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HomeMy WebLinkAboutA Concept for Power Production Assistance to Electric Utilities, January 1980A Concept for Power Production Assistance To Electric Utilities A Report Prepared-for _. Representative Nels A. Anderson, Jr. By _ ArthurYoung & Company . ; January: 1980 ARTHUR YOUNG & COMPANY 730 T STREET ANCHORAGE, ALASKA 99501 January 14, 1980 Representative Nels Anderson, Jr. House of Representatives Pouch V Juneau, Alaska 99811 Dear Representative Anderson: We are pleased to submit the attached report discussing a concept for power production assistance to electric utilities. The data supporting the estimated costs of the concept were obtained from 1978 and earlier sources. We suggest that an effort be made to update the cost estimates based on 1979 year- end data that should be available from the utilities by February, 1980. If you have any questions concerning this report please do not hesitate to call Charles P. Sitkin. He can be reached in Anchorage at 907-279-0422 ve a yours, Co Foot YOUNG ct ECO on A Concept for Power Production Assistance To Electric Utilities A Report Prepared for Representative Nels A. Anderson, Jr. By Arthur Young & Company January 1980 A CONCEPT FOR POWER PRODUCTION ASSISTANCE TO ELECTRIC UTILITIES EXECUTIVE SUMMARY A concept is presented in this report to provide finan- cial assistance to electric utilities experiencing high power production costs due to the cost of fuel, the geographic remote— ness of the utilities, the number and classes of consumers they serve, and the relatively small size of the: utilities electric load. The power production cost reduction received by the uti- lity would be passed on to its consumers through lower electric rates. In order to evaluate alternative methods to provide financial assistance to electric utilities, the following nine criteria are established: 1. The program must provide immediate assistance for the severely impacted rural electric consumers. Ze The program must reduce the current disparity be- tween rural and urban electric rates. 3. The program must promote the efficient use of gen- erating facilities. 4. The program must promote the development and utili- zation of new and more economical generating facil- ities. 5S. The program must promote conversion to renewable energy resources. 6. The program must ultimately become economically self-sustaining. ar The program must be relatively simple to develop and administer. 8. The program must be operationally consistent with the intent of existing energy-related legislation. oF The program must conform to the cost-of-service rate making philosophy as approved by the Alaska Public Utilities Commission. The method selected should prove to be relatively easy for the legislature to address. It proposes the use of existing administrative organizations, and offers the opportunity for funding from other sources than the State General Fund. An espe- cially important characteristic of the method presented is that the State would have the capability to perform cost-benefit ana- lyses in order to determine if capital expenditures for alter- native power production systems could be justified by the attendant reduction in the financial assistance provided by the State. The concept would work as follows: Step 1: The legislature will designate (1) the lowest residential rate for a utility that will be eligible to participate in the program and (2) the amount of the reduction in the residential rate for the utilities with the highest resi- dential rates (e.g., what should Alaska Village Electric Cooperative's residential consumers pay)? Step 2: The Alaska Public Utilities Commission will implement the legislative direction by desig- nating, through the method described in this report, the adjusted power production cost for each participating utility. The APUC would also approve a tariff reflecting lower consumer rates. Step 3: The Alaska Power Authority will administer the power production assistance program after the APUC has approved a utility's tariff and ad- justed power production cost. Each month the utility will submit a report to the Alaska Power Authority showing its sold kilowatt-hours and its actual power production costs. The Alaska Power Authority will pay the utility for its cost of production in excess of the ap- proved adjusted power production costs. In this way, the power production costs incurred by a participating utility will remain constant during the period of the legislative appropriation. Step 4: The legislature will have the opportunity an- nually to review the power production assis- tance program and adjust its guidelines, developed in Step 1, if it is appropriate. Step 5: Based on changes directed in Step 4 and/or changes in the utility's actual power produc-— tion costs, the cycle is repeated starting with the APUC's review and approval of the utility's tariff and adjusted power production costs. The Power Production Assistance Program should be of- fered to all utilities serving residential consumers that fall within the guidelines established by the legislature. Although the primary objective of the program is to provide rate relief to residential consumers, all the consumers of a participating uti- lity should receive a rate reduction associated with the reduced power production cost. This comprehensive approach will be in the best interests of the utility and the State. The lower large power consumer rates will help to assure the purchase of power from the local utility rather than self-generation by the large power consumer. This will enable the utility to operate more efficiently and offers the potential for a lower amount of State financial assistance. The cost of the Power Production Assistance Program described in this report could range annually between $6,300,000 to $12,500,000, if diesel fuel costs continue to increase as they did during 1979. The large range in potential program costs is due to the possible range of assistance that the legislature could determine to be appropriate. It should be recognized, how- -iii- ever, that a substantial portion of these costs are already being incurred by the State through its payment of the electric costs of State owned facilities. When this fact is taken into consid- eration, the incremental cost of the Power Production Assistance Program is substantially less. -iv- Tatts hi. Iv. TABLE OF CONTENTS INTRODUCTION sista siilailiciieen eiioul ears iical (el reulecdialeiaieuleetila Aye ORO On RO DONG elite ot ee esate ocmoritefiea nels tal eialieeeial Bc] LOucia ne rot) Repore |e |e) ls) +) roi) fel 1) ol iel er iellen| suite ANALYSIS OF ALTERNATIVE APPROACHES. ........ A. B. Cc. THE Program Criteria. ... eae Direct and Indirect Assistance. OUNCE reac lata areiaireriale Alternatives for Indirect Assistance. ..... POWER PRODUCTION ASSISTANCE PROGRAM ...... Oe ar ed) ol fol on lied opel oon) ater carinikefil oultedicounlceulines alleialves| ile WOCROGRLORy «+ + 6 6s «© 6 ee ee ee eh le le Hypothetical Example: Application of the Power Production Assistance Program to Kotzebue Electric Aseociation, Inc. . 2. 2 s+ «+ © © © Other Considerations for the Power Production Beetetenes Programs («j= +) we) we sm!) el ls le SOND ENG a fou oor) fog od |e) etl oe | ies) eyo! Ke et || ot loll roy oll fl oe ftont fs A. B. Program Costs ...-. * fa ale Sources of Funds for the Power Production Aspietasese Program « «6. + 6 oe 8s te te ee EVALUATION OF POWER PRODUCTION ASSISTANCE PROGRAM . A. B. Cc. D. The Program Must Provide Immediate Assistance for the Severely Impacted Rural Electric Consumers The Program Must Reduce the Current Disparity Between Rural and Urban Rates. ........ The Program Must Promote Efficient Use of Generating Facilities. . 2. «)e « «« « # « « The Program Must Promote the Development and Utilization of New and More Economical Generating Facilities’ |< |<) fe: |e) ia) (6) || o) \e) le o The Program Must Promote Conversion to Renewable Energy Resources .....+.+..e- ‘ The Program Must Ultimately Become Economically Self-Sustaining. ... erence a et oe The Program Must Be Relatively Simple to Develop and Administer . . «© «© «© « «© «© «© e © © © @ @ . . The Program Must Be Operationally Consistent with the Intent of Existing Energy-Related Legislation. The Program Must Conform to the Cost-of-Service Rate Making Philosophy as Approved by the Alaska Public Utilities Commission. . . .....«« « 54 54 55 56 58 59 60 60 APPENDIX I Alaska Utility Abbreviations. .... APPENDIX II APPENDIX III REA Form 12f: Operating Report - Internal II.1 II.2 TET III .2 III.3 III .4 III.5 III .6 Iv.1 IV.2 IvV.3 Iv.4 V.l Commercial Consumers . ....+ +. « Combustion Plant ..... ++ «+e «© «© « TABLE OF EXHIBITS Criteria for Programs Offering Economic Relief from High Electric Costs .....+.++s+s-. Power Production Costs as a Percentage of Residential Consumption Cost .....+.. Steps in Implementing the Power Production Assistance Program... . 1. 24 «6 «© «© © © «© « Example Residential Revenue Requirement Adjustment Curve to be Determined by the Legislature. . . 2. 2. 2. 2. © © © © © © © ww Example Power Production Assistance Curve. . . Example Residential Revenue Requirement Adjustment Curve Determined by the Legislature Example Power Production Assistance Impact. . Example Power Production Assistance Curve. . . Electric Rates for Residential and Small Example Power Production Assistance Cost Analysis. Power Production Assistance Cost Estimates for Three Levels of Assistance ...... Total Power Production Assistance Cost Estimates Proposed Hydroelectric Projects. . .. +... . Sensitivity of Annual Debt Service Requirements to Interest Rates. . . 2. 2. © «© «© © «© © ew - 62 - 64 82 15 18 20 23 24 26 33 43 45 46 Sl 57 s B 8 2 F I. I. INTRODUCTION The cost of electricity in rural Alaska is exceptionally high. The cost will continue to increase as long as the primary energy source is diesel fuel. Many ideas have been put forth in recent years that could provide the electric consumer with some form of economic relief. These ideas have ranged from artificially rolling back the cost of fuel to that price enjoyed at some earlier period in time, to direct payments to the consumer through a method such as Governor Hammond's energy credit proposal. One idea frequently mentioned is to provide economic relief directly to the utility. Robert W. Retherford is a frequently referenced proponent of providing financial help directly to the utility. He suggests a methodology be developed to provide financial assistance to uti- lities for a portion of their power production costs and that the resultant savings be passed to the consumer through lower rates.1l A. SCOPE OF REPORT Representative Nels Anderson requested that this report be prepared in order to develop a concept for providing financial assistance directly to utilities with the goal of reducing rates to electric consumers. In order to develop such an operating 1 "Blectricity - Vital Ingredient to Quality in Survival," Robert W. Retherford, Alaska Native Foundation Energy Conference, Anchorage, Alaska, May, 1979. i concept, performance criteria is first established and then al- ternative approaches to providing financial assistance to elec- tric utilities is examined and discussed. A preferred approach to providing financial assistance is selected and presented in sufficient detail that operating procedures and/or legislation could evolve directly from the methodology developed herein. An attempt is made to estimate the cost of the suggested approach under certain specific conditions based on the data available at the time of the report's preparation. The rapidly escalating cost of diesel fuel tends to make any published report involving energy costs obsolescent upon publication. A concerted effort should be made to obtain the most accurate current data regarding electric rates and power production costs prior to the establishment of a final cost estimate. Sources of funds to support the proposed financial as- sistance program are discussed in the report. B. OUTLINE OF REPORT Section II of this report, Analysis of Alternative Ap- proaches, presents a set of criteria for evaluating programs designed to provide economic relief for high electric costs throughout Alaska. This section also discusses different forms of direct and indirect assistance and, in particular, expands upon concepts for providing indirect assistance. Section III discusses the power production assistance program in detail and explains how it works. Alternative ver- sions of the basic concept are examined, where appropriate. Section IV presents an estimate of the cost of the power production assistance program and a discussion of funding sources in the short and long terms. Section V evaluates the power production assistance pro- gram according to the criteria established in Section II. : 5 : a 3 Ke : it II. ANALYSIS OF ALTERNATIVE APPROACHES There are numerous approaches to the problem of pro- viding economic relief from the high electric costs typically encountered in rural Alaska. Some of these approaches have been publicly discussed; others have not. The purpose of this section is to examine alternative approaches to electric rate relief in Alaska, in terms of the criteria that any such program should be expected to meet. A. PROGRAM CRITERIA In Exhibit II.1 nine requirements or criteria are listed that should be addressed by any program designed to provide re- lief from high electric costs in rural Alaska. These criteria are discussed in detail below. 