Commerce Co. and subsidiaries, 26,000,000 kilowatt-hours at a cost of 1 cent per kilowatt-hour. Picher Co. and subsidiaries, 39,000,000 kilowatt-hours at a cost of 1.2 cents per kilowatt-hour. Assuming that the Pensacola project would capture this market and the municipal market, a sale of 145,000,000 kilowatt-hours would be assured. The Pensacola project as contemplated, with an initial installation of two 20,000-kilowatt units and 50 percent operating factor, would have for sale at the transmission line 155,000,000 kilowatt-hours, so that it would have only 10,000,000 kilowatt-hours surplus for which it would have to compete in a market of 224,000,000 kilowatt-hours. Federal Power Commission The average plant rate in (table 1), of 1.3 mills per Market value of power.-The estimate of the project is set forth in table 4, together with the cost of operation and the fixed charges. The loan portion of the project, exclusive of transmission lines, is approximately $10,700,000 of $267 per kilowatt, with a debt service of $14.30 per kilowatt. Operation and maintenance of the system, exclusive of transmission line operation, is approximately $140,000 or $3.50 per kilowatt, so that the total cost per kilowatt per year is $17.50 or 4.06 mills per kilowatt-hour with a 50-percent operating factor. The average cost of fuel in area I is stated in the market study (p. 48) as 7 mills per million B. t. u. 1936 is found to be 18,060 B. t. u. per kilowatt-hour kilowatt-hour would be the fuel cost per kilowatt-hour (p. 48, F. P. C.). The investment cost of fuel burning plants of the size and type in area I may be estimated at not less than $95 per kilowatt dependable capacity. The annual fixed charges, including taxes and insurance, will not be less than 11% percent of $10.90 per kilowatt. The operation and maintenance cost per kilowatt of fuel burning plants is at least $1 more than that of the hydroelectric plants and may be placed therefore at $4.50 per kilowatt, making the total fixed cost per kilowatt per year $15.40 or the cost per kilowatt-hour with an operating factor of 60 percent (instead of 50 percent for the Pensacola project) 2.94 mills per kilowatt-hour, and including fuel cost of 1.3 mills, a total of 4.24 mills per kilowatthour. The natural growth of load would require additional capacity in plants of moderate size. If these new plants are built with high thermal efficiency, say 24 percent, a plant rate of 14,200 B. t. u. per kilowatt-hour, the investment cost per kilowatt would be not less than $120 per kilowatt capacity. The fuel cost in area I is very low. The cost increment per kilowatt is $25, or $2.88 per kilowatt per year, 0.55 milļ per kilowatt-hour. The fuel cost of such a plant would be 1 mill per kilowatt-hour instead of 1.3 mills, or a net saving of 0.3 mill for fuel. It becomes evident that plants with the higher thermal efficiency of 24 percent as against the prevailing thermal efficiency of the system plants of 19 percent would not be economically justified in view of the fact that plants of that type cost at least 25 percent more than the thermally less efficient plants. Conclusion. The foregoing market study indicates (1) that when the Pensacola project is completed there will be ready a market to absorb the output of the initial installation of the plant of 40.000 kilowatts of 175,200,000 kilowatthours per year at the bus bar or 155,000,000 kilowatt-hours at the end of the transmission lines at a sale price of 8 mills per kilowatt-hour; (2) that the total cost, production, and fixed charges per kilowatt-hour delivered into the bus bar will be approximately 4.06 mills and compares favorably with the total cost of 4.24 mills per kilowatt-hour of existing systems; (3) that new thermally more efficient plants will not be able to produce at lower cost on account of higher fixed charges. The letter dated June 8, 1937, by Maj. Gen. E. M. Markham, Chief of Engineers, states: "The proposed reservoir would afford annual benefits in reducing flood damages estimated at $74.000 for Arkansas River, and $273,000 for the Mississippi River and $37,000 indirect benefits, a total of $384,000 * JAMES J. WAGNER, TABLE 1.-Power generation by interconnected systems in State of Oklahoma, area 1, from Federal Power Commission market study (Docket No. Okla. 1097 P) System Plant TABLE 2.-Power generation by municipal systems in State of Oklahoma from Federal Power Commission market study (Docket No. Okla. 1097-P) TABLE 3.-Energy requirements and generation in M kw.-hr. of area 1, State of Oklahoma, from Federal Power Commission market study (Docket No. Okla. 1097-P) 1 Includes municipal street lighting, municipal light and power, street and interurban railways, etc. 2 Sales classifications of the energy requirements were derived from reports of the utilities, with minor estimates and adjustments where information was not complete. TABLE 4.-Grand River Dam Authority, hydroelectric plant (Docket No. Oklahoma Project estimate: Preliminary. 