Southern Intertie Cost Benefit Analysis Links

SOUTHERN INTERTIE COST - BENEFIT ANALYSIS History of the different C-B reports (Table)

PROJECT COST

Tesoro Route Crossing C (millions of 1997 dollars) from the FEIS (page 2-3 et seq.)
	Constructed Cost	Present Worth Operations & Maintenance	Present Worth Submarine Cable Replacement	Total Life Cycle Costs
On Land (A) 44.8 mi	$ 47.4	$ 3.2	$ 0	$ 50.6
Offshore (C) 17.2 mi	$ 58.7	$ 1.5	$ 13.2	$ 73.4
TOTAL (A+C) 62.0 mi	$ 106.1	$ 4.7	$ 13.2	$ 124.1
State Grant	$ 70
Utility Share	$ 36.1

Utility cost shares (% of 36.1 million): Chugach Electric (30.23%); Anchorage ML&P (22.43%); Homer Electric (11.6%); Matanuska Electric (14.19%); Seward (1.44%); Golden Valley Electric (20.11%)

COST BENEFIT ANALYSIS

Key tables from the DEIS (page 1-30, Vol. 1)

TABLE 1-11 NET PRESENT WORTH OF BENEFITS FOR THE PROJECT
Category	Updated Value (millions of 1997 $)	IMPORTANT! See 12/6/02 release of "secret" study side by side comparison
Capacity sharing	$20.9
Economy energy transfer	$37.8
Reliability	$49.4
Spinning reserve sharing	$9.3
Reduced line maintenance	$4
Avoid minimum CT generation on Kenai (*)	$10.7
Avoid not loading line during bad weather/construction (*)	$11.4
Total Benefits	$143.5	$56.7
Notes: 1. Present worth in 2004, the first year of operation for the Project. 2. All present values calculated using discount rate of 4.5 percent, as recommended by AEA. 3. Economy energy transfer includes transmission losses and gas royalties. * Asterisks indicate benefits not considered in 1989 due to different assumptions for system operating parameters prior to completion of the Bradley Lake Hydroelectric Project.

1.4.1 Construction and Life Cycle Costs (from page 1-31 of the DEIS)

The construction costs for the Project were estimated by Power Engineers, Inc. in 1996 and were updated in 1997 and 1998 (Power Engineers 1998) to reflect the potential facility requirements identified as part of the current siting studies being conducted for the EIS for the Project. The updated cost study also determined the present value of the operation and maintenance and submarine cable replacement costs over the 40-year project life. The results of this study are summarized in Table 1-12.

TABLE 1-12 SUMMARY OF BENEFITS AND COSTS (millions of 1997 dollars)
	Tesoro Route (Route Options A, D, N)	Enstar Route (Route Options E South, F, H, K)
Constructed cost	$99.5	$90.2
Present worth* of operation and maintenance costs	$4.3	$6.1
Present worth of cable replacement costs	$10.7	$3.3
Total life cycle cost	$114.5	$99.6
Present worth of project benefits	$143.5	$143.5
Benefit/cost ratio	1.25	1.44
Adjusted** benefit/cost ratio range	2.12	2.72
* A discount rate of 4.5 percent was used as recommended by the AEA based on the long-term real cost of money (AEA March 1991). ** The adjusted benefit/cost ratio is calculated by subtracting the $46.8 million state grant funding for the Project from the constructed cost and dividing into the benefit value. NOTE: The state grant has now (11/02) grown to $70 million due to interest accumulation.

CHUGACH CONSUMERS QUESTION: How confident can we be of the $106.1 million construction cost plus $17.9 million future replacement costs?

Right in Chugach Electric's own back yard, the South Anchorage Loop had a 50% cost overrun. Any cost overrun would be devastating to project economics from the public perspective.
Beluga generator rebuild has jumped from $15 million estimate to $20 million and still not done - 25% cost overrun.
Cooper Lake reconstruction was to cost $7 million but wound up costing $15 million - 100% cost overrun.
Homer Electric's Kachemak Bay submarine cable ballooned from a $2 million initial estimate when decision was made to go ahead with construction to completion at $4 million - a 100% cost overrun.
On the other hand, Chugach does have extensive experience with submarine crossing construction and maintenance in Cook Inlet. Recent cable jobs have been coming in lower then engineers estimates. Also the recent experience Golden Valley has with the Northern Intertie completion between Healy and Fairbanks needs to be looked at but has not been incorporated into Chugach Southern Intertie estimates as of 1/2003.

Please send comments or questions to: CHUGACH CONSUMERS

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