1. The program must provide immediate assistance for the severely impacted rural electric consumers Electric costs in many areas of rural Alaska have in- creased at an alarming rate over a relatively short period of time. Rural electric consumers are experiencing a severe econo- mic burden due to the high cost of electricity. The program must be implemented rapidly, and operate in such a manner as to assist these rural consumers immediately. EXHIBIT II.1 CRITERIA FOR PROGRAMS OFFERING ECONOMIC RELIEF FROM HIGH ELECTRIC COSTS The program must provide immediate assistance for the severely impacted rural electric consumers. The program must reduce the current disparity between rural and urban electric rates. The program must promote the efficient use of generating facilities. The program must promote the development and utilization of new and more economical generating facilities. The program must promote conversion to renewable energy resources. The program must ultimately become economically self-sustaining. The program must be relatively simple to develop and ad- minister. The program must be operationally consistent with the intent of existing energy-related legislation. The program must conform to the cost-of-service rate making philosophy as approved by the Alaska Public Utilities Commission. 2. The program must reduce the current disparity between rural and urban electric rates Rural electric rates in Alaska are considerably higher than urban electric rates. In some areas of rural Alaska, elec- tric rates are ten times more than the rates in the urban areas. Due to the relatively small number of consumers involved in rural Alaska, this ten to one disparity can be reduced without substan- tial cost to the State. 3. The program must promote the efficient use of generating facilities Any program designed to provide electric rate relief in rural areas should be structured in such a way as to promote ef- ficiency in the operations of the affected utilities. In parti- cular, the program should: ry Encourage the use of fuel-efficient generators ver- sus maintenance-efficient generators; o Encourage the use of inter-ties between existing electric distribution systems in rural Alaska. 4. The program must promote the development and utilization of new and more economical generating facilities To the extent that new technologies for the generation of electric power become available, or that existing sources of power become economically more attractive, the program should en- courage both affected utilities’ and the State to become involved in the development of these resources. 5. The program must promote conversion to renewable energy resources Hydroelectric power is one of the most viable alterna- tives for the State of Alaska to attain energy self-sufficiency after the depletion of existing petroleum resources. Any program designed to alleviate the economic impact of high electric costs in rural Alaska must promote the development of hydroelectric power. 6. The program must ultimately become economically self- sustaining Due to the immediacy of the problems this program is designed to solve, the immediate source of funding is likely to be interest earnings on the Permanent Fund, or from the General Fund. However, a methodology should exist whereby this program could become economically self-sustaining without reliance on Permanent Fund revenues or the General Fund. 7. The program must be relatively simple to develop and administer The cost of any program of this nature could be in- creased significantly by “administrative overhead." Addition- ally, unnecessary complexity could hinder the development of the program and slow down the timetable for program implementation. 8. The program must be operationally consistent with the intent of existing energy-related legislation Existing energy-related legislation, specifically A.S. 44.56, Alaska Power Authority, and 18.57, Regional Electric Auth-— orities, state the general goals and objectives of electrical power programs in the State of Alaska. The program should be consistent with such legislation. 9. The program must conform to the cost-of-service rate making philosophy as approved by the Alaska Public Utilities Commission Rural Alaska electric rates of those utilities regulated by the APUC are currently based on the cost-of-service concept. Any program designed to provide relief to rural consumers should not substantially distort the cost-of-service concept. In order to maintain efficient development and use of electric energy within the State of Alaska, any distortion should be kept to a minimum. B. DIRECT AND INDIRECT ASSISTANCE The several options to provide electric cost relief to rural rate payers may be divided into two categories: e Direct assistance to the rate payer. e Indirect assistance through a subsidy to a utility. Programs calling for direct assistance to the rate payer would require the State to engage in transactions with each eli- gible rate payer within the State of Alaska. These transactions could take any one of three forms: e Rebates on State income tax payments; e "Energy stamps"; e Cash payments to rate payers (or to the utility in the name of the rate payer). Each of these alternatives is discussed below. 1. State Income Tax Rebates This proposal would require each taxpayer in the State of Alaska to claim an energy tax credit on the State income tax return. The amount of this credit could be determined by years of residency within the State of Alaska. This proposal would also provide for a refund or dividend check to the individual, if that individual received more tax rebate than was owed in State income tax. 2. Energy Stamps This proposal would be essentially analogous to the Fed-— erally funded food stamp program. Eligible individuals would re- ceive “energy stamps" which could be used in lieu of cash to pay for electric energy consumption. Presumably, the qualifications for receipt of such stamps would be dependent on geographical lo- cation and possibly personal income. 3. Cash Payments This proposal calls for direct cash payments to be made to energy consumers or to the utility in his behalf. These cash payments would be intended to pay for a portion of a consumer's electric costs. The criteria for the determination of qualifica-— tion for and amount of payment could be established in a number of ways, including electric costs, geographic location, age, or income level. While the programs mentioned above could be structured to provide assistance for rural electric rate payers, it must be =O= recognized that they also have significant shortcomings. For instance: e They amount to pure subsidy programs, in that they address no issues beyond immediate relief from high electric costs. e They have no provision to become economically self- sustaining in the long run. e The development and administration of these pro- grams would be extremely complex; the number of re- quired transactions would be high, the possibility for fraud would be significant, and the cost of implementing proper controls might be prohibitive. For these reasons, direct assistance to rural rate payers is not seen to be a viable alternative. C. ALTERNATIVES FOR INDIRECT ASSISTANCE Indirect assistance may be provided to electric utili- ties in a number of ways. Since any financial assistance to a utility must be interpreted as a reduction in the cost of its operation for rate making purposes, the alternatives to be exa- mined should be stated in terms of what portion of a utility's costs are to be subsidized by any State assistance. The four alternatives examined here are: All costs of operation; Capital costs; Fuel costs; eee Power generating costs. mei ren) Ad COSTS The first alternative is State financial assistance to electric utilities to subsidize all costs of operations; these costs include power generating costs, transmission and distribu- tion costs, meter reading costs, general and administrative costs, capital costs, and return requirements. This alternative has the advantage of simplicity, in that existing reporting re- quirements of utilities regulated by the Alaska Public Utilities Commission (APUC) would not be materially changed. However, it would provide no incentive to improve the general operations of the utility. The subsidy would be spread over all cost cate- gories--making it difficult to monitor a utility's internal reasons for increased costs. For example, a subsidization of general and administrative expenses might well lead to increases in the operating overhead of some electric utilities without any corresponding benefit to the consumer. 2. Capital Cost Assistance Another possible area of State financial assistance to electric utilities would be the underwriting of capital costs. This could be interpreted to mean State assistance in the funding of new capital projects, or State assumption of some portion of existing debt costs, including principal and/or interest pay- ments. Through discretionary leverage gained from this program, the State could control the rate of capital spending for new power generation and transmission projects, and promote the ex- penditure of resources in areas of particular interest to the State, such as hydroelectric generation and waste heat recovery. New capital projects may provide lower cost electricity in the future. The capital assistance itself, however, would -11- probably not have a great impact on electric rates in many utilities, since capital costs are not a significant portion of the revenue requirement of these utilities.!1 While this option should certainly be maintained as a possible avenue for increased State involvement in directing the development of renewable energy resources in the State of Alaska, other alternatives must be examined. 3. Fuel Costs In most rural electric utilities, fuel costs represent the single largest expense in the cost of providing electric ser- vice. Rising fuel costs have also been largely responsible for the dramatic increase in rural electricity rates in the past two years. For this reason, some form of State subsidy to utilities for fuel costs appears an attractive alternative. The main problem with this approach is the imbalance that it would tend to encourage in the power-producing mode of affected generating facilities. In particular, many rural facil- ities find themselves in a situation where they must consider both the maintenance cost of power production and the fuel cost of power production. Often, the most maintenance-efficient method of power production is not the most fuel-efficient. Typi- cally, a compromise is found somewhere between these two modes, at a point which yields the lowest total cost to the facility. Were the State to subsidize fuel costs alone, a utility that is interested in minimizing its total cost of generating power would tend to move towards maintenance-efficient generating modes and to discount fuel-efficiency in its operations. In some utilities, subsidizing fuel costs alone may not be sufficient even if one hundred percent of the fuel cost is re- imbursed to the utility. The manner in which a fuel cost subsidy 1 "Permanent Fund Investment in Utility Capital Formation," memo to Investment Advisory Commission, Senate and House Committee on the Permanent Fund, from APUC, no date. -12- program would be administered is also complicated. Would the utility be subsidized or would the fuel dealer be subsidized? How would fuel prices be controlled? Would the fuel dealers make unrealistic profits? How would capital intensive technological changes be justified if fuel costs are artificially suppressed? A broader approach to financial assistance should be taken. 