HomeMy WebLinkAboutPreliminary Market & Financial Assessment, Lake Tyee to Swan Lake Intertie, March 1991et
SINE AH >
a
PRELIMINARY
MARKET AND FINANCIAL ASSESSMENT
LAKE TYEE TO SWAN LAKE INTERTIE
a
ALASKA ENERGY
AUTHORITY
MARCH 1991
RW. BECK
AND ASSOCIATES, INC.
in association with
&® A Recycled Paper Product RSA ENGINEERING, INC.
RW, BECK
AND ASSOCIATES, INC.
Fourth and Blanchard Building, Suite 600 m 2101 Fourth Avenue @ Seattle, Washington 98121-2375 m USA
Telephone (206) 441-7500 m Fax (206) 441-4962
WS-2113-AA1-AX March 21, 1991
Alaska Energy Authority
701 East Tudor Road
Anchorage, Alaska 99519
Preliminary Market and
Financial Assessment of the
Lake Tyee to Swan Lake Intertie
In accordance with the terms of our agreement, we have completed and herewith submit
the report on the subject study. This study has been prepared pursuant to our subconsultant
agreement with RSA Engineering, Inc., dated September 15, 1990, and the Alaska Energy
Authority’s Contract Number 2800308 with RSA Engineering, Inc.
We appreciate the cooperation given to us by the Alaska Energy Authority, Ketchikan
Public Utilities, and the Thomas Bay Authority during the course of our study.
Respectfully submitted,
Austin, TX = Boston, MA = Columbus, NE = Denver, CO @ Indianapolis, IN = Minneapolis, MN
Nashville, TN = Orlando, FL m Phoenix, AZ m Sacramento, CA m Seattle, Washington
Preliminary Market and Financial Assessment
of the
Lake Tyee to Swan Lake Intertie
for the
Alaska Energy Authority
Table of Contents
Section Description
Letter of Transmittal
Table of Contents
List of Tables
List of Figures
1 Executive Summary
Introduction
Methodology of Analysis
Summary of Findings
2 Introduction
Purpose of Report
Methodology of Analysis
Principal Assumptions
3 Transmission Project Overview
General Description
Estimated Cost of Construction
Estimated Operating Costs
4 Market Analysis
General Description of Market Area
Hydroelectric Generation Capability
Projected Electricity Requirements
Use of the Project
Benefits of the Project
Estimated Available Payments for the Project
5 Financial Analysis
Funding Sources
Estimated Financing Requirements
6 Sensitivity Analysis
Introduction
Altemative Load Requirements
Alternative Fuel Price
Alterative Interest Rates
Alternative Bond Term
7 Other Considerations
Expansion of the Lake Tyee Project
Interconnection with Metlakatla wnNnre ONDD 11
12
13
18
18
19
20
21
83
33
38
38
38
38
39
50
50
Table
Preliminary Market and Financial Assessment
of the
Lake Tyee to Swan Lake Intertie
for the
Alaska Energy Authority
List of Tables
Description
Comparison of Estimated Financing Requirements
Estimated Unit Costs of Construction
Estimated Total Costs of Construction
Estimated Construction Cash Flow Requirements
Existing Power Requirements and Generation Capacity
Projected Peak Demand and Total Energy Requirements - Base Case
Derivation of Surplus Tyee Power and Ketchikan Need for Tyee
Base Case - Cost Analysis - Price Scenario A
Base Case - Cost Analysis - Price Scenario B
Lake Tyee and Swan Lake Hydroelectric Projects -
Summary of Operating Assumptions
Estimated Financing Requirements and Sources and Uses of Funds -
Tyee Price Scenario A
Estimated Financing Requirements and Sources and Uses of Funds -
Tyee Price Scenario B
Sensitivity Analysis - Comparison of Estimated
Financing Requirements
Projected Peak Demand and Total Energy Requirements - Low Case
Projected Peak Demand and Total Energy Requirements - High Case
Low Load Case - Cost Analysis
Diesel Fuel Cost Assumptions
Low Fuel Cost Case - Cost Analysis
High Fuel Cost Case - Cost Analysis
Lake Tyee Third Unit - Estimated Cost of Construction
Metlakatla Impact Analysis
14
15
16
22
23
24
38
30
32
35
36
40
41
42
43
45
46
48
52
$3
3-1
5-1
Preliminary Market and Financial Assessment
of the
Lake Tyee to Swan Lake Intertie
for the
Alaska Energy Authority
List of Figures
Description
Tyee-Swan Intertie - Location Map
Comparison of Incremental Power Costs - With and Without Intertie 37
1. EXECUTIVE SUMMARY
Introduction
In 1987, the Alaska Energy Authority (the "Authority") conducted a reconnaissance level study
of several possible transmission interconnections in Southeast Alaska. Several of the interconnections
evaluated were found to have potential for long-term economic benefits, one of which included a 138-
kilovolt transmission line (the "Intertie" or the "Project") connecting the Lake Tyee hydroelectric project
to Ketchikan Public Utilities ("KPU") through the Swan Lake hydroelectric project. A new electric load
forecast for Lower Southeast Alaska including the Lake Tyee and Swan Lake market areas was completed
in June 1990. This new forecast indicated that electric loads in the Ketchikan area had grown
considerably since 1987 and that under various scenarios would continue to grow, possibly substantially,
in the near to intermediate future. As a result, the Authority deemed it appropriate to conduct a
preliminary assessment of the market and financial feasibility related to development of the Intertie (the
"Study"). This report summarizes the analysis undertaken and the results of the Study.
The Intertie is intended to interconnect the Lake Tyee and Swan Lake hydroelectric projects, both
of which are owned by the Authority as a part of the Four Dam Pool. Through this proposed transmission
connection, the electric systems of Ketchikan, Wrangell and Petersburg will be interconnected. Presently,
Petersburg Municipal Power & Light ("PMP&L") and Wrangell Municipal Light & Power ("WML&P"),
both municipally-owned, are the only utilities interconnected with the Lake Tyee project and purchase
most of their electricity requirements from this resource. A substantial amount of surplus power is
available from Lake Tyee that could be used by other utilities if transmission lines were available. KPU
is the only electric utility interconnected with the Swan Lake project and is expected to fully utilize the
annual generation potential of this resource within a few years. The Intertie would provide KPU with
access to the Lake Tyee project and its generation surplus to the needs of PMP&L and WML&P.
Methodology of Analysis
The primary goal of the Study was to determine the amount of debt that the Intertie could support
and the amount of additional funding required to construct the Intertie. Related analysis included the
estimation of the amount of surplus generation available from the Lake Tyee project, determination of the
amount of power KPU can utilize from Lake Tyee, estimation of the potential savings to KPU resulting
from utilization of Lake Tyee power as opposed to available alternative resources, and estimation of the
level of debt repayment that could be made towards Intertie related debt obligations without negatively
affecting the cost of power to the utilities’ customers.
Part of the costs associated with the Intertie may include debt service on revenue bonds, assuming
that a portion of the costs of the Intertie are to be financed with revenue bonds. In the analysis, the size
of the debt issue has been determined such that the resulting costs of power to KPU with the Intertie are
not significantly greater than those costs without the Intertie. State contributions are assumed to fund the
remaining costs of constructing the Intertie.
The following steps describe the approach used to perform the Study:
1. Determine the estimated amount of Lake Tyee power surplus to the needs of
WML&P and PMP&L for each year of the Study Period.
Tyee - Swan Intertie Study -1- R. W. Beck and Associates, Inc.
2 Determine KPU’s need for power additional to that supplied by the Swan Lake
project and KPU’s municipally owned hydroelectric resources.
3. Estimate the cost of KPU’s diesel generation resource which is additional to its
hydroelectric generation.
4. Based on the estimated savings in diesel generation costs, determine the amount
that KPU could pay for the cost of power from Lake Tyee without adversely
affecting the cost of power to KPU customers.
_ Update the cost estimate for the Intertie that was originally developed in 1987
by Harza Engineering Company ("Harza") as part of the Authority’s Southeast
Intertie Study.
6. Develop annual operating cost estimates for the Intertie and estimate applicable
wheeling rates.
a Based on the estimated amount available to be paid for power purchased over the
Intertie and the cost of operating the Intertie, determine the amount of debt
service that could be paid on Intertie debt.
8. Estimate the amount of revenue bonds supported by the available debt service
payment and determine the resulting State contribution required to complete
financing of the Intertie.
9. Evaluate the effects of various alternative load forecast and oil price scenarios on
the results of the financing requirement estimates.
The analysis was prepared on an annual basis for a twenty-year study period, 1991 through 2010.
Much of the information used as a basis for the analysis was prepared by others as a part of previous
Studies funded by the Authority. Principal among these are the load forecast projections developed by the
Institute of Social and Economic Research ("ISER") dated June 1990 and the Southeast Intertie Study
conducted by Harza Engineering in 1987.
Power sold from the Lake Tyee and the Swan Lake Projects is sold by the Authority under
provisions of the Four Dam Pool Power Sales Agreement. The analysis assumes that KPU would
purchase power over the Intertie at a price that reflects KPU’s expected cost of diesel generation either
in 1996 or 1999, with the price remaining constant thereafter. These payments by KPU could contribute
to Tyee revenues, or to payment of Intertie costs, or to both. Two scenarios are considered: (a) KPU
payments contribute first to Tyee revenues according to the terms of the Four Dam Pool power sales
agreement, with any remaining balance contributing to Intertie costs, and (b) KPU payments are dedicated
entirely to payment of Intertie costs, with no additional revenue accruing to Four Dam Pool revenue for
surplus power sales to KPU.
Revenues from potential surplus energy sales to Ketchikan Pulp Company ("KPC") are not
included in the estimates of amounts available to pay the costs of the Intertie. It is assumed, however,
that with the Intertie, KPC would purchase power from Lake Tyee at a rate similar to that which it pays
currently for surplus power from Swan Lake. It is estimated that revenues from surplus energy sales to
KPC would be split evenly between the State, the Four Dam Pool Project Management Committee and
Tyee - Swan Intertie Study -2- R. W. Beck and Associates, Inc.
the retail utility. In this case, PMP&L and WML&P are assumed to be the retail utility for sales related
to Lake Tyee.
Summary of Findings
In its October 1987 report, Harza estimated the cost of construction of the Intertie to be
$28,903,000. Using the basic material and labor requirements developed by Harza, we have updated the
cost estimate of the Intertie to 1991 dollars to account for actual increases in labor and material since
1987. Although basic labor and material costs were not reestimated but rather were increased by
experienced changes in price levels, a change in the width of the Intertie right of way assumed by Harza
increased the cost of right of way clearing. In constant 1991 dollars, the cost of the Intertie is estimated
to be $39,798,000.
It is estimated that the Intertie can be engineered, permitted, designed, and constructed over a five
year period. Construction can be accomplished in about one-and-one-half years over two construction
seasons. Although engineering and other developmental efforts could conceivably be done in about one
year, the Authority indicates that its experience for similar projects would require about three years for
study and development prior to initiation of construction. Based on a five year development and
construction schedule for the Intertie and an assumed annual inflation rate of 4.5 percent, the total cost
of construction is estimated to be $45,871,000 in nominal dollars.
The benefits of the Intertie will be in reduced diesel generation costs for KPU. These benefits
are offset in part by the cost of purchased power from Lake Tyee and the cost of operating the Intertie.
The costs of a transmission line are typically recovered through charges assessed on the power transmitted
over the line referred to as "wheeling charges". For this analysis, the wheeling charges to be assessed for
transmission have been estimated based on the projected costs of operation of the Intertie, inclusive of debt
repayment costs, and are assumed to be charged on a fixed cost basis each year rather than on a per KWh
or variable basis. Upon payment of operations and maintenance expenses and the costs of purchased
power, it is assumed that the remaining savings will be available for Intertie debt repayment.
The total estimated present value in 1991 of diesel generation cost savings to KPU with the
Intertie is $28.1 million over the Study period, 1996 through 2010, exclusive of any savings to KPC.
Over this same period the estimated present value of payments to the State for KPU purchases of Tyee
power, if priced according to the provisions of the Four Dam Pool Power Sales Agreement, is $12.2
million, of which approximately half is related to payment of the Four Dam Pool debt service component.
Subtracting the estimated cost for power purchased from Lake Tyee (based on the pricing provisions of
the Four Dam Pool Power Sales Agreement-Tyee Price Scenario A) and the operations and maintenance
costs of the Intertie yields the amount available for debt repayment, estimated to be $602,000 in 1996, the
first year of Intertie operation. As diesel fuel prices escalate over time, the amount available for debt
repayment increases. In 1999, it is estimated that KPU diesel generation savings with the Intertie would
allow $1,185,000 of debt repayment in that year if KPU were to break-even on diesel generation power
costs.
If power from Lake Tyee were provided at no cost to KPU (Tyee Price Scenario B), the amount
available for Intertie debt repayment would be $1,984,000 in 1996 and $2,944,000 in 1999.
Although other means may be available, the most likely approach to finance the Intertie appears
to be a combination of Authority issued revenue bonds and State contributions. Amounts to be secured
from each funding source will depend on the relative costs of each and the level of debt repayment that
the Intertie can support. While a legal opinion will be required, revenue bonds issued to finance the
Tyee - Swan Intertie Study -3- R. W. Beck and Associates, Inc.
Intertie would probably be tax-exempt because the repayment of debt through wheeling charges would
be made almost exclusively by the city of Ketchikan, an exempt agency under the Internal Revenue
Service Code. State appropriations are assumed to be provided at the beginning of Intertie development
and would therefore be available to pay all initial development, engineering and design, and construction
costs until the appropriation is exhausted. It is assumed that interest eamings on the appropriations will
accrue to the Project.
For purposes of this analysis, the amount of revenue bonds that can be supported by the Intertie
has been estimated under two different scenarios: (1) annual costs with the Intertie are equal to the
alternative costs in the first year of operation, and (2) annual costs with the Intertie are higher than the
cost of the alternative in the first three years of Intertie operation and equal in the fourth year of Intertie
operation. This is to say that the amount of revenue bonds has been estimated so that the cost of power
to be purchased by KPU over the Intertie is equivalent to the cost of diesel generation in either the first
or fourth year of Intertie operation. Since the cost of diesel generation is being projected to increase over
time and the annual costs of the Intertie will be essentially fixed, the costs of power over the Intertie will
decrease relative to the costs of diesel generation.
Table E-1 shows the estimated financing requirements and sources of funds for the two Lake Tyee
pricing scenarios, respectively. The pricing scenarios, labeled A and B, indicate the assumptions regarding
the cost of the Lake Tyee power to KPU. Scenario A assumes that the cost of Lake Tyee power to KPU
is based on the provisions of the Four Dam Pool Power Sales Agreement. Scenario B assumes that there
is no cost to KPU for the power purchased from Lake Tyee. All diesel generation savings to KPU
resulting from construction of the Intertie are assumed to be applied toward the costs of the Intertie in
Scenario B.
As can be seen in Table E-1 for pricing Scenario A where KPU pays for Lake Tyee power, only
$6.2 million of revenue bonds could be issued if the Intertie costs were to break-even in the first year of
operation. This amount increases to $12.4 million if the fourth year is considered the break-even year.
