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<br />003410 <br /> <br />Utilities install units to meet "base loads," loads that are expected durin& <br />off-peak periods. Base load units (all coal-fired in Colorado) have low <br />operatin& costs but hi&h capital costs. They serve base loads economically <br />because their hi&h capital costs can be amortized over a lar&e amount of <br />ener&y output. Peakin& units have hi&h operatin& costs, because they <br />usually burn natural &as, but low capital costs. Thus, durin& off-peak <br />periods when all ener&y is bein& &enerated by burnin& coal, costs are low. <br /> <br />Durin& peak periods when natural &as is bein& burned in addition to coal, <br />'costs are hi&her. Because all utilities use "economic dispatch" (they use <br />first the source of power with lowest cost, second the source with the <br />second-lowest cost, and so forth), operatin& costs reach a maximum durin& <br />peak periods. <br /> <br />Emer&ency power is the most expensive. When physical dama&e forces <br />utilities to shut down equipment, the utilities draw on whatever resources <br />are available. Normally they contact other utilities for support durin& an <br />emer&ency, buyin& power in transactions that may take place within a matter <br />of minutes and at prices that can be very hi&h. <br /> <br />Survey of Contracts. Following is a survey of transactions among utilities <br />that illustrate the three basic types of contractual arrangements. Parties <br />to the transaction are named, the transaction is described and the price of <br />electricity is determined. (The results of the survey are summarized in <br />Table 2.1.). <br /> <br />1. Public Service Company (PSCo) and Colorado-Ute Electric Association <br />(CUEA). Since PSCo peaks in the summer and Colorado-Ute peaks in the <br />winter, the contract is desi&ned so that the. off-peak utility can support <br />the on-peak utility. That is, CUEA provides power to PSCo in the summer. <br />when CUEA has excess capacity. The reverse occurs in the winter. The <br />contract is "demand only," which means that the buying utility draws upon <br />the selling utility for capacity. In this contract the utility that draws <br />capacity is obliged to pay back ener&y drawn, but the repayment is in kwh at <br />some time in the future, not in money. <br /> <br />6 <br />