Turning now to the question of the amount of revenue to be derived from power, reference may be made to the firm power to be counted on from the Boulder Canyon installation as discussed in the section under that heading It is there shown reasonable to count upon a continuous or firm power of 550,000 horsepower, or in round figures on 3,600,000,000 kilowatt-hours sale product at the power-house switchboard. The load factor which can be assumed for the plant will depend on the character of the demand for electric power in the territory in which the product of the plant is to be sold. In the present case it seems reasonable to assume that the market in which power from Boulder Canyon will be marketed will in general have the demand characteristics of Los Angeles and of southern California generally. For this, the value of 55 per cent has been taken which seems reasonable and proper taking the known characteristics of the electrie demand in southern California as a general standard. This load factor of 0.55 taken with the firm power above, implies a peak load or station capacity of 1,000,000 horsepower, and this figure is used as the basis of all power-house estimates of cost. With the above product at the switchboard, it then becomes necessary to examine the possible market, within economic transmission distance for such an amount of power. Regarding this question it may be noted that the record of the various hearings before Congress is particularly full on this point and gives strong evidence for the conclusion that by the time the dam and plant could be completed, the demand due to normal growth in the territory susceptible of economic service from Boulder Canyon should be sufficient to absorb a very large percentage of the available power from the plant; and that within a period of two or three years from completion, a market should be found for the entire product. A careful independent study of this subject by Messrs. Ready and Butler, consulting engineers of San Francisco, and the details of which have been carefully examined by the undersigned, support these same general conclusions. Without entering into the minor details of these estimates, it would appear that an average sale price of 0.20 cent per kilowatt-hour realized over the first 10 years of operation and applied to 79 per cent only of the normal full output of the plant, would, for this 10-year period, furnish $57,000,000 and which, with $5,000,000 for the same period assumed from water, would make up the $62,000,000 needed over this 10-year period for interest, operation, and maintenance. The following table shows similarly, for varying average sale prices at the canyon, the percentage of the total normal product to which they must be applied in order to realize the same results and conversely, the same percentages for which it might be assumed, no market whatever could be found. It would seem proper to expect that somewhere within the limits of such a range of operative conditions may be found a well assured business prospect for these first years of operation, during which the market must be developed and assured. Assuming the same operating charges with the same income as above for the period of bond redemption, it is of interest to examine the effect of an increase in the assumed capital sum due to contingencies or unforeseen causes of any character whatever. Sale price per kilowatt-hour at power house switchboard to cover interest, operation, and redemption within the period stated. It would thus appear that there is a very considerable possible margin of increase in the investment (if for any reason such increase became necessary) without exceeding, for the 30-year period of redemption, a sale price of 0.22 cent and with lower figures for longer periods of time. It is obvious that the details of such a finacial set-up may be endlessly varied. With somewhat higher sale prices assumed, the margin against uncertainty could be correspondingly increased, or otherwise, the revenue to be assumed from water could be correspondingly reduced. Thus with an assumed sale price of 0.25 cent the revenue from power alone would serve for total operation and maintenance and for the redemption of the capital sum in about 26 years or in any longer period with a still higher margin for contingencies. Or otherwise, higher returns from water than those assumed would permit of still lower possible prices for power, or again might be assumed as counting toward increased insurance against contingencies or future uncertainties. It would thus appear that, with a fair and reasonable margin of safety it should be possible to meet all the financial requirements of the project with a sale price of power at the power house close about 0.20 cent per kilowatthour while a sale price of 0.25 cent should produce a situation with a large margin for uncertainties and contingencies, or otherwise permitting of repayment of the principal sum over a period of years definitely shorter than as assumed above. In connection with the general subject of the economic aspect of the Boulder Canyon project, it is to be assumed that the Secretary of the Interior, in making contracts, especially under the general head of water service, will take under due consideration, on the one hand, the value of the service or relief rendered, and on the other the economic condition and capacity for payment on the part of the communities served. Under these conditions it may well result that the income under the general head of "water" will considerably exceed the $1,500,000 assumed in these estimates and in such case, the excess as above noted, would stand as a still further margin against