ML20071B040
| ML20071B040 | |
| Person / Time | |
|---|---|
| Site: | Washington Public Power Supply System |
| Issue date: | 02/24/1983 |
| From: | Hartmann S DEBEVOISE & LIBERMAN, WASHINGTON PUBLIC POWER SUPPLY SYSTEM |
| To: | Bright G, Grossman H, Harbour J Atomic Safety and Licensing Board Panel |
| References | |
| ISSUANCES-CPA, NUDOCS 8302250298 | |
| Download: ML20071B040 (12) | |
Text
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.e law omccs or 00tKETED DEB EVOIS E ~ &' LiBERMAN
'"" E 1200 S EVENTEENTH STREET.N.W.
WAS HINGTON. O. C. 2003 6 TELEPHONE (202) 857-9800
=%:nj m February 24, 1983 Herbert Grossman, Esq.
Dr. Jerry Harbour Chairman, Atomic Safety and Atomic Safety and Licensing _ Board Licensing Board U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C.
20555 Washington, D.C.
20555~
Glenn O. Bright Atomic Safety and Licensing Board U.S.
Nuclear Regulatory Commission Washington, D.C.
20555 Re:
Washington Public Power Supply System (WPPSS Nuclear Project No. 1)
Docket No. 50-460-CPA Gentlemen:
On February 3, 1983,' we provided the Board and partici-pants in the ? rehearing Conference with a copy of the Supply System's letter to the NRC Staff dated April 30, 1982.
The letter discussed the decision by the Supply System's Board of Directors to suspend construction of WNP-1 for a period of from two to five years, and transmitted the related recommendation of the Administrator of the Bonneville Ad-ministration and the BPA resource analysis.
The caption in that letter inadvertently referred to the NNP-1 operating license proceeding rather than the WNP-1 i
construction permit proceeding.
Accordingly, we hereby
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i 8302250298 830224 PDR ADOCK 05000460 9
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resubmit that letter and its attachments for inclusion on the docket for the WNP-1 construction permit pro'ceed-ing.
Sincerely, San rd L.
IIartman Counsel for Applicant Attachments cc:
Service List l
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April 30. 1982 G01-8"-0169 Docket No. 50-460 Mr. Harold R. Denton, Director Office of Nuclear Reactor Regulation /NRC Phillips Bldg., Room P-404A 9720 Norfolk Avenue Bethesda, Maryland 20014 i
Dear Mr. Denton:
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Subject:
STATUS OF WNP-1 The purpose of this letter is to provic
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"". t information regarding the status of activities relat'*d 'o c ntinued construction of WNP-1.
On April 19, 1982, th ad.nistrator of Bonneville Power Administration (SPA) reccamended to Se SeMply System's Board of Directors that construction of WNP-1.be delayed fo a
- riod of "from 2 to 5 years" (see attached l ette r).
On re'ne: day urt ressrphi.1) an order was issued by the Bentoning t I
a" County Sr 'ric slowdown o terr. ' n onstruction on WNO-1 for a two week period, until id be held.
The Supply System Board met in ajd$v-ca e hea 'n e
FQdspadoiFiday April 23) to review the BPA rec _ommendation with the
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A6;ini;2rato d to receive further input from the Supply System staff ano\\t6e public.
Becaus of the existence of the restraining order, and to pi pde time for the Board to evaluate alternatives presented at the meeting, no action was taken by the Board at the April 23 meeting.
As a rescit of a court hearing held en Monday (April 26) the restraining order against Board action on WNP-l ~was lifted.
Several alternatives to the SPA recommendation were presented at. the April 23 meeting, and others were prepared subsequent to that.
The Board mat again on Wednesday (April 28) in Seattle to hea: further puclic comment on the SPA recommendation.
At the conclusion of the April 23 meeting, the Board deferred their decision until Thursday (April 29) to provide time to review the alternatives and censider pu'iic cqmments.
At the Thurscay meeting, the BPA Acministrator stated c
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H. 'R. Danton Page 2 April 30,1982 Status of WNP-1 that none of the ' alternatives would be acceptable to BPA and that a construction
~ delay on WNP-1 was required.
