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<br />,"lI\ <br />ti<".' <br />''',-(,.-' <br /> <br />4 <br /> <br />It should be noted that a power privilege charge for non-Federal <br /> <br />development supersedes or takes the place of a cost allocation of joint <br /> <br />project costs and satisfies the cost-sharing requirement. However, due to <br /> <br />certain legal and policy constraints, the same approach (power privilege <br /> <br />charge) is neither practical nor appropriate for Federal development, <br /> <br />operation, and marketing of hydropower. The procedures below which <br /> <br />allocate joint costs to power equal to 50 percent of net power benefits <br /> <br />(total benefits less separable costs) is conceptually the same as charging <br /> <br />50 percent of net revenues. The difference is that benefits are estimated <br /> <br />in advance and become fixed in the allocation; whereas, revenues are the <br /> <br />actual benefits as they accrue over time. <br /> <br />The foregoing considerations led to the allocation procedures outlined <br /> <br />and illustrated below which you are, to use for the Dallas Creek and <br /> <br />Dolores Projects. The resulting cost allocation for Dallas Creek is <br /> <br />enclosed as tables 1 and 2 to help explamn the method. <br /> <br />Steps in the allocation to small add-on hydropower are: <br /> <br />1. Capitalize current power benefits at the current plan formulation <br /> <br />rate (7-5/8 percent). <br /> <br />2. As shown in table 1, convert the "costs to be allocated" to <br /> <br />7-518 percent. <br /> <br />3. Assign separable costs of power to the power function and subtract <br /> <br />them from the present worth of power benefits. <br /> <br />4. Determine one-half of",the remaining net power benefits after <br /> <br />subtracting separable costs and assign this amount of project joints costs <br /> <br />to power. <br />