State appropriations for the two break-even scenarios are $31.0 million and $27.5 million, respectively.
Table E-1 indicates that, for pricing Scenario B, assuming KPU would not pay for Lake Tyee
power, $22.5 million of revenue bonds could be issued if the Intertie costs were to break even in the first
year of operation. If costs were to break even in the fourth year of operation, the revenue bond amount
would increase to $31.4 million. For the first and fourth year break-even cases, the necessary State
appropriation would be $22.5 million and $17.0 million, respectively. The overall costs of power
purchased over the Intertie by KPU will be essentially the same for pricing Scenarios A and B and, as
such, Figure 5-1 represents the comparable costs for both scenarios. In pricing Scenario B, KPU does not
pay for power purchased from Lake Tyee but instead pays larger amounts toward Intertie debt service.
Several assumptions were made in evaluating the effects of the Intertie. Because these
assumptions are only estimates of conditions that may or may not occur in the future it is necessary to
observe the effect on the results of the analysis of the variation of key input assumptions. In particular,
the load requirements of KPU and the cost of diesel fuel will have a significant effect on the feasibility
of the Intertie. In evaluating the effects of changing the assumptions, the primary comparison is between
the base case and the particular sensitivity case. Affects of changing certain assumptions on the total
estimated financing costs of the Intertie are shown in Table E-1.
Tyee - Swan Intertie Study -4- R. W. Beck and Associates, Inc.
Table 1-1
Table 1-1
Tyee — Swan Intertie Study
Comparison of Estimated Financing Requirements
($000)
Present
Funding Requirements (1) Value of
First Year Breakeven Fourth Year Breakeven Payments
Case Bonds State Bonds State to Tyee (2)
Base Case (3)
Tyee Price Scenario A (4) $6,200 $31,000 $12,400 $27,500 $12,224
Tyee Price Scenario B (5) 21,400 22,500 31,400 17,000 0
Alternative Assumptions (6)
Low Load Forecast (7) 0 34,500 0 34,500 0
Low Fuel Cost (8) 2,600 33,000 7,100 30,500 12,224
High Fuel Cost (9) 9,700 29,000 17,800 24,500 12,224
15 Year Bond Repayment (10) 16,900 25,000 25,000 20,500 12,224
(1) - Estimated amount of revenue bonds based on amounts available to pay debt service and required
State grant to complete funding requirements. Amounts available to pay debt service are
based on power costs with the Intertie breaking even with costs without the Intertie in
either the first or fourth year of Intertie operation.
(2) - Estimated present value of payments to the State for purchases of power by KPU from the Lake
Tyee project between 1996 and 2010. Assumes discount rate of 8.0%.
(3) - Base Case assumptions include medium load forecast for KPU, high load forecast for WML&P and
PMP&L, medium fuel escalation, and a revenue bond interest rate of 9.0% and repayment period of
25 years.
(4) - Assumes payment for power purchased from Lake Tyee by KPU is priced similarly to rates paid
currently by Four Dam Poo! participants.
(5) - Assumes KPU pays nothing for power purchased from Lake Tyee. Revenues which would have gone
to pay for Lake Tyee power are paid towards Intertie debt service instead.
(6) - Results of the sensitivity analysis are dervived using the Tyee Price Scenario A and all
assumptions other than the specifically changed assumption are those provided for the
Base Case.
(7) - Based on low load forecast for KPU.
(8) - Assumes lower diesel fuel cost escalation as provided by the Authority.
(9) - Assumes higher diesel fuel cost escalation as provided by the Authority.
(10) - Based on 15 year bond repayment period. Assumes Tyee Price Scenario B.
Tyee - Swan Intertie Study -5- R. W. Beck and Associates, Inc.
2. INTRODUCTION
Purpose of Report
In 1987, the Alaska Energy Authority (the "Authority") conducted a reconnaissance level study
of several possible transmission interconnections in Southeast Alaska. Several of the interconnections
evaluated were found to have potential for long-term economic benefits, one of which included a 138-
kilovolt transmission line (the “Intertie" or the "Project") connecting the Lake Tyee hydroelectric project
to Ketchikan Public Utilities ("KPU") through the Swan Lake hydroelectric project. Projected electricity
requirements for the Ketchikan area did not indicate a need to proceed with development of the Intertie
at that time. A new electric load forecast for Lower Southeast Alaska including the Lake Tyee and Swan
Lake market areas was completed in June 1990. This new forecast indicated that electric loads in the
Ketchikan area had grown considerably since 1987 and that under various scenarios would continue to
grow, possibly substantially, in the near to intermediate future. As a result, the Authority deemed it
appropriate to conduct a preliminary assessment of the market and financial feasibility related to
development of the Intertie (the "Study"). The Authority retained the services of RSA Engineering, Inc.,
and R.W. Beck and Associates, Inc., in October 1990 to conduct the Study. This report summarizes the
analysis undertaken and the results of the Study.
The Intertie is intended to interconnect the Lake Tyee and Swan Lake hydroelectric projects, both
of which are owned by the Authority as a part of the Four Dam Pool. Through this proposed transmission
connection, the electric systems of Ketchikan, Wrangell and Petersburg will be interconnected. Presently,
Petersburg Municipal Power & Light ("PMP&L") and Wrangell Municipal Light & Power ("WML&P"),
both municipally-owned, are the only utilities interconnected with the Lake Tyee project and purchase
most of their electricity requirements from this resource. A substantial amount of surplus power is
available from Lake Tyee that could be used by other utilities if transmission lines were available. KPU
is the only electric utility interconnected with the Swan Lake project and is expected to fully utilize the
annual generation potential of this resource within a few years. The Intertie would provide KPU with
access to the Lake Tyee project and its generation surplus to the needs of PMP&L and WML&P.
The Study is intended to quantify the amount of surplus generation available from the Lake Tyee
project, determine the amount of power KPU can utilize from Lake Tyee, estimate the potential savings
to KPU resulting from utilization of Lake Tyee power as opposed to available alternative resources, and
estimate the level of debt repayment that could be made towards Intertie related debt obligations without
negatively affecting the cost of power to the utilities’ customers. The Study also updated the construction
cost estimate for the Intertie which was originally developed in 1987, and the derivation of necessary
"wheeling" rates for transmission over the Intertie were to be derived. In addition, the cost of expanding
the Lake Tyee project to include a third 10-megawatt turbine generator and the potential operating benefits
of this action were to be investigated. The effects of interconnecting Metlakatla with Ketchikan on the
financial feasibility of the Intertie were also to be estimated.
This report provides an overview of assumptions, methodology, results and conclusions of the
Study. It is intended to serve as a document for presentation to the Authority, the utilities and
communities of Lower Southeast Alaska and the State Legislature.
Methodology of Analysis
The primary goal of the Study was to determine the amount of debt that the Intertie could support.
Even though a capital project such as the Intertie may be projected to provide economic benefits over its
life, debt service obligations usually result in the cost of power from the project being higher than the cost
Tyee - Swan Intertie Study -6- R. W. Beck and Associates, Inc.
of its alternative in the near term. If the project costs are significantly higher, electricity rates may need
to be increased so as to unnecessarily burden the utility customers. Accordingly, the Study estimates and
compares the costs that KPU would incur with and without the Intertie.
Part of the costs associated with the Intertie may include debt service on revenue bonds, assuming
that a portion of the costs of the Intertie are to be financed with revenue bonds. In the analysis, the size
of the debt issue has been determined such that the resulting costs of power to KPU with the Intertie are
not significantly greater than those costs without the Intertie. State contributions are assumed to fund the
remaining costs of constructing the Intertie. A more complete description of the financing options and
parameters for the Intertie is provided in Section 5 of this Report.
The following steps describe the approach used to perform the Study:
1. Determine the estimated amount of Lake Tyee power surplus to the needs of
WML&P and PMP&L for each year of the Study Period.
2. Determine KPU’s need for power additional to that supplied by the Swan Lake
project and KPU’s municipally owned hydroelectric resources.
ne Estimate the cost of KPU’s diesel generation resource which is additional to its
hydroelectric generation.
4. Based on the estimated savings in diesel generation costs, determine the amount
that KPU could pay for the cost of power from Lake Tyee without adversely
affecting the cost of power to KPU customers.
5. Update the cost estimate for the Intertie that was originally developed in 1987
by Harza Engineering Company as part of the Authority’s Southeast Intertie
Study.
6. Develop annual operating cost estimates for the Intertie and estimate applicable
wheeling rates.
7. Based on the estimated amount available to be paid for power purchased over the
Intertie and the cost of operating the Intertie, determine the amount of debt
service that could be paid on Intertie debt.
8. Estimate the amount of revenue bonds supported by the available debt service
payment and determine the resulting State contribution required to complete
financing of the Intertie.
9. Evaluate the effects of various altemative load forecast and oil price scenarios on
the results of the financing requirement estimates.
The analysis was conducted using annual projections of load requirements and hydroelectric
generation capability. A more sophisticated and time consuming approach for a system heavily dependent
on hydroelectric resources would be to evaluate the projected hourly load requirements of the utility and
the hourly operation of the hydro reservoirs. This approach, which is beyond the scope of this Study
primarily because of the lack of necessary data, more thoroughly accounts for the operating restrictions
on the hydroelectric system as it pertains to the load requirements placed on it. Although such an analysis
Tyee - Swan Intertie Study -7- R. W. Beck and Associates, Inc.
should be included in any subsequent evaluations of the Intertie, it is not anticipated that the results would
be significantly different from the results of this Study.
The analysis has also been oriented as a financial analysis rather than an economic analysis. The
financial analysis evaluates nominal cost effects on a year by year basis while an economic analysis tends
to determine the present value of the costs and benefits of a project over an extended period of time,
typically the life of the project.
Principal Assumptions
The analysis was prepared on an annual basis for a twenty-year study period, 1991 through 2010.
Much of the information used as a basis for the analysis was prepared by others as a part of previous
studies funded by the Authority. Principal among these are the load forecast projections developed by the
Institute of Social and Economic Research ("ISER") dated June 1990 and the Southeast Intertie Study
conducted by Harza Engineering in 1987.
Power sold from the Lake Tyee and the Swan Lake Projects is sold by the Authority under
provisions of the Four Dam Pool Power Sales Agreement. It is assumed that the cost of power purchased
from Lake Tyee by KPU will be sold according to two alternative scenarios, (a) at rates for surplus power
sales identified in the Four Dam Pool Power Sales Agreement, and (b) at no cost. The Four Dam Pool
Sales Agreement has the provision of a "rate reopener" every fifteen years which is intended to evaluate
the level of sales from the Four Dam Pool projects and the status of various costs and financing needs.
A significant adjustment could be made to the power sales rates at the time of a reopener if circumstances
warranted, though no such adjustment is assumed for this analysis. In addition, the cost of power to KPU
from Lake Tyee may be subject to some negotiation according to the Authority.
Several other assumptions were critical to the analysis and are summarized as follows:
1. General inflation of 4.5 percent per year.
2. Tax-exempt financing on the portion of Intertie costs that are to be funded from
bonds at an annual interest rate of 9.0 percent, 25-year amortization period and
interest capitalized six months past the expected on-line date.
3. Financing fees related to bond issuance are estimated to be 3.0 percent of the
amount of bonds and a debt service reserve fund equal to one year’s level debt
service is to be established at the time of financing. No reserve and contingency
fund or working capital is to be financed.
4. State contributions, as needed, will be assumed to be granted to the Intertie
construction fund upfront permitting accrual of interest eamings to the intertie
construction fund as is the case with the Alaska Industrial Development and
Export Authority ("AIDEA") and the Healy Clean Coal Project.
5. Interest earnings accrue on Intertie related funds at an annual rate of between 7.5
percent and 9.0 percent depending on the nature of the fund.
6. The cost of power purchased by KPU from Lake Tyee will be priced under two
alternative scenarios as follows:
Tyee - Swan Intertie Study -8- R. W. Beck and Associates, Inc.
a. According to the provisions of the Four Dam Pool Power Sales
Agreement for additional power sales. (Tyee Price Scenario A)
Power will be sold with a debt service component of 3.0 cents per
KWh and an operations and maintenance ("O&M") component
based on the current Four Dam Pool O&M budget inflated
annually. The O&M component, currently at 2.4 cents per KWh,
is determined based on annual O&M costs distributed
proportionally to each Four Dam Pool utility according to power
purchases from the Four Dam Pool projects. Estimated sales of
Lake Tyee power to KPU over the Intertie have been factored in
to the projected O&M component for this analysis (Tyee Price
Scenario A).
b. At no cost. (Tyee Price Scenario B) This pricing alternative is
based on the assumption that because transmission
interconnections, such as the Intertie, were not anticipated at the
time of the Four Dam Pool was established, the provisions of the
Four Dam Pool Power Sales Agreement would not apply to sales
over the Intertie and that an appropriate power sales rate would be
negotiated. This is consistent with the existing Four Dam Pool
policy of negotiating rates for sales of non-firm surplus power.
as As KPU loads grow, KPU will be able to utilize the full annual energy output
of the Swan Lake project. This may require a change in the management of
KPU’s generation resources from present operation practices.
8. Oil prices for generation fuel are to increase based on projections of world oil
prices developed by the Authority in October 1989. These world oil prices are
shown below in constant 1988 dollars and in nominal dollars based on a 4.5
percent annual inflation rate:
Low Middle High
1988 Nominal 1988 Nominal 1988 Nominal
1990 13 14.2 16 17.5 19 20.7
2000 14 23.7 20 33.9 26 44.1
2010 15 39.5 25 65.8 35 92.2
Presently, diesel fuel costs in Ketchikan are indicated to be approximately $1.10
per gallon. It is intended that the long-term fuel cost projections used in the study
disregard the upswing in prices that occurred in the latter part of 1990.
9. The variable operations and maintenance cost of diesel generation is assumed to
be 1.0 cents per KWh in 1990 dollars based on an estimate provided in KPU’s
most recent rate study dated December 1989. This is the portion of diesel
generation operations and maintenance cost that is incurred only if diesel
generators are operated. Other costs of diesel operations and maintenance are
assumed to remain fixed regardless of whether or not diesel generators are
Tyee - Swan Intertie Study -9- R. W. Beck and Associates, Inc.
operated. A previous study performed for the Authority assumed the variable
diesel operations and maintenance cost to be 3.0 cents per KWh which represents
nearly all operations and maintenance expense.
10. Community load forecasts to be used in the Study are from the report dated June
25, 1990, prepared for the Authority by ISER.
11: No capacity benefits are assumed for the Intertie. The individual communities
will continue to require backup generation capability for the single largest
generation contingency on each system. For KPU, this contingency is presently
the entire Swan Lake system. Projected sales to Ketchikan Pulp Company
("KPC") will be on a non-firm basis, i.e. KPU will not need to maintain backup
reserve to supply this component of its load.
12 Power sales to KPC by KPU will only continue as long as surplus power from
the Swan Lake project is available and, with the Intertie, as long as surplus
power from either the Swan Lake or Lake Tyee project is available. Estimated
revenues from the sale of surplus Lake Tyee power to KPC are not included in
the evaluation of revenues available to pay Intertie operations or debt service
costs. Revenues from Lake Tyee sales to KPC are instead assumed to be
allocated evenly to WML&P and PMP&L, the State, and the Four Dam Pool
Project Management Committee.