Because BPA support is essential to the financing of all three Supply System projects, the Board voted to accept the BPA
, recommendation.
A ramp down of construction activities at WNP-l~wi~11 begin immediately:
Activities essential to maintaining the Construction Permit will continue throughout the construction delay.
This'will include supporting.NRC review of the FSAR as required, and processing of the OL Application. We would like to meet with the staff in the near future to dis' cuss details of the WNP-1 licensing review schedule in light of the planned construction delay.
It should be noted that the most recent "need for power" study performed by BPA (attached), which was the basis for the recommendation to delay WNP-1, shows a clear need for all three of the Supply System projects. The only item being questioned is the time of the need.
Therefore, the action taken on WNP-1.is only a deferral and not termination. Because WNP-1 is approximately 63% complete at this time and represents a valuable resource to the region, tennination of the plant at this stage is not being considered. We firmly believe that construction will be resumed in the 2 to 5 year period discussed by BPA.
For this reason, we believe it will be to our mutual benefit for the Commission to proceed with the docketing of the WNP-1 FSAR. The FSAR was, submitted for acceptance review in November 1981, and it is our understanding that the staff has found it acceptable for docketing.
Copies of the FSAR g
are now being prepared for docketing and it is o2r intent to submit those copies to the staff by May 14, 1982.
Docketing of the Operating License Applicatien at this time would avoid the need to repeat the acceptance review process ~when construction resumes.
We will continue to keep you apprised of the situation as further infomation is developed.
Very truly yours, Y
- G. D. Bouchey, Deputy Director Safety & Security GCS/sm Attachments cc:
CR Bryant BPA RW Hernan NRC AD Toth NRC DG Eisenhut NRC RH Engelken R0. V
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Depanment of Energy
.SonneviDe Power Adtninistradon omczormeAomswrea P.O. Sex 3621 Perdand.Cregon 97208 April 19,1%2
' w r,* = AP Mr. Stanzen E. Cain Chai =an, I.xecucive Board Washington Public Power Supply System 17930 Pacific Eighway South Suite 400 Seaccle,Tiash1=g:en 98188
Dear X:
. Cain:
In ace =rda=ce with =y ec=itment to express =y recc-andation regardi=g the conse:ue:1cn schedules to be =aintained for the wig 1,' 2, and 3 projects, I am hereby =otifying you of the cenclusions which have been reached.. It is necessary : hat these reec--adations be ful.ly understood by you and the =2=bers of your Board in the developmen: of the Washing cs Public Power Supply Sys:en's Lo83 budget and in the develepcent of a future financing plan.
To assis: in this understandi=g, = embers of =y s:aff-and I will be available l
at the Izecutin 3 card =eeting of Ap:1119,1982 to review the factors lead-i=g to this rece _endation and ud'1 be available thereafter to respond to any further i=quiries which you or===bers of your 3 card ay develop.
I su reew and' g to the Board and staff of the Supply System tha::
1.
The construction of ICTP #2 and W7 93. proceed at full pace to l
=ain ain or i= prove the existing ec=scrue:1on schedules for these p roj e ccs.
2.
The constructica ec=pletion schedule of InG #1 be delayed for a period of f:cm 2 to 5 years; and i
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The Board i=struct the staff of the Supply Syste= to prepare a budget and financing plan consistent with these recc=endaticas.
i This rece=endatica is the result of careful considera:1ca of many fae: ors and, in view of the significant i= pact 1: will have on the regica, was not.an easy choice. However, I believe that as yc s and the othe: =e=bers of your Soard becc_e =cre fully ac:tuainced with all of the financing, econe=ic, =arketing and lead /resoure.e balance studies and investiga:icas which have preceded
- his recc=enda:ica you will share =y belief : hat adherence to :he proposal is the p:: den actica to be taken.
Sincerely, 7
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- /.,d i.l /
' M n -< /
i Ad=ints: 2: ;
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s Analysis of Resource alternatives Bormevme Power Admirustration g
U.S.Departmentof Energy I
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rii19,1982 r.