1097-P) Land, right-of-way, easements (applicant's estimate). Construction: Dam up to elevation 765 feet (with flood control). Construction (power plant). Construction transmission lines___. Engineering Legal Administrative and supervision_. Interest during construction___. Project cost.... Grant base (less lands). Grant 45 percent_-- Loan 55 percent- Operation: Management, clerical, etc_ Engineers and assistants. Lineman Personnel Plant maintenance__ Transmission maintenance_. Supplies-- Production cost-- $45, 000 1,250,000 11, 877,000, 2, 923, 000 1,500,000 16, 300, 000 1, 350, 000 500,000 35,000 152, 000 368,000 20, 000, 000 18, 750, 000 8,437, 000 11, 563, 000 24, 000, 36, 000 24, 000 16,000 100, 000 80,000 27,000 10, 000 237,000, The Power Division has approved the Grand River authority for a power project only for a total estimated cost of $18,000,000. This project includes some flood-control features. As a purely flood-control matter, the War Department has estimated that the construction of a dam to elevation of 765 feet for purely flood-control purposes would cost $20,914,000. The Power Division has estimated that a project can be constructed to include all the flood-control features recommended by the War Department for the sum of $20,000,000, using as the basis for this estimate the cost figures of the War Department as contained in their letter of June 8, 1937, by reducing the power plant equipment to one-half and by making corresponding reductions in other items. A readjustment of the costs of this project on this basis is as follows: Preliminary expenses-- Land, rights-of-way, easements (War Department estimates) --- Construction: 765-foot dam including flood control Power plant 2 by 16,000 kilowatts-- Construction Transmission lines... Engineering_ Legal fees___ Administrative and legal costs. Interest 4 percent--$11,000,000-11⁄2 years, approximately‒‒‒ Total---- $45, 000 1,937, 000 11, 877, 000 2,323, 000 1,500,000 15, 700, 000 1, 350, 000 500, 000 35, 000 65, 000 368, 000 20, 000, 000 On this revised basis an item of $350,000 set up by the applicant as a payment to the Grand Hydro interest is eliminated. On that basis the Power Division estimates that the earning capacity of this plant will be not less than $1,000,000 per year, with a sale of at least 125,000,000 kilowatt-hours at 8 mills. The annual generation of the plant as reduced will be approximately 140,000,000 kilowatt-hours primary energy on a 50 percent operating factor. The estimated fixed charges and operating cost will not exceed $900,000, leaving a surplus of not less than $100,000 per year. This provides a debt margin of only 11 percent, which in the opinion of the Finance Division is not a satisfactory margin to assure the liquidation of the loan. If an allotment is made, the offer should contain the following conditions; 1. No payments shall be made from any Federal funds to the Grand Hydro interests. 2. No funds shall be made available until the applicant has submitted a statement establishing to the satisfaction of the Administrator, the self-liquidating feature of this revised project. 3. Cost of all land, rights-of-way, easements shall be excluded from the grant base, and applicant shall submit evidence satisfactory to the Administrator that the land required can be purchased within the estimate. 4. The applicant shall procure a final decision by the Supreme Court of Oklahoma satisfactory to the Administrator upholding the constitutionality of the Grand River Dam Authority Act and amendments thereto, the validity of the organization of the applicant and its powers to construct and operate the project as proposed, the validity of the proceedings for the authorization, issuance, and sale of the bonds, including all covenants and agreements of the applicant as contained in the bonds and the proceedings for their authorization, issuance, and sale, and the validity of the loan and grant agreement between the United States of America and the applicant. 5. The applicant will begin work on the project as early as possible but in no event later than January 1, 1938, and complete such project with all practicable dispatch, and in any event by July 1, 1939. 6. The applicant will construct the project at a cost not to exceed $20,000,000, and in accordance with plans, drawings, specifications, and construction contracts which shall be satisfactory to the Administrator, and will furnish such engineering supervision, inspection, and regulation as the Administration shall require. 7. The Administrator may designate a project engineer and a project auditor as his representatives on the project, and, if the Administrator shall so request, the applicant will pay the salaries and expenses of said project engineer and project auditor. 8. The applicant will submit estimates of all proposed expenditures for periods of not less than 3 months each, which shall be in form and substance satisfactory to the Administrator. |