4. Power Production Costs Under this concept, State aid would extend to the costs of production of electric power. Cost assistance would end "at the bus bar."l1 Bus bar costs (referred to as power production costs in this report) are: Cost of fuel for power generation; Operations cost of generating plant; Maintenance cost of generating plant; Depreciation associated with generating plant; Taxes associated with generating plant; Interest on debt associated with generating plant; ooo eee @ Insurance associated with generating plant. In many small utilities, these costs amount to seventy percent of the total cost of the utility's operation. State aid for these costs should significantly reduce a utility's revenue requirement, thereby reducing the rates to the electric consumer. Distribution expense, expense of maintaining customer accounts, administrative and general expense, taxes, and return requirements would be outside the scope of State aid. This ap- proach is reasonable, considering the fact that power generation costs as a percentage of total costs, tend to increase as the a 1 The point at which electricity leaves the generation portion of the electric system and enters the transmission/distribu- tion system. oe total costs of electricity per kilowatt hour increases. The relationship is portrayed in Exhibit II.2 where, for selected utilities, the average cost per kwh for 300 kwh is shown with respect to the power production cost as a percentage of total operating cost. Better documentation and analysis of power production cost will also prove to be of great assistance in making capital investment decisions pertaining to alternative energy systems intended to reduce or contain future energy costs. In general, power production costs, as defined above, will become the "yard- stick" for measuring future electric generation investment deci- sions. It is therefore logical to start using this cost category now as the basis for determining any State financial assistance program. Future State electric generation investment decisions can then be made with due consideration to the impact of its cap— ital investment on the State's financial assistance obligation. -14- EXHIBIT II.2 POWER PRODUCTION COSTS AS A PERCENTAGE OF RESIDENTIAL CONSUMPTION COST 1976 1976 POWER AVERAGE PRODUCTION COST RESIDENTIAL AS A PERCENT OF CONSUMPTION UTILITIES TOTAL UTILITY*** COST kwh) * OPERATING COST** MP&L 2.4 42.3 CEA 2.7 46 .6 MEA 3.7 39.3 HEA 3.9 44.5 GVEA 5.4 72.1 KdEA 8.0 70.1 CVEA 8.8 73.2 NEA 10.8 75.6 NEC 12.7 73.8 KtEA 14.7 74.5 Sources: * * * RK Alaskan Electric Power Statistics, Fifth Edition, Alaska Power Authority, 1977. Fuel Costs and Bus Bar Costs, Memo C.S. Guess to Bob Williams, May 22, 1978. See Appendix I for complete names. -15- III. THE POWER PRODUCTION ASSISTANCE PROGRAM III. THE POWER PRODUCTION ASSISTANCE PROGRAM In this section, the methodology for the power produc- tion assistance program is presented. Considerations pertaining to potential variations in the program are also discussed. A. OVERVIEW The power production assistance program (PPAP) would provide financial assistance to participating utilities by com- pensating each utility for its power production costs in excess of a pre-established threshold. That threshold level cost to be paid by the utility would be a function of its power production cost. Higher cost utilities would have a larger percentage of their power production costs covered by the program; lower cost utilities would have a smaller percentage covered. All classes of consumers will benefit by the power pro- duction assistance program. Each kilowatt-hour sold would re- ceive an equivalent reduction in cost, regardless of the nature of the consumer. This broad coverage will ultimately reduce the cost of State assistance in all forms. Most rural diesel fuel powered utilities are operating below their most fuel efficient level. Programs that promote the consolidation of electric loads, whether from private, State or Federal consumers, will tend to reduce the unit cost of electricity. The PPAP would be administered by existing State agencies. No new organizations will be necessary. -16- The Alaska Power Authority would receive the funding earmarked for financial assistance to participating utilities. It would disperse the funds while at the same time pursuing the development of alternative energy systems that could reduce or eliminate the necessity for the financial assistance. The Alaska Public Utilities Commission would approve the adjusted power production cost for participating utilities based on the direction provided by the legislature. In order to control the PPAP throughout the State, util- ities desiring to participate in the program should be regulated by the APUC. The key to the success of this program will be the proper reporting and monitoring of the power production costs. Hence, a participating utility should be expected to maintain its records consistent with APUC requirements. B. METHODOLOGY Implementation of the power production assistance pro- gram consists of nine steps, as outlined in Exhibit III.1. The implementation process calls for the program to be structured on an annual basis, with annual re-evaluation of program parameters and progress. Each step is described in detail below. 1. Establish Legislative Direction Under this plan, the legislature would be responsible for two basic decisions: e The electric rate below which there would be no assistance. iT EXHIBIT III.1 STEPS IN IMPLEMENTING THE POWER PRODUCTION ASSISTANCE PROGRAM Establish Legislative Direction e Lowest rates to be assisted e Amount of assistance desired at highest rates. Establish the Power Production Assistance Curve Appropriate Funds for Alaska Power Authority Dis- bursement Acceptance of Tariff Revision Requests Utility Reports Monthly to Alaska Power Authority Alaska Power Authority Disburses Funds to the Utility Progress Evaluation Legislative Re-establishment of the Power Production Assistance Program -18- e The amount of residential rate relief to be given to the utilities with the highest rates. Exhibit III.2, Revenue Requirement Adjustment Curve, will be used to explain the approach necessary to make these two decisions and to explain why the decisions are necessary for the process. The purpose of the financial assistance program is to provide lower electric rates for the consumers in rural Alaska. Hence, the legislature, in determining the magnitude of the as- sistance, should work in terms that relate to the rates charged to their constituents. After the legislature has established the parameters of the revenue requirement adjustment curve and appro-—- priated the necessary funds to support the PPAP, this information should be converted to terms appropriate to administer the program in terms of power production costs. In order to establish the revenue requirement adjustment curve, the legislature must decide what the adjusted residential revenue requirement per kilowatt hour should be with respect to the actual residential revenue requirement per kilowatt hour for the highest cost significant consumers. For example, the Alaska Village Electric Cooperative (AVEC) residential revenue require- ment is approximately 40¢ per kilowatt-hour (point A, Exhibit III.2); the legislature could decide that a 40¢ per kilowatt—-hour actual residential revenue requirement should be adjusted to 25¢ per kilowatt hour (point B, Exhibit III.2). Twenty five cents is selected arbitrarily for this example; the legislature might de- cide that some other value is more appropriate. Having selected these two points, the intersection, (point C, Exhibit III.2) then becomes one of the two points necessary to derive the revenue re- quirement adjustment curve. Tos ADJUSTED RESIDENTIAL REVENUE REQUIREMENT (¢/KWH) 25 to o - a ae o on °o EXAMPLE RESIDENTIAL REVENUE REQUIREMENT ADJUSTMENT CURVE TO BE DETERMINED BY THE LEGISLATURE F 10 20 30 4 50 ACTUAL RESIDENTIAL REVENUE REQUIREMENT (¢/KWH) @° III LIGIHXa The legislature then selects a residential revenue re- quirement (point D, Exhibit III.2) below which no financial assistance is deemed appropriate. In this example, 10¢ per kilo- watt-hour is selected. This point also has the attribute that as a utility's costs increase and the residential revenue require- ment of the utility exceeds point D, it could then be eligible to receive financial assistance consistent with the legislature's determination. In other words, there is an automatic ceiling above which consumers will receive some financial assistance for high power production costs. Having defined Points C and D in Exhibit III.2, a straight line is then drawn between them. This line then defines the functional relationship between the actual residential reve— nue requirement and the adjusted residential revenue requirement. The impact of the slope of this line is that the smaller utili- ties, generally with a higher revenue requirement per kilowatt-— hour, will receive a larger percentage of economic assistance than the larger utilities with a lower revenue requirement. One final decision must be made by the legislature that pertains to the extension of the line D-C beyond point C. Should the line extend at the same slope toward Point F--wherein resi- dential revenue requirements per kilowatt-hour in excess of 40¢ would be adjusted to a unit cost higher than 25¢; or should the line extend toward E--so that, regardless of the revenue require-—- ment above 40¢ per kilowatt-hour, 25¢ would be the highest reve— nue requirement for electricity paid in Alaska? In summary, the legislature must establish: o the residential rate adjustment for the highest cost utility having a significant number of con- sumers; note e the point below which it believes no financial as- sistance is necessary. The next step is to apply the determinations made by the legislature to the process of reducing the utility's power pro- duction costs through the establishment of the power production assistance curve (Exhibit III.3). 2. Establish the Power Production Assistance Curve In order to derive the power production assistance curve (Exhibit III.3), an analyst uses the revenue requirement adjust- ment curve determined by the legislature to establish the differ— ence between the actual residential revenue requirement and the adjusted revenue requirement in terms of cents per kilowatt-hour for the residential consumer. If AVEC was selected as the highest cost utility with a significant number of consumers, the analyst would enter the curve in Exhibit III.4 at 39.67¢, the current residential rate including surcharge and read 24.79¢ as the adjusted residential revenue requirement. This implies a legislative desire to reduce the AVEC rate by 14.88¢ per kilo- watt-hour (39.67 - 24.79 = 14.88¢). The 14.88¢ is then sub- tracted from the established actual power production cost of AVEC, assumed for this example to be 27.44¢, to yield an adjusted power production cost per kilowatt-hour of 12.56¢ shown in Exhi- bit III.3. These two values establish Point A in Exhibit III.3. Point B is established, in this example, by assuming that for a residential revenue requirement in the range of 10¢ per kilowatt-hour, the power production cost is 70% of the reve- nue requirement or 7¢ per kilowatt-hour (Point B, Exhibit III.3). A straight line can then be drawn between Points A and B estab- lishing the power production assistance curve. This curve then becomes the basis for administering the power production assis- tance program. -22- ADJUSTED POWER PRODUCTION COST (¢/KWH) 25 20 15 10 EXAMPLE POWER PRODUCTION ASSISTANCE CURVE 15 20 25 ACTUAL POWER PRODUCTION COST (¢/KWH) 30 €°III LIGIHxg ADJUSTED RESIDENTIAL REVENUE REQUIREMENT (¢/KWH) EXAMPLE RESIDENTIAL REVENUE REQUIREMENT ADJUSTMENT CURVE DETERMINED BY THE LEGISLATURE (same as Exhibit III.2 with the addition of AVEC) ACTUAL RESIDENTIAL REVENUE REQUIREMENT (¢/KWH) PIII LIGIHXa For this example, any utility with a power production cost above 7¢ per kilowatt hour would receive some financial as- sistance. The larger the power production cost, the larger per- centage of financial assistance the utility would receive. A significant reason for working with the power produc-— tion assistance curve rather than the revenue requirements curve, established by the legislature, is that there are anomolies among the utilities at the lower cost end of the curve wherein a util- ity's approved revenue requirement might be above 10¢ per kilo- watt hour yet its associated power production cost is less than 10¢ per kilowatt hour. For example, a utility that may purchase low cost power, but has high transmission costs. Conversely, there may be some utilities whose revenue requirement is less than 10¢ per kilowatt-hour but whose associated power production cost is higher than 7¢ per kilowatt—hour. Since the intent of this program is to provide financial assistance for the high cost of power production, it would be consistent with the intent of this methodology that all utilities having power production costs higher than the Point B in Exhibit III.3 be considered for finan- cial assistance regardless of their revenue requirement, while utilities having power production costs less than Point B should not be considered for financial assistance since their high rates must be caused by other than power production costs. Exhibit III.5 depicts the impact of the power production assistance program suggested in this report for selected utilities. The reader should recognize that the data shown here is for example purposes only, being based on the revenue require- ment adjustment curve used in Exhibit III.2. The power produc-— tion costs were derived from electric utility 1978 annual reports -25— OTILITY* AML&P (Anchorage) CEA (Anchorage) KdEA (Kenai, City) HEA (Homer) AEL&P (Juneau) PUCo. (Pelican) HEA (Seldovia) HEA (Port Graham) MEA (Palmer) GVEA (Fairbanks) CEA (Kenai) CEA (Hope) Paxson Lodge AP&T (Skagway) GHEA (Juneau) KdEA (Kodiak) YPI (Yakutat) BUECI (Barrow) HL&P (Haines) AMFAC (Sand Point) AP&T (Dot Lake) CVEA (Valdez) AP&T (Craig) CVEA (Glennallen) AP&T (Tok) NEC (Nushagak) BeU (Bethel) NP&L (Northway) MCE&P (McGrath) NEA (Naknek) MEA (Unalakleet) KEA (Kotzebue) TPC (Tanana) APCo. (Aniak) KdEA (Port Lions) NEA (Egegik) AUI (Arctic) FYU (Fort Yukon) T-HREA (5 villages) BL&P (Bettles) EXHIBIT [11.5 ADJUSTED POWER PRODUCTION COST PER KWH+ 1.37 1.37 2.32 2.67 7.05 6.98 4.60 4.60 4.43 5.54 2.61 7.49 7.41 7.87 7.83 7.50 7.44 8.12 7.45 Watt 8.26 7.51 9.10 8.8 8.57 8.75 10.81 LE CLT 9.81 10.11 11.47 EXAMPLE POWER PRODUCTION ASSISTANCE IMPACT **FOR DISCUSSION PURPOSES ONLY** (ceats/kwh RESIDENTIAL APPROXIMATE RATE PER KWH 1979 POWER BASED ON 300 KWH PRODUCTION CONSUMPTION COST PER EFFECTIVE 9/1/79)** KWE *** 3.36 1.37 4.83 1.37 $.17 2.32 6.00 2.67 6.44 - 7.25 7.18 7.83 - 7.83 - 3.68 - 9.70 6.98 10.44 4.60 10.44 4.60 11.17 4.43 11.19 5.54 11.85 2.61 12.37 8.79 13.46 8.50 14.00 9.10 14.31 10.06 14.33 8.85 14.39 - 14.83 3.60 14.91 11.27 14.96 8.67 15.55 9.84 16.45 11.65 16.61 3.88 17.00 14.73 17.87 - 18.00 - 20.24 13.62 20.44 12.76 23.33 13.44 24.28 21.00 24.69 - 24.75 - 25.00 22.34 25.91 17.34 27 .00 18.45 27.50 23.44 39 .67° 27 .44 AVEC (48 villages) Note: * See Appendix [ for utility aoames ** Based on APUC Summary dated September, 1979 interest, and depreciation. e+ fuel, - Sufficient data not available for estimate. -26- 12.56 Based on APUC annual reports and REA Form 12f (12/31/78) updated by the consultant for fuel cost increases. estimates of operations, maintenance, Includes insurance, Based on power production assistance curve - Exhibit III.3 Adjusted for 2.47¢ fuel surcharge POWER PRODUCTION ASSISTANCE 0.00 0.00 0.00 0.00 0.13 -00 -00 -00 +00 -00 +00 +30 09 +53 2.23 1.35 hPrrPoOoOoOoOo°o 1.16 3.01 1.22 2.07 3.39 1.37 5.63 4.82 4.19 4.69 10.19 11.17 7.53 83.34 11.97 14.88 submitted to the Alaska Public Utilities Commission and an esti- mated adjustment was made for fuel cost increases. Because the information presented in the annual reports was not intended spe- cifically for the purposes of this analysis and because of the rapidly changing costs of fuel, many assumptions had to be made concerning the utilities' power production costs. The quality of the values shown in Exhibit III.5 is sufficient to serve as an example of the methodology being discussed, but should not be considered as final or definitive for any particular utility. 