conditions at present unforeseen, or otherwise would shorten correspondingly the total time for the repayment of the capital sum. COST OF DELIVERY OF POWER AT CONSUMER'S RECEIVING STATION In order to determine the general economic aspect at Boulder Canyon power, an estimate of its price must be made at the consumer's receiving station which, for purposes of the problem, has been assumed to be distant about 300 miles from the generating plant. The cost of power transmission is, moreover, closely dependent on the amount transmitted and to make the problem definite, this amount has been taken at 350,000 firm horsepower or about 260,000 kilowatts at a load factor of 55 per cent, and hence with a peak load of about 470,000 kilowatts. Careful estimates based on the schedule of charges and costs applicable to a municipal or publicly owned organization, indicate, per kilowatt-hour received at the consumer's main receiving station, a transmission cost of about 0.16 cent. Further, the loss of power in transmission has been taken at 12 per cent. Hence the effective cost at the receiving end at a point 300 miles distant will be found by dividing the sale price at the power house switchboard by 0.88 and adding thereto the 0.16 cent for transmission. 82561-28-PT 4- -3 The relation between the two costs at the power house and at the receiving station is shown by the following table: Costs of Boulder Canyon power at a market point 300 miles distant, including transmission and allowance for steam reserve, public ownership.—In order to develop the full comparison of Boulder Canyon power with power from competitive sources, the question of steam auxiliary or reserve for Boulder Canyon power must be considered. If such an amount of power as 350,000 firm horsepower or any considerable part of the Boulder Canyon output is to be brought a distance of 300 miles and compete with steam power generated on the spot, it must be compared on the basis of equal reliability. For many years to come it may be assumed that the water supply at Boulder Canyon will be adequate for the power contemplated, but there will be some hazards in transmission and these must be balanced by some installation of steam reserve. The amount of such reserve to be considered as attributed to Boulder Canyon power will depend to some extent on how it is assumed to be fitted into the general picture of the power supply of southern California, as a whole, and its cost chargeable to Boulder Canyon will vary according as it is considered strictly as a reserve or emergency station or as it may be assumed to be run in part on a high-load factor, thus carrying a part of the base load. Various estimates in accordance with these alternate suggestions, and again referring primarily to a municipal or publicly owned plant, indicate an additional cost per kilowatt-hour chargeable to Boulder Canyon power of 0.05 to 0.08 cent, due to the need of some measure of steam reserve at the market end of the transmission line. The final resultant costs of Boulder Canyon power at a market 300 miles distant and including cost of transmission and allowance for steam reserve— all as based on various sale prices at the power house, are shown in the accompanying table. A comparison between these costs and those for steam power, under the various assumptions made, will serve to show the character and extent of the margin between the costs of power from the two sources and will indicate the general schedule of prices at the power house within which it would be desirable to hold Boulder Canyon power in order to give it any desired or specified margin of advantage over the cost of steam power, all with reference to publicly owned operation. In the case of a privately owned plant and operation, the rates of fixed charges will be greater than in the case of public ownership and operation. In the general case similar to the preceding, the indicated costs of transmission per kilowatt-hour are about 0.21 cent and the additional cost per kilowatt-hour for a suitable support in the form of steam reserve, from 0.06 to 0.08 cent. In the place of the preceding table, therefore, giving the cost applicable in the case of public ownership, the following prices are indicated for the case of private ownership. Costs of Boulder Canyon power at a market point 300 miles distant, includ ing transmission and allowance for steam reserve, private ownership.-As in the preceding case then, a comparison of such resultant costs of Boulder Canyon power with all steam power and private ownership, will indicate the sale price of the former at the canyon necessary in order to realize or maintain any specified margin or difference between the two. GENERAL REFERENCES Problems of the Colorado River Basin, 1924, Vol. I, pp. 11, 13, 20, Vol. V, Vol. VIII, Supp. pp. 1-5, 11-30, 99-350. Hearings, 69th Cong., 1st sess., S. Res. 320, pp. 77, 532, 629, 796, 890. Hearings, 68th Cong., 1st sess., H. R. 2903, p. 1155, 1383, 1393. THE COST OF STEAM POWER IN SOUTHERN CALIFORNIA The cost of steam power in southern California is of importance in connection with the general economic problem of the Colorado River, since power from the latter must come into competition with power in southern California, generated upon its own ground. It will presumably be accepted without discussion or argument that power from the Colorado River can be marketed in southern California at rates lower than those suited to the present hydraulic developments in this territory, or to any which can be foreseen in the future. Regarding steam power, however, recent years have witnessed marked improvements in fuel economy and reductions in cost per unit of output and the probable future trend of progress regarding power from steam is by no means as clear as it seems to be with regard to power from hydraulic sources. The elements in the cost of power from steam are as follows: 1. Cost of plant or capital investment. 