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ANALYSIS OF RESOURCE ALTERNATIVES BONNEVILLE POWER ADMINISTRATION April 19, 1982
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SUMMARY
i This paper presents the details of a decision v' i.ch vill have a significant h
impact on the future of the Pacific Northwest.
Circumstances which are largely economic have placed in - jeopardy =ajor regional energy programs, the financial health of many of the region's electric utilitiea, and possibly the region's fiscal credibility.
The incomes and e=ployment of thousands of the region's ' citizens are being ' impacted by these-circumstances.
The decision announced in this paper was =ade following extensive analysis of complex power financing and supply issue's.
There was vide consultation with regional leaders, concerned individuals, an i experts inside and outside the region.
The final decision was based upon the judgment of the Bonneville Power Administration (SPA), which is charged with. the responsibility of providing electrical energy to the region on a " prudent and businesslike" basis,.
The decision BPA has been addressing is what its recom=endation should be to the Washington Public Power Supply System (Supply System) on future financing alternatives for the Supply System's projects #1, #2, and 93.
Because of the need for additional financing in May,1982 to continue construction of these plants, decisions must be made i==ediately to provide as much certainty as possible about the future of these projects.
The managers of the financing group which markets the Supply System's construction bonds for the projects have advis'ed BPA that existing cir'cums tances could make the next bond sale,-
i scheduled for May 1982, more difficult and perhaps more expensive than past sales.
The costs of these plants, as a result of long-term contracts called net-billing agreements, became the ultimate responsibility of BPA and its customers several years ago.
The status and scheduling of these plants, therefore, inescapably affect every person and every consumer of electricity in the region.
In reaching a decision on the schedu)ing of resources needed in the region, a number of realities other than economics =ust be addressed.
Not the least of l
these is the State of Washington Initiative 394 which signals a serious voter concern. BPA respects this concern and undetstands that the decision it makes regarding the Supply System projects, and other energy f aciliticis, =ust be in the best interests of BPA's ulti= ate constituents--the ratepayers throughout the Pacific Northwest.
Actions taken nov =ust provide sufficient flexibility for the region to i
respond to future load / resource i= balances and changes in power carketing j
conditions.
Because of the enor=ous regional. investment in the three Supply System projects, = cans must be found to realize the =axi=u= value of these i=portant regional assets.
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f' In all of the analyses SPA performed, it was apparent that
- the on-schedule completion of kTP 02 is a critical event in the region from the standpoint of both power production and the economic benefits of the revenues it will produce.
The advanced stage of completion of the project (it is about 90 percent complete), - the-large capital invest =ent (more than S2 billion already ec=:itted.), and the near-ter= availability of the power and revenues
,(about 22 f.onths away) make the early cocpletion and operation of kTP #2 an economic i= perative for the region.
. On the basis of these analyses, BPA has concluded that from the viewpoint of need-for power, economics, and financing, it vill be feasible to extend the construction schedule of kVP #1 for a period of up to 5 years.
Near-term funding options appear to be adequate to continue k1P #2 and MiP #3 on their current schedules and extend construction of k1P #1.
A forecasted near-term power surplus supports extension of the Mi? 01 construction schedule by up to 5 years.
Construction can be restarted earlier if circu= stances dictate.
Given the uncertainties involved, no one ele =ent of.the SPA analyses is, by itself, persuas ive.
What is, persuasive is the reinforcing consistency with which all factors-load / resource uncertainties, resource economics, and financial' planning point to the same conclusion.
It is a matter of business prudence that BPA reduce its financial risk and not leverage itself further by incurring additional debt to support surplus capability..
-Considering the interests of the ratemayers and the region as a whole,-
continuing WNP F2 and F3 on current schedules and extending the construction of k3P #1 best preserves and protects the econo =ic and financial integrity of 3PA and the region.
- It has fewer disadvantages and more advantages than any of the other options. and orovides flexibility for the region in meeting future lead / resource balances.and in resnonding to ranid changes and contingencies.
OB.JE CTIVES The principal objectives BPA used in perfor=ing the analyses and testing the decisions were:
1.
To. further the best interests of current and future ratepayers of the t
region.
