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<br />, <br /> <br />. <br /> <br />. <br /> <br />Tudor Engineering <br /> <br />Page 4 <br /> <br />project's output will not be needed to meet peak load demands, so that the <br />project will be operated to produce base load power, and that the long-run <br />marginal cost is properly computed using the costs of a coal-fired thermal <br />plant producing base-load power. This should require only minor additional <br />computations beyond those included in the Interim Report, inasmuch as Tudor <br />has already assembled cost data for coal-fired steam base-load plants. <br /> <br />The data from the Interim Report can be used to illustrate this <br />decision analysis procedure in the case of Alternative 2. <br /> <br />Scenario A - Peaking Power Production <br />Average Annual Project Benefits - <br />Average Annual Project Costs - <br />Benefit/Cost Ratio - <br /> <br />$41,050,000 <br /> <br />$33,800,000 <br />1.21 <br /> <br />Scenario B - Peaking Power Production <br />Average Annual Project Benefits - <br />(229 GWH @ 65 mills/kwh) <br />Average Annual Project Costs - <br />Benefit/Cost Ratio - <br /> <br />$18,615,000 <br /> <br />$33,800,000 <br />0.55 <br /> <br />P {Scenario A} > 0.88 for EV(B/C ~atio) > 1.0 <br />EV (Benefits) = $33,800,000 = P ($41,050,000) + (1-P)($18,615,000) <br />Interpretation - The odds in favor of the existence <br />of adequate peaking power demand must be nearly <br />9 to 1 in order for the expected value of the <br />benefit/cost ratio to equal or exceed unity. <br />Alternatively, the project is not economically <br />justified if there is more than one chance in <br />ten that adequate peaking power demand will not <br />exist. <br />