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" . . , Tudor Engineering Page 3 The problem of uncertainty about future peaking power demand and price is so great and so fundamental to estimating the benefits of Cache La Poudre alternatives that I have decided to give it special prominence through a simple decision analysis approach. This approach will highlight the uncertainties, and their possible consequences, which are involved, will provide a way of dealing adequately with that uncertainty, and will minimize the additional work required of Tudor in Phase II. The essence of the decision analYSis approach is to construct two scenarios and to carry through the analysis of each alternative in the context of each of those scenarios. The result will be an estimate of the value of each of the evaluation criteria for each of the alternatives for each scenario. Then, for each alternative, the expected value method will be used to determine the minimum outcome probability for the higher valued of the two scenarios which would be required to produce an expected value of the benefit-cost ratio just equal to unity. Both of the two scenarios will be based upon the assumptions that the project under evaluation is built to produce peaking power, thus requiring no reworking of Tudor's previous project formulations, and that the long-run marginal cost avoided is the appropriate measure of project benefits. The fist scenario will be based upon the additional assumptions that the project's output of peaking power will be needed to meet peak load demands throughout the life of the project, and that long-run marginal cost is properly computed using the coal cycling alternative employed by Tudor in the Interim Report, but incorporating the refinements already suggested by Tudor and the interest rate adjustment which I will discuss later in this letter. The second scenario will be based upon the assumptions that the