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. . price. However, the long-run marginal cost of peaking power implicit in the Interim Report's calculations is 203 mills/kwh (composite rate) with fuel price escalation, or 190 mills without fuel price escalation. There is reasonable doubt that peaking power demand would grow at the 5 percent rate projected by the utilities if peaking power were to be priced at this estimated long-run marginal cost. In fact, it is not unreasonable to suppose that peaking power demand might grow very little, if at all, if such very large rate increases were to occur. While utilities in this area do not now price power, and particularly peaking power, at its long-run marginal cost, there are still indications that future power pricing will move in this direction due to the influence of the buy-back provisions of PURPA and the general trend of regulatory authorities (including the Colorado PUC) to strive for rates which reflect real marginal costs. But even if this change does not occur, and the peaking power load growth necessary to justify a Cache la poudre peaking plant is realized, it would then be improper to calculate benefits at the 203 mill rate when the power produced is, in fact, marketed at a lower rate. This would constitute a violation of the willingness to pay principle of benefit estimation. The problem of uncertainty about future peaking power demand and orice is so great and so fundamental to the evaluation of the Cache la poudre project alternatives that it deserves special attention in Phase II through a "break-even" analysis. This approach will highlight the uncertainties involved and their possible consequences, will provide a way of dealing adequately with that uncertainty, and will minimize the additional work required in Phase II. The purpose of this break-even analysis for hydropower benefits (peaking power only) is to estimate the minimum peaking power val ue (expressed as a compos i te of energy and capac i ty values) which would be required to make the power benefits just equal to the seperable costs for hydropower in alternatives 2 and 7. Hydropower Benefits (Non-Peaking). Run-of-river hydropower benefits wl.ll hc-c.stTmatccf using "nTtvalues developed in phase I of the study with an average plant factor for the four alternatives. This single value shall be considered a representative value for run-of-river hydropower for all four alternatives. M&I Benefits. The City of Fort Collins may satisfy its future water needs by building a new storage project to make water rights it now owns or may acquire usable. M&I benefits shall be estimated as the cost of the proposed new Fort Collins storage project (for 10,000 acre-feet of municipal storage), -4-