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I. EXECUTIVE SUMMARY The initial power facilities of the Rio Grande Project (RGP) were placed in service in 1940. These facil ities were the Elepnant Butte Powerplant, consistin9 of three 8.1 MW generating units, the 6.9 - 115 kV Elephant Butte Switchyard, and 63 miles of 115-kV transmission line. Between 1941 and 1952, 428 miles of 115-kV transmission lines and several substations were added. In 1973 and 1979 the transmission lines and sub- stations were sold, except for the Hot Springs Substation, the sale of which is presently under negotiation. Present power customers are Plains Electric Generation and Transmission Cooperative and the City of Truth or Consequences, Power revenues must pay all annual power operating expenses, must pay all annual irrigation expenses in excess of those paid by the irri- gators, must repay power replacement costs with interest within the ser- vice lives of the equipment, must repay all power investment costs with interest within 50 years, and must repay all irrigation investment costs without interest in 60 years, except those paid by the irrigators. An electric power rate of 7.12 mills per kWh at 58.2 percent load factor was placed in effect in 1940 which was sufficient at that time to pay operating expenses and to repay within established periods all costs ass i gned to be repa id by the power revenues. The r ate was ch anged in 1949 to 6.64 mills per kWh. After 1950, conditions changed and power revenues were insufficient for repayment; the major changes were a low water supply and escalating operation and maintenance costs. Repayment studies since 1950 showed that the project was in finan- cial trouble. In an effort to improve the condition of the project, the Bureau of Reclamation initiated procedures for rate adjustments in 1973. A repayment study for Fiscal Year 1972 showed that a power rate of about 15 mills per kWh would be required for project payout. Because this rate was higher than competitive rates in the area, the Bureau increased the , RGP rate in April 1974 to only 8.15 mills, which was competitive with the rates of other power supplies in the market area. A repayment study for Fiscal Year 1974 showed that a rate of 24.5 mills would be required to repay the project costs, but the rate approved in 1978 was limited to 16,03 mills to be competitive with rates of other area power sources, The rate was increased in three phases to the follow- ing: 11.01 mills per kWh for April 1978 through March 1979 13.40 mills per kWh for April 1979 through March 1980 16.03 mills per kWh for April 1980 and thereafter Power repayment stud i es cont i nue to i nd icate that the ex i st ing power rate is insufficient to pay within allowable time frames the costs ass i9ned to the power funct ion. Several power repayment studies have been made for Fiscal Year 1980 and three options have been selected based on possible modes of future operation and marketing. Following is a des- cription of the three options and the power rate needed for each oj),t,'iClll'lLl ,~ II '..).1~.. ~J. 1