Western Association To Enjoy Rivers P.O. Box 2151 Grand Junction CO 81502 May 24, 1999 Secretary FERC 888 1st St. NE Washington DC 20426 Re: Additional Comments on DEA #4515-014 - Price-Stubb Dam power site In a letter dated April 27, 1999, the W.A.T.E.R. Club of Grand Junction, Colorado submitted comments on the recreational aspects of the draft EA for amending the Jacobsen Hydro #1 license at the Price-Stubb dam on the Colorado River near Palisade, CO. In that letter we recommended voiding this license an an alternative to no action or amending the license. This letter addresses economic aspects of the draft EA and supports our recommendation to void the license. We believe that the licensee, E. R. Jacobsen, recognizes that the proposed project either as currently licensed or as configured in the amendment is not economic and construction is not justified. In a letter dated March 22, 1999 to US Congressman Scott McInnis of Colorado (attached), Jacobsen proposed that the Bureau of Reclamation (BOR) give him $1.1 million which he would use to construct a hydro power plant at the Ridgeway Reservoir in return for transferring the license to BOR. Attempting to use a non-economic FERC license as leverage to obtain federal funding for a private power facility is not an acceptable use of the license and it should be voided. BOR has recently released a draft EA recommending removal of the Price-Stubb dam as the least costly alternative to allow upstream migration of endangered fish. If the license is not voided in a timely manner, Jacobsen can wait until it lapses due to non-construction. If this happens, BOR must wait to remove the dam, and may be forced by other time constraints to build an out-of-channel fish ladder that costs $500,000 more than dam removal - clearly a waste of public funds. Residents of the Grand Valley and citizens of Colorado and of the USA in general will benefit significantly more from removal of the dam in a timely manner by the Bureau of Reclamation than they will from continued delays due to current lack of economic value of the project. The original license was issued in 1990 based on an application submitted in 1983 using costs and revenue projections from 1982. Capital costs used in the economic analysis in the DEA for amending the license were provided to FERC by the licensee in 1996. This is period of 14 years. The 1982 application was for a 2500 kilowatt power plant. The current amendment is for 999 kilowatt power plant, a 40% reduction in size. The 1982 capital cost was $3,334,430, not including a fish preclusion device costs and excess cost of an out of channel fish ladder. The 1996 capital cost was $1,300,000, about 39% of the original cost, and also does not include costs of a fish preclusion device and excess costs of an out of channel fish ladder. The 1996 capital cost does not reflect increased costs due to loss economy of scale and due to long term inflation. This cost also does not include the cost of a fish preclusion device that meets US Fish and Wildlife Service (USF&W) requirements. For this project, BOR projects the need for a self cleaning screen with 1.5" mesh and about 2500 square feet of surface area oriented 15x to the canal wall to reduce velocities from 2.5 feet per second to 0.5 feet per second. According to the Bureau of Reclamation, the cost for these devices has been as much as $2.0 million for similar sized projects (not including long term maintenance and repair costs). Although non-physical fish preclusion devices have been developed, none have met USF&W endangered species recovery program requirements. Assuming a 15% increase in cost due to reduced scale, an 13% increase in cost due to inflation (from Bureau of Labor Statistics 1984-1996), $2.0 million for a fish preclusion device and $0.5 million for the excess cost of an out-of-channel fish ladder, 1996 capital costs as shown in the draft EA should be about $4.2 million. The 1982 annual overhead and maintenance (O&M) cost was $96,700. The 1996 project is 40% as large as the 1982 project, or about $38,700, not including increased costs of operating a fish preclusion device, or costs due to loss of economy of scale and due to long term inflation,. Labor costs for this period increased about 8.5%. Assuming parts and replacement costs are about 50% of O&M, are 15% higher due to loss of economy of scale and 13% higher due to inflation, 1996 annual O&M cost should be at least $46,000, which is the cost used in the draft EA. For an annual production rate of 6.8 million kwh, average O&M cost is at least 6.8 mils ($0.0068) per kwh. Wheeling costs are about 2.5 mils per kwh for each utility whose transmission lines are utilized. Power from the project would be delivered to the nearest Public Service Company of Colorado (PSC) transmission line. In 1982, PSC was potentially interested in purchasing power from the Hydro #1 facility. However, they currently do not need this power and are not required to purchase it. Consequently, Jacobsen must pay wheeling costs to use PSC transmission lines to deliver the power to other potential customers. Tri State is also not currently seeking new power, but if they were Jacobson would have an added delivery cost of 2.5 mils per kwh. Thus the total non-capital cost of energy production and delivery is a minimum of 9.3 mils/kwh. The proposed amendment for the project uses 40 mils per kwh.as the long term value of electrical energy. Recent long term contract values for clean power in Western Colorado have been between 13.5 mils (Redlands Water and Power sale to Colorado Public Service) and less than 25 mils per kwh (sales to Tri State Generation and Transmission). Using 25 mils/kwh for revenue and 9.3 mils/kwh for O&M cost, there are 15.7 mils/kwh available to repay capital investment and to provide a return on investment. At an annual rate of production of 6.8 million kwh, it would take nearly the entire 40 year life of the project, or 39 years, to recover a capital cost of $4.2 million at 15.7 mils/kwh. Clearly, when interest cost and the incentive for profit are considered, this project is not economic and will never be built. The break even cost in 1982 was 31 mils/kwh. The break even cost in the draft EA using 1996 data is 35 mils. Neither cost included the 2.5 mils/kwh wheeling costs for delivery across PSC transmission lines. The 1982 feasibility study used revenues of 39, 42, 59 and 140 mils/kwh. Since then, energy prices have plummeted, and utilities are not required to purchase power at their highest avoided cost as implied by a 1982 PUC ruling included in the 1983 application. Utilities request competitive bids, and recent contracts contain energy values that are well below the break even cost of the Jacobsen project, not even considering interests costs, inflation costs, loss of economy of scale and added cost of a fish preclusion device and excess cost of an out-of-channel fish ladder. No wonder Mr. Jacobsen is willing to trade his FERC license at Price-Stubb for $1.1 million of taxpayer funds and a FERC license at the Ridgeway dam. The proposed power plant at the Price-Stubb dam is not economic, will never be built, and the licensee is attempting to use the license as leverage to obtain taxpayer funds to develop a power plant at another site. This is not an acceptable use for the license. It is potentially causing costly delays in removal of the Price-Stubb dam and it should be voided. Sincerely, Peter S. Winn Water park Committee Chairman cc: Scott McInnis, US Congressman, Grand Junction CO Robert Norman, US Bureau of Reclamation, Grand Junction CO Patricia Shraeder, US Fish and Wildlife Service, Grand Junction CO Andrew Fahlund, American Rivers, Washington DC John Gangemi, American Whitewater, Bigfork, MT attachment: Settlement plan for T&E Fish Passage, March 22, 1999