2.
To mini =ime the financial risks to, and maximice the fiscal integrity of, 3?A and the region as a whole.
3.
To preserve the region's economic ability to deliver the. benefits of the Pacific Northwest Electric Power Planning and Conservation Act (Regional l
Act), including conservation an'd renewable resource development.
4.
To bring greater' certainty, stability, and predictability to rates and
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resource decisions.
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To provide a =axi=um opportunity for the region's econe=y to recover and re=ain prosperous.
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To-identify the most effective strategy for marketing the bonds,needed to finance the completion or preservation of the Supply System projects.
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To maxi =ize the region's flexibility to accommodate changing load and economic conditions.
S., To identify a choice which assures a healthy and positive constrtiction environ =ent within the Supply System in order that maximum efficiencies can be achieved.
LOAD / RESOURCE ANALYSIS Recent demand forecasts, including 3PA's preli=inary forecast, show that the region, while needing additional electricity, supplies in the 1990's,.now faces possible surpluses of generating capacity in the 1980's.
BPA's forecast shows annual average percentage load increases of
.8, 1.7, and 2.5 percent as its low, base, and high case forecasts.
Under the Regional Act, the Regional Power Planning Council has responsibility for forecasting future loads and resource require =ents.
It will be several =onths before the Regional Council can publish for co= ment its first load forecast which, in April 1983, vill become a part of the official regional power plan.
In this interim period BPA has been vorking closely with the Regional Council, a.nd has reviewed the BPA preliminary forecast with the Council as well as other regional public and private utilities.
3PA also arranged to' have its preli=inary forecast independently reviewed by National Economic Research Associates (NERA),
consulting. economists from outside the region with an international reputation for expertise in electric
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energy de=and forecasting.
That firm suggested that, the BPA range of load growth is too narrow and reco== ended th'at a higher range "would provide a more defensible guide to policy."
A number of utility executives and experts believe it is prudent utility practice to plan resources.to meet loads in the high portion of the forecasting range.
Under these circumstances, and using-the high range reco== ended, all three net-billed projects could prove to be needed on schedule.
However, a driving 41e=ent in the situation is that financial and other constraints preclude this option.
WP #2 is currently scheduled to beco=e ce==ercially operational in February 1984, WP #1 in June 1986, and WP #3 in December 1986.
Although numerous alternatives for revising the completion schedules were examined, in the following analysis only the three cost likely options are depicted:
Option A - Continue the current schedule for completing all three plants.
Option 3 - Complete WP #2 and #3 on schedule and extend 'co=pletion of WP #1 up to 5 years.
Option C - Co=plete WP #2 on schedule and extend co=pletion of WP #1 up to 5 years and #3 up to 3 years. /
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The following chart shows the effect of these options on the load / resource belance:
REGIONAL FIRM LOAD / RESOURCE BALANCE Assuming A1.7 Percent Annua!GrowthRate Average Megawatts
+3000 --
Current Construction Schedule Option A
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WNP *1 Extended Five Years
+2000 -
Ottion B "sN
_._._._ WNP *1 Extended 5 Years.
+1000 --
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Option C and 83 Extended 3 Years s
N s
- y s
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SURPLUS (+)
,s, O
OEFICIT(-)
, _, _, _ y.
g
-1000 -
-2000 -
-3000 -
-4000 l
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1983 198S 1990 1995 2000 This chart suggests the following:
1.
Clearly, all three plants are needed by the region since there vill be significant firs deficits in the ea.rly 1990's.
The questions are "When are they needed?" and " Shou'Id construction of any of the plants be I
extended?"
2.
Under the current construction schedule for the three net-billed plants, there vill be.sc=e significant surpluses in the mid-and late 198C 's.
3.
If construction is extended on two
- projects, there vill be-some significant fir = lead deficits in the late 1980's and early 1990's.
4 If the loads turn out to be greater, as se=e of the forecasts indicate, then the point at which deficits occur is =oved up in ti=e.
