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, . . Tudor Engineering Page 5 Yet another source of uncertainty in the estimation of future hydroelectric power benefits by the alternative cost method lies in assumptions about future fuel costs. Tudor handled this issue in the Interim Report through sensitivity analyses showing the values of the evaluation criteria if substantial fuel cost escalation is assumed and if no escalation is assumed. This treatment is satisfactory and should be continued in the Phase II report. Uncertaintv Concernin2 Municioal Water Suoolv Benefits Evaluation of the benefits of project storage for municipal water supply purposes also involves substantial uncertainty, albeit of a somewhat different form. The same issue of the effect of price and demand elasticity upon future consumption levels which underlies the problematic nature of future peaking power demand and benefit calculations also underlies the estimation of municipal water supply benefits. However, I do not believe that it would be reasonable to ask Tudor to analyze this issue in Phase II, given the resources available for conducting that phase of the study. I believe that the questions which have been raised concerning municipal water supply benefits can be addressed adequately and at little cost in Phase II by adopting a sensitivity analysis approach similar to that which Tudor has applied to the fuel cost escalation issue in the Interim Report. In this case, municipal water supply benefits should be estimated in two ways, and the differing values of their pertinent evaluation. criteria which result should be shown for each alternative. The first method of benefit estimation should be the alternative cost of equivalent storage, as presently included in the Interim Report. However, this cost should be shown both in terms of per acre foot of storage and per acre foot -