Tyee - Swan Intertie Study - 10- R. W. Beck and Associates, Inc.
3. TRANSMISSION PROJECT OVERVIEW
General Description
The Southeast Alaska Transmission Intertie report prepared by Harza Engineering Company for
the Authority dated October 1987 described four alternative routes for the Intertie. At the time of that
study, Alternative B was recommended as the lowest cost alternative. Our review of the description of
the alternative transmission routes included in the Harza study indicates, however, that Alternative A is
actually the lowest cost alternative. Alternatives A and B differ only slightly in the location of one section
of the Intertie. The description, specifications and cost estimate included herein are based on Harza’s
Alternative A as the selected route. For the purposes of this Report, we have relied entirely upon the
specifications and routing of the Intertie developed by Harza in 1987. See Figure 3-1 for a map of the
proposed Intertie route as prepared by Harza Engineering Company in 1987.
The selected route of the Intertie parallels the existing Tyee Lake to Wrangell transmission line
for approximately four miles from the Lake Tyee switchyard, tums south into the Eagle River drainage
area and crosses the Behm Canal at Point Lees with a submarine-cable to Revilla Island. An overhead
line then continues from Behm Canal through the Beaver and Kalm Creek drainages, tums eastward and
follows existing and planned U.S. Forest Service logging roads to the Swan Lake switchyard, crossing
Orchard Creek in the process. In total, the Intertie will be 49.1 miles long and will include 4,200 feet of
submarine cable with the remainder being overhead transmission line. The Intertie is specified for
transmission at 138 kilovolts.
Power over the Intertie will be transmitted from the Swan Lake project to KPU’s system over the
existing Swan Lake to Ketchikan transmission line. This existing line is estimated to have a transmission
limit of 49 megawatts which becomes the limiting factor in transmissions over the Intertie.
The conductor specified for the overhead portion of the Intertie is 397.5 aluminum conductor,
steel-reinforced (ACSR). H-frame wood pole structures will support the line and will be placed nominally
at nine structures per mile. Much of the Intertie will be constructed over rugged terrain. For the estimated
26 miles of transmission line that is to be constructed in areas without existing road access, helicopter
construction techniques are assumed to be needed. Helicopter construction techniques assume all material,
equipment, and construction crews are transported via helicopter as well as helicopter assistance with
conductor stringing. Right of way clearing and widths were estimated based on National Electrical Safety
Code (NESC) requirements to provide minimum clearance for construction and conductor deflection for
ice loading and wind force. The original costs of right of way preparation were based on a nominal right
of way width of 70 feet. Typically in Alaska right of way clearance is closer to 120 to 150 feet to provide
greater protection from falling trees and consequently higher transmission line reliability and lower
maintenance costs. We have adjusted the estimated cost of clearing to represent a 140-foot wide right of
way for the Intertie.
Submarine cable is specified as 240 square millimeter copper conductor with ethylene propylene
rubber dielectric insulation without a lead sheath. Outside cable diameter will be 7.2 inches. The lack
of industry experience with a submarine cable of this type at the specified voltage may necessitate the use
of an oil-filled cable. Typically, material and installation costs of an oil-filled cable would exceed those
of solid dielectric. It is estimated that the allowance for the submarine cable included herein, however,
would accommodate the cost of an oil-filled cable.
Tyee - Swan Intertie Study -ll- R. W. Beck and Associates, Inc.
The Intertie will traverse remote wildemess regions which could make maintenance and repair
work very difficult. Weather conditions can also hamper access to portions of the Intertie at certain times.
Although the Intertie can be constructed so as to provide a very high level of reliability, it will still be
necessary to consider the Intertie to be less than 100 percent reliable because of the potential of outages
due to any number of environmental factors. Consequently, KPU will need to provide backup generation
capability to the power it expects to purchase over the Intertie.
Estimated Cost of Construction
In its October 1987 report, Harza estimated the cost of construction of the Intertie to be
$28,903,000. Using the basic material and labor requirements developed by Harza, we have updated the
cost estimate of the Intertie to 1991 dollars to account for actual increases in labor and material since
1987. Basic labor and material costs were not reestimated but rather were increased by experienced
changes in price levels. The average increase in construction wages between 1987 and 1990 was 11.49
percent, or 2.87 percent per year, as estimated by Alaska Economic Trends. Costs for underground
materials, overhead conductor and fixtures, and poles and related fixtures over the same period escalated
21.07 percent, 33.47 percent and 18.6 percent, respectively, as estimated by the Handy-Whitman
construction index. Costs between 1990 and 1991 were assumed to escalate 4.0 percent.
Certain assumptions used by Harza related to the construction cost estimate are noted as follows:
. Labor costs are based on 60-hour work weeks and include fringe benefits,
mobilization, demobilization and lodging based on Alaska Department of Labor
estimates.
. Labor hours and production rates were estimated for transportation of materials,
structure construction, conductor stringing and excavation.
° The overhead structure construction used tangent construction and compensated
for angle, deadend and crossing structures.
. Line material costs were based on quotes from manufacturers plus an additional
25 percent for shipping and handling.
° Contractor’s profit and overhead was estimated at 45 percent of total labor costs.
Construction costs of the Intertie have been estimated based on the costs of submarine cable
construction and construction of overhead lines for three different foundation conditions; normal, rock and
muskeg. Based on the estimated length of construction for each of these four conditions, the total cost
of the Intertie has been estimated. Table 3-1 provides the estimated cost per mile for each of the three
overhead line foundation conditions and the estimated cost of the submarine cable needed for the Intertie.
Table 3-2 provides the estimated total cost of construction of the Intertie.
It is estimated that the Intertie can be engineered, permitted, designed, and constructed over a five
year period. Construction can be accomplished in about one and a half years over two construction
seasons. Although engineering and other developmental efforts could conceivably be done in about one
year, the Authority indicates that its experience for similar projects would require about three years for
study and development prior to initiation of construction. Based on a five year development and
construction schedule for the Intertie a cash flow requirement schedule has been estimated and is shown
Tyee - Swan Intertie Study -12- R. W. Beck and Associates, Inc.
in Table 3-3 in 1991 dollars and in nominal dollars including assumed inflation estimated at 4.5 percent
per year.
Estimated Operating Costs and Characteristics
The Intertie is assumed to begin operation in 1996, the earliest year it could be available assuming
a five-year development and construction schedule. Conductor size would limit power transfers to 90.8
MVA and at typical transmission levels, power losses over the transmission line are estimated to be
approximately 1 percent. For the purpose of analysis, however, losses from Lake Tyee to KPU, which
include losses over the Intertie and over the existing Swan Lake to KPU transmission line, are assumed
to be 5 percent of power transmitted from the Lake Tyee powerhouse.
Annual operating costs of the Intertie are estimated to be 1 percent of the costs of construction
of the Intertie or $319,000 per year in 1991 dollars. Although this is the level of maintenance cost
typically assumed for transmission systems in Southeast Alaska, it may be high for the Intertie because
of the possibility of coordinating certain preventative maintenance activities with those conducted for the
existing transmission lines in the Lake Tyee and Swan Lake areas resulting in some cost savings. For
comparison, the annual operations and maintenance costs of the Lake Tyee to Wrangell transmission line
have averaged $330,000 over the past three years.
Tyee - Swan Intertie Study -13- R. W. Beck and Associates, Inc.
Table 3-1
Lake Tyee to Swan Lake Intertie
Estimated Unit Costs of Construction (1)
Labor Cost
Cable Stringing
Structure Erection
Total Labor
Materials
Conductors and Accessories
Line Conductors
Insulators, Hardware
and Miscellaneous
Subtotal
Poles and Fixtures
Poles
Guys, Anchors and
Other Materials
Subtotal
Total Material
Total Construction
Cost per Mile
Line Length (miles)
Manufacture Cable
Installation
Table 3-1
Overhead Line
(1991 Dollars per mile)
Foundation Type
Basic Rock Muskeg
$57,609 $57,609 $57,609
48,573 82,460 94,886
$106,182 $140,070 $152,495
$18,604 $18,604 $18,604
10,381 10,381 10,381
$28,985 $28,985 $28,985
$31,627 $31,627 $31,627
7,161 7,161 7,161
$38,788 $38,788 $38,788
$67,773 $67,773 $67,773
$173,955 $207,843 $220,268
27.9 8.4 12.0
Submarine Cable
(1991 Dollars per 1,000 feet)
$128,010
$110,135
(1) - Based on cost estimates provided in the Southeast Alaska Transmission Intertie Study
dated October 1987. Original estimates, provided in 1987 dollars, have been adjusted
to 1991 price levels using experienced changes in price levels between 1987 and 1990
and assumed escalation in 1990 of 4.0%.
Tyee - Swan Intertie Study na R. W. Beck and Associates, Inc.
Lake Tyee to Swan Lake Intertie
Table 3-2
Table 3-2
Estimated Total Costs of Construction
Direct Construction
Land and Land Rights
Station Equipment
Poles, Fixtures, and
Overhead Conductors (1)
Submarine Cable
Mobilization
Cable Manufacture
Installation
Engineering and Surveys
Subtotal
Road and Trails (Clearing) (2)
Communications System
Subtotal
Contingency 20.00%
Direct Construction Costs
Engineering and
Owners Cost 17.00%
Total Construction Costs
(1991 Dollars)
$472,000
6,636,000
9,830,000
757,000
538,000
463,000
136,000
$1,894,000
9,275,000
239,000
$28,346,000
$5,669,000
$34,015,000
$5,783,000
$39,798,000
(@- Includes cost of helicopter construction over 26 miles of the Intertie.
Estimated incremental cost of helicopter construction is $22,592 per mile.
(2) - Estimated cost of clearing a 140 foot wide right-of-way.
Tyee - Swan Intertie Study Bykje R. W. Beck and Associates, Inc.
Apnig anjsaquy upmg - aah -9I- ou] ‘Saqo1s0ssy pup 22g “MY
Total Project Time: 5 Years
Total Construction Time: 1.5 Years
Table 3-3
Lake Tyee to Swan Lake Intertie
Estimated Construction Cash Flow Requirements
(1991 Dollars)
Year | Year 2 Year 3 Year 4 Year 5 Total
Engineering and Owner Cost
Percent 5% 10% 35% 35% 15% 100 %|
Total Cost $317,470 $634,940 $2,222,290 $2,222,290 $952,410 $6,349,400
Clearing
Percent 0% 0% 0% 85% 15% 100%
Total Cost $0 $0 $0 $9,460,500 $1,669,500 $11,130,000
Structure Assembly and Erection
Percent 0% 0% 0% 60% 40% 100%
Total Cost $0 $0 $0 $7,249,680 $4,833,120 $12,082,800
Submarine Cable
Percent 0% 0% 15% 35% 50% 100%
Total Cost $0 $0 $340,920 $795,480 $1,136,400 $2,272,800
Switch Yard and Substation
Percent 0% 0% 0% 40% 60%) 100%
Total Cost $0 $0 $0 $3,185,280 $4,777,920 $7,963,200
Total Project
Percent 1% 2% 6% 58% 34%) 100%}
Total Cost $317,470 $634,940 $2,563,210 $22,913,230 $13,369,350 $39,798,200
Cash Flow Requirement (Nominal Dollars)
1991 1992 1993 1994 1995 Total
Total Cost 317,000 664,000 2,799,000 26,148,000 15,943,000 $45,871,000
Assumed Inflation Rate 4.50% €-€ AQeL
Figure 3-1
- TYEE LAKE HYDRO
ies
LEGEND
Sa mmm PREFERRED ome EXISTING/
ROUTE PLANNED ROADS
ome om ALTERNATIVE eoeee AGENCY
ROUTES SUGGESTED
a ELIMINATED REFINEMENT
“FROM FURTHER ——-—~ WILDERNESS. SCREENING BOUNDARY.
sore, EXISTING T/LINE
ALASKA POWER AUTHORITY
/ “SOUTHEAST INTERTIE. PROJECT —
SEGMENTS
TYEE LAKE — SWAN LAKE
ROUTE ALTERNATIVES
A HARTA ENGINEERING COMPANY DATE OCT. 1987 Tyee - Swan Intertie Study -17- R. W. Beck and Associates, Inc.
4. MARKET ANALYSIS
General Description of the Market Area
The market area under evaluation is the electric service territory of the municipal electric systems
of Petersburg, Wrangell and Ketchikan and the cooperatively-owned electric utility of Metlakatla Power
& Light ("MP&L"). Presently, these utilities operate as isolated systems with the exception of PMP&L
and WML&P which are interconnected through the Lake Tyee transmission line. With the completion
of the Lake Tyee and Swan Lake projects in 1984, KPU, PMP&L and WML&P became almost entirely
reliant upon hydroelectric generation for their power supply requirements. Previously, diesel generation
systems supplied most of the power needs of WML&P and PMP&L and a significant amount of KPU’s
requirements. Although most of the generation needs are currently supplied from the hydroelectric
projects, the utilities continue to maintain their diesel generation systems primarily as backup systems in
case the hydroelectric plants or their integral transmission systems fail for any number of reasons.
Electricity requirements in the market area have fluctuated in the past subject to a number of
socio-economic factors. Electricity requirements for 1989 and installed generation capacity for each of
the utilities are as shown in Table 4-1.
Hydroelectric Generation Capability
Table 4-1 indicates the estimated annual energy production capability of the various hydroelectric
facilities for both average and low water conditions. Hydroelectric energy generation is directly related
to weather conditions and fluctuates annually. The energy production estimates for the Lake Tyee and
Swan Lake projects included herein have been based on historical hydrologic data, 1952 through 1978,
assumptions regarding monthly load pattems, area-capacity curves, minimum reservoir storage capability,
head loss factors and generating efficiencies. The basic data used for these projections is shown in Table
4-5.
The estimated annual energy production capability of the Swan Lake project, net of transmission
losses, is 82,000 MWh for average water and 64,000 for low water. Previous estimates for the Swan Lake
project have varied based on the period of hydrologic data used. In 1989, low water conditions and less
than optimal operation of the Swan Lake project produced significantly lower energy than indicated herein.
A detailed reservoir operations study should be conducted for the Swan Lake project to determine the
actual capability of this project.
Estimated annual energy production for the Lake Tyee project is 134,400 MWh for average water
and 129,900 for low water. The small difference between average and firm energy production is a result
of Lake Tyee’s relatively large storage reservoir.
The annual energy production capability of KPU’s municipally-owned hydroelectric projects is
assumed to be 62,700 MWh for average water and 56,000 MWh for low water. The estimate for average
production is based on average historical operations and the low water estimate is based on production
in calendar year 1989.
Tyee - Swan Intertie Study - 18 - R. W. Beck and Associates, Inc.
