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CHAPTER 1 PURPOSE AND NEED Electrical Power Power from the proposed facility would be sold to local utilities. For the first 15 years of project operation, capacity and energy would be sold to the Public Service Company of Colorado for resale to its customers. The 15-year power sales contract signed in 1988 would coincide with the financing term for project related debt. Beginning in year 16, the Sponsors would be free to select a different power purchaser for the balance of the lease term with Reclamation. Under the Public Utilities Regulatory Policies Act of 1978 (PURPA), Sponsors are assured a market for project power at rates not to exceed the purchasing utility's "avoided cost." Avoided cost is generally defined as the cost a utility would incur to provide an equivalent amount of generation. The avoided cost standard was developed to ensure that electric rate payers would be indifferent to such purchases. Power sales from the project at rates less than or equal to avoided costs would thus be economical when compared to other alternatives. Electrical power needs within specific service territories are forecast by individual utilities. Public Service Company of Colorado, in their 1987 forecast of loads and resources (PSCo, 1987), showed the need for 472 megawatts (MW) of additional capacity to meet minimum reserve criteria in 1992 (the facility's first year of operation), increasing to over 1,100 MW by 1996 (the last year in the 10-year forecast). The December 1988 version of this plan (PSCo, 1988) showed power needs to range from 500 MW in 1992 to 1,000 MW by 1998. Generation from the proposed project, as well as other independent small power producers, is expected to fill a portion of that need. In accordance with those forecasts and conditions, the project's power sales agreement was approved by the Colorado Public Utilities Commission in June 1988 (CPUC, 1988). Demand forecasts for the larger Rocky Mountain Power Area (Colorado and parts of Wyoming and South Dakota) are published annually by the Western Systems Coordinating Council (WSCC). The 1988 WSCC forecast showed the need for 1,568 MW of new capacity in the area from 1988 to 1997 (WSCC, 1988). The Federal Energy Regulatory Commission (FERC) also provides independent assessments of power needs. Within Colorado in 1988, FERC has established the need for new power resources in environmental assessments for hydropower projects at paonia Dam (44FERC 62,010 7/1/88), Lemon Dam (43FERC 62,305 6/16/88), and Maroon Creek (Project 10,441, 7/20/88). The proposed AB Lateral Facility, under a 40-year lease from Reclamation and with a potential 100-year project life, would be useful in meeting a portion of 1 -4