For er.a=ple, the upper forecast of 2.5 percent combined with all three plants on schedule would show a deficit in 1987 instead of the 1990 shown on the chart. -
CONSERVATION AND RINEWA3LE RESOURCES The region's future power
- needs, forecasting. uncertainties, and the desirability of having additional resources near-at-hand dictate that BPA's existing and announced conservation and small (under 5 average megawatts) renewable resources programs should continue to operate during the period of surplus.
BPA considers these programs to be valuable, unfinished resources chd will make an aggressive effort to complete them.
3PA has es ti=ated" that, at most,.450 average me'gavatts are achievable by 1990 in conservation and renewables in addition to the savings from programs already undervay or ineluded in 3PA's prelisinary forecast, at costs less than the incremental cost to complete and operate the Supply System projects.
The cost-effectiveness test for conservation and small renewables in this period vill reflect the reduced value of the resources dtgring the probable near-term surpluses.
3PA vill continue to emphasize its residential conservation programs wh'ich have been offered to all regional utilities and which are underway in 96 utility service areas.
The programs offer increased. energy efficiency to
-qualifying households with electric space or water heat in these service areas l
at little or no cost to the homeowner.
Comit=ents to large renewable resources vill be. made on the basis of an sxtended planning horizon showing need for new power in the post-1990 periodv I.
3PA must continue to develop its
- policy, program, and organizational capability in renewables in order to be able to address this need effectively.
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The principles of cost-effectiveness and the protection of the ratepayers' interest in assuring an adequate and reliable power supply vill continue to be paramount in 3PA's decisions and actions on conservation and renewable resources development.
ECONOMIC ANALYSIS OF ALTERNATIVES FOR SUPPLY SYSTEM PROJECTS 01, 02, AND F3, BPA's econo =ic analysis examined a large nu=ber of resource alternatives including the alternative of completing *all three plants on schedule but not operating WNP #1 and #3 until they are needed.
The analysis then focused on the economic impact of the alternatives on revenues from power sales, including the exa=ination of the most likely outlook for marketing any excess power.
3PA esti=ated the construction costs, operating costs, fuel costs, the costs which would be incurred i'f the. plants stood idle waitidg to serve, and financing costs.
The net econo:ic impacts of the three alternatives, when compared with the current schedules for co=pleting and operating the three plants were found to be:
- 1. 'Cc=pleting all three plants on schedule but deferring the operation of
'(SP 01 and 03 (letting the= sit idle) in the event of surplus vould create-e 9
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net economic di'sadvantage of about Sl28'million (compared with completing the plants on their current schedule, operating them and selling the surplus).
I 2.
Constructing WP92 and 93 on schedule, but extending construction of WPel up to 5 years vould have an economic advantage of about 5212 million compared with bringing all the plants in on schedule (about
$340 million advantage oter alternative 1).
3.- Constructing WP #2 on schedule, but extending construction of WP #1 up to 5 years and 93 up to 3 years would also: present a slight economic advantage of about $20 million coepared with completing all the plants on schedule (roughly $700 million less advantage than option 2).
FINANCIAL ANALYSIS In SPA's financial analysis, perfor=ed cencurrently with the two analyses described previously, an equally large number of alternatives were examined.
In order to fully assess the alternatives, SPA considered the following:
a.
The financing requirements for each plant.
b.
The revenue / rate impacts of the construction and operational alternatives.
The limits of BPA's flexibf.li'ty in financing the plants.
c.
d.
The constraints of the financial =arkets (a=ounts that can be raised at reasonable interest rates),
e.
The i= pacts on the credit worthiness of 3PA, the region's utilities, and states.
f.
The legal and political implications of the alternatives, including the possible i= pacts of Initiative 394.
Based on advice provided by underwriters (the people who market the bonds to individual investors) and financial advisors, it was deter =ined that 5550 to 5650 million would be a reasonable a=ount, for the bond offering this May.
'Therefore, 3?A realistically has only two financing optians available:
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fund WP 02 to a level which will per=it co=pletion while contL.v: q construction of one of the other two plants, or (2) to delay both other plac..s while applying all the proceeds of the bond sale toward ce=pletion of WP P2.