Projected Electricity Requirements
In June 1990, ISER presented its twenty year forecast for electricity requirements for KPU,
WML&P, PMP&L and MP&L. This econometric forecast provides high, medium and low scenarios for
each utility based on differing assumptions of growth and commercial activity in the area. Specific large
commercial loads identified include KPC in Ketchikan and Wrangell Forest Products in Wrangell. In
addition to the explicit electricity requirements of these operations, the level of relative activity for these
major employers also affects the number of electric consumers in the communities and consequently, the
overall need for electricity.
Both KPC and Wrangell Forest Products have significant amounts of electrical generation
equipment fueled primarily with oil and process wastes. When surplus generation is available, KPC
purchases up to 1,800 MWh per month from KPU but it is unknown at this time how much it will
continue to purchase.
Power purchases by KPC are related to surplus generation available from Swan Lake and are
priced at a special rate for non-firm energy established by contract between KPC and KPU. A resolution
of the Four Dam Pool Project Management Committee ("PMC") dated August 19, 1987 allows the sale
of non-firm surplus power from the Four Dam Pool projects and specifies the distribution of revenues
from these power sales as one-third to each of the State, the retail utility and the PMC. Subsequent
revisions have redistributed the non-firm power sales revenues.
As KPU continues to utilize the capability of the Swan Lake project less surplus power will be
available for KPC. Whether or not KPC continues to buy power depends primarily on the cost and
availability of the power. It can be assumed that KPC will not purchase power from KPU unless the
power is priced at a level at or below KPC’s own generation cost. For purposes of this analysis, it has
been assumed that KPC will purchase surplus power from either Swan Lake or Lake Tyee, depending on
availability, in amounts and at a cost similar to its current purchase arrangements with KPU. Revenues
produced from the sale of surplus Lake Tyee power to KPC are assumed to be distributed to the State,
the PMC and WML&P and PMP&L, the retail utilities. These revenues are not assumed to be available
to pay any costs of the Intertie.
Wrangell Forest Products ("WFP") has in the past few years purchased substantial amounts of
power from WML&P. Recent environmental restrictions placed on WFP have required WFP to incinerate
much of its process waste; and with its installed generation equipment and some added fossil fuel, the
company produces its own power. WFP is not expected to purchase much power in the future.
The projected base case forecast for the utilities for each year 1990 through 2010 as developed
by ISER are shown in Table 4-2. This base case forecast indicates annual average increases in total
energy requirements of 2.0 percent, 0.9 percent, and 1.3 percent over the twenty-year period for KPU
(exclusive of KPC), WML&P and PMP&L, respectively. The base case also assumes annual KPU energy
sales to KPC of 15,560 MWh throughout the entire period. High and low forecasts as developed by ISER
have been included in the analysis and are shown in Section 6 of the Report.
The base case forecast assumes certain new commercial development in the market area. There
is new mining activity in the area particularly with regard to operations just across the border in Canada
and some investigation of electrical interconnection to these mines has been made. No electricity sales
to these mining operations have been assumed for the Study.
Tyee - Swan Intertie Study -19- R. W. Beck and Associates, Inc.
Use of the Intertie
The Intertie will be used primarily for the transmission of non-firm energy from the Lake Tyee
project to KPU. WML&P and PMP&L will continue to have "first rights" to the capability of Lake Tyee;
and, as such, only generation capability surplus to their needs will be available to KPU. Assuming that
KPU uses essentially no diesel generation upon completion of the Intertie, KPU energy requirements for
the base case do not indicate a need for the entire surplus capability of Lake Tyee until 2008. Table 4-3
shows the projected surplus generation available from Lake Tyee and KPU’s need for Lake Tyee energy
for each year of the Study period assuming the high load forecast scenario (see Table 6-3) for Petersburg
and Wrangell and the medium load forecast scenario for KPU. For the purpose of this analysis, non-firm
sales to KPC are assumed to continue with the Intertie as long as surplus power is available. Since KPC
will not purchase diesel generation from KPU there will be no diesel generation from KPC sales offset
with the Intertie.
Energy purchases from Lake Tyee will be considered non-firm by KPU, that is KPU will continue
to maintain diesel generation capacity equivalent to its peak demand because of the vulnerability of the
transmission interconnection to Lake Tyee. For analytical purposes, however, the power from Lake Tyee
can be relied upon on an annual basis. This Study does not include any capacity benefits from the
Intertie.
Benefits of the Intertie
The benefits of the Intertie will be in reduced diesel generation costs for KPU. These benefits
are offset in part by the cost of purchased power from Lake Tyee and the cost of operating the Intertic.
The costs of a transmission line are typically recovered through charges assessed on the power transmitted
over the line referred to as "wheeling charges". For this analysis, the wheeling charges to be assessed for
transmission have been estimated based on the projected costs of operation of the Intertie, inclusive of debt
repayment costs, and are assumed to be charged on a fixed cost basis each year rather than on a per KWh
or variable basis. The estimated costs of operation and maintenance for the Intertie in 1996, the first year
of operation, are estimated to be $319,000 at 1991 price levels. Upon payment of operations and
maintenance expenses and the costs of purchased power, it is assumed that the remaining savings will be
available for Intertie debt repayment.
As stated previously, the primary purpose of this analysis is to determine the level of debt
financing that could be reasonably supported with the estimated available funds provided through
implementation of the Intertie. To this extent it is assumed that the full cost savings estimated to be
incurred by KPU with the Intertie is available to pay the following in order: (1) the costs of power from
Lake Tyee, (2) operations and maintenance expenses of the Intertie, and (3) debt repayment on Intertie
debt obligations. The analysis in this form provides a "break-even" estimate in each year of the Study.
It may not be reasonable to assume that the utilities would enter into any contractual arrangement simply
to break-even with estimated diesel generation costs, however, the Study provides a frame of reference
for financial evaluation. For the purpose of estimating the amount of debt the Intertie can support, it has
been assumed that the costs of the Intertie to KPU will break even in either the first or fourth year of
Intertie operation, and will remain fixed thereafter.
It should be emphasized that this analysis assumes that the annual costs of the Intertie, including
any debt repayment requirements, will be paid by KPU through fixed annual wheeling charges assessed
by the Authority on power transmissions.
Tyee - Swan Intertie Study - 20 - R. W. Beck and Associates, Inc.
Estimated Available Payments for the Intertie
The derivation of the estimated savings in KPU diesel generation expenses and the resulting
amount assumed to be available to pay towards the costs of the Intertie are shown in Table 4-4.
Subtracting the estimated cost for power purchased from Lake Tyee (based on the pricing provisions of
the Four Dam Pool Power Sales Agreement-Tyee Price Scenario A) and the operations and maintenance
costs of the Intertie yields the amount available for debt repayment as shown also in Table 4-4. As can
be seen in Table 4-4, $602,000 is available for debt repayment in 1996, the first year of Intertie operation.
As diesel fuel prices escalate over time, the amount available for debt repayment increases. In 1999, it
is estimated that KPU diesel generation savings with the Intertie would allow $1,185,000 of debt
repayment in that year if KPU were to break-even on power costs.
If power from Lake Tyee were provided at no cost to KPU (Tyee Price Scenario B), the amount
available for Intertie debt repayment would be $1,984,000 in 1996 and $2,944,000 in 1999. The
derivations of these values are shown in Table 4-5.
The total estimated present value in 1991 of diesel generation cost savings to KPU with the
Intertie is $28,100,000 over the Study period, 1996 through 2010, excluding any benefits from surplus
sales to KPC. Over this same period the estimated present value of payments to the State for KPU
purchases of Tyee power, if priced according to the provisions of the Four Dam Pool Power Sales
Agreement, is $12,224,000, of which approximately half is related to payment of the Four Dam Pool debt
service component.
As previously mentioned, revenues from potential surplus energy sales to KPC are not included
in the estimates of amounts available to pay the costs of the Intertie. It can be assumed, however, that
with the Intertie, KPC would purchase power from Lake Tyee at a rate similar to that which it pays
currently for surplus power from Swan Lake. Based on a current rate of 3.5 cents per KWh inflated over
time and the assumption that KPC would purchase approximately 15,500 KWh annually (net of
transmission losses), subject to availability, it is estimated that KPC would pay $745,000 for surplus power
from Lake Tyee in 1996. As currently contracted by the Four Dam Pool, these revenues from surplus
sales to KPC would be split evenly between the State, the Four Dam Pool PMC and the retail utility. In
this case, PMP&L and WML&P are assumed to be the retail utility for sales related to Lake Tyee.
Tyee - Swan Intertie Study -21- R. W. Beck and Associates, Inc. ‘ye
Table 4-1
Tyee - Swan Intertie Study
Existing Power Requirements and Generation Capacity
1989 Firm Energy Requirements (MWh) (1)
1989 Total Energy Requirements (MWh) (2)
1989 Peak Demand (KW)
Hydroelectric Resources
Utility Owned
Capacity (KW)
Energy Capability (MWh)
Average Water
Low Water
Swan Lake - State Owned
Capacity (KW)
Energy Capability (MWh)
Average Water
Low Water
Lake Tyee - State Owned
Capacity (KW)
Energy Capability (MWh)
Average Water
Low Water
Diesel Generation Capacity (KW)
Table 4-1
KPU WML&P PMP&L MP&L
120,607 17,221 30,368 24,743 136,172 31,074 30,368 += 24,743 24,600 3,600 6,000 7,100
14,000 0 2,000 4,000
62,700 0 10,000 22,000 56,000 0 10,000 22,000
22,500
82,000 64,000
20,000
134,400
129,900
17,450 8,400 5,600 8,950
(1) - Includes energy sales to utility customers, energy losses and utility own use.
Excludes non-firm energy sales to large industrial customers.
(2) - Firm energy requirements plus non-firm energy sales.
Tyee - Swan Intertie Study -22- R. W. Beck and Associates, Inc.
Table 4-2
Table 4-2
Tyee - Swan Intertie Study
Projected Peak Demand and Total Energy Requirements (1)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Average Annual Increase:
1990-95
1995-00
2000-10
Base Case
Peak Demand (KW) Total Energy Requirements (MWh)
KPU(2) WML&P PMP&L MP&L KPU3) WML&P PMP&L MP&l KPC(4)
26,900 3,500 6,100 7,200 131,898 23,885 31,121 25,331 15,565
30,400 3,400 6,200 7,400 149,202 17,989 31,460 25,869 15,565
30,800 3,400 6,200 7,400 151,955 16,857 31,477 25,931 15,565
32,100 3,400 6,300 7,400 158,569 16,947 31,756 25,948 += 15,565
33,100 3,400 6,300 7,400 163,372 17,077 32,117 25,978 = 15,565
33,700 3,400 6,300 7,400 166,607 17,081 32,200 25,978 15,565
34,000 3,500 6,400 7,500 168,149 17,263 32,597 26,118 15,565
34,300 3,500 6,500 7,500 169,737 17,436 33,053 26;316 15,565
34,300 3,600 6,600 7,600 172,413 17,651 33,514 26,506 15,565
34,900 3,600 6,700 7,600 173,503 17,902 34,041 26,707 = 15,565
35,100 3,700 6,800 7,700 175,631 18,154 34,578 26,913 15,565
35,500 3,700 6,900 7,700 177,486 18,379 35,056 27,089 15,565
35,900 3,700 7,000 7,800 178,850 18,557 35,444 27,252 15,565
36,200 3,800 7,100 7,800 180,127 18,744 35,849 27,399 = 15,565
36,500 3,800 7,100 7,900 181,768 18,959 36,319 27,557. 15,565
36,800 3,900 7,300 7,900 183,978 19,228 36,895 27,729 = 15,565
37,200 4,000 7,400 8,000 186,583 19,539 37,564 27,939 15,565
37,800 4,000 7,500 8,000 189,512 19,880 38,294 28,172 15,565
38,400 4,100 7,700 8,100 192,714 20,245 39,071 28,429 = 15,565
39,000 4,200 7,800 8,200 195,911 20,603 39,833 28,695 15,565
40,300 4,200 8,000 8,300 198,917 20,941 40,547 28,944 15,565
46% -0.6% 0.6% 0.5% 4.8% -6.5% 0.7% 0.5% 0.0%
0.8% 1.7% 15% 0.8% 1.1% 1.2% 1.4% 0.7% 0.0%
1.4% 1.3% 16% 0.8% 1.3% 1.4% 1.6% 0.7% 0.0%
(1) - Source: Alaska Energy Authority, "Electric Load Forecast for Ketchikan, Metlakatla, Petersburg
and Wrangell, Alaska: 1990-2010", by Institute of Social and Economic Research,
University of Alaska, June 25, 1990.
(2) - Does not include peak demand of Ketchikan Pulp Company (KPC).
(3) - Does not include projected non-firm sales to KPC.
(4) - Projected non-firm energy sales by KPU to KPC. Subject to availability of surplus hydroelectric
generation capability.
Tyee - Swan Intertie Study oa R. W. Beck and Associates, Inc.
