WSP09333

• File Number: 8220.100.40
• Description: CRSP
• Basin: Colorado Mainstem
• Date: 1/30/1961
• Author: USDOI
• Title: Forth Annual Report on the Statuts of the Colorado River Storage Project
• Water Supply Pro - Doc Type: Annual Report

COLORADO RIVER STORAGE, PROJECT

11

BUREAU COMMENTS ON CONSULTANTS} REPORT

In connection with reassessing the operation, maintenance and -replacement
costs of transmission facilities as recommended by the consuititntsl there are it
number of ways that have been used by the Bureau in estimating operation and
maintenance costs. Among them is the method suggested by the consultants,
using it percentage of investment in. tra;nsmission f:'tcilities. ~rom long experience
the Bureau has found that the applwatIOn of it ratIo of operatIOn and maintenance
{lasts to investment on one system may prove to be very unreliable and inaccurate
when applied to another system having different chamcterist,ics. In the case of
transmission facilities for the storage" project power system, the Bureau has
estimated operation and maintenance costs by considering the terrain traversed,
the isolation facltor of the facilities involved, the distance factor, and the require.
ment for repayment of applicable administrative and general ex.pense. Taking
luto account the above faotors, and experience on other similar Bureau systems,
personnell'equirements for transmission line and substation crews were developed
as the basis for deriving operation and maintenance costs. The consultants
advised that their figilres did not include administrative and general expenses.
However, in the Bureau's operations, administrative and general expenses aaso..
(dated with transmissi()n systems are reimbursable and must be included as a
part of operation and'. maintenance costs. The Bureau h,as reassessed its esti.
mates of operation, maintenanoe, and replacement costa as suggested by the oon-
sultants, but in light of the foregoing conoludes that no ohange in the estimates is
warranted.
In regard to the consultants' suggestion that a 230~kilovolt line from Curecanti
to Rangely be included as a part of the Federal system under the utilities' proposal,
it was pointed out that this line would complete the northern loop when the
Flagstaff.Glen Canyon...Salt Lake Oity line is completed. The Bureau. does not
normally provide reserVe transmission capacity, which would appear to be the
main pllrp08e of the suggested line. If this line were added to the Federal system
under the utility proposal, the construction costs of the Federal portion of the
transmission system would be increased almost $12 million and operation, main-
tenance'. and replacement costs would be increased about $83,000, annually. If
such a line provided o-QIy reserve capacity without any reduction in wheeling
charges, it would have ~the effect of increasing the spread between costs and
savings shown on table 2. If, on the other hand, the line served to reduce wheel..
ing oharges and is assumed to be treated in a manner similar to the Four Corners
displacement situation ~ set forth in the letter from Arizona Public Service Co.
dated September 26, 19no (see attaohment 4 of the appendix), the resultant
savings over the period of study would do little more than offset the increased
costs associated with the ~Iine.
The Bureau's est,imate: of Federal taxes forgone as shown in table 2 was com~
puted as a percent of investment in the manner described on page 42 of the
regional director's report. Although stating that the Bureau used a reasonable
approach, the consultants suggested that a, computation as a percent of revenue
was another practical method. Data from the Federal Power Commission show
Federal income taxes paiq by the five utilities amounted to an average of 10.1
percent of gross revenue over the period 1948-59. Oompilations of data from
the 1959 annual reports submitted to the Federal Power Oommission by these
five utilities show that tot~l Federal income taxes paid and/or deferred amounted
to 12.4 percent of gross revenues. Use of this 12.4 percent would result in a
present worth value of $28,400,000, or an amount less than the $30 million used
in table 2.

CONCLUSIONS

As directed by the House Interior and Insular Affairs Committee in Committee
Report No. 1087, and by bO. th the Senate and House Appropriations Commit. tees
in Senate Report No. 486 and House Report No. 424J respectively, the Bureau
has given long and careful conside.ration to the utility proposal, and as a l'esult
reaches the following conclusions:
If the utility proposal is accepted and power sold at the same power rates as
under the all-Federal system, the project could not meet the payout requirements
of the authorizing act. Consequently, if the proposal is accepted, the power
sold must produce larger r~~enues than would .be, th~ case ~nder the all-F:e<;leral
.'3ystem. Based upon obtalIi:lng the same totallrngatlOn aSSIstance to partIClpat~
ing projects by year 2049 as with the all~Federal system) the necessary revenue
increase would amount to al~out $254 million over the 8B-year study period. To
produc{:l this increased revenue would obvioUE~ly require that a higher average