3. Appropriate Funds for Alaska Power Authority Disbursement At this point, an estimate of the cost of one year's operation of the power production assistance program will be made, and funds for this amount appropriated for disbursement by the Alaska Power Authority. These funds would be designated for use solely in the administration of the power production as- sistance program. Funds also should be appropriated for one ad— ditional position at the Alaska Power Authority for program implementation, and another additional position for the APUC to perform the staff work necessary to establish the level of power production assistance and to monitor the performance of the par- ticipating utilities. 4. Acceptance of Tariff Revision Requests The Alaska Public Utilities Commission (APUC) will re- ceive tariff revision requests from utilities wishing to partici- pate in the power production assistance program. Some utilities that may be eligible for the PPAP are not now regulated. In order that the State maintain appropriate control of the PPAP, participating utilities should submit to economic regulation. Utilities that desire to participate in the PPAP will present a standard filing with an additional schedule providing more speci- -27- fic information on its power production costs. It is suggested that the components of the power production costs be those spe- cified in REA Form 12f, Section B (see Appendix III). costs include: e and approving a power production cost for the utility, eoeeeoeeeoeeee?ee Production Expense: operation; supervision and engineering; fuel WwioOL l- fuel, gas; general expenses; miscellaneous other power generation expenses; rents; maintenance, supervision and engineering; maintenance of structures; maintenance of generating and electric plant; maintenance of miscellaneous other power generation plant. Fixed Costs: These @ depreciation; @ taxes; e@ insurance. The APUC, after reviewing the tariff revision request will use the power production adjustment curve approved by the legislature to establish an adjusted power production cost per kilowatt-hour. This. adjusted power production cost will then yield an adjusted revenue requirement for the utility and the resulting revised tariff to be approved by the Public Utilities Commission. -28- The adjusted power production cost then becomes the basis for the cost obligation of the utility. Actual expenses above this value will be borne by the State. A possible varia- tion to this method would be to fix the subsidy paid by the State at a specific level determined by the power production assistance curve; and then as power production costs vary during the year, the utility would pay these increased costs--primarily due to fuel cost increases. Although there are good reasons for admin— istering the program in this manner, the most notable reason being that it is consistent with the current method of passing fuel cost adjustments to the consumer, it would violate the leg- islative intent of the approved revenue requirement adjustment. For example, if in fact the legislature determines that AVEC con—- sumers should pay 25¢ per kilowatt-hour for their electricity, does it make sense that within a few months after implementation of the program, they be required to absorb a fuel surcharge that could increase the intended rate by 10%-20%? The method to be used must be determined by the legislature. For purposes of this report, it will be assumed that the utility will be responsible for a fixed power production cost per kilowatt-hour and that the State will pick up all costs in excess of the established threshold. 5. Report Monthly to Alaska Power Authority The participating utility will report to the Alaska Power Authority on a monthly basis. This report will be on a form similar to the REA Form 12f, and will include: e Total power production costs of electric power for the preceding month, e Total kilowatt hours sold, e Total power production costs per kilowatt hour. soge 6. Alaska Power Authority Disburses Funds to the Utility Based on the monthly report submitted to the Alaska Power Authority in Step 5, the Alaska Power Authority will remit to a utility an amount equal to the number of kilowatt-hours sold times the difference between the actual power production cost per kilowatt-hour and the approved power production cost per kilo- watt-hour determined in Step 4. Should there be significant deviations in cost components, possibly indicating avoidable in- efficiencies in operations or malfeasance, the Alaska Power Authority may submit the utility's report and other relevant materials to the Alaska Public Utilities Commission for a review and approval prior to payment. In order to provide an incentive for a utility to main- tain and introduce new power production efficiencies as the year progresses; it is suggested that when a utility's actual power production costs are reduced, the adjusted power production cost per kilowatt-hour for the utility be modified immediately by the Alaska Power Authority so that the utility will experience a re- duction in its operating costs as well as the State experiencing a reduction in its financial assistance requirement. 7. Progress Evaluation At the end of the fiscal year, the Alaska Public Utili- ties. Commission will evaluate the progress of the PPAP. This review will include an evaluation of: 7 The total cost of the program, e The effectiveness of the program, e The degree to which anticipated results were realized, -30- e The impact on the implementation of operating economies, - The impact upon new capital programs. This evaluation will support the Alaska Public Utilities Commission's recommendation to the legislature for the appro- priate power production assistance during the next year. 8. Re-establishment of the Power Production Assistance Program For each fiscal year, the legislature will reestablish the power production program, if desired. It will again deter- mine the lowest rates to be assisted and the amount of assistance desired to the highest rates. The power production cost thres-— holds for each utility will be automatically adjusted. Utilities experiencing power production cost decreases would be required to provide this information to the APUC. A revision of its power production cost would be determined, and a reduction in rates would result. If the utility experiences an increase in its ad- justed power production cost, it must decide if it requires a rate increase--considering its entire revenue requirement in- cluding return on equity. An annual review of the PPAP should be made by the leg- islature because the power production assistance curve should be adjusted to reflect inflation. A sunset provision in the ena- bling legislation may not be sufficient to limit the cost of the PPAP, nor would it address the issue of how much the residential rate payer should be expected to pay. On the other hand, since, under PPAP, the rates of the participating utilities will be re- duced through the regulatory process; the program, when termin- ated, could require rapid and perhaps large increases to make up for the lost financial assistance provided under the program. -31- C. HYPOTHETICAL EXAMPLE: APPLICATION OF THE POWER PRODUCTION ASSISTANCE PROGRAM TO KOTZEBUE ELECTRIC ASSOCIATION, INC. 1. Setting the Power Production Assistance Threshold For the purposes of this example, it is assumed that the legislature has established the power production assistance threshold as follows: eo The lowest power production cost covered by the program is 7¢ per kilowatt hour. e The highest power production cost affected by the program is that of AVEC, which is 27.44¢ per kwh; the program is designed to set a power production assistance threshold for AVEC of 12.56¢ per kwh (meaning that the State will pay any power produc- tion costs over 12.56¢ per kilowatt hour). 2. Establishing Kotzebue Power Production Costs For purposes of this example, we will use 1978 power generation and cost figures for Kotzebue Electric Association, Inc. (KtEA), an REA Cooperative providing electric energy to residents in Kotzebue, Alaska. In 1978, Kotzebue sold 8,562,961 kilowatts of electricity, at a total cost to the utility of $1,256,936. Of this total cost, $964,633 represented the cost of generating power, including fuel, power plant operations and maintenance, and allocated insurance, taxes, and interest costs. Thus, total power production costs were 76.7% of the total utility's operating costs. Based on these figures, the total power production cost was 11.27¢ per kwh. This point is indicated on the horizontal axis of Exhibit III.6. -32— ADJUSTED POWER PRODUCTION COST (¢/KWH) 25 20 15 10 EXAMPLE POWER PRODUCTION ASSISTANCE CURVE (same as Exhibit III.3 with the addition of KtEA) \ i AVEC KOTZEBUE i { \, 1.27¢ 27.44¢ 10 15 25 25 30 ACTUAL POWER PRODUCTION COST (¢/KWH) Q9°III LIGIHXa 3. Determination of the Power Production Assistance Threshold To determine the adjusted power production costs of KtEA, it is first necessary to draw a line vertically from the horizontal axis to the power production assistance curve, and then to the left from that point to the vertical axis. When this is done, it can be seen that the power production assistance threshold for KtEA is 8.16¢ per kwh (see Exhibit III.6). This means that the cost of power production for KtEA would be 8.16¢ per kilowatt-hour, while the State would pay the remaining 3.11¢ plus any additional approved costs that occur during the year. This would, of course, result in an overall rate reduction, as determined by the actual revenue requirement of 3.11¢ per kilo- watt-hour for KtEA customers. Assuming the quantity of the electricity sold for the coming year does not change, then the cost of this program to the State could be expected to be 3.11¢ times 8,562,961 kilowatt-— hours, or $266,308. Therefore, as a result of State assistance, the cost of electricity to the residents of Kotzebue would be reduced from an average of 15.64¢ per kilowatt-hour to 12.53¢ per kilowatt-hour. This would be an approximate 20% reduction in residential electric rates. 