Apnig ansaquy ung - 2a] -~7- “2uy ‘sam120Ssy pup 429g “MY BASE CASE
Tyee Sales at Contract Rate
Med KPU Load, Med Fuel
Tyee T-Line Online 1996
Table 4-3
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 1 of 4
Derivation of Surplus Tyee Power
Capacity Requirements (KW)
Wrangell Peak
Petersburg Peak
Total
Capacity Resources (KW)
Petersburg Hydro
Petersburg Diesel
Wrangell Diesel
Lake Tyee
Total
Net Demand on Tyee (1)
Surplus Tyee Capacity
Energy Requirements (MWh)
Wrangell
Petersburg
Tyee TL Losses
Total
Energy Resources (MWh)
Petersburg Hydro
Petersburg Diesel
Wrangell Diesel
Lake Tyee
Total
Surplus Tyee Energy
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
3,500 3,500 3,700 3,800 3,900 3,900 4,000 4,100 4,300 4,400
6,200 6500 7,000 7,200 7,300 7,500 7,700 7,900 8,200 8,500
9,700 10,000 10,700 11,000 11,200 11,400 11,700 12,000 12500 12,900
2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600
7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
35,100 35,100 35,100 35,100 35,100 35,100 35,100 35,100 35,100 35,100
7,700 8,000 8700 9,000 9,200 9,400 9,700 10,000 10,500 10,900
12,300 12,000 11,300 11,000 10,800 10,600 10,300 10,000 9,500 _—9,100
23,672 18,383 27,543 27,907 28,203 28,437 28,890 29,427 30,056 30,660
31,711 33,168 35,574 36,491 37,257 37,956 39,009 40,211 41,563 42,942
2,269 2,078 2,656 2,720 2,773 2,820 2,895 2,982 3,081 3,180
57,052 53,629 65,773 67,118 68,203 69,218 70,794 72,620 74,700 76,702
10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
0 0 0 0 ) 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
47,652 43,629 55,773 57,118 58,233 59,213 60,794 62,620 64,700 66,782
57,652 53,629 65,773 67,118 68,283 69,213 70,794 72,620 74,700 76,782
86,748 90,771 78,627 77,282 76,167 75,187 73,606 71,780 69,700 67,618
Notes: 1. Petersburg peak plus Wrangell peak less Petersburg Hydro. pjo | o8eg €-p 1981
Apnig ansaquy unmg - aah] “2uy ‘Sammioossy pup 422g *‘M "YN BASE CASE
Tyee Sales at Contract Rate
Med KPU Load, Med Fuel
Tyee T-Line Online 1996
Table 4-3
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 2 of 4
Derivation of Surplus Tyee Power
Capacity Requirements (KW)
Wrangell Peak
Petersburg Peak
Total
Capacity Resources (KW)
Petersburg Hydro
Petersburg Diesel
Wrangell Diesel
Lake Tyee
Total
Net Demand on Tyee (1)
Surplus Tyee Capacity
Energy Requirements (MWh)
Wrangell
Petersburg
Tyee TL Losses
Total
Energy Resources (MWh)
Petersburg Hydro
Petersburg Diesel
Wrangell Diesel
Lake Tyee
Total
Surplus Tyee Energy
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
4,500 4,600 4,700 4,900 5,000 5,200 5,400 5,600 5,800 6,000 6,200
8,700 9,000 9,200 9,600 9,900 10,300 10,600 11,100 11,500 12,000 12,500
13,200 13,600 13,900 14,500 14,900 15,500 16,000 16,700 17,300 18,000 18,700
2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600 5,600
7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500
20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
35,100 35,100 35,100 35,100 35,100 35,100 35,100 35,100 35,100 35,100 35,100
11,200 11,600 11,900 12,500 12,900 13,500 14,000 14,700 15,300 16,000 16,700
8,800 8,400 8,100 7,500 7,100 6,500 6,000 5,300 4,700 4,000 3,300
31,160 31,755 32,348 33,035 33,787 34,599 35,444 36,362 37,372 38,428 39,454
44,116 45,574 46,947 48,524 50,254 52,128 54,075 56,185 58,500 60,915 63,286
3,264 3,366 3,465 3,578 3,702 3,836 3,976 4,127 4,294 4,467 4,637
78,540 80,695 82,760 65,187 87,743 90,563 93,495 96,674 100,166 103,810 107,377
10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
68,540 70,695 72,760 75,137 77,743 80,563 83,495 86,674 90,166 93,810 97,377
78,540 80,695 82,760 85,137 87,743 90,563 93,495 96,674 100,166 103,810 107,377
65,860 63,705 61,640 59,263 56,657 53,837 50,905 47,726 44,234 40,590 37,023 b JO 7 o8eg €-p M08L
Apnig ansaquy upg - aad] -9T- “oul ‘SamI20ssy pup y2ag “MY BASE CASE
Tyee Sales at Contract Rate
Med KPU Load, Med Fuel
Tyee T-Line Online 1996
Page 3 of 4
Table 4-3
Alaska Energy Authority
Tyee - Swan Intertie Study
Derivation of Ketchikan Need for Tyee
Capacity Requirements (KW)
Ketchikan Peak
Reserves
Total Requirement
Capacity Resources (KW)
KPU Hydro
KPU Diesel
KPU Diesel Additions
Swan Lake
Total Resources
Additional Capacity Required
Energy Requirements (MWh)
Ketchikan
KPC
Energy Resources (MWh)
KPU Hydro
KPU Diesel
Swan Lake
Total
Displaceable Diesel Energy
Tyee Surplus Available to KPC
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
26,900 30,400 30,800 32,100 33,100 33,700 34,000 34,300 34,300 34,900
22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500
49,400 52,900 53,300 54,600 55,600 56,200 56,500 56,800 56,800 57,400
14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000
17,450 17,450 17,450 17,450 17,450 17,450 17,450 17,450 17,450 17,450
0 0 0 0 0 0 0 0 0 0
22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500
53,950 53,950 53,950 53,950 53,950 53,950 53,950 53,950 53,950 53,950
0 0 0 650 1,650 2,250 2,550 2,850 2,850 3,450
131,898 149,202 151,955 158,569 163,372 166,607 168,149 169,737 172,413 173,503
15,565 15,565 15,565 15,565 15,565 15,565 15,565 15,565 15,565 15,565
62,700 62,700 62,700 62,700 62,700 62,700 62,700 62,700 62,700 62,700
0 4,502 7,255 13,869 18,672 21,907 23,449 25,037 27,713 28,803
69,198 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000
131,898 149,202 151,955 158,569 163,372 166,607 168,149 169,737 172,413 173,503
0 4,502 7,255 13,869 18,672 = 21,907 23,449 25,037 27,713 28,803
0 0 0 0 0 0 16,343 16,343 16,343 16,343 p JO € oBeg €-p AQeL
-LT- Apnig ansaquy uomg - aac] “ouy ‘saq1o0ssy pun 422g "MY Table 4-3
Alaska Energy Authority
Tyee - Swan Intertie Study
BASE CASE
Tyee Sales at Contract Rate
Med KPU Load, Med Fuel
Tyee T-Line Online 1996
Page 4 of 4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Derivation of Ketchikan Need for Tyee ]
Capacity Requirements (KW)
Ketchikan Peak 35,100 35,500 35,900 36,200 36,500 36,800 37,200 37,800 38,400 39,000 40,300
Reserves 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500
Total Requirement 57,600 58,000 58,400 58,700 59,000 59,300 59,700 60,300 60,900 61,500 62,800
Capacity Resources (KW)
KPU Hydro 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000 14,000
KPU Diesel 17,450 17,450 17,450 17,450 17,450 17,450 17,450 17,450 17,450 17,450 17,450
KPU Diesel Additions 0 0 0 0 0 0 0 0 0 0 0
Swan Lake 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500 22,500
Total Resources 53,950 53,050 53,950 53,950 53,950 53,950 53,950 53,950 53,950 53,050 53,950
Additional Capacity Required 3,650 4,050 4,450 4,750 5,050 5,350 5,750 6,350 6,950 7,550 6,850
Energy Requirements (MWh)
Ketchikan 175,631 177,486 178,850 180,127 181,768 183,978 186,583 189,512 192,714 195,911 198,917
KPC 15,565 15,565 15,565 15,565 15,565 15,565 15,565 15,565 15,565 15,565 15,565
Energy Resources (MWh) i
KPU Hydro 62,700 62,700 62,700 62,700 62,700 62,700 62,700 62,700 62,700 62,700 62,700
KPU Diesel 30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 48,014 51,211 54,217
Swan Lake 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000 82,000
Total 175,631 177,486 178,850 180,127 181,768 163,978 166,583 160,512 192,714 195,911 198,917
Displaceable Diesel Energy 30,931 32,786 34,150 35,427 37,0080 39,276 41,803 44,812 48,014 51,211 54,217
Tyee Surplus Available to KPC 16,343 16,343 16,343 16,343 16,343. 12,491 6,818 555 0 0 0
b JO p a8eg €-p A1G2L
- 87 - Apnig ansaquy upg - aad 7 “oul ‘saqio0ssy pup yoag ‘MY BASE CASE - PRICE SCEN. A
Tyee Sales at Contract Rate
Medium KPU Load, Med Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(M Wh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000) T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
Table 4-4
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 1 of 2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
0.83 0.89 0.95 1.01 1.07 1.13 1.20 1.26 1.33 1.39
1.00 1.05 1.09 1.14 1.19 1.25 1.30 1.36 1.42 1.49
0 4,502 7,255 13,869 18,672 21,907 23,449 25,037 27,713 28,803
0 0 0 0 0 0 23,449 25,037 27,713 28,803
0 0 0 0 0 0 2,076 2,336 2,720 2,969
0 0 0 0 0 0 305 341 394 428
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 2,381 2,677 3,114 3,397
0 0 0 0 0 0 2,381 2,677 3,114 3,397
3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
2.40 2.51 2.62 2.74 2.86 2.99 2.60 2.67 2.73 2.80
5.40 5.51 5.62 5.74 5.86 5.99 5.60 5.67 5.73 5.80
0 0 0 0 0 0 24,683 26,355 29,172 30,319
0 0 0 0 0 O (1,234) (1,318) (1,459) _ (1,516)
0 0 0 0 0 0 23,449 25,037 27,713 28,803
0 0 0 0 0 0 1,382 1,494 1,672 1,758
0 0 0 0 0 0 999 1,183 1,443 1,639
0 0 0 0 0 0 397 415 434 454
0 0 0 0 0 0 602 767 1,009 1,185
January 1991
28,065
12,224
12,827 Z JO | oBeg a CLAD
- 6T- Apnig ansaquy upmg - aah “ouy ‘Saq120ssy pup yDag ‘MY BASE CASE - PRICE SCEN. A
Tyee Sales at Contract Rate
Medium KPU Load, Med Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(M Wh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000) T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
8.0%
Table 4-4
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 2 of 2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1.46 1:57 1.68 1.79 1.90 2.02 2.13 2.25 2.37 2.49 2.61
1.55 1.62 1.70 1.77 1.85 1.94 2.02 2.11 2.21 2.31 2.41
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 48,014 51,211 54,217
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
3,344 3,808 4,245 4,696 5,222 5,864 6,611 7,460 7,364 7,099 6,792
480 532 579 628 686 760 847 947 928 890 848
0 0 0 0 0 0 0 0 0 0 )
0 0 0 0 0 0 0 0 0 0 0
3,824 4,340 4,824 §,323 5,908 6,624 7,458 8,407 8,292 7,989 7,640
3,824 4,340 4,824 5,323 5,908 6,624 7,458 8,407 8,292 7,989 7,640
3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
2.87 2.95 3.03 3.12 3.22 3.33 3.44 3.54 3.65 3.76 3.88
5.87 5.95 6.03 6.12 6.22 6.33 6.44 6.54 6.65 6.76 6.88
32,559 34,512 35,947 37,292 39,019 41,345 44,087 47,171 44,234 40,590 37,023
(1,628) (1,726) (1,797) (1,865) (1,951) (2,067) += (2,204) = (2,859) (2,212) ~— (2,029) (1,851)
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
1,911 2,053 2,168 2,282 2,427 2,617 2,839 3,085 2,942 2,744 2,547
1,913 2,287 2,656 3,041 3,481 4,007 4,618 §,322 5,350 5,245 5,093
474 495 518 541 565 591 617 645 674 704 736
1,439 1,792 2,139 2,500 2,916 3,417 4,001 4,677 4,676 4,541 4,357 Z JO 7 oBed tb A192
Apmig ansaquy upg - 2a] ou] ‘saq120ssy pup yoag “MY BASE CASE - PRICE SCEN. B
Tyee Sales at No Cost
Medium KPU Load, Med Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(M Wh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000)
T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings Cost of Tyee Power
Net for T-line Debt Service
Table 4-5
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 1 of 2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
0.83 0.89 0.95 1.01 1.07 1.13 1.20 1.26 1.33 1.39
1.00 1.05 1.09 1.14 1.19 1.25 1.30 1.36 1.42 1.49
0 4,502 7,255 13,869 18,672 21,907 23,449 25,037 27,713 28,803
0 0 . 0 0 0 QO 23,449 25,037 27,713 28,803
0 0 0 0 0 0 2,076 2,336 2,720 2,969
0 0 0 0 0 0 305 341 394 428
0 0 0 0 0 0 0 0 0 0
0 0 ) 0 0 0 0 0 0 0
0 0 0 0 0 0 2,381 2,677 3,114 3,397
0 0 0 0 0 0 2,381 2,677 3,114 3,397
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0 0 0 0 0 0 24,683 26,355 29,172 30,319
0 0 0 0 0 0 (1,234) (1,318) (1,459) (1,516)
0 0 0 0 0 0 23,449 25,037 27,713 28,803
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 2,381 2,677 3,114 3,397
0 0 0 0 0 0 397 415 434 454
0 0 0 0 0 0 1,984 2,262 2,680 2,944
January 1991
28,065
0 25,051 Z JO | Beg S-p F1GeL
Apmig anuaquy upg - 2a] -1€- “ou ‘samioossy pun 22g "MY Page 2 of 2
BASE CASE - PRICE SCEN. B
Tyee Sales at No Cost
Medium KPU Load, Med Fuel
Tyee T-Line Online 1996
Table 4-5
Alaska Energy Authority
Tyee - Swan Intertie Study
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal) 1.46 1.57 1.68 1.79 1.90 2.02 2.13 2.25 2.37 2.49 2.61
Diesel Variable O&M (c/KWh) 1.55 1.62 1.70 1.77 1.85 1.94 2.02 2.11 2.21 2.31 2.41
Diesel Generation (MWh) 30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 48,014 51,211 54,217
Diesel Offset by Tyee (MWh) 30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
KPU Cost Savings ($000)
Diesel Fuel . 3,344 3,808 4,245 4,696 §,222 5,864 6,611 7,460 7,364 7,099 6,792
Diesel Variable O&M 480 532 579 628 686 760 847 947 928 890 848
Capital Cost 0 0 0 0 0 0 0 0 0 0 0
Fixed O&M 0 0 0 0 0 0 0 0 0 0 0
Total 3,824 4,340 4,824 §,323 5,908 6,624 7,458 8,407 8,292 7,989 7,640
Savings Available for Tyee & TL 3,824 4,340 4,824 5,323 5,908 6,624 7,458 8,407 8,292 7,989 7,640
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
O&M Component 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Tyee Sales to KPU (MWh) 32,559 34,512 35,947 37,292 39,019 41,345 44,087 47,171 44,234 40,590 37,023
Transmission Losses(M Wh) (1,628) (1,726) (1,797) (1,865) (1,951) (2,067) ~— (2,204) ~— (2,359) ~— (2,212) ~— (2,029) (1,851)
Net to KPU Load (MWh) 30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
Cost of Tyee Power to KPU ($000) 0 0 0 0 0 0 0 0 0 0 0
Net Available for T-line ($000) 3,824 4,340 4,824 5,323 5,908 6,624 7,458 8,407 8,292 7,989 7,640
T-line O&M ($000) 474 495 518 541 565 591 617 645 674 704 736
Net for Debt Service ($000) 3,350 3,845 4,306 4,782 §,343 6,034 6,840 7,762 7,618 7,285 6,904
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
ZjJOZ o3eg S-p FGeL
Table 4-6
Table 4-6
Tyee - Swan Intertie Study
Lake Tyee and Swan Lake Hydroelectric Projects
Summary of Operating Assumptions
Lake Tyee Swan Lake
Hydrology
Period 1952-78 1952-78
Average inflow (cfs) 161 467
Load Pattern (Percent of Annual)(1)
October 8.4 8.4
November 8.8 8.8
December 9.6 9.6
January 8.5 8.5
February 1% 7.8
March 8.8 8.8
April Web) Ue!
May 7.6 6
June qe) ES
July 8.4 8.4
August 8.7 8.7
September 8.4 8.4
Reservoir Characteristics
Maximum Storage (acre-feet) 88,500 127,000
Maximum Elevation (feet) 1,396 330
Minimum Storage (acre-feet) 33,750 41,000
Minimum Elevation (feet) 1,250 269
Power Generation Characteristics
Installed Capacity (MW) 20.0 22.5
Head Loss Factor (*Q2) 0.000125 0.000050
Tailwater Elevation (feet) 29.0 8.0
Maximum Hydraulic Capacity (cfs)(2) 250 1,000
(1) - Load patterns are shown as the same due to the unavailability of additional
data. More detailed information is not expected to significantly alter
the annual energy generation estimate.
