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<br />003412 <br /> <br />.4. Public Service Company and Redlands Water District. PSCo has a contract <br />to buy power from the Redlands Water District near Grand Junction. The <br />price of $lS.50/kw/month and 1.77i/kwh requires that Redlands be available <br />on peak. This contract was struck outside the normal procedures established <br />by the Federal Energy Regulatory Commission (FERC), though Redlands is a <br />small facility covered by the special federal regulations of the Public <br />Utilities Regulatory Policy Act of 1978 (PURPA). <br /> <br />PORPA requires that utilities buy power from small power producers at <br />"avoided costs. that are similar to what economists call marginal costs. <br />When a utility buys power from a small power producer instead of producing <br />power itself, the utility avoids certain costs, costs that the utility is <br />supposed to pay to the small power producer. The Colorado Public Utilities <br />Commission is charged with determining avoided costs exactly and with <br />establishing rates for small power producers. The rates established for <br />PSCo are shown in Table 2.1. (Tables appear at the end of each chapter.) <br />The rates are for small power producers who can supply power during peak <br />hours (8:00 a.m.. to 10:00 p.m.) and who can maintain a 7S~ availability <br />factor during those hours; prices would be lower for small power producers <br />who cannot meet these criteria. <br /> <br />Kethod Two: Unit Costs <br /> <br />Complicating the task of calculating the costs utilities incur when they <br />install and run their own equipment is the fact that utilities base their <br />accounting on historical investment costs rather than on replacement costs. <br />Thus, older plants seem cheaper than new ones because inflation has raised <br />the cost of new facilities. For example, the figures shown in the demand <br />column in Table 2.2 are derived from the original capital costs of the <br />plants, spread over the life of the units. The oldest plant shown is Nixon <br />and the newest is Rawhide. (Rawhide is to go on line in 1984, so costs are <br />estimated). Nixon appears cheaper than the others, Rawhide more expensive. <br /> <br />8 <br />