4. Possible Events During the Program Period Two events could occur during a given program period: 1. Change in the price of fuel; 2. Implementation of operating efficiencies. Assume that the price of fuel at the beginning of the program period is $ .98 per gallon and, further, that operating efficiency is such that energy conversion efficiency is 11 kilo- =34= watt-hours per gallon. This means that, given the current level of energy production, KtEA would use, during the program year, 778,451 gallons of fuel at a total cost of $762,882 or an average of $63,573 per month. If the cost of fuel were to rise from $ .98 per gallon to $1.10 per gallon, the total price increase, to the extent it were not accounted for in determining the revenue requirement, would be passed on to the Alaska Power Authority; this would amount to an additional $7,785 per month, or $93,420 per year if this situation existed for all twelve months. KtEA would not be required to submit a request to the Alaska Public Utilities Commission for a fuel surcharge adjust- ment. In order to obtain APUC approval of a fuel surcharge, a utility must present twelve months of history showing the in-—- creases in fuel costs and related information necessary to justify the surcharge. The second possible event is an improvement in the oper- ating efficiency of the power generating equipment of KtEA. If, due to operational changes or additional capital investment, the power production cost were to drop from 11.27¢ per kilowatt-hour to 10.15¢ per kilowatt-hour during the program year, KtEA could immediately apply to the Alaska Power Authority for a redefini- tion of its adjusted power production cost as defined in Exhibit III.6. The new adjusted power production cost based on 10.15¢ per kwh is 7.86¢, a reduction of 0.3¢ in utility costs (8.16 -7.86 = 0.3) and a reduction of 0.82¢ in State assistance (3.11 -2.29 = 0.82). This represents a 3.7 percent reduction in the utility's share of the power production costs, and a 26.4 percent decrease in the State contribution. The utility would not be required to reduce its rates to consumers during the annual program period. Therefore, there -35=— would be an incentive for the utility to increase its efficiency in areas that would benefit both the State and the utility. An- nually, however, the power production cost of the utility will be reviewed and subject to adjustments which should reflect cost reductions due to operating efficiencies as well as increased costs. The burden of requesting a decrease in a utility's ad- justed power production cost is on the utility. Since it will be the beneficiary of the increased margin, it is reasonable that they be required to make the request. Such a procedure will also tend to maintain an arms length relationship between the Alaska Power Authority and the utility with regard to its internal busi- ness decision process. D. OTHER CONSIDERATIONS FOR THE POWER PRODUCTION ASSISTANCE PROGRAM A number of possibilities exist for variations to the basic concept of the power production assistance program. These variations could: Make the program more flexible, Make the program more equitable, Make the program easier to administer, Provide incentives for improvements in operational efficiency. Variations examined during the course of this study are discussed below. -36— 1. Program Scope The power production assistance program, as described in this report, envisions a reduction in the electric rates for all classes of consumers. When examining the requirement for rate relief to the consumers in rural Alaska, one immediately thinks of the impact of the high cost of electricity on the residential consumer. Upon reflection, one can see that the small commercial consumer undoubtedly will pass his energy costs to his customers, thereby also impacting the residential consumer. It then would appear logical to include the small commercial consumer in the PPAP. Continued service to large power consumers is mandatory in order to assure the financial viability of rural electric uti- lities. The loads the larger consumers require contribute signi- ficantly to the financial stability of the utility and increase the operational efficiency of the generation plant. The State is already assuming the cost of their public facilities, hence any financial assistance provided the utility serving State owned and operated buildings is just a different manner of payment. On the other hand, financial support for power production serving the private sector and Federally owned electric consumers can be jus-— tified in that these loads will increase the efficiency of the utility, reducing the total power production cost per kilowatt- hour. This will cause the utility to enter the power production cost adjustment curve at a lower point and thereby receiving a smaller amount of financial assistance. Some utilities in the State do not serve any residential consumers. This fact should be considered by the legislature. Perhaps only utilities serving a minimum number of residential consumers should be included in the power production assistance program. ~37- 2. Fixed Adjusted Power Production Costs vs Fixed Financial Assistance The methodology described in this report is based upon assigning a fixed adjusted power production cost to a utility; the State picking up any costs incurred during the program year in addition to that cost. Considering the rapid increase in fuel costs, this approach appears logical since the rates desired by the legislature will then remain constant during the program year. On the other hand, Robert W. Retherford, in his paper "Electricity-Vital Ingredient to Quality in Survival" previously cited, suggests that the financial assistance provided to the utility should be a fixed amount and any increased costs occur- ring during the program year should be borne by the utility. The primary reason presented by Mr. Retherford for this approach is the incentive placed on the utility to operate in an efficient manner. His point is a valid one, but it must be weighed against the potential impact of rapidly increasing fuel costs. The ap- proach providing a fixed amount of financial assistance will re- quire the continued use of fuel surcharges to cover the increased cost of fuel. The basic methodology for PPAP is not changed by the method of providing financial assistance. When developing the final procedures for the implementation of the PPAP, the legis- lature should decide whether they desire to hold rates constant, with respect to power production costs, during a program year; or whether they want to hold the financial assistance level constant and accept rate increases due to fuel cost adjustments as the year progresses. -38- 3. Regionally-Based Assistance Rates Under this concept, the threshold level, above which power production costs would be subsidized by State funds, would be determined on a regional basis--that is, the southeast region might have a different power production cost curve than the southwest region. The purpose of this concept would be to re- flect in the assistance program intrinsic differences in electric rates by geographic region. It is believed, however, that using different assistance rates for geographic regions is not re- quired, for the following reasons: * Intrinsic differences in electric costs are already reflected in existing rates; a sliding scale of ad- justed power production rates, as proposed, takes existing electric generation cost differentials into account. e This concept would require the legislature to create different scales for each geographic region, thus complicating the process of obtaining legisla- tive approval of the program. @ Differing scales would complicate the responsibili- ties of the Alaska Power Authority and APUC in the administration of the program. For these reasons, it is not recommended that regional- ly-based assistance rates be used in the PPAP. 4. Efficiency Standards Rather than using existing power production costs for each utility, a theoretical power production figure could be used =390= based on power generation efficiency standards. These standards might follow the format suggested in the following table: POSSIBLE EFFICIENCY STANDARDS Plant Size Generator Speed Efficiency Large 600 RPM 14 kwh/Gal Medium 1,200 RPM 12-13 kwh/Gal Small 1,800 RPM 11 kwh/Gal In the case of small utilities, however, which will be most effected by the power production assistance program, gener- ating efficiency is not always a factor over which the utility has complete control. For example, AVEC is now running at ap- proximately a 7.25 kilowatt-hour per gallon efficiency. This is due in part to the fact that electric loads vary significantly and utility operations do not always have the most fuel efficient engine on-line. Efficiency standards cannot be reasonably en- forced for small remote utilities, and these are the utilities that will be most affected by, and have the most need of, the program. An efficiency standard-based rate scale is not recom- mended. 5. Incentives for Operational Improvements In order to simplify the administration of the power production assistance program, and to obviate the necessity for the utility to return to the APUC for a tariff revision because of fuel cost increases, it has proposed that monthly remittances to the utility by the Alaska Power Authority be equal to the dif- ference between the approved adjusted power production cost and -40-— the actual cost of producing electricity. This would mean, how- ever, that any operational improvements made by the facility during a year when the adjusted power production cost is already fixed will decrease the contribution by the State and have no effect on the contribution by the utility rate payers. This is a disincentive to the implementation of operational improvements in the generation of electricity. In order to remove this disincentive, the Alaska Power Authority should, upon request by the utility, immediately modify the adjusted power production cost for any utility which imple- ments an improvement during a program year that results in a low- ering of power production costs per kilowatt—hour. This would mean, in effect, that the State and the utility would both share in the benefits of the improvement. Eble IV. FUNDING This section discusses the initial cost of the power production assistance program and sources of funding for the pro- gram. A. PROGRAM COSTS There are two aspects of costs in supporting PPAP. The first is the direct cost of providing financial assistance to the participating utilities and the second is the administrative cost of the program. 1. Direct Program Costs An estimate of the direct program costs was prepared using information contained in the annual reports submitted to the APUC by each utility and an REA Form 12f summary for December 31, 1978 obtained from Alan Yost, the Alaskan REA field repre- sentative. Since the utility annual reports are in a different for- mat from the REA Form 12f, estimates were made for insurance, in- terest and depreciation expenses. Fuel costs were adjusted, based on information obtained from the APUC showing fuel prices at the beginning of 1979 and the last fuel prices incurred in 1979. Referring to Exhibit IV.1, these power production costs are shown in the column headed "Approximate 1979 Power Production Costs." EXHIBIT LVierd: EXAMPLE POWER PRODUCTION ASSISTANCE COST ANALYSIS (40¢/kwh Residential Revenue Requirement Adjusted to 25¢) UTILITY Se= PUCo. (Pelican) CPU (Cordova) KdEA (Kodiak) YPI (Yakutat) BUECI (Barrow) HL&P (Haines) AMFAC (Sand Point) CVEA (Valdez) AP&T (Craig) CVEA (Glennallen) AP&T (Tok) NP&E (Cold Bay) NEC (Nushagak) BeU (Bethel) NP&L (Northway) MEA (Unalakleet) KtEA (Kotzebue) TPC (Tanana) NEA (Naknek & Egegik) APCo (Aniak) AUI (Arctic)+ FYU (Fort Yukon) T-HREA BL&P (Bettles) AVEC (48 villages) APPROXIMATE 1979 POWER POWER ADJUSTED POWER PRODUCTION PRODUCTION PRODUCTION costT* 7.18 0.13 7.84 0.61 8.79 1.30 8.50 1.09 9.10 1.53 10.06 2.23 8.35 1.35 8.60 1.16 8.12 0.82 8.67 1.22 9.84 2.07 10.22 2.34 11.26 3.10 3.88 1.37 14.73 5.63 13.62 4.82 12.76 4.19 13.44 4.69 19.41 9.04 21.00 10.19 22.34 11.17 17.34 7.53 18.45 8.34 23.44 11.97 27.44 14.88 Total Direct Program Cost ASSISTANCE —(E/KWH)___(£/RWH) COST (¢/ KWH) -05 +23 +49 +41 57 -83 +50 +44 +30 +45 a -88 -16 “51 10 +80 +57 +75 +37 10.81 Le 9.81 10.11 11.47 12.56 es OCHMWOAIWBAIAIIAAAAAAA Estimated 1980-81 Direct Program Cost Assuming: @ Fuel cost is 50% of power production cost. @ Fuel cost increases 30% over 1979 estimate. * Calculated based on 1978 annual justed from 1/79 prices to last for 12/31/78, where applicable. ** 1978 annual report submitted to APUC. See Appendix [ for complete names. + No residential consumers. -43- reports submitted to APUC. recorded price for 1979 and/or REA Form 12f 1978 KWH SOLD INCREASE By 20%** 2,551,118 3,769 ,254 64 ,048 ,276 4,915 ,4138 9,032,204 7,336 ,250 6,625 ,632 25 ,320 ,650 1,877 ,955 20 ,678 ,522 6 ,430 ,630 3,131,422 6,634,774 20,985 ,613 1,291,543 2,295 ,600 10 ,275 ,553 2,407 ,783 6,350,703 804,571 3,727 ,046 1,625 ,838 5 ,926 ,273 991,096 19,182,579 TOTAL POWER PRODUCTION ASSISTANCE eee $ 3,316 22 ,992 832 ,627 53,578 115 ,161 168 ,053 89 446 293 ,719 15 ,399 252 ,278 133 ,114 73,275 205 ,678 287 ,502 72,714 110 ,648 430 ,546 112,925 574,104 81,986 639,710 122 ,426 494,251 118 ,634 2.854 368 $8,158 450 $9,382,218 Fuel costs ad- Exhibit IV.1 is for the case where a 40¢ per kilowatt- hour residential revenue requirement is adjusted to 25¢ per kilo- watt-hour and where 10¢ per kilowatt-hour residential revenue requirement is the point below which there is no financial assis- tance. The adjusted power production costs for each utility are shown in the second column. The third column shows the power production assistance provided by the State--the difference be- tween the first and second column. The fourth column shows the total kilowatt-hours sold by each utility in 1978 increased by 20% for the anticipated growth between 1978 and the initiation of the PPAP. The last column shows the direct power production assistance cost for each utility. The direct program cost under the conditions mentioned above will be $8,158,450. If we make further assumptions that fuel is 50% of the power production costs and that fuel costs will increase by 30% between 1979 and the average cost for the first PPAP year, the estimated direct program costs for the 1980- 1981 period could be $9,382,218. In order to provide some understanding for the sensi- tivity of the program costs to variations in the amount of assis-— tance provided to the residential consumer, two additional cases have been calculated and are shown in Exhibit IV.2. These cases are for the situation where a 40¢ per kilowatt-hour residential revenue requirement has been adjusted to 20¢ and to 30¢, respectively. Ten cents per kilowatt-hour revenue requirement remains the point below which there is no financial assistance for in all cases. Exhibit IV.3 is a summary of the total power production assistance cost estimates for each of the three cases. -44~ EXHIBIT IV.2 POWER PRODUCTION ASSISTANCE COST ESTIMATES FOR THREE LEVELS OF ASSISTANCE DIRECT POWER PRODUCTION ASSISTANCE LEVELS UTILITY* 40¢ to 25 40¢ to 20¢ 40¢ to 30¢ PUCo. (Pelican) $ Sole $ 4,337 $ 2,296 CPU (Cordova) 22 ,992 29,777 15,077 KdEA (Kodiak) 832 ,627 1,101,630 557 ,220 YPI (Yakutat) 53 ,578 70,782 35 ,883 BUECI (Barrow) 115,161 182,451 92,128 HL&P (Haines) 168 ,053 222,319 111,536 AMFAC (Sand Point) 89 ,446 117 ,936 59 ,631 CVEA (Valdez) 293 ,719 389 ,938 194 ,969 AP&T (Craig) 15 ,399 20 ,282 10,141 CVEA (Glennallen) 252 ,278 332 ,924 167 ,496 AP&T (Tok) 133,114 175 ,556 88 ,100 NPCE (Cold Bay) (a, oro 97 ,074 48 ,850 NEC (Nushagak) 205 ,678 272,026 136 ,676 BeU (Bethel) 287 ,502 379 ,840 190 ,969 NP&L (Northway) 72,714 96 ,O91 48 ,304 MEA (Unalakleet) 110 ,648 146 ,230 73,459 KtEA (Kotzebue) 430 ,546 570 ,293 286 ,688 TPC (Tanana) 112 ,925 149 ,283 75 ,123 NEA (Naknek & Egegik) 574,104 758 ,909 381,042 APCo (Aniak) 81,986 108 ,456 54,469 AUI (Arctic)+ 639 ,710 845 ,885 424 ,947 FYU (Fort Yukon) 122 ,426 161,933 81,292 T-HREA 494 ,251 653 ,075 328 ,SI6é BL&P (Bettles) 118 ,634 156 ,890 78,792 AVEC (48 villages) 2,854 ,368 3,775 ,132 1,897 ,157 Program Cost $8,158,450 $10,819,049 $5,440,561 Estimated 1980-1981 Direct Program Cost $9 ,382 ,218 $12 441 ,906 $6,256 ,645 Assuming Oe Oe e@ Fuel cost is 50% of power production cost. e Fuel cost increases 30% over 1979 estimate. Notes: * See Appendix I for complete names. ** Each level represents the reduction of a 40¢/kwh residential revenue requirement to the lower level as described in the methodology. + No residential consumers. -45- EXHIBIT IV.3 TOTAL POWER PRODUCTION ASSISTANCE COST ESTIMATES BASIC CASE LEVEL OF ASSISTANCE 40¢ to 25¢ 40¢ to 20 40¢ to 30¢ Direct Power Production 8,158 ,450 10 ,819 ,049 5,440 ,461 Assistance Cost Administrative Cost 59,728 59 ,728 59 ,728 Total PPAP Cost 8,218,178 105878) 7.0.7. 