(2) - Values shown are less than actual instantaneous hydraulic capacities
to provide some degree of reality in the amount of spill, which is
underestimated in monthly-type analyses.
Tyee - Swan Intertie Study - 32- R. W. Beck and Associates, Inc.
5. FINANCIAL ANALYSIS
Funding Sources
Although other means may be available, the most likely approach to finance the Intertie appears
to be a combination of Authority issued revenue bonds and State contributions. Amounts to be secured
from each funding source will depend on their relative costs and the level of debt repayment that the
Intertie can support.
While a legal opinion will be required, revenue bonds issued to finance the Intertie would
probably be tax-exempt because the repayment of debt through wheeling charges would be made almost
exclusively by the city of Ketchikan, an exempt agency under the Internal Revenue Service Code. If
Metlakatla Power & Light, a non-exempt agency, were to be interconnected to Ketchikan it may be
necessary to issue an amount of taxable debt based on MP&L’s expected usage share of the Intertie.
MP&L could conceivably finance its representative portion of the Intertie with Rural Electrification
Administration ("REA") debt, although ownership of the Intertie would become an issue if REA were
involved.
State contributions to the Intertie could be in the form of a grant or loan with either a levelized
or a ramped repayment schedule. State appropriations are assumed to be provided at the beginning of
Intertie development and would therefore be available to pay all initial development costs, engineering and
design and construction until the appropriation is exhausted.
For the purpose of this analysis, it has been assumed that any revenue bonds issued for the Intertie
will be tax-exempt and any additional construction costs will be funded with a State grant. The revenue
bonds will be secured with wheeling revenues, less operating expenses, to be collected from operation of
the Intertie. In addition, the "moral obligation" of the State through the Authority will probably be
required to obtain a good interest rate. Wheeling revenues will need to be pledged through a contractual
arrangement between the Authority and KPU.
Estimated Financing Requirements
Even though a capital project such as the Intertie may provide long-term benefits to its users,
annual costs during the early years of operation may be higher than the cost of alternatives and prove to
be burdensome to the consumer. The high early year costs are normally the result of levelized debt
service payments required for revenue bonds used to finance the project. Over time, the levelized debt
service payments become less significant compared to rising alternative costs.
For purposes of this analysis, the amount of revenue bonds that can be supported by the Intertie
has been estimated using two different criteria: (1) annual costs with the Intertie are equal to the
alternative costs in the first year of operation, and (2) annual costs with the Intertie are higher than the
cost of the alternative in the first three years of Intertie operation and equal in the fourth year of Intertie
operation. This is to say that the amount of revenue bonds has been estimated so that the cost of power
to be purchased by KPU over the Intertie is equivalent to the cost of diesel generation in either the first
or fourth year of Intertie operation. Since the cost of diesel generation is being projected to increase over
time and the annual costs of the Intertie will be essentially fixed, the costs of power over the Intertie will
decrease relative to the costs of diesel generation.
Tyee - Swan Intertie Study - 33 - R. W. Beck and Associates, Inc.
State appropriations are assumed to be available to pay for the remaining construction and
development costs, and the full amount of the required appropriation is assumed to be provided at the
beginning of Fiscal Year 1992. Interest earnings on the appropriation are assumed to accrue to the
Intertie.
The estimated financing requirements include the related costs associated with revenue bond
issuance. These related costs include interest during construction, financing costs and funding of a debt
service reserve fund equal in to ten percent of the issued amount of revenue bond debt. Debt service on
the revenue bonds is assumed to be capitalized until six months after completion of the Intertie, and
interest eamed on bond funds is assumed to accrue to the Intertie construction fund.
Tables 5-1 and 5-2 show the estimated financing requirements and sources of funds for the two
Lake Tyee pricing scenarios, respectively. The pricing scenarios, labeled A and B, indicate the
assumptions regarding the cost of the Lake Tyee power to KPU. Scenario A assumes that the cost of
Lake Tyee power to KPU is based on the provisions of the Four Dam Pool Power Sales Agreement.
Scenario B assumes that there is no cost to KPU for the power purchased from Lake Tyee. Diesel
generation savings to KPU resulting from construction of the Intertie are assumed to be applied, in
entirety, toward the costs of the Intertie in Scenario B.
As can be seen in Table 5-1 for pricing Scenario A where KPU pays for Lake Tyee power, only
$6.2 million of revenue bonds could be issued if the Intertie costs were to break-even in the first year of
operation. This amount increases to $12.4 million if the fourth year is considered the break-even year.
State appropriations for the two break-even scenarios are $31.0 million and $27.5 million, respectively.
The sources and uses of funds for each scenario are also shown in Table 5-1. Figure 5-1 graphically
presents the comparison of estimated KPU diesel generation costs to the costs of purchases from Lake
Tyee over the Intertie assuming debt repayment levels established for the first and fourth year break-even
cases.
Although a State appropriation of between $27.5 and $31.0 million is estimated to be necessary
to fund the Intertie, the State in tum will receive an estimated $12.2 million (1991 present value) from
the sales of Lake Tyee power to KPU between 1996 and 2010. This assumes that KPU will be required
to pay for power purchased from Lake Tyee at rates similar to those paid currently by the Four Dam Pool
participants.
Table 5-2 indicates that, for pricing Scenario B, assuming KPU would not pay for Lake Tyee
power, $22.5 million of revenue bonds could be issued if the Intertie costs were to break even in the first
year of operation. If costs were to break even in the fourth year of operation, the revenue bond amount
would increase to $31.4 million. For the first and fourth year break-even cases, the necessary State
appropriation would be $22.5 million and $17.0 million, respectively. The overall costs of power
purchased over the Intertie by KPU will be essentially the same for pricing Scenarios A and B and, as
such, Figure 5-1 represents the comparable costs for both scenarios. In pricing Scenario B, KPU does not
pay for power purchased from Lake Tyee but instead pays larger amounts toward Intertie debt service.
It should be noted that the analysis described herein represents only one repayment option that
may be available. As an altemative, the Intertie could be funded with State appropriations with all or part
of the appropriation considered a loan. While a State loan offers greater flexibility in repayment than
revenue bonds, it does have the disadvantage of using State monies that could be used for other programs.
The Four Dam Pool was financed in part with a State loan as an alternative to revenue bonds to reduce
debt repayment levels.
Tyee - Swan Intertie Study - 34- R. W. Beck and Associates, Inc.
Table 5-1
Table 5-1
Tyee - Swan Intertie Study
Estimated Financing Requirements and
Sources and Uses of Funds
Base Case - Tyee Price Scenario A
(Nominal Dollars)
Breakeven Year (1)
Ist Year 4th Year
Diesel Generation Cost Savings (2) $2,381,000 $3,397,000
Cost of Lake Tyee Power (3) 1,382,000 1,758,000
Net Available to Pay Intertie Costs $999,000 $1,639,000
Intertie O&M Costs (4) 397,000 454,000
Net Available for Debt Service (5) $602,000 $1,185,000
Estimated Sources of Funds
Revenue Bonds (6) $6,200,000 $12,400,000
State Appropriations 31,000,000 27,500,000
Total Financing Requirements $37,200,000 $39,900,000
Estimated Uses of Funds
Construction Costs (7) $45,871,000 $45,871,000
Financing Fees (8) 186,000 372,000
Debt Service Reserve Fund (9) : 620,000 1,240,000
Capitalized Interest (10) 558,000 1,395,000
Interest Earnings (11) (10,035,000) (8,978,000)
Total Uses of Funds $37,200,000 $39,900,000
Date of Revenue Bond Issuance (12) July 1995 April 1995
(1) - Estimated year of Intertie operation in which costs of power to KPU would be equivalent with or without
the Intertie.
(2) - Estimated savings in KPU diesel generation costs in the specific year resulting from operation of
the Intertie and purchase of surplus Lake Tyee power by KPU.
(3) - Cost of power in the specific year to be purchased by KPU from Lake Tyee assuming implementation
of payment provisions included in the Four Dam Pool power sales agreement.
(4) - Estimated annual operations and maintenance expenses on the Intertie.
(5) - Amount available to pay debt service costs on Intertie debt obligations.
(6) - Estimated amount of tax-exempt revenue bonds that could be issued to fund Intertie capital costs based on
the resultant debt service, net of interest earnings on the debt service reserve fund, being equal to
or slightly less than the Net Available for Debt Service.
(7) - Estimated total construction and development costs for the Intertie.
(8) - Based on assumed financing fees of 3% of total bonds issued.
(9) - Assumed to be equal to 10% of total revenue bonds.
(10) - Interest on Intertie revenue bonds is assumed to be capitalized from the date of issuance until six months
past the date of expected initial operation.
(11) - Estimated interest earnings during construction on Intertie funds at an assumed interest rate of between
7.5% and 9.0%, depending on the fund. Includes earnings on State appropriations.
(12) - Estimated date of bond issuance. Assumes State appropriations are used prior to bond issuance.
LL
Tyee - Swan Intertie Study - 35 - R. W. Beck and Associates, Inc.
Table 5-2
Table 5-2
Tyee — Swan Intertie Study
Estimated Financing Requirements and
Sources and Uses of Funds
Base Case - Tyee Price Scenario B (No Cost)
(Nominal Dollars)
Breakeven Year (1)
ist Year 4th Year
Diesel Generation Cost Savings (2) $2,381,000 $3,397,000
Cost of Lake Tyee Power (3) 0 0
Net Available to Pay Intertie Costs $2,381,000 $3,397,000
Intertie O&M Costs (4) 397,000 454,000
Net Available for Debt Service (5) $1,984,000 $2,943,000
Estimated Sources of Funds
Revenue Bonds (6) $21,400,000 $31,400,000
State Appropriations 22,500,000 17,000,000
Total Financing Requirements $43,900,000 $48,400,000
Estimated Uses of Funds
Construction Costs (7) $45,871,000 $45,871,000
Financing Fees (8) 642,000 942,000
Debt Service Reserve Fund (9) 2,140,000 3,140,000
Capitalized Interest (10) 3,371,000 5,652,000
Interest Earnings (11) (8,124,000) (7,205,000)
Total Uses of Funds $43,900,000 $48,400,000
Date of Revenue Bond Issuance (12) October 1994 July 1994
(1) - Estimated year of Intertie operation in which costs of power to KPU would be equivalent with or without
the Intertie.
(2) - Estimated savings in KPU diesel generation costs in the specific year resulting from operation of
the Intertie and purchase of surplus Lake Tyee power by KPU.
(3) - Assumes that Lake Tyee power is provided at no cost to KPU.
(4) - Estimated annual operations and maintenance expenses on the Intertie.
(5) - Amount available to pay debt service costs on Intertie debt obligations.
(6) - Estimated amount of tax-exempt revenue bonds that could be issued to fund Intertie capital costs based on
the resultant debt service, net of interest earnings on the debt service reserve fund, being equal to
or slightly less than the Net Available for Debt Service.
(7) - Estimated total construction and development costs for the Intertie.
(8) - Based on assumed financing fees of 3% of total bonds issued.
(9) - Assumed to be equal to 10% of total revenue bonds.
(10) - Interest on Intertie revenue bonds is assumed to be capitalized from the date of issuance until six months
past the date of expected initial operation.
(11) - Estimated interest earnings during construction on Intertie funds at an assumed interest rate of between
7.5% and 9.0%, depending on the fund. Includes earnings on State appropriations.
(12) - Estimated date of bond issuance. Assumes State appropriations are used prior to bond issuance.
Tyee - Swan Intertie Study - 36 - R. W. Beck and Associates, Inc.
Apnig ansaquy uomg - ak] -LE- “ouy ‘samso0ssy pup y22g “MY Comparable Cost of Power (c/wkh) 22
FIGURE 5-1
COMPARISON OF ESTIMATED INCREMENTAL POWER
COSTS TO KPU WITH AND WITHOUT INTERTIE
(Nominal Dollars)
207
18+
167
14+
KPU Diesel Generation
without Intertie
Energy Purchased over Intertie
(4th Year Breakeven) SSMS Pe eontte may ant? nHOTRaHeneeTRaneanet RCN RRR IPRAnstentteent Tt NateAtetnasttennan nee? Reemnenensemmnsccenmarsimre aati
Energy Purchased over Intertie
(1st Year Breakeven)
6+
4+
er <L_ First Year of Intertie Operation
0 T SO T T T T T T T Pe ee 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Year
2010 I-§ ounsty
6. SENSITIVITY ANALYSIS
Introduction
Several assumptions as previously defined have been made in evaluating the effects of the Intertie.
Because these assumptions are only estimates of conditions that may or may not occur in the future it is
necessary to observe the effect on the results of the analysis when key input assumptions are varied. In
particular, the load requirements of KPU and the cost of diesel fuel will have a significant effect on the
outcome of the feasibility of the Intertie. In evaluating the effects of changing the assumptions, the
primary comparison is between the base case and the particular sensitivity case.
Alternative Load Requirements
ISER has prepared high and low load forecast estimates to accompany its base case forecast for
each of the utilities. In general, the high forecasts assume more favorable economic growth scenarios for
the communities and in some cases additional large commercial loads. The low and high load forecasts
are shown in Table 6-2 and 6-3, respectively. Using the low forecast for KPU but maintaining the high
forecast for Petersburg and Wrangell, surplus Lake Tyee generation capability and KPU’s need for
additional energy were estimated. Based on the estimated diesel generation requirements without the
Intertie, the savings in diesel generation costs have been estimated and are shown in Table 6-4 for the low
forecast scenario. Similarly to the analysis for the base case, non-firm energy sales from KPU to KPC
have not been included in the estimation of diesel generation cost savings for the low load scenario.
The results of the financing requirements analysis have been developed for the alternative load
forecast scenario and are presented in Table 6-1. This table indicates the estimated funding from revenue
bonds and the consequent State appropriation requirement for each case assuming both first year and
fourth year break-even years. In addition, Table 6-1 shows the present value of payments for Lake Tyee
power estimated to be purchased by KPU between 1996 and 2010.
Alternative Fuel Price
The Authority has provided altemative fuel price estimates for evaluation. Since the Intertie will
displace diesel generation, a higher fuel price than that assumed for the base case will improve the
financial feasibility of the Intertie. Lower fuel prices have the opposite effect. The alternative fuel price
projections are shown on Table 6-5 and the estimated diesel generation savings are shown in Table 6-6
and 6-7 for the low and high fuel price scenarios, respectively. The alternative fuel price analysis results
shown in Tables 6-6 and 6-7 are based on base case load requirements. Financing requirements are shown
in Table 6-1.
Alternative Interest Rates
The Base Case analysis assumes an annual interest rate of 9.0 percent on revenue bonds issued
to finance the Intertie. Lower or higher interest rates would affect the amount of revenue bonds that can
be issued. Table 6-1 indicates the financing requirements for two alternative interest rate cases, 8.0
percent and 10.0 percent.
Tyee - Swan Intertie Study - 38 - R. W. Beck and Associates, Inc.
Alternative Bond Term
The Base Case assumptions include a 25-year amortization period for the repayment of revenue
bonds. Assuming a 15-year repayment period, the amount of annual debt service would be slightly higher
for an equivalent amount of revenue bonds. Consequently, the amount of revenue bonds that can be
issued resulting in equivalent debt service payments is slightly lower for a 15-year repayment than for a
25-year repayment period. Table 6-1 indicates the financing requirements for the 15-year repayment
alternative.
