes that would be foregone as a result of Federal development rather than the most likely alternative. The effect of this was to reduce the net value of Federal power by about $2.60 per kilowatt-year. In September 1955 the Corps of Engineers, North Pacific Division, requested that power values be supplied for use in their current review of House Document 531. Pursuant to this request the procedures used in the past studies were reconsidered with a view to obtaining values which could be more readily applied and which would be more representative of the outlook at that time. result, the following changes were made in the basic criteria : As a (1) During conferences with North Pacific Division and Bonneville Power Administration it was agreed that power values would be determined for the major load centers only, and that in ecenomic feasibility studies hydro costs would include only the cost of transmission required to make deliveries to these major load centers (the distribution beyond the major load centers being the same whether hydro or alternative steam is used to serve the loads). This reduced the annual transmission cost liability of the hydro plant from about $7 per kilowatt of installed capacity to about $3.26. (2) In the earlier studies it was assumed that 50 percent of the Federal power would be utilized by privately owned utilities throughout the 50-year period. Estimates based on the current outlook indicated that between 1960 and 1985 the percentages taken by private utilities would be less than 50 percent and that after 1985 all power developed by future additions to the Federal system would be utilized by publicly owned systems. (3) In the previous studies it was concluded that steam-electric power would be the cheapest alternative source by 1980. The rapid load growth now anticipated indicates that this point will be reached in the early 1970's. (4) The addition of taxes to both costs and benefits would have approximately the same effect on the benefit-cost ratio as the omission of taxes from both. It was decided therefore to base the value on costs exclusive of taxes and to omit taxes from the hydro plant costs in order to simplify the computation. The results of this study indicated that the value, based on "present worth" procedures, was approximately equal to the cost of power from publicly financed steam-electric plants then estimated at $12.70 per kilowatt-year plus 3 mills per kilowatt-hour. In the latter part of 1956 it was concluded that insufficient weight may have been given to the cost of potential hydro developments as an alternative source of supply. Consequently, a detailed study was made to determine the supply which would be utilized by both publicly and privately owned utilities as an alternative to obtaining power from the Federal projects. The costs of these alternatives were estimated and "spot value" based on these alternative costs were determined for the period 1960-2010. The average value during the 1960-70 decade, based on present worth procedures, was found to be about $12.70 per kilowatt-year plus 3 mills per kilowatthour. The cost of power from a public non-Federal steam-electric plant at that time was estimated at $12.80 per kilowatt-year plus 3.30 mills per kilowatt-hour. III. SUBSEQUENT DEVELOPMENTS Information on the values developed in the studies discussed in the foregoing was given to the Board of Consultants for the Columbia River Review Study in a meeting at the office of the Corps of Engineers in Portland, Oreg., in December 1956. The Board later recommended that power values be based on the cost of alternative steam-electric power, and the Corps of Engineers adopted the recommendation. In a letter dated September 30, 1957, the North Pacific Division of the Corps of Engineers requested that previously prepared estimates of steam-electric power costs be revised to reflect July 1957 price levels. These revised cost estimates are shown in considerable detail in the chapter entitled "Estimated Costs of Power From Steam-Electric Plants-Pacific Northwest." The results of that study are summarized on table 1 of this report. Estimates are shown on table 1 of the at-market cost of steam-electric power in each subarea and weighted averages for the area for various types of financing-private, public non-Federal, and Federal. Costs for non-Federal financing are shown both with and without taxes and for Federal financing for both 2.5 percent and 3 percent money costs. It may be seen from table 1 that the cost of power from public non-Federal steam-electric plants is estimated at $15.46 per kilowatt-year plus 3.34 mills per kilowatt-hour. This may be compared to the estimates of July 1956 of $12.80 per kilowatt-year plus 3.3 mills per kilowatt-hour. The relative large increase in capacity cost was due to two factors the increase in the estimated capital cost and the increase in the cost of money that occurred in this period. Inasmuch as these same factors would operate to increase almost proportionately, the values determined by present worth analyses, it may be concluded that the revised steam-electric costs would agree closely with the power values determined by the present worth method, if these were revised to July 1957. IV. CONCLUSIONS AND RECOMMENDATIONS Detailed studies of the cost of an alternative hydro-steam system, using weighted public and private financing based on the percentages of Federal hydro estimated to be utilized by publicly and privately owned systems, indicated that the "value" of Federal power, using present worth procedures, was roughly the same as the cost of power from public non-Federal steam-electric plants. In view of the relatively minor differences between costs of public non-Federal steam-electric power and the value as determined by rigorous studies of the costs of an alternative hydro-steam system, and because of the complex and timeconsuming studies required to keep the hydro-steam system costs up to date, it is recommended that the cost of power from public non-Federal steam plants, without taxes, be adopted as the value of power from federally constructed hydroelectric plants in the Pacific Northwest. This cost, as of July 1957, is estimated at $15.46 per kilowatt-year plus 3.34 mills per kilowatt-hour. |