Because the load / resource, resource econc=ic, and financial analyses indicate the feasibility and prudence of continuing WP 02 plus one other plant on their current schedules, a choice =ust be made between proceeding with WP #1 or #3.
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4 CHOICE OF WP #1 OR WP #3 There are several valid arguments for selecting WNP fl over WP #3 for
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cn-schedule completion.
WP #1 would be in commercial operation about 6 months earlier than WP #3; the power would be about 9 mills per kWh cheaper (or about 10 percent); and WP #1 is located on the Hanford, Washington, nuclear reservation, near WP #2.
on the Hanford reservation, it is near However, since WP #1 h lor,ated numerous DOT. nuclear programs and a sk 31ed nuclear labor force.
When a startup is required, remobilization of the work force should occur more rapidly at the WP 91 plant at Hanford than at Satsop, Washington, location of WP #3.
Such an edge might prove to be a significanc economic advantage in view of the rapid changes which have occurred in regional load / resource balances.
This could result in significant cost savings to regional ratepayers.
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WP #3's location is vest of the Cascade Range and closer to the major Pacific Northwest load centers than WP #1, resulting in shorter transmission distances.
This reduces line losses and increases transmission reliability--an additional potential cost savings to regional ratepayers.
In ter=s of. the total financing required to ce=plete all of WP 91 and the Supply System's 70 percent share of WNP 03, there is ' little to distinguish between the projects.
Roughly $1.5 billion in additional Supply System financing is required to complete each plant.
It.is of significance that the capability of WP #1 has been wholly assignell to BPA.
WP #3 is jointly owned by the Supply System and four investor-owned
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utilities -(IOU's) with only 70 percent, of its capability assigned to EPA.
A decision to extend the construction schedule of WNP #3 would require, the agreement of the other owners and it now appears they =ay need that power earlier than BPA.
Additionally, the other owners vill assist 7,7A in furnishing" oversight to the Supply System.
Finally, extending construction on WP #1 vill result in a slightly lover 3PA rate increase next October than if WNP 03 construction schedules were extended instead.
RATEIhPACTS i
i are rising: rapidly, it is difficult to find cause Ddring a period when rates for optimism.
However, the future o;tiook is for stabilization of electricity rates in view of an esticated reluction in the need for expensive new resources.
Also, the anticipated te=porary resource surpitis vill allow the region to take advantage of time 2in anticipation of lower inflation and interest rates when it may meet its needs at reduced borrowing rates which vill produce lower cost resources.
Most i=portantly, the region vill continue to enjoy electricity prices which, as a whole, are significantly lover than the national average, as shown on the chart on the following page.
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AVERAGE RETAll ELECTRICITY RATES IN COMPARISON TO 1960 PNW RATES
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,PNW* vs. U.S.
1980 DOLLARS i
MILLS /kWh
+40 w..
- ,s*. ~"...-
+30 -
=...
3s 20 -
s. 's...,_, /
+10 -
1960 Rate Level O
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PNW -
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a 1960 1970 1980 1990 1995 7a g YEAR i
In addition, the results of our economic analysis and our review of the debt I
service BPA would have to pay on bonds eyet to.be issued for the construction of the Supply System projects #1, 92', and #3, indicate that:
1.
Failing to go forward with WNP #2 would result in increased power purchases and higher rates both in the near-and long-term.
i 2.
Going forward with afl three projects vonld result in the need for a higher rate increase planned for next October.
3.
If we proceed with WNP #2 and 03 on current schedules and extend construction of WNP #1 for 5 years, 1983 rt.tes will be reduced by
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about $90 million~.
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- Finally, while extending cons truction schedules for all three projects could result in a short-term decrease in rates, it would result in much higher rates in the mid-and long-term.
Consequently, proceeding with current construction on WNP #2 and WNP 03, and extending the construction for WNP 0) vill benefic ratepayers in both the short-and long-term while providing power supply flexibility necessary to support the regional economy.
NCIE:
THE SONNEVILLE POWER ADMINISTRATION WELCOMES QUESTIONS.UiD. CO.F.:.NTS ON THE INFOP.MATION PROVIDED IN THIS PAPER.
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