Tyee - Swan Intertie Study - 39 - R. W. Beck and Associates, Inc.
Apnig anuatuy uomg - aah 7,
“Ou] ‘saq190ssy pup yoog “MY
Table 6-1
Tyee - Swan Intertie Study
Sensitivity Analysis
Comparison of Estimated Financing Requirements
($000)
Present
Funding Requirements (4) Value of
Price First Year Breakeven Fourth Year Breakeven Payments
Case Loads (1) Fuel (2) Scenario(3) Bonds State Bonds State to Tyee (5)
Base - Price Scenario A Med Med A $6,200 $31,000 $12,400 $27,500 $12,224
Base - Price Scenario B Med Med B 21,400 22,500 31,400 17,000 0
Alternative Assumptions
Low Load Low Med A $0 $34,500 $0 $34,500 $0
Low Fuel Med Low A 2,600 33,000 7,100 30,500 12,224
High Fuel Med High A 9,700 29,000 17,800 24,500 12,224
15 Year Bond Repayment Med Med A 5,300 31,500 9,700 29,000 12,224
15 Year Bond Repayment Med Med B 16,900 25,000 25,000 20,500 0
8% Bond Interest Rate Med Med A 6,200 32,000 13,000 28,000 12,224
10% Bond Interest Rate Med Med A 6,000 30,000 11,700 27,000 12,224
(1) - Projected load requirements used for case analysis. High, medium or low.
(2) - Projected diesel fuel cost escalation used for case analysis. High, medium or low. See Table 6-5.
(3) - Price Scenario A assumes KPU pays rates for power purchased from Lake Tyee similar to rates paid currently by
Four Dam Pool purchasers. Scenario B assumes KPU does not pay for power from Lake Tyee.
(4) - Estimated amount of revenue bonds based on amounts available to pay debt service and required State grant to complete funding
requirements. Amounts available to pay debt service are based on power costs with the Intertie breaking even with
costs without the Intertie in either the first or fourth year of Intertie operation.
(5) - Estimated present value of payments to the State for purchases of power by KPU from the Lake Tyee project between
1996 and 2010. Assumes discount rate of 8.0%. 1-9 2198L
Table 6-2
Table 6-2
Tyee - Swan Intertie Study
Projected Peak Demand and Total Energy Requirements (1)
Low Case
Peak Demand (KW) Total Energy Requirements (MWh)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Average Annual Increase:
1990-95
1995-00
2000-10
KPU(2) WML&P PMP&L MP&L KPU(3) WML&P PMP&L MP&L KPC(4)
26,500 3,500 6,100 7,200 130,156 23,740 30,741 25,198 15,565
26,400 3,300 6,000 7,300 129,370 17,569 30,461 25,586 12,000
26,100 3,300 5,900 7,300 129,210 16,215 29,973 25,485 10,000
27,000 3,200 5,900 7,300 133,567 16,107 29,807 25,404 7,500
27,800 3,200 5,900 7,200 137,333 16,113 29,871 25,331 5,000
28,400 3,200 5,800 7,200 140,652 15,956 29,675 25,194 5,000
28,600 3,200 5,900 7,200 141,472 16,012 29,778 25,229 5,000
28,500 3,200 5,800 7,200 140,952 15,928 29,591 25,220 5,000
28,400 3,200 5,800 7,200 140,587 15,864 29,444 25,190 5,000
28,400 3,200 5,800 7,200 140,504 15,815 29,340 25,147 5,000
28,500 3,200 5,800 7,200 141,103 15,922 29,532 25,171 5,000
28,600 3,200 5,800 7,200 141,545 15,964 29,584 25,193 5,000
28,700 3,200 5,800 7,200 141,898 16,005 29,617 25,197 5,000
28,700 3,200 5,800 7,200 142,178 16,043 29,662 25,208 5,000
28,800 3,200 5,900 7,200 142,546 16,098 29,733 25,229 5,000
27,400 3,300 5,900 7,200 135,614 16,170 29,830 25,274 100
27,500 3,300 5,900 7,200 136,015 16,244 29,931 23,523 100
27,600 3,300 5,900 7,200 136,874 16,330 30,064 25,385 100
27,800 3,300 5,900 7,300 137,696 16,411 30,182 25,460 100
27,900 3,300 6,000 7,300 138,237 16,461 30,238 = 25,521 100
28,000 3,300 6,000 7,300 138,838 16,517 30,306 = 25,577 100
1.4% -1.8% -10% 0.0% 1.6% -7.6% -0.7% 0.0% -20.3%
0.1% 0.0% 0.0% 0.0% 0.1% 0.0% -0.1% 0.0% 0.0%
-0.2% 0.3% 0.3% 0.1% -0.2% 0.4% 0.3% 0.2% -32.4%
(1) - Source: Alaska Energy Authority, "Electric Load Forecast for Ketchikan, Metlakatla, Petersburg
and Wrangell, Alaska: 1990-2010", by Institute of Social and Economic Research,
University of Alaska, June 25, 1990.
(2) - Does not include peak demand of Ketchikan Pulp Company (KPC).
(3) - Does not include projected non-firm sales to KPC.
(4) - Projected non-firm energy sales by KPU to KPC. Subject to availability of surplus hydroelectric
generation capability.
Tyee - Swan Intertie Study - 41 - R. W. Beck and Associates, Inc.
Table 6-3
Table 6-3
Tyee - Swan Intertie Study
Projected Peak Demand and Total Energy Requirements (1)
High Case
Peak Demand (KW) Total Energy Requirements (MWh)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Average Annual Increase:
1990-95
1995-00
2000-10
KPU(2) WML&P PMP&L MP&L KPU3) WML&P PMP&L MP&l KPC(4)
27,300 3,500 6,200 7,300 133,947 23,672 31,711 25,500 15,565
31,500 3,500 6,500 7,500 154,433 18,383 33,168 26,233 15,565
32,500 3,700 7,000 7,600 160,399 = 27,543 35,574 26,477 15,565
40,200 3,800 7,200 8,000 198,280 27,907 36,491 28,034 15,565
42,300 3,900 7,300 8,000 208,316 28,203 37,257 28,206 15,565
47,200 3,900 7,500 8,100 232,673 28,437 37,956 28,224 15,565
47,700 4,000 7,700 8,100 235,418 28,890 39,009 28,472 15,565
47,800 4,100 7,900 8,200 235,907 29,427 40,211 28,893 15,565
49,600 4,300 8,200 8,400 244,768 30,056 41,563 29,382 15,565
50,600 4,400 8,500 8,500 249,260 30,660 42,942 29,917 15,565
52,800 4,500 8,700 8,700 260,218 31,160 44,116 30,321 15,565
53,600 4,600 9,000 8,800 264,411 31,755 45,574 30,777 = 15,565
54,900 4,700 9,200 8,900 270,808 32,348 46,947 31,180 15,565
56,100 4,900 9,600 9,000 276,556 33,035 48,524 31,557 15,565
57,400 5,000 9,900 9,100 282,768 33,787 50,254 31,980 15,565
59,000 5,200 10,300 9,300 290,442 34,599 52,128 32,456 15,565
60,700 5,400 10,600 9,400 298,989 35,444 54,075 32,957 15,565
62,500 5,600 11,100 9,600 308,090 36,362 56,185 33,491 15,565
64,600 5,800 11,500 9,700 318,308 37,372 58,500 34,079 15,565
66,800 6,000 12,000 9,900 329,184 38,428 60,915 34,688 15,565
69,100 6,200 12,500 10,100 340,029 39,454 63,286 35,299 15,565
11.6% 2.2% 3.9% 2.1% 11.7% 3.7% 3.7% 2.1% 0.0%
2.3% 2.9% 3.0% 1.4% 2.3% 1.8% 3.1% 1.4% 0.0%
2.7% 3.3% 3.7% 1.5% 2.7% 2.4% 3.7% 1.5% 0.0%
(1) - Source: Alaska Energy Authority, "Electric Load Forecast for Ketchikan, Metlakatla, Petersburg
and Wrangell, Alaska: 1990-2010", by Institute of Social and Economic Research,
University of Alaska, June 25, 1990.
(2) - Does not include peak demand of Ketchikan Pulp Company (KPC).
(3) - Does not include projected non-firm sales to KPC.
(4) - Projected non-firm energy sales by KPU to KPC. Subject to availability of surplus hydroelectric
generation capability.
Tyee - Swan Intertie Study -42- R. W. Beck and Associates, Inc.
- €p- Apnig anjsaquy upmg - aay ‘ou] ‘Sa~ioossy pup 429g “MY LOW LOAD CASE
Tyee Sales at Contract Rate
Low KPU Load, Med Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(M Wh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000)
T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
Table 6-4
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 1 of 2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
0.83 0.89 0.95 1.01 1.07 1.13 1.20 1.26 1.33 1.39
1.00 1.05 1.09 1.14 1.19 1.25 1.30 1.36 1.42 1.49
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
3.00 3.00 3.00 3.00 3.00 . 3.00 3.00 3.00 3.00 3.00
2.40 2.51 2.62 2.74 2.86 2.99 2.60 2.67 2.73 2.80
5.40 5.51 5.62 5.74 5.86 5.99 5.60 5.67 5.73 5.80
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
January 1991
0
0
0
Z jo | a3eg +9 F92L
Apnig ansatuy upg - 2a] “ou] ‘SamIIOSsY pup yIaq “MY LOW LOAD CASE
Tyee Sales at Contract Rate
Low KPU Load, Med Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(M Wh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000) T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
Table 6-4
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 2 of 2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1.46 1.57 1.68 1.79 1.90 2.02 2.13 2.25 2.37 2.49 2.61
1.55 1.62 1.70 1.77 1.85 1.94 2.02 2.11 2.21 2.31 2.41
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
2.87 2.95 3.03 3.12 3.22 3.33 3.44 3.54 3.65 3.76 3.88
5.87 5.95 6.03 6.12 6.22 6.33 6.44 6.54 6.65 6.76 6.88
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 )
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 Z JO Z o8ed 9 F192
Table 6-5
Table 6-5
Tyee - Swan Intertie Study
Diesel Fuel Cost Assumptions (1)
($/gallon)
Low Medium High
1990 0.74 0.83 0.91
1991 0.78 0.89 0.99
1992 0.83 0.95 1.07
1993 0.87 1.01 ie
1994 0.91 1.07 1.23
1995 0.96 £13 1.31
1996 1.00 1.20 1.39
1997 1.05 1.26 1.47
1998 1.10 133 1.55
1999 15 1.33. 1.64
2000 1.20 1.46 1.72
2001 1.26 1.57 1.87
2002 1.33 1.68 2.03
2003 1.40 1.79 2.18
2004 1.47 1.90 2.33
2005 1.54 2.02 2.49
2006 1.62 2.13 2.65
2007 1.69 2.25 2.80
2008 La 2.37 2.96
2009 1.85 2.49 3.13)
2010 1.93 2.61 3.29
Average Annual Increase
1990-2000 4.9% 5.8% 6.6%
2000-2010 4.9% 6.0% 6.7%
1990-2010 4.9% 5.9% 6.6%
(1) - Source: Alaska Energy Authority, Alaska Electric Light &
Power, Juneau Energy Advisory Committee, "Juneau 20-Year
Power Supply Plan Update", CH2M-Hill, August 1990. Fuel prices
are based on Alaska Energy Authority projections of world
oil prices. Includes assumed annual inflation of 4.5%.
Tyee - Swan Intertie Study - 45 - R. W. Beck and Associates, Inc.