5,500 ,189 30% FUEL COST INCREASE Direct Power Production 9,382,218 12 ,441 ,906 6,256 ,645 Assistance Cost Administrative Cost 59,728 59,728 59,728 Total PPAP Cost 9,441 ,946 12,501 ,634 6,316 ,373 -46-— 2. Administrative Costs The cost of administering this program should be nomi- nal. It is anticipated that one additional position would be necessary to review the monthly power production cost report sub- mitted to the Alaska Power Authority and to prepare the necessary payment authorizations within the Alaska Power Authority. This job position would probably be classified as a Grade 18, compen- sated at approximately $22,000 per year plus fringe benefits for a total compensation of $28,364 per year.1l The Alaska Public Utilities Commission should also have one additional staff member to handle the special requirements that will be imposed upon them to regulate this program. This utility financial analyst might also be appropriately classified as a Grade 18 with a total compensation of $28,364 per year. Occupancy costs for these positions would amount to ap— proximately $1,500 per year. Total administrative costs would then be $59,728. The APUC may have an additional administrative cost associated with the start-up of the PPAP. Some non-regulated utilities, such as municipal utilities, may desire participation in the PPAP. This initial tariff approval activity could place additional demands on the Commission and its staff. 3. Total Program Cost Estimates Using the information developed in the previous subsec- tions, the sum of the direct and indirect cost categories for the year starting in mid-1980 and extending to mid-1981 will be ap- proximately $8,218,178 for the case where the 40¢ per kilowatt-— hour residential revenue requirement is adjusted to 25¢ and —— Om” 1 Fringe benefits calculated as 22% of direct wages plus $1,524. -47- $10,878,777 and $5,500,189 for adjustments to 20¢ and 30¢, re- spectively. These values are shown in Exhibit IV.3. B. SOURCES OF FUNDS FOR THE POWER PRODUCTION ASSISTANCE PROGRAM It is anticipated that the cost of the power production assistance program would initially be funded by those monies available for legislative appropriation. Alternatively, the State could impose surcharges on less expensive urban power. In the longer term, the State should look for non-tax sources of revenue to support maintenance of this program, such as revenues from the sale of State generated power. Each of these alterna- tive sources of funds is examined in this section. 1. Short-Term Sources of Funds a. Interest on the Permanent Fund--An appealing immediate source of funds for the operation of this program is interest earnings on Permanent Fund monies. Use of Permanent Fund interest earn- ings would not directly deplete State monetary resources, and would have no impact on the State income tax structure. Further- more, a considerable portion of earnings of the Permanent Fund can be attributed to State export of energy resources, and thus, assistance to electric utilities for this program can be viewed as an in-kind allocation to the people of Alaska as a result of the exploitation of the State energy wealth. b. General Fund--An alternative to using interest earnings of the Permanent Fund to implement the power production assistance program is to appropriate monies directly from the General Fund. In effect, there is no difference between appropriating monies from the General Fund and using interest from the Permanent Fund, because the interest on the Permanent Fund, if not otherwise -48- directed, would flow into the General Fund. However, the use of Permanent Fund interest earnings is conceptually more attractive. c. Surcharges on Inexpensive Urban Power--In order to avoid the use of public monies for funding this program, a surcharge might be implemented on the cost of less expensive urban power. Given the large disparity between the number of urban consumers whose electric rates are relatively low and the number of rural con- sumers affected by high electric rates, the required amount of such a surcharge would be quite small (on the order of a fraction of a cent per kilowatt-hour). d. Reallocation of current funding--A large portion of the total electric energy generated by rural utilities is consumed by school facilities. For example, approximately fifty percent of AVEC's sold kwh is consumed by State-owned facilities. The cost of this power is already borne by the State. Hence, a large por- tion of the cost of this program is already being paid by the State of Alaska in other forms--such as through the REAA's uti- lity budgets. 2. Long-Term a. Revenues from the Sale of Power by The Alaska Power Author—- ity--The Alaska Power Authority (APA) is empowered to "acquire... and to improve, equip, operate, and maintain power projects."1 It is similarly empowered to issue bonds to finance such projects and to sell power from these projects to any entity legally au- thorized to distribute power in the State of Alaska. The prices which the Authority may charge for this power are dependent on a number of factors detailed in A.S. 44 .56.090; these factors include recovery of all operating and maintenance expenses, debt service expenses, and a debt service coverage fac-— eee 1 ALS. 44.56.080. -49-— tor necessary for bond marketability. To the extent that power provided by the Alaska Power Authority facilities is less expen- sive than power currently available to the purchasing entity, the Alaska Power Authority could charge a rate differential to the purchasing entity, and apply that differential to the costs of operating a power production assistance program. This appears to be the most attractive long-term source of money to operate the power production assistance program. Modifying language would probably be necessary in Section 44.56.090, however, in order to authorize the APA to include this differential in the cost of electric power sold. b. Proposed Alaska Power Authority Projects--Exhibit IV.4 shows hydroelectric projects in the State currently being investigated by the Alaska Power Authority or individual utilities, arranged in order of earliest anticipated completion date. Funds for maintenance of the power production assistance program could be expected to come from sales of electricity from projects owned by the State. For example, by 1986, the Bradley Lake Project could be expected to be completed. The output from that project would be approximately 320 million kilowatt-hours per year. If the cost of power sold for these projects included a l-cent per kilowatt-hour charge for maintenance of the power production assistance program. Total income to the program would be about $1.6 million; a one cent charge would yield $3.2 million. While this would be insuf- ficient to pay all costs of the program, it would have a signifi- cant impact. In contrast, the Susitna Project, expected to yield 6.1 billion kilowatt-hours per year, would contribute over $30 to $60 million per year under the same assumptions. =50= ESTIMATED 1980 NAME Green Lake Grant Lake Solomon Gulch Swan Lake Terror Lake Lake Tyee Power Creek Gunnuk Creek Black Bear Creek Gartina Creek Thayer Creek Mennonite Creek Larson Bay Old Harbor Haines/ Skagway Lake Elva Tazamina Lake Kisaralik River Bradley Lake Susitna Source: PROPOSED HYDROELECTRIC PROJECTS EXHIBIT IV.4 COST OF FIRM FIRM CONSTRUCTION CAPACITY ENERGY EARLIEST ($ MILLIONS) (MEGAWATTS ) (MKWH) FINISH STATUS 40.0 13.5 44.5 1981 Construction 12.0 1.5 12.0 1984 Feasibility 35.0 1,2 56.0 1982 In construction 60.0 18.0 66.0 1983 At financing stage 70.0 15.0 125.0 1984 Feasibility - Possible Environmental Problems 40.0 8.9 75.0 1984 License Applied for 18.0 5.0 20.0 1985 Feasibility 7-1 0.75 3.4 1985 Feasibility SO 5.0 22.0 1985 Feasibility 4.8 0.45 2.2 1985 Feasibility 5.4 0.21 1 <0 1985 Feasibility a0) 0.2 1.8 1984 Feasibility 2.2 iO) 2.7 1985 Feasibility 3.3 1.2 2.6 1985 Feasibility 20.0 7.0 21.0 1986 Feasibility 10.0 1,5 8.5 1984 Feasibility 58.0 30.0 90.0 1986 Feasibility 100.0 36.0 159.0 1986 Feasibility 160.0 70.0 320.0 1987 Phase I Studies 2,600.0 1,400.0 6,100.0 1990 Feasibility (591-3 Alaska Power Authority As long as capital costs remain high, the power produc- tion costs of new hydroelectric projects will not necessarily provide the consumer with a reduced cost of energy. Although, in time, it will be less expensive, since hydroelectric power costs stay relatively constant while fossil fuel generated electric costs will continue to escalate. It is questionable whether such a surcharge on the cost of new hydroelectric power sold by the Alaska Power Authority facilities is economically feasible or politically acceptable in the short run. -52- V. EVALUATION OF POWER PRODUCTION ASSISTANCE PROGRAM V. EVALUATION OF THE POWER PRODUCTION ASSISTANCE PROGRAM relieve the high cost of energy in rural Alaska is that it satis- fies, to the greatest extent possible, ments outlined in Section II. evaluate The basic requirement for any program designed the proposed power production assistance program in terms of those nine requirements. A. THE PROGRAM MUST PROVIDE IMMEDIATE ASSISTANCE FOR THE SEVERELY IMPACTED RURAL ELECTRIC CONSUMERS rapidly, action. The power production assistance program can be activated given prompt legislative and regulatory commission The steps required prior to implementation are: Legislative approval of the power production assis-— tance program; Legislative determination of the electric rate as- sistance curve; Derivation of the power production assistance curve; Appropriation of funds to the Alaska Power Author- ity for administration; -53- the nine program require- The purpose of this section is to e Approval by the Alaska Public Utilities Commission of tariff revision requests of electric utilities. These steps, discussed in detail in Section III, could be completed in a reasonably short time frame, if, in the opinion of the legislature, the problem is severe enough to warrant imme— diate action. B. THE PROGRAM MUST REDUCE THE CURRENT DISPARITY BETWEEN RURAL AND URBAN RATES Due to the concept of a power production assistance curve which provides higher rates of relief for higher power pro— duction costs, and less assistance at low power production costs, this program would reduce the disparity between rural and urban rates. For instance, as can be seen from Exhibit III.5, the current disparity in rates between AVEC and Anchorage ML&P is about 12 to 1; based on the hypothetical curve given in Exhibit II1.2, this disparity would be reduced to about 712 to 1. Of course, depending on the shape and position of the curve as defined by the legislature, the rate disparity could be reduced by any degree felt desirable. In this respect, the flexibility of PPAP is one of its most attractive features. C. THE PROGRAM MUST PROMOTE EFFICIENT USE OF GENERATING FACILITIES Even though the cost to the utility of generating elec- tricity is effectively fixed under this program, incentives to improve generating efficiency still exist due to the concept of immediate adjustment downward of the power production threshold upon implementation of any operational improvements. This con- -54- cept ensures that any cost savings to the utility from opera- tional improvements will be shared by the State and by the utility, rather than being solely to the benefit of the State. With regard to the other costs of the utility outside of power production, these are not affected by the power production assis— tance program, any