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<br />COLORADO RXVERSTORAGE PROJECT
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<br />utilities 'operating iA th13 area, provided, of course, that the power preference
<br />laws are complied -W;ith and projeot repayment and consumer' power rates are
<br />~ not adversely affeoted."
<br />Th. vi.w. a. .xpr....~ in H.R. 1087 cl.arly did net .xp.ct the utilities .tc build
<br />the backbon. .)'stem bl1t that the Bur.au .hould con.ider the utility propo.alln
<br />the light of. usmg the -lines of the utilities to provide marketing service to the
<br />preference ,customers. jUnder the provisions of. the marketing principles it is
<br />contemplated -that both: e,cisting and future lines of the utilities _and others may
<br />be used-to.tranamit poJwer to the customer from the identified delivery points.
<br />Such. arrangements wollld be left 1;0 the discretion of the customers.
<br />. Principles 1,.2, 3, anl;l-5 were designed to assure that-construction of backbone
<br />lines by utilities would hot prevent physical-compliance with ,preference customer
<br />laws. As has-been ind~cated earlier herein, compliance with these principles can
<br />be assured by suitable _'contractual arrangements.
<br />Rates paid by preference customers- will be affected. Under -the yardstiok
<br />system and usual Bureau practice, the firm power rate would be 6 mills per
<br />kilowatt~hour. Underi the utilities' proposal and ,to prevent adverse effect on
<br />project feasibility, thei'rate for firm power would have to be (t57 mills per kilo-
<br />watt-hour. The addeU cost to preference customers due to the increase in rate
<br />01 0.57 rolll,per kilotatt-hour would b. approxiroately$~53,808,000 over tbe
<br />.86 years of the studY'ior an ~verage annual added cost of about $2,951,000.
<br />!aUMMARY OF CONSULTANTS' REVORT
<br />,
<br />The-Bureau retaine:d Mr. B. C. Russell, former official of the Idaho Power Co.,
<br />Boise, Idaho, and tlle consulting firm of Jack D. St~vens, Seattle, Wash., as
<br />consultants to review the Bureau's analysis of the utility proposal. A copy of
<br />their-report" dated N'ovember 12, 1960, is-attached.
<br />.. In summary, the yonsultants (a) found that the _Bureau had properly inter-
<br />prl?ted the utility -l?foposal, (b) fO':l~d that the .Bureau had correctly applied the
<br />w-lieeling rates specifi.ed ~y the utihtws, (c) recommended that the Bureau reassess
<br />:ita costs of operatiol}, maintenance, and replacement (0. & M. & n.) for trans...
<br />l;Ilission and euhstatton facilities) (d) found that the yardstick system was ade-
<br />quate to do the int~nded job of transmission, (e-) B_uggested that a 2,30'!"kilovolt
<br />line _from Curecanti ~o Rangely be added to the Federal system under_ the utility
<br />proposal, aJ1d (j) r~commended that- the Bureau interconnect' its system with
<br />the private utility"jsystems at all points where such interconnections. would
<br />provide' mutual op~rating advantages. . . .
<br />In addition, the ,consultants suggested an approach to the problem of .taxer:.
<br />forgone based uponl using a percentage of revenue. They stated that statistics
<br />supplied them by t'f;16 _utilities show 21.3 percent of the average annual wheeling
<br />charge would be pajd as Federal income ta}l;. The p:resent worth of this amount
<br />is shown to be $49 :million. The effect on the Bureau's_comparison of costs and
<br />savings of u8i~g th:~ constl~taJfts' higher figure for taxes,is shown, in table 3~
<br />TABLE 3.-ConsuU4nts' computations .of present w.orth .of savings and increased costs
<br />. '.~!- -' . , . - i: ; under the-utility proposal 1 . , . ., '
<br />
<br />ltem
<br />
<br />Savtfigs :
<br />
<br />Increased
<br />costs
<br />
<br />6.57.m1ll rate for utiUty:proposBl and 6-mUl rate for yardstick: system:
<br />Transmission iuv0stment ~~ _ ~_~._h.~.~_.___._._.~_~...~n...w___..w_nw $100,847, 000 _~_....n~_...
<br />Operation, maint01laUCll, Bud re:placement~.~_~_~___~.~,_~.~_M~___~.~_~._. 36, 541,000 ~..._._.~~.~._
<br />Imputed interest on irrigatIon. .".....~___~~~.~_.~....~_w___'_~__..w_._._._ 4,631, 000 ~"._~_~._"_.~.
<br />Federal tax on whlleling. _.._.n_.~.____~~'_.~_~_~._....._h__._...~_n~h 49,000, 000 .____.h__~__~
<br />Wheeling costs." .l____~___._._.~_._~.~~_._w."~.~._h~..~..h.._~_._.~w.. ._~_.._._-.~__. $217,775,000
<br />i' .
<br />TotaL_..__o__nr..w._.__n_~___._M:_~~-O--..-h-W..-W~---.-~_.~~~~~._._ 200,019,000 217,775,000
<br />DIfference. ._.. _ ~_~ _ ~_... _._ _ ____ _ .~_ _ __.. _ __.. ._~ _ _w~o. ~~. ...... o.W" __ _.~ _~_~" _ _~ _ _. 17, 756, 001}
<br />6~inlll rate fol' tM utility proposal and yardstick system:
<br />, Tra-l).smission inv~stment ~_ .._._.__~~.~~~n___'_'c.nn_o_o_w__.w_o..~._ ,109,841, 000 .__~o.nouu_
<br />Operation, mPr.int~nancel and rep~acement .._._.___.__.___~"h__._~__d__ 36, 541,000 ___~_________.
<br />Federal tax on W.ijeelin~_ "_~_~_._._~_.~.~_.~.____~"__~_._~___~_~~~__~_.~_ 49,000, 000 _~~~"__.._____
<br />Wte~ggi~J:f~:r~!~~.~~:i~~:=:::::::==::::::::::::::::::::::::::::'::== ======:::===== 21i: ~~~: ~~
<br />
<br />T()ta1..~"~'___._;_~.~.._"._w_~~.~"W____~__u...~~.~_~.._~_._.___~________ 195,388,000. 221,851,000
<br />Dlfierenoo~~_...;, _ ._~ _:.: __~ _ ___~" __. _ ____. ~_~ _ ._~ _ .'__ _.~w" ._w _ _ ~_ _""_ __ _. ~~~ ROo.. __~" _. 26, 403, 000
<br />: .
<br />
<br />
<br />t For period 19M through '2M9.
<br />B Includes interest during construction.
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