- OF - Apnis ansamy unas - ak] “2u] ‘saqtoossy pup yoag ‘MY LOW FUEL COST
Tyee Sales at Contract Rate
Med KPU Load, Low Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(M Wh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000) T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
Table 6-6
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 1 of 2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
0.74 0.78 0.83 0.87 0.91 0.96 1.00 1.05 1.10 1.15
1.00 1.05 1.09 1.14 1.19 1.25 1.30 1.36 1.42 1.49
0 4,502 7,255 13,869 18,672 21,907 23,449 25,037 27,713 28,803
0 0 7 0 0 0 0 23,449 25,037 27,713 = 28,803
0 0 0 0 0 0 1,743 1,947 2,253 2,445
0 0 0 0 0 0 305 341 394 428
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 2,048 2,288 2,647 2,873
0 0 0 0 0 0 2,048 2,288 2,647 2,873
3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
2.40 2.51 2.62 2.74 2.86 2.99 2.60 2.67 2.73 2.80
5.40 §.51 5.62 5.74 5.86 5.99 5.60 5.67 §.73 5.80
0 0 0 0 0 0 24,683 26,355 29,172 30,319
0 0 0 0 0 O (1,234) (1,318) (1,459) (1,516)
0 0 0 0 0 0 23,449 25,037 27,713 28,803
0 0 0 0 0 0 1,382 1,494 1,672 1,758
0 0 0 0 0 0 666 794 976 1,115
0 0 0 0 0 0 397 415 434 454
0 0 0 0 0 0 268 378 541 661
January 1991
22,721
12,224
7,484 Z JO | o8eq 9-9 21QRL
- Ly - Apnig anjsaquy upg - aa “ou ‘SaqDI20SSy pup yI2g ‘MY LOW FUEL COST
Tyee Sales at Contract Rate
Med KPU Load, Low Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(MWh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000)
T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
Table 6-6
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 2 of 2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1.20 1.26 1.33 1.40 1.47 1.54 1.62 1.69 1.77 1.85 1.93
1.55 1.62 1.70 1.77 1.85 1.94 2.02 2.11 2.21 2.31 2.41
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 48,014 51,211 54,217
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
2,740 3,067 3,367 3,675 4,039 4,490 5,015 5,614 5,503 §,272 5,017
480 532 579 628 686 760 847 947 928 890 848
0 0 0 0 0 0 ty) 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
3,220 3,599 3,946 4,303 4,726 5,250 §,862 6,561 6,431 6,162 5,865
3,220 3,599 3,946 4,303 4,726 5,250 5,862 6,561 6,431 6,162 5,865
3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
2.87 2.95 3.03 3.12 3.22 3.33 3.44 3.54 3.65 3.76 3.88
5.87 5.95 6.03 6.12 6.22 6.33 6.44 6.54 6.65 6.76 6.88
32,559 34,512 35,947 37,292 39,019 41,345 44,087 47,171 44,234 40,590 37,023
(1,628) (1,726) (1,797) (1,865) (1,951) (2,067) (2,204) += (2,859) + (2,212) +~— (2,029) (1,851)
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
1,911 2,053 2,168 2,282 2,427 2,617 2,839 3,085 2,942 2,744 2,547
1,309 1,546 1,778 2,021 2,299 2,633 3,023 3,477 3,489 3,419 3,318
474 495 518 541 565 591 617 645 674 704 736
835 1,050 1,261 1,480 1,734 2,042 2,406 2,831 2,815 2,714 2,582 ZJ0 7 Beg 9-9 7108.1
-8p- Apnig ansaquy uvmg - aad] ‘Quy ‘samioossy pup yag ‘MY HIGH FUEL COST
Tyee Sales at Contract Rate
Med KPU Load, High Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(M Wh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000)
T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
Table 6-7
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 1 of 2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
0.91 0.99 1.07 1.15 1.23 1.31 1.39 1.47 1.55 1.64
1.00 1.05 1.09 1.14 1.19 1.25 1.30 1.36 1.42 1.49
0 4,502 7,255 13,869 18,672 21,907 23,449 25,037 27,713 28,803
0 0 0 0 0 0 23,449 25,037 27,713 28,803
0 0 0 0 0 0 2,409 2,725 3,187 3,493
0 0 0 0 0 0 305 341 394 428
0 ) 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 2,715 3,066 3,582 3,921
0 0 0 0 0 0 2,715 3,066 3,582 3,921
3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
2.40 251 2.62 2.74 2.86 2.99 2.60 2.67 2.73 2.80
5.40 5.51 5.62 5.74 5.86 §.99 5.60 5.67 5.73 5.80
0 0 0 0 0 0 24,683 26,355 29,172 30,319
0 0 0 0 0 O (1,234) (1,318) (1,459) (1,516)
0 0 0 0 0 0 23,449 25,037 27,713 28,803
0 0 0 0 0 0 1,382 1,494 1,672 1,758
0 0 0 0 0 0 1,332 1,572 1,910 2,162
0 0 0 0 0 0 397 415 434 454
0 0 0 0 0 0 935 1,156 1,476 1,709
January 1991
33,408
12,224 18,170
Z JO | a8eg L-9 31921
Apnig aijsaquy upg - 2a] -6r- ‘Quy ‘saw120ssy pup y2ag “MY HIGH FUEL COST
Tyee Sales at Contract Rate
Med KPU Load, High Fuel
Tyee T-Line Online 1996
Cost Analysis
KPU Diesel
Diesel Fuel Cost ($/gal)
Diesel Variable O&M (c/KWh)
Diesel Generation (MWh)
Diesel Offset by Tyee (MWh)
KPU Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
Cost of Tyee Power to KPU (c/kWh)
Debt Service Component
O&M Component
Total
Tyee Sales to KPU (MWh)
Transmission Losses(MWh)
Net to KPU Load (MWh)
Cost of Tyee Power to KPU ($000)
Net Available for T-line ($000) T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate
KPU Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
8.0%
Table 6-7
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 2 of 2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1.72 1.87 2.03 2.18 2.33 2.49 2.65 2.80 2.96 3.13 3.29
1.55 1.62 1.70 1.77 1.85 1.94 2.02 2.11 2.21 2.31 2.41
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 48,014 51,211 54,217
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
3,947 4,549 5,123 5,716 6,404 7,239 8,206 9,306 9,225 8,927 8,568
480 532 579 628 686 760 847 947 928 890 848
0 0 0 0 0 0 0 0 0 0 0
0 0 ) 0 0 0 0 0 0 0 0
4,427 5,081 5,702 6,343 7,090 7,999 9,053 10,253 10,153 9,817 9,416
4,427 5,081 5,702 6,343 7,090 7,999 9,053 10,253 10,153 9,817 9,416
3.00 3.00 3.00 3.00 3.00 - 3.00 3.00 3.00 3.00 3.00 3.00
2.87 2.95 3.03 3.12 3.22 3.33 3.44 3.54 3.65 3.76 3.88
5.87 5.95 6.03 6.12 6.22 6.33 6.44 6.54 6.65 6.76 6.88
32,559 34,512 35,947 37,292 39,019 41,345 44,087 47,171 44,234 40,590 37,023
(1,628) (1,726) (1,797) (1,865) (1,951) (2,067) (2,204) ~— (2,359) += (2,212) ~— (2,029) (1,851)
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 42,023 38,560 35,172
1,911 2,053 2,168 2,282 2,427 2,617 2,839 3,085 2,942 2,744 2,547
2,516 3,028 3,534 4,061 4,663 §,382 6,214 7,168 7,212 7,073 6,869
474 495 518 541 565 591 617 645 674 704 736
2,042 2,533 3,016 3,520 4,098 4,791 5,597 6,523 6,538 6,369 6,133 Z JO 7 adeg L-9 FIQRL
7. OTHER CONSIDERATIONS
Expansion of the Lake Tyee Project
Design and construction of the Lake Tyee hydroelectric project anticipated the addition of a third
10 MW turbine generator at a later date. This would increase the peaking capacity of the project but
would essentially provide no additional energy generation because of limitations in the hydraulic storage
capacity of the lake itself. Assuming average water conditions, the increased energy potential of the Lake
Tyee project is estimated to be 1,000 megawatt-hours per year. With the Intertie, the expanded capability
of the Lake Tyee project could provide some benefits to the integrated system through greater peaking
capacity at Lake Tyee and by allowing more effective utilization of the Swan Lake project. Coordinated
operation could provide some increased generation among all of the integrated hydroelectric projects by
taking advantage of the differing hydrologic and storage characteristics of the various projects. Most of
this increased generation would be realized with the Intertie alone regardless of the installation of the third
turbine at Lake Tyee. Some system reliability enhancements would be realized with the third turbine.
The cost of installing a third 10 MW turbine at the Lake Tyee powerhouse is estimated to be
$5,500,000 in 1991 dollars. This cost includes the costs for furnishing and installing the turbine, governor,
spherical valve, generator, exciter, control boards and SCADA equipment, switchgear and second stage
concrete. The estimated cost also includes the estimated costs of engineering and administration and a
20 percent contingency. It does not include the costs of additions to the switchyard at the Lake Tyee
powerhouse, financing costs, and the cost of replacement power during the installation of the spherical
valve, a task estimated to require approximately 20 days, which requires shutdown of the entire Lake Tyee
project. (There may be an opportunity to use the existing ball valve which may not necessitate draining
of the power tunnel, however, the assessment of this requirement is beyond the scope of the Study). This
cost estimate has been made based on the escalation and adjustment of the actual costs of the two existing
Lake Tyee turbine-generator units averaged with the costs of a similar project constructed recently in
Washington state.
The estimated costs of the Lake Tyee expansion are shown in Table 7-1. The incremental annual
operations and maintenance costs associated with the third turbine at Lake Tyee are estimated to be
approximately $50,000 in 1991 dollars.
Interconnection with Metlakatla
MP&L is an isolated system located on Annette Island approximately 15 miles from the nearest
interconnection point with KPU’s electric system. In 1987, Harza Engineering estimated the cost of a
transmission system connecting KPU and MP&L to be $6,610,000. Approximately one mile of this
transmission system would need to be a submarine cable. The load requirements of MP&L are presently
in the range of 7,100 KW peak demand and 24,743 MWh annual total energy requirements. MP&L
supplies its load with a 4,000 KW local hydroelectric system and diesel generation as necessary to supply
the remainder.
MP&L supplies power to a local sawmill which has significant hourly fluctuations in its power
usage as various pieces of equipment are tumed on and off. This fluctuating load affects the operation
of MP&L’s system and would affect the operating systems of any other interconnected utilities.
Disregarding this operation constraint, however, the amount of diesel generation that could be displaced
if MP&L were interconnected with the Lake Tyee project through KPU and the Intertie has been estimated
Tyee - Swan Intertie Study - 50- R. W. Beck and Associates, Inc.
for each year of the Study period and is shown in Table 7-2. If this additional interconnection were made
along with the Intertie, the resulting financing requirements of the Intertie are estimated to be $7,900,000
of revenue bonds and $30,000,000 State grant assuming a first-year break-even requirement, and that Lake
Tyee power is sold to MP&L and KPU at a rate similar to that paid by the Four Dam Pool participants
(Pricing Scenario A). This is a slight increase in revenue bond debt over the base case without MP&L
resulting from the estimated additional amount of $175,000 from MP&L to pay debt service in 1996. The
capital costs of the MP&L to KPU transmission system are assumed to be funded separately from the
Intertie and have not been included in the estimated financing requirement of the Intertie.
Tyee - Swan Intertie Study -51- R. W. Beck and Associates, Inc.
Table 7-1
Table 7-1
Tyee - Swan Intertie Study
Lake Tyee Third Unit
Estimated Cost of Construction (1)
(1991 Dollars)
Turbines, Governors and Valves $1,550,000
Generators and Accessories 1,000,000
SCADA and Communications Equipment 550,000
Subtotal $3,100,000
Installation $900,000
Contingency 20.0% 800,000
Engineering and Owner's Costs 15.0% 700,000
Total Construction Cost $5,500,000
(1) - Does not include costs for switchyard modifications, replacement power
during construction or financing costs.
Tyee - Swan Intertie Study - 52- R. W. Beck and Associates, Inc.
-¢€S- Apnig atatuy upmg - aah “ou] ‘samiz0ssy pup yIag “MY METLAKATLA IMPACT - BASE
Tyee Sales at Contract Rate
Med KPU Load, Med Fuel
Tyee T-Line Online 1996
Table 7-2
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 1 of 4
Metlakatla Impact Analysis
Energy Requirements (MWh)
Metlakatla
Energy Resources (MWh)
MP&L Hydro
MP&L Diesel
Total
Displaceable Diesel Energy
Ketchikan
Metlakatla
Total
Diesel Offset by Tyee (MWh)
KPU & MP&L Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
25,331 25,869 25,931 25,948 25,978 25,978 26,118 26,316 26,506 26,707
22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000
3,331 3,869 3,931 3,948 +~=«3,978~—«3,978 += 4,118 = 4,316 = 4,506 4,707
25,331 25,869 25,931 25,948 25,978 25,978 26,118 26,316 26,506 26,707
0 4,502 7,255 13,869 18,672 21,907 23,449 25,037 27,713 28,803
3,331 3,869 3,931 3,948 3,978 3,978 4,118 4,316 4,506 4,707
3,331 8,371 11,186 17,817 22,650 25,885 27,567 29,353 32,219 33,510
0 0 0 0 0 0 27,567 29,353 32,219 33,510
0 0 0 0 0 0 2,441 2,739 3,163 3,455
0 0 0 0 0 0 359 399 458 498
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 2,800 3,138 3,621 3,952 0 0 0 0 0 0 2,800 3,138 3,621 3,952 pjo] seg CL NGL
Page 2 of 4
METLAKATLA IMPACT ~- BASE Table 7-2
Tyee Sales at Contract Rate Alaska Energy Authority
Med KPU Load, Med Fuel Tyee - Swan Intertie Study
Tyee T-Line Online 1996
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 :
Apnig ayisatuy ung - aah] Metlakatla Impact Analysis
=~: “uy ‘samyo0ssy pup 22g “MY
Tyee Sales to KPU & MP&L (MWh) 0 0 0 0 0 0 29,018 30,898 33,915 35,274
Transmission Losses(MWh) 0 0 0 0 0 O (1,451) (1,545) (1,696) (1,764)
Net to Load (MWh) 0 0 0 0 0 0 27,567 29,353 32,219 33,510
Cost of Tyee Power ($000) 0 0 0 0 0 0 £65 ARS2° 1983 2,046
Net Available for T-line ($000) 0 0 0 0 0 0 1,175 1,387 1,678 1,907
T-line O&M ($000) 0 0 0 0 0 0 397 415 434 454
Net for Debt Service ($000) 0 0 0 0 0 0 717 971 1,244 1,453
Net Present Value ($000)
Discount Rate 8.0% January 1991
KPU & MP&L Diesel Offset Savings 31,254
Cost of Tyee Power 13,727
Net for T-line Debt Service 14,513 p jo 7 a8eg CL AGL
-o¢- Apnig arjsaquy upg - aa], “Quy ‘Sap120ssy pup yIag “MY METLAKATLA IMPACT - BASE
Tyee Sales at Contract Rate
Med KPU Load, Med Fuel
Tyee T-Line Online 1996
Table 7-2
Alaska Energy Authority
Tyee - Swan Intertie Study
Page 3 of 4
Metlakatla Impact Analysis
Energy Requirements (MWh)
Metlakatla
Energy Resources (MWh)
MP&L Hydro
MP&L Diesel
Total
Displaceable Diesel Energy
Ketchikan
Metlakatla
Total
Diesel Offset by Tyee (MWh)
KPU & MP&L Cost Savings ($000)
Diesel Fuel
Diesel Variable O&M
Capital Cost
Fixed O&M
Total
Savings Available for Tyee & TL
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
26,913 27,089 27,252 27,399 27,557 27,729 27,939 28,172 28,429 28,695 28,944
22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000 22,000
4,913 5,089 5,252 5,399 5,557 5,729 5,939 6,172 6,429 6,695 6,944
26,913 27,089 27,252 27,399 27,557 27,729 27,939 28,172 28,429 28,695 28,944
30,931 32,786 34,150 35,427 37,068 39,278 41,883 44,812 48,014 51,211 54,217
4,913 5,089 5,252 5,399 5,557 5,729 5,939 6,172 6,429 ~—-6,695 6,944
35,844 37,875 39,402 40,826 42,625 45,007 47,822 50,984 54,443 57,906 61,161
35,844 37,875 39,402 40,826 42,625 45,007 47,822 45,339 42,023 38,560 35,172
3,875 4,399 4,898 5,411 6,004 6,720 7,548 7,548 7,364 7,099 6,792
557 615 668 724 789 871 967 958 928 890 848
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
4,431; 5,014- 5,566 6,135. 6,794 7,591 8515 8506 8292 7,989 7,640
4,431 5,014 5,566 6,135 6,794 7,591 8,515 8,506 8,292 7,989 7,640 p JO € adeg TL GR
Apnig ayisamuy unas - aah] -9¢- “Quy ‘Saq1I0SSy pup yoag ‘MY
METLAKATLA IMPACT - BASE
Tyee Sales at Contract Rate
Med KPU Load, Med Fuel
Tyee T-Line Online 1996
Page 4 of 4
Table 7-2
Alaska Energy Authority
Tyee - Swan Intertie Study
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Metlakatla Impact Analysis
Tyee Sales to KPU & MP&L (MWh)
Transmission Losses(M Wh)
Net to Load (MWh)
Cost of Tyee Power ($000)
Net Available for T-line ($000)
T-line O&M ($000)
Net for Debt Service ($000)
Net Present Value ($000)
Discount Rate 8.0%
KPU & MP&L Diesel Offset Savings
Cost of Tyee Power
Net for T-line Debt Service
37,731 39,868 41,476 42,975 44,868 47,376 50,339 47,726 44,234 40,590 37,023
(1,887) (1,993) (2,074) (2,149) (2,243) (2,369) (2,517) (2,386) (2,212) (2,029) (1,851)
35,844 37,875 39,402 40,826 42,625 45,007 47,822 45,339 42,023 38,560 35,172
2,215 2,372 2,501 2,630 = 2,791 = 2,999 = 3,242, 3,121 ~=—2,942 2,744 = 2,547
2,216 2,642 3,065 3,505 4,003 4,592 5,273 5,385 5,350 5,245 5,093
474 495 518 341 565 591 617 645 674 704 736
1,742 2,147 2,547 2,964 3,438 4,001 4,656 4,740 4,676 4,541 4,357
b JO p aed TL Ge