savings due to greater efficiencies in this area are realized entirely by the utility; thus, the efficiency incentives already existing in this area remain unchanged. D. THE PROGRAM MUST PROMOTE THE DEVELOPMENT AND UTILIZATION OF NEW AND MORE ECONOMICAL GENERATING FACILITIES The power production assistance program will promote the development of more economical generating facilities for two reasons: e More economical generating facilities will bring about a lowering of the power production assistance threshold; since assistance is based on a sliding scale, the savings to the utility in power produc- tion costs will be shared by the State and by the utility, thus retaining the incentive for the uti- lity to achieve these economies. e In many cases, more economical generating facili- ties will require more capital-intensive generating facilities. For instance, waste heat recovery, solar, wind, and interconnection of isolated dis- tribution systems, and hydroelectric facilities are all basically capital-intensive in nature. It is likely that development in this area will be pri- marily due to the efforts of the State through the Alaska Power ~55- Authority; the PPAP will provide an incentive to the State to develop these more efficient, although more capital-intensive, generating facilities because, in doing so, they will lower the amount of assistance that must be rendered to the participating utilities. E. THE PROGRAM MUST PROMOTE CONVERSION TO RENEWABLE ENERGY RESOURCES The most immediately attractive source of power based on renewable energy resources is hydroelectric power. Further, it is likely that the major developer of hydroelectric power will be the Alaska Power Authority. Currently, two major problems hamper the development of hydroelectric power: e The current cost of capital is such that debt ser- vice requirements of the capital-intensive hydro- electric projects will have a significant cost im- pact on the electricity produced by these projects. This can be seen from Exhibit V.1, which shows annual debt service as a function of interest rates on a $35 million, 35-year project. e Because of the cost of capital and other factors, it is unclear whether electricity produced by many proposed hydroelectric projects in the State of Alaska will be, in the short-term, price-competi- tive with existing fossil-fuel based electricity. -56- EXHIBIT V.1 SENSITIVITY OF ANNUAL DEBT SERVICE REQUIREMENTS TO INTEREST RATES Principal: $35 Million, 35-Year Term, Level Payments Annual Total Interest Payment Payments Rate ($ Millions) ($ Millions) 0% 1.000 35.000 1% 1.190 41.650 2% 1.400 49 .000 3% 1.629 57.015 4% 1.875 65 .625 5% 2.138 74.830 6% 2.414 84.490 7% 2.703 94.605 8% 3.003 105.105 9% Sioa 115.920 10% 3.629 127.015 11% 3.952 138 .320 12% 4.281 149.835 13% 4.614 161.490 14% 4.950 173 .250 15% 5.290 185.150 16% 5.631 197 .085 17% 5.975 209.125 18% 6.319 221 .165. 19% 6.665 233'.275 20% 7.012 245 .420 =-57- In the future, however, the price of diesel fuel (the fuel used by most high-cost utilities in the State of Alaska) can be expected to increase significantly, while the cost of capital may decline from its current high rate. If this happens, hydro- electric power should become a viable alternative to diesel power. The Alaska Power Authority will then be encouraged to develop hydroelectric power at this point for two reasons: e By lowering power production costs to affected uti- lities, the amount of assistance rendered by the State to these utilities will be lowered. e A source of funds could be created to offset the remaining drain on the funds posed by the assis- tance program by charging utilities purchasing power from the Alaska Power Authority a small pre- mium for hydroelectric power. F. THE PROGRAM MUST ULTIMATELY BECOME ECONOMICALLY SELF-SUSTAINING While it is too early to say that this program can become completely self-sustaining over time, there will exist sources of funding for the program outside of the General Fund or interest earnings on the Permanent Fund. The amount of these funds will be determined largely by legislative action and the success of the Alaska Power Authority in providing hydroelectric power in the State. -58- G. THE PROGRAM MUST BE RELATIVELY SIMPLE TO DEVELOP AND ADMINISTER In this respect, the power production assistance program is far superior to any program requiring direct subsidies to rate payers or tax payers in the State of Alaska. The only interface required will be that between the affected utilities and existing energy-related agencies--the Alaska Public Utilities Commission and the Alaska Power Authority. To a large extent, these inter- faces are already defined. Existing reporting procedures by uti- lities will be minimally revised. However, the necessity for period fuel surcharge requests will no longer exist. Affected utilities will no longer have to submit any interim rate adjust- ment requests based on the power production component of its costs. The Alaska Power Authority has been selected to admi- nister the PPAP because: e The Authority is already in existence; e The Authority offers a potential source of revenue to replace appropriations from the General Fund; 2 The financial assistance offered under the PPAP will serve as a benchmark for evaluating capital- intensive alternative energy projects; e The Authority's primary mission is to create alter- native energy generation capabilities. It is anticipated that the Alaska Power Authority would not attempt to perpetuate and expand the PPAP in a bureaucratic manner; but rather, strive to replace the financial assistance -59- offered by the PPAP with capital projects that offer the oppor- tunity for lower cost electric energy. H. THE PROGRAM MUST BE OPERATIONALLY CONSISTENT WITH THE INTENT OF EXISTING ENERGY-RELATED LEGISLATION The intent of existing energy-related legislation in the State of Alaska is clear; the interests of the people of the State of Alaska are served through the provision of adequate, safe, reliable, electric facilities at affordable rates. PPAP is wholly in accord with existing legislation from this standpoint, and supports the intent of the State to provide affordable elec-— tric power to all of its citizens. I. THE PROGRAM MUST CONFORM TO THE COST-OF-SERVICE RATE MAKING PHILOSOPHY AS APPROVED BY THE ALASKA PUBLIC UTILITIES COMMISSION Since existing rates of regulated utilities are based on the cost-of-service concept, any program to provide assistance that is limited to any group of rate payers will tend to distort this concept. However, the cost-of-service concept is never implemented in its pure form. For instance, electric customers are typically divided into classes, and all members of each class are charged the same rate for electricity; but it certainly does not cost exactly the same amount to serve each customer within any given class--in effect, subsidies on a very large scale exist within customer classes. Furthermore, groupings of service areas within a geographically diverse utility, such as AVEC, may all be charged the same rate, even though the cost-of-service may vary dramatically by individual service area; this is another example of an approved form of subsidy. In this sense, a program to pro- vide a larger percentage of electric cost relief for rate payers -60-— served by high-cost utilities than served by lower cost utili- ties, represents less of a distortion of the cost-of-service con- cept than some existing and accepted practices. -61- APPENDIX I ALASKA UTILITY ABBREVIATIONS APPENDIX I ALASKA UTILITY ABBREVIATIONS! AL Akiachuk, Limited (Village of Akiachak) Private AEL&P Alaska Electric Light and Power Company (Juneau) Private AML&P Anchorage Municipal Light and Power Dept. Municipal APA-E Alaska Power Administration-Eklutna (Anchorage) Federal APA-S Alaska Power Administration-Snettisham (Juneau) Federal APC Aniak Power Company Private AP&T Alaska Power & Telephone Company (Craig, Hydaburg, Skagway, Tok) Private AVEC Alaska Village Electric Cooperative, Inc. (48 villages) Cooperative AUI Arctic Utilities, Inc. 1/ (Deadhorse) Private BU&EC Barrow Utilities & Electric Cooperative, Incorporated Cooperative BUC Bethel Utilities Corporation, Inc. 2/ Private BL&P Bettles Light & Power, Inc. Private ccu Circle City Utilities Private CEA Chugach Electric Association, Inc. (Anchorage Area) Cooperative COK City of Klukwan Municipal COM City of Manokotak Municipal Cou City of Unalaska Municipal CPCo. Chitina Power Co., Inc. 4/ Private CPU Cordova Public Utilities Municipal CVEA Copper Valley Electric Association, Inc. (Glennallen, Valdez) Cooperative DLE Dot Lake Electric, Inc. Private FMU Fairbanks Municipal Utilities System Municipal FYU Fort Yukon Utilities Private GHEA Glacier Highway Electric Association, Inc. (Juneau area) Cooperative GVEA Golden Valley Electric Association, Inc. (Fairbanks area) Cooperative HEA Homer Electric Association, Inc. (Kenai Peninsula) Cooperative HL&P Haines Light and Power Co., Inc. Private H (EJJ) Hughes (Esther J. James) Private I-NEC Iliamna-Newhalen Electric Cooperative, Inc. (Iliamna, Newhalen, Nondalton) Cooperative =Go5 KdEA KtEA KPU LBES MEA MUC MP&L MGL&P Nac NEA NEC NiP&L NL&P NP&E NP&L PLI PMP&L PUC SED SES ss TePC T-HREA TPC WML&P WSI WTC YPI [oo|pole ig ig, Oy be ae Kodiak Electric Association, Kotzebue Electric Association, Ketchikan Public Utilities Larsen Bay Electric System Matanuska Electric Association, Inc. Inc. Inc. (Palmer-Talkeetna Area and Unalakleet) Manley Utility Co. Metlakatla Power and Light McGrath Light & Power 3/ Napakiak Corporation Naknek Electric Association, Nushagak Electric Cooperative, Nikolski Power & Light Co. Nome Light and Power Utilities Northern Power & Engineering Corporation, (Cold Bay) Northway Power & Light, Paxson Lodge, Inc. Inc. Inc. Inc. Petersburg Municipal Power & Light Pelican Utility Company Sitka Electric Department Seward Electric System Semloh Supply (Lake Minchumina) Teller Power Company Tlingit-Haida Regional Electric Authority (Angoon, Hoonah, Kake, Kasaan, Klawock) Tanana Power Company Wrangell Municipal Light and Power (Sand Point on Wakefield Seafoods, Inc. Popov Island) Weisner Trading Co. Yakutat Power, Owned by Atwood Enterprises, Owned by Northern Power and Engineering Corporation of Anchorage Subsidiary of Alaska Commercial Co. Commercial Co. 12/76) Subsidiary of Copper Valley Trading Co. 5-76) Inc. -63- Inc. (Manley Hot Springs) (Dillingham) Inc. Cooperative Cooperative Municipal Municipal Cooperative Private Municipal Private Private Cooperative Cooperative Private Municipal Private Private Private Municipal Private Municipal Municipal Private Private Cooperative Private Municipal Private Private Private (acquired from Northern (CPCO. Sold by Auction APPENDIX IT ELECTRIC RATES FOR RESIDENTIAL AND SMALL COMMERCIAL CONSUMERS APPENDIX II ELECTRIC RATES FOR RESIDENTIAL AND SMALL COMMERCIAL CONSUMERS The following rates summary was prepared by the Alaska Public Utilities Commission and reflects the rates and fuel sur- charges that were in effect in September 1979. There have been a number of increases since that time. -64- -sg9o- ELECTRIC RATES* FOR RESIDENTIAL AND SMALL COMMERCIAL CONSUMERS SEPTEMBER, 1979 *Utilities Regulated by the Alaska Public Utilities Commission. Monthly Latest Amount of Areas Ucility Rates per KWH Minimum Bill Revision Surcharge Served AELE&P General Residential $4.00 U-75-65 (4) oLLe Juneau lst 200 - 5.8¢ (12/19/75) Douglas Over 200 - 4.4¢ Auke Bay Small Commercial $25 lst 1000 - 5.8¢ Next 3100 - 5.4¢ Over 4100 - 4.3¢ ALASKA lst 40 - 15.29¢ $3.30 U-78-79(2) 2.96¢* Craig POWER & Next 60 - 13.11¢ (1/15/79) TELEPHONE Over 100 - 10.93¢ lst 40 - 16,55¢ $3.30 Same as above 1.78¢ Hydaburg Next 60 - 14.35¢ Over 100 - 12,.15¢ lst 100 - 14.1¢ $5.00 U-78-62 (3) 1.29¢4 Skagway Next 300 - 7.8¢ (1/15/79) Over 400 - 7.1¢ lst 100 - 13¢ $7.50 Original 4.29¢% Tok Next 100 - 12¢ Tariff Next 800 - 9.5¢ (7/15/71) Over 1000 - 8¢ lst 100 - 15¢ $10.00 Original 0 Dot Lake Over 100 - 14¢ Tariff (3/29/78) * Those surcharges have not been approved by the Commission as of 9/1/79. Utility ALASKA VILLAGE ELECTRIC COOPERATIVE Rates per KWH Residential All KWH - 37.2¢ Small Commercial All KWH - 34.2¢/KWH Large Power Demand Charge lst 10 KWH - O Over 10 KWH - $10/KWH Energy Charge lst 1,500 KWH - 32.5¢ Over 1,500 KWH - 24.8¢ Monthly Minimum Bill $18.60 $34.20 $250.00 Latest Revision U-77-77 (4) (3/1/78) Amount of Surcharge 0 Areas Served 46 villages AMPAC FOODS, INC. ' a XI | Farm & Home lst 200 - 15¢ Over 200 - 13¢ Commercial Demand Charge lst 10 KWH - 0 Over 10 KWH - $3.00/KWH Energy Charge lst 100 - 13¢ Next 100 - 11¢ Over 200 - 7¢ $7.50 $7.50 Original (4/19/77) Sandpoint ANCHORAGE , MUNICIPALITY OF Residential Small General Services Demand Less than 10 KWH 4.16¢ $3.84 $6.10 U-79~-13 (6) (7/11/79) -2399¢ Anchorage ANIAK POWER Residential lst 250 - 20¢ Over 250 - 18¢ $20.00 Original Taritt (6/30/74) 4.61¢ Aniak -g9o- Monthly Latest Amount of Areas Utility Rates per KWH Minimum Bill Revision Surcharge Served ANIAK Commercial $20.00 POWER lst 1600 KWH - 18¢ (continued) Over 1600 KWH - 16¢ ARCTIC lst 10,000 - 25¢ Demand Charge Original oO Deadhorse UTILITIES Over 10,000 - 19¢ lst 100 KWH - Tariff $10/KW (10/6/75) Over 100 KWH - $5/KW BARROW Residential $10.00 Original oO Barrow UTILITIES lst 200 - 15¢ Tariff & ELECTRIC Next 300 - 12¢ (4/13/74) COOPERATIVE Over 500 - 11.112¢ General Service $20.00 lst 220 - 15¢ Next 450 - 12¢ Next 450 - 10¢ Over 1120 - 9¢ BETHEL Residential $5.54 U-79-47 (1) -94¢ Bethel UTILITIES lst 50 - 18.94¢ (5/15/79) Next 200 - 15.81¢ Over 250 - 11.82¢ Commercial lst 50 - 18.94¢ Next 450 - 14.24¢ Next 2,500 - 12.67¢ Next 22,000 - 11.82¢ Over 25,000 - 11.39¢ $5.54 for 5 KVA or less $1.11 per KVA additional -69- Monthly Latest Amount of Areas Utility Rates per KWH Minimum Bill Revision Surcharge Served BETTLES General Service 2nd Revision 4.5¢ Bettles LIGHT & 24¢ (2/1/74) POWER CHUGACH General Residential $4.36 U-77-68 (4) oO Anchorage ELECTRIC Urban (3/16/78) lst 50 - 8.7¢ Next 200 - 4.4¢ Next 500 - 2.7¢ Next 750 - 2.4¢ Next 1500 - 2.0¢ Commercial L&P $4.36 Urban lst 100 - 6.2¢ Next 400 - 4.0¢ Next 1000 - 3.5¢ Next 1500 - 3.2¢ Over 3000 - 2.9¢ General Residential $4.36 Same as above 0 Anchorage Suburban Moose Pass ist 50 - 8.7¢ Cooper Landing Next 200 - 5.4¢ Next 500 - 4.0¢ Next 750 - 2.4¢ Over 1500 - 2.0¢ Commercial L&P $4.36 Suburban [st 100 - 7.5¢ Next 400 - 5.4¢ Next 1000 - 4.4¢ Next 1500 - 3.7¢ Over 3000 - 2.9¢ -Ol- Monthly Latest Amount of Areas Utility Rates per KWH Minimum Bill Revision Surcharge Served CHUGACH General Residential $11.21 U-77-68 (4) 0 Kenai ELECTRIC lst 90 - 12.5¢ (3/16/78) (continued) Next 160 - 10.6¢ Next 500 - 6.2¢ Next 250 - 3.5¢ Over 1000 - 2.0¢ Commercial L&P $11.21 lst 100 - 10.2¢ Next 400 - 8.1¢ Next 1000 - 6.7¢ Next 1500 - 6.2¢ Over 3000 -- 4.4¢ General Residential $24.92 Same as above 0 Hope lst 90 - 12.5¢ Next 160 - 10.6¢ Next 500 - 6.2¢ Next 250 - 3.5¢ Over 1000 - 2.0¢ Commercial L&P $24.92 lst 100 - 10,2¢ Next 400 - 6.1¢ Next 1000 - 6.7¢ Next 1500 - 6.2¢ Over 3000 - 4.4¢ CIRCLE Residential & Commercial $10.00 Original 0 Circle ELECTRIC lst 100 - 32¢ Tariff Next 100 - 22¢ Over 200 - 17¢ Monthly Latest Amount of Areas Utility Rates per KWH Minimum Bill Revision Surcharge Served COPPER Residential $15.00 Tariff No. 2 3.22¢* Glennallen VALLEY lst 200 - 13¢ U-77-88 (5) Copper Center ELECTRIC Next 800 - 11¢ (6/2/78) Over 1000 - 9¢ Commercial $30.00 lst 500 - 13¢ Next 500 - 11¢ Next 1000 - 10¢ Over 2000 - 9.5¢ Residential $15.00 Same as above 2.50¢* Valdez lst 200 - 13¢ Next 300 - 11¢ Next 500 - 9¢ \ Over 1000 - 8¢ x , Commercial $30.00 lst 500 - 13¢ Next 500 - 11¢ Next 1000 - 10¢ Over 2000 - 8¢ CORDOVA Residential $15.00 Original 0 Cordova ELECTRIC lst 200 - 15.5¢ Tariff COOPERATIVE, Next 300 - 13.5¢ (3/15/79) INC, Next 500 - 11.0¢ Over 1000 - 9.0¢ *These surcharges have not been approved by the Commission as of 9/1/79. -Zl- Monthly Latest Amount of Areas Utility Rates per KWH Minimum Bill Revision Surcharge Served CORDOVA Small Commercial $42.00 Original 0 Cordova ELECTRIC Ist 300 ~ 15.5¢ Tariff COOPERATIVE, Next 700 - 11.0¢ (3/15/79) INC. Over 1000 - 8.5¢ (continued) FORT YUKON Residential $10.00 U-78-92 (2) 2.545¢* Fort Yukon lst 100 - 31.86¢ (5/1/79) Next 400 - 19.11¢ Over 500 - 12.74¢ Commercial & Governmental $10.00 lst 100 - 38.23¢ Next 400 - 31.86¢ Next 500 - 25.49¢ Next 1000 - 19.11¢ Over 2000 - 16.57¢ GLACIER Residential $12.00 U-78-88 (2) 0 Auke Bay HIGHWAY Tet 250) —132.3¢ (5/23/79) ELECTRIC Next 250 - 9.6¢ ASSOCIATION Next 250 - 7.7¢ Over 750 - 4.7¢ Commercial & Large Power $12.00 Demand Charge lst 25 KW - 0 Over 25 KW - $3.70/KW *These surcharges have not been approved by the Commission as of 9/1/79. -EL1- Utility GLACIER HIGHWAY ELECTRIC ASSOCIATION (continued) Rates per KWH Commercial & Large Power Energy Charge [st 250 - 12.3¢ Next 250 - 9.6¢ Next 500 - 7.7¢ Next 9000 - 6.1¢ Over 10,000 - 4.0¢ Monthly Latest Minimum Bill Revision $12.00 Amount of Surcharge Areas Served GOLDEN VALLEY Residential lst 100 - 14.03¢ Next 1400 - 7.54¢ Over 1500 - 5.91¢ General Service - 1 lst 400 - 14.03¢ Next 600 - 9,12¢ Next 4000 - 7.02¢ Over 5000 - 5.61¢ General Service - 2 Demand Charge lst 50 - 0 Over 50 - $4.75/KW Energy Charge lst 400 - 13.47¢ Next 600 - 10.67¢ Next 4000 - 8.42¢ Next 45,000 - 5.33¢ Over 50,000 - 4.63¢ $10.00 U-79-56 (1) (9/1/79) $10.00 (a) The demand charge for contract capacity or (b) $1.00 per KVA of installed transfer capacity or (c) Member's highest monthly demand charge within past 12 months. Fairbanks Big Delta Nanana Delta Junction North Pole Healy HAINES LIGHT & POWER Residential lst 100 - 16.4¢ Next 625 - 8.6¢ Over 725 - 6.9¢ $14.25 U-79-52(1) (7/19/79) 3.11¢* Haines *These surcharges have not been approved by the Commission as of 9/1/79, -Pl- Utility HAINES LIGHT & POWER (continued) Rates per KWwil Large Power Demand Charge $2.00/KW per month for KW over 25 Energy Charge lst 500 - 38.4¢ Next 54,500 - 7.9¢ Over 55,000 - 4,6¢ Commercial [st 100 - 21.9¢ Next 3400 - 7.8¢ Over 3500 - 6.4¢ Monthly Minimum Bill $33.35 $19.00 Latest Revision Amount of Surcharge Areas Served Haines HOMER ELECTRIC Farm & Residential lst 50 - 9¢ Next 50 - 7¢ Next 200 - 5¢ Next 800 - 3.5¢ Over 1100 - 1.7¢ Commercial, Large Power & Public Bldgs. Demand Charge Ist 25 - 0 Over 25 - $2.75/KW Energy Charge lst 50 - 9¢ Next 50 - 7¢ Next 1200 - 5¢ Next 6200 - 4¢ Next 42,500 - 3¢ Next 50,000 - 2¢ Over 100,000 - 1.7¢ $7.50 $7.50 Second Revision (11/10/77) Original Rates (4/1/70) Homer -SL- Utility Rates per KWH HOMER ELECTRIC (continued) Farm & Residential Jst /50)\- | 15¢ Next 50 - 8¢ Next 200 - 6¢ Over 300 - 5¢ Town & Village 1st 50) —)15¢ Next 50 - 8¢ Next 200 - 6¢ Over 300 - 5¢ Monthly Minimum Bill $7.50 $5.00 Latest Revision First Revision (11/1/74) Amount of Surcharge 0 Areas Served Seldovia Commercial L&P Demand Charge lst 10 - 0 Over 10 - $3.00/KW Energy Charge lst 50 - 15¢ Next 50 - 8¢ Next 2900 - 6¢ Next 7000 - 5¢ Over 10,000 - 4¢ $7.50 Residential Ist 50 = 15¢ Next 50 - 8¢ Over 100 - 6¢ Commercial L&P Demand Charge lst 10 - 0 Over 10 - $3.00/KW Energy Charge Ist 50 - 15¢ Next 50 - 8¢ Next 2900 - 6¢ Next 3000 - 5¢ $5.00 $7.50 First Revision (11/10/77) Original Rates (9/27/72) Port Graham Monthly Latest Amount of Areas Utility Rates per KWH Minimum Bill Revision Surcharge Served HOMER City Light Residential $5.00 First City of Kenai ELECTRIC lst 50 - 10¢ Revision (continued) Next 50 - 5¢ (11/10/77) Next 100 - 4¢ Small Commercial $5.00 Public Buildings lst 50 - 10¢ Next 50 - 5,5¢ Over 200 - 4.5¢ KODIAK Farm & Home $13.00 U-78-81 (2) 2.07¢ Kodiak ELECTRIC lst 100 - 13.00¢ (7/13/79) Next 300 - 12.00¢ Next 300 - 10.00¢ Over 700 - 9,00¢ Commercial $26.00 lst 200 - 13.00¢ Next 800 - 11.00¢ Next 4000 - 10.00¢ Over 5000 - 8.50¢ Farm & Home $13.00 U-78-81 (2) 2.02¢ Port Lions lst 100 - 25.00¢ (7/13/79) Next 100 - 23.00¢ Over 200 - 20.00¢ Commercial $26.00 lst 100 - 25.00¢ Next 100 - 23.00¢ Over 200 - 17.00¢ -LL- Monthly latest Amount of Areas Utility Rates per KWH Minimum Bill Revision Surcharge Served KOTZEBUE Residential & $14.00 U-76-46 (3) 3.436¢* Kotzebue ELECTRIC Small Commercial (12/3/76) lst 50 - 26¢ Next 50 - 22¢ Next 9900 - 13.5¢ Over 10,000 - 12.5¢ MANLEY Residential $5.00 Original 0 Manley Hot Springs UTILITY lst 100 - 30¢ Tariff co., INC. Over 100 - 25¢ (7/14/78) Commercial $5.00 Same as above 0O lst 100 - 30¢ Next 900 - 25¢ Over 1000 - 20¢ MATANUSKA Residential $9.00 U-78-75 (5) 0 Palmer ELECTRIC lst 100 - 11.6¢ (7/12/79) Chugiak Next 150 - 7.7¢ Eagle River Next 250 - 5.8¢ Talkeetna Next 700 - 3.2¢ Wasilla Over 1200 - 2.6¢ Commercial & Small Power $9.00 Ast 100 - 14.2¢ Next 400 - 9.0¢ Next 1500 - 5.2¢ Over 2000 - 3.2¢ Residential $10.00 U-76-67(4) (5) 1.3¢ Unalakleet lst 50 - 38.65¢ Next 50 - 19.32¢ Over 100 - 14.49¢ (3/21/77) *This surcharge has not been approved by the Commission as of 9/1/79. -8l- < Monthly Latest Amount of Areas Utility Rates per KWil Minimum Bill Revision Surcharge Served — MATANUSKA Commercial & Small Power $10.00 U-76-67(4) (5) 1.3¢ Unalak leet ELECTRIC lst 50 - 38.65¢ (3/21/77) (continued) Next 50 - 25.77¢ Next 200 - 19.32¢ Over 300 - 15.30¢ McGRATH LIGHT Residential $5.00 Original 6.2¢ McGrath & POWER lst 50 - 13.5¢ Tariff Next 150 - 11.5¢ (6/6/77) Next 300 - 11.0¢ Next 4500 - 10,0¢ Over 5000 - 8.5¢ Commercial $5.00 lst 50 - 13.5¢ Next 450 - 10.5¢ Next 2500 - 10.0¢ Next 22,000 - 9.0¢ Over 25,000 - contract rate NAKNEK Farm & Home $13.50 U-78-84 (1) iy Naknek ELECTRIC lst 50 - 27¢ (10/1/78) Next 50 - 21.6¢ Next 100 - 16.2¢ Next 300 - 13.5¢ Over 500 - 12.2¢ Other $13.50 Demand Charge lst 10 - 0 Over 10 - $4.0 5/ Kw Energy Charge lst 50 - 27¢ Next 50 - 21.6¢ Next 2,900 - 15.5¢ Next 7,000 - 12.8¢ Over 10,000 - 10.8¢ Utility NAKNEK ELECTRIC (continued) Monthly Latest Rates per KWH Minimum Bill Revision Farm & Home $16.20 U-78-84 (1) lst 50 - 32.4¢ (10/1/78) Next 50 - 39,7¢ Over 100 - 21,6¢ Other $12.00 Demand Charge lst 10 - 0 Over 10 - $4.05/KW Energy Charge lst 5Q - 32,4¢ Next 50 - 39.7¢ Over 100 - 21.6¢ Amount of Surcharge 0 Areas Served Egegik NORTHERN POWER & 1 3 1 ENGINEERING Residential $10.00 U-77-83 (2) lst 50 - 16.6¢ (5/1/78) Next 650 - 13.3¢ Over 700 - 11.6¢ General Service $32.00 lst 1000 - 12.5¢ Next 4000 - 11.6¢ Next 5000 - 10,8¢ Over 10,000 - 9.1¢ - 968¢ Cold Bay NORTHWAY POWER & LIGHT Residential & $10.00 First Small Commercial Revision lst 100 - 13¢ (2/21/74) Next 100 - 12¢ Next 100 - 11¢ Over 300 - 9.5¢ 5.77¢* Northway *This surcharge has not been approved by the Commission as of 9/1/79. 1 00 °o 1 Urility Rates per KWi NUSHAGAK ELECTRIC Farm & Home lst 50 - 22¢ Next 50 - 15¢ Next 400 - 11.5¢ Over 500 - 10.5¢ Commercial & Industrial lst 50 - 22¢ Next 50 - 15¢ Next 2900 - 12¢ Over 3000 - 10.5¢ Monthly Minimum Bill $11.00 $11.00 Latest Revision U-76-50 (4) (11/30/76) Amount of Surcharge 2.615¢* 2,.615¢* Areas Served Dillingham PELICAN UTILITIES 7.25¢ per KWH $5.00 U-76-23 (3) (8/1/76) Pelican TANANA POWER Residential lst 200 - 24¢ Next 200 - 22¢ Over 400 - 20¢ Commercial lst 10,000 - 18.5¢ Next 10,000 - 17.6¢ Over 20,000 - 16.2¢ $14.40 $50.00 U-78-63 (2/9/79) fanana TLINGIT-HAIDA REGIONAL ELECTRICAL AUTHORITY Residential lst 300 - 27¢ Over 300 - 23¢ Small Commercial lst 300 - 27¢ OVer 300 - 23¢ $16.50 $27.00 Pending Tariff Pending Tariff Angoon Hoonah Kake Klawock *This surcharge has not been approved by the Commission as of 9/1/79. -TS- Monthly Latest Amount of Areas Utility _ Rates per KWH Minimum Bill Revision Surcharge Served YAKUTAT Residential $12.00 U-76-82 2.796¢% Yakutat POWER lst 100 - 12¢ (1/1/78) Next 200 - 10¢ Next 700 - 8.5¢ Next 1000 - 8¢ Commercial $30.00 2.796¢* lst 300 - 10¢ Next 700 - 8.5¢ Next 4,000 - 8¢ Over 5,000 - 7.5¢ Large Commercial $180.00 2.796¢* lst 2,000 - 9¢ Next 18,000 - 7.5¢ Over 20,000 - 6.5¢ *This surcharge has not been approved by the Commission as of 9/1/79. APPENDIX III REA FORM 12f: OPERATING REPORT — INTERNAL COMBUSTION PLANT “NO farther funds moy de paid ous under this program aniess this repert is completed and filed as required (7 USC 90] «t seq./" U.S. DEPARTMENT OF AGRICULTURE Form Approved RURAL ELECTRIFICATION ADMINISTRATION OUR No. 40-ROS66 BORROWER DESIGNATION eee eee eee een TO: _U. S. DEPARTMENT OF AGRIC ILTURE, REA, WASHINGTON, 0.C._ 20250 PCAN, INSTRUCTIONS = Submit uriginol und three copies in REA by the 20th uf each month for the prcesig enh Sn Mes name te (reassess SECTION A. INTERNAL COMBUSTION GENERATING UNITS FUEL CONSUMPTION LUBE OIL OPERATING HOURS = THIS MONTH GROSS GENERATION ‘MWH) Re een eaeee cere DELIVERED COST OF PURCHASES THIS MONTH | PUBL or fe per | gas (e per 1000 cw | Lupe ore fe Per gallon) fe at fon ) | ave, eTU BER CU. FT. OF . STATION SERVICE NATURAL GAS LHV | | + OF GROSS FACTORS | % _| MAXIMUMOEMANO | kw | LABOR REPORT Lose... NO. EMPLOYEES FULL TIME | TOTAL PLANT PAYROLL .. (including superintendent) His duambem rovnenariow:le a] 1S MINUTE GROSS PLANT .. RUNNING PLAN capacity NO. OF EMPLOYEES PART-TH (2) CHARGED TOMAINTENANCE) SECTION 8. COST OF NET ENERGY GENERATED PRODUCTION EXPENSE imoueen THIS YEAR THIS MONTH 7 i AMOUNT (5) MILES /Kwee AMOUNT IS) eee emer emcee eee al [eruen C—O pare ey reer FUEL, sus-TOTAL 2 +3) on q ie a &, MISC, OTMER COWER GENERATION EXPENSES 49 Ce ””—OE ed 7 RENTS L350] . OPERATION EXPENSE THRU 7) Seas @, MAINTENANCE SUPERVISION ANO ENGINEERING | 5] | [fm To, MAINTENANCE OF STRUCTURES a (ie wamrenance or cenenatines eceerscant | 93 | Sd Ee] [a mamrenance exsoacw meu —Pocmee| [ra terns emopuerion exeense ve stay Fre eer FIXED COSTS Hh OEPRECIATION Hui a a [is maunanee | ee ee ee SECTION YEAR - TO ATE STATISTICS (3) CHARGED TOTOTHER AC + FUEL CONSUMPTION, OIL (1000 GALS.) .. PLANT FACTOR (GARUGL) -orcennervressennns: FUEL CONSUMPTION, GAS (1000 C.F.) sssseeees RUNNING PLANT CAPACITY FACTOR veren AVG. BTU PER GALLON OF O1L cessesesssersees AVG. NO. OF FULL TIME EMPLOYEES wien AVG. BTU PER CU. FT. OF NATURAL GAS AVG, MO, OF PART-TIME EMPLOYEES wn TOTAL BTU, OIL (10%) seececrcesresersnenensseeses TOTAL MAN@HOURS WORKED scscseressesenees TOTAL BTU, GAS (10%) ssescescsseseeeerensees TOTAL PLANT PAYROLL. sessscsssesscnsessenees TOTAL BTU (Sum Of S plus 6) sveveerenvens PAYROLL CHARGED TO OPERATION mcssews 8. AVG. BTU PER KWH... PAYROLL CHARGED TO MAINTENANCE... REMARKS, INCLUOING UNSCHEDULED OUTAGES (If additional Space is needed, use reverse side.) REA FORM 12 = REV 9~77 Pace —-22- PLANT LOAD CURVE ad eae fw ne a] re S92 | mma Ll Ua S| Sc fear ” 2 . 4 a fry . 2 * 6 8 10 .* OAY OF MAXIMUM OEMANO OAT OF MINIMUM: OEMANO HOURS MOTE: tor mewinam and minima dey load curves with date of cach, using indicated maximam demand. Lobel cock curve“ —= +" o ~ <=" At Aigh and. low poinss, (+ signifies leading P. F., ~ cignifien lagging ?. ©.) Ocssqnase seals in im AEA rome 12 (EV 9-77 2335