2. Cost of fuel. 3. Operation and maintenance. 4. Fixed charges. The undersigned has had occasion in recent months to direct an extended investigation bearing upon the subject matter of this section, and the results of which may be given in summary form herewith. We may first consider the results to be expected from modern high-grade installations with steam pressures of 550 to 600 pounds per square inch and with a steam temperature of about 700° F. and including series feed-water heating and perhaps steam reheating as well. 1. For such plants the capital investment per kilowatt capacity will vary from $100 for large installations and favorable conditions to $110 or $115 for smaller installations or less favorable conditions. These figures, however, do not include land. This is so variable a feature that it can be hardly introduced into the estimates in any consistent way. Except in special cases its effect on the final cost of power is slight. 2. At the present time the cost of fuel oil is about $1 per barrel. Certain users of fuel oil at the present time, however, are understood to be enjoying the advantage of a considerably lower price due to the terms of long-time contracts made some years ago when the prevailing prices were $0.70 to $0.80 per barrel. Users of oil fuel are able also to realize marked economies by the installation of a double system of combustion, suited alternately to oil or to natural gas. Favorable contracts for such gas have been made (and are understood to be now operative) which give heating values equivalent to oil at about $0.80 per barrel. On the other hand, it is understood that no time contracts for oil, of any extended duration, can now be obtained at any such price as $1 per barrel. The future trend of the price of fuel oil, looking foward to a period of 10 years is doubtful in the extreme and for longer periods of time is quite beyond the reach of any reasonable basis of estimate. Without going here into details, the broad facts are these: In MS. form, Bureau of Reclamation. A few years ago it was estimated that at the then rate of production, such reserves would be practically exhausted in a period of 20 to 25 years. Since those estimates, some new fields have been discovered. Methods of extracting oil from the ground are improving. The demand is constantly increasing. Enormous reserves are available in the oil shales, awaiting only the development of some economic method of extraction of the oil from the rock. No methods are at present known which will produce such oil in competition with its extraction in liquid form from the ground. While California territory has been generally prospected for oil, there may be still large fields as yet unknown and uncounted. The same is of course true of other territory in the United States and to still higher degree in the world at large. In a situation of such complexity and with such diverse and unknown elements, the uncertainity of any forecast regarding the cost of fuel oil over any period of future time is clearly apparent. It may seem proper to conclude that over a long period of years the probabilities will be for a rise in price rather than for a fall, but as to how much or how soon, it is quite impossible to forecast. In considering fuel oil prices over any considerable period in the future, it would seem proper to use figures of $1, $1.25 and $1.50. The first as possibly representing present conditions or those in the very near future while the higher figures seem within the limits of probability for a future period of any considerable extent. In this connection it should also be noted that prices of power based on the low fuel prices which may be enjoyed at the present time as a result of earlier favorable contracts, have no significance in the present inquiry, since the competition of Boulder Canyon power with that from steam will be based primarily on the fuel conditions of the next half century. Following the questions of the cost of fuel per barrel or per unit of sale, there comes the question of heating value and of the cost of power in terms of heat. California oils are usually taken at about 6,200,000 British thermal units per barrel which corresponds to about 18,500 British thermal units per pound. The heat economy of modern high grade steam power stations may be said to range from about 12,500 British thermal units per kilowatt-hour station output as a minimum to 14,000 for what may be termed the upper level of high grade practice and on to higher figures for less modern or less economical plants. The heat economy will also vary somewhat with the station load factor, that is, the ratio between the average station load and the station capacity; but for present purposes the two figures above may be taken as representing for the usual station operating conditions, (12,500) the very best which might be expected at the present time and (14,000) the upper average of modern high grade practice. On this understanding, the fuel costs per kilowatt-hour for the three prices of oil per barrel will be as given in the following table: 3. Fuel costs per kilowatt-hour.-Operation and maintenance for steam power plants are well standardized. Operation will range from about 0.06 cent per kilowatt-hour for a station load factor of 40 per cent to 0.04 cent for a station factor of about 60 per cent with intermediate figures closely in inverse proportion to the station load factor. |