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(APPENDIX 30]

SUMMARY OF STUDIES ON HOOVER DAM POWER VALUES

BY

R. F. WALTER, L. N. MCCLELLAN, W. F. DURAND

SEPTEMBER 10, 1929 (SUMMARY OF REPORTS)

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SUMMARY OF REPORT DATED SEPTEMBER 10, 1929 By R. F. WALTER, CHIEF ENGINEER, BUREAU OF RECLAMATION, L. N. McCLELLAN, ELECTRICAL ENGINEER, BUREAU OF RECLAMATION, AND W. F. DURAND, CONSULTING ENGINEER, RELATIVE To RATES FOR BOULDER CANYON POWER

COMPETITIVE POWER

The Boulder Canyon project act provides that the rates to be charged for power shall be justified by competitive conditions at distributing points or competitive centers. A number of estimates of cost of residual undeveloped hydroelectric power projects in the Sierra Nevada Mountains, geographically tributary to the power market in southern California, have been examined and it is found that the cost of such developments, including the cost of transmission facilities for delivering power in the vicinity of Los Angeles, varies from $300 to $400 per kilowatt. The total estimated cost

of the Boulder Canyon development is $121,000,000, of which $25,000,000 is allocated to flood control. By deducting the $25,000,000 allocated to flood control and adding $50,000,000 for the cost of transmission lines and terminal substations it is found that the total estimated cost of the Boulder Canyon power development is in round figures $146,000,000 for an installed capacity of 750,000 kilowatts, which is at the rate of $195 per kilowatt.

It thus appears that as a hydroelectric power project, and in comparison with the estimated costs of other hydroelectric developments which could supply power to the southern California market, the Boulder Canyon development stands in a class by itself and it is quite unapproachable by any of the remaining undeveloped hydroelectric projects on the Sierra Nevada streams.

Under present economic conditions in southern California the value of Boulder Canyon power is determined not by the cost of competitive hydroelectric power but by the cost of producing power in large steam generating stations located at tidewater and operating on fuel oil or natural gas.

COST OF FUEL OIL

The price of fuel oil (or natural gas) is the most important single factor affecting the cost of steam power in southern California. At present the large central stations which supply power to the southern California territory are using natural gas for fuel, but they are equipped for_burning fuel oil.

Data derived from various sources representing conditions in southern California in June of the present year (1929) gave prices of fuel oil, or of gas equivalent to fuel oil, ranging from $0.68 to about $0.80 per barrel. Since that time it has been stated that the State conservation law, which went into effect during the summer requiring the beneficial use of natural gas as a condition to the working of wells for oil, has resulted in marked reductions in the price of gas for boiler fuel, in some cases down to the equivalent of oil at about $0.50 per barrel. 160912—33- 32

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It is understood that the result has been, for the time being, a general unsettling of the conditions affecting the price of fuel in this part of the State. However, it seems fair to assume that the conditions will prove only temporary in character and it is the general consensus of opinion that, for any such period as the 15 years covering the first contract period under the Boulder Dam act, the price of fuel will presumably increase rather than decrease. The depletion of nearby oil fields and natural-gas supplies; improvements in the process for obtaining gasoline from fuel oil, thus tending to decrease the fueloil residue; together with the general governmental policy of conservation and restriction of production will all tend toward this end,

The Boulder Canyon project act provides for the readjustment of the rates for sale of power 15 years after the contracts are executed and every 10 years thereafter. With this provision for readjustment of rates the price of fuel oil is of concern only for the period beginning when Boulder Canyon power becomes available and ending with the first 15-year period, a matter of perhaps 8 or 9 years.

Considering the present price of fuel oil and natural gas and that, as above noted, these prices are more likely to increase than decrease, it is considered fair to assume an average price of fuel oil, for a period beginning 6 to 7 years and ending 15 years from the present time, somewhere in the range between $0.75 and $0.80 per barrel.

The price of fuel oil is a very important factor in determining the value of power at Boulder Canyon. A difference, for example, of 5 cents per barrel in the assumed price of oil will result in a difference of about $325,000 per year in the value of power at Boulder Canyon, assuming a 60 per cent load factor.

STEAM POWER

The amount of steam power which would be required as substitute for any particular installation at Boulder Canyon is determined by the losses in transmitting power from Boulder Canyon to the load centers and from the substitute steam plant to the same load centers. The installed capacity will depend on the amount of spare capacity in the substitute steam plant. The losses from generators to low voltage side of transformers at the terminal substation have been taken as follows:

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Good operating practice would require some spare capacity in a steam power plant of the size necessary for a substitute for Boulder Canyon power. Such a plant would have probably six or seven units and sufficient capacity should be provided so that full plant output could be maintained with one unit out of service and without exceed

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