Re:Questions for NREL from EPA Contractor Questions for NREL from EPA Contractor

Hurlbut, Hurlbut,David to: Colleen McKaughan, Haase, Scott 04/18/2012 09:27 AM

Cc: Anita Lee, Eugene Chen, "Peterson, Dave"

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Nice to hear from you, Colleen.

 * The SCR and SCR+ scenarios generally assume a flat 20 year period for 

amortizing initial fixed costs (capital plus installation). Table 1-12 

includes estimates based on a 10-year recovery.

 * LNB/SOFA were treated as existing plant in service. These costs are 

already in rate base, so all of our estimates of cost impacts treat LNB/SOFA 

as part of the current baseline, not as a potential change case.

 * The discount rates we used are shown in table 1-10. All are WACC provided 

by the utility, except for SRP which added what they refer to as a "risk 

premium" on top of their WACC. They would not provide a simple WACC, nor could 

we find one. For CAWCD, we used an approximation based on the current rate 

paid on municipal revenue bonds in Arizona.

I'll ask Dave Peterson to weigh in on the fourth question. But honestly, both 

Reclamation and CAWCD were somewhat stumped about how they'd pay for the US 

share of costs. Lacking better guidance from them, we assumed the simplest 

reasonable approach that didn't depend on federal appropriation: issuing 

revenue bonds. So those estimates would be stable within the range shown in 

table 4-10, apart from any cost unrelated to BART. I can't say offhand whether 

revenues from excess power sales would affect the pumping charge; Dave 

Peterson might be able to shed some light on that.

I hope this helps.

________________________________

David Hurlbut, Ph.D.

Economist

Strategic Energy Analysis Center

National Renewable Energy Laboratory

303-384-7334

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________________________________

From: Colleen McKaughan <McKaughan.Colleen@epamail.epa.gov<

mailto:McKaughan.Colleen@epamail.epa.gov>>

Date: Tue, 17 Apr 2012 18:06:40 -0600

To: "Haase, Scott" <Scott.Haase@nrel.gov<mailto:Scott.Haase@nrel.gov>>, David 

Hurlbut <david.hurlbut@nrel.gov<mailto:david.hurlbut@nrel.gov>>

Cc: Anita Lee <Lee.Anita@epamail.epa.gov<mailto:Lee.Anita@epamail.epa.gov>>, 

Eugene Chen <Chen.Eugene@epamail.epa.gov<mailto:Chen.Eugene@epamail.epa.gov>>

Subject: Questions for NREL from EPA Contractor
Hi, Scott and David,

Our contractor has four questions that he was hoping that NREL could answer. 

Would you be willing to respondto the questions below? We are fine with 

getting a response via email, or getting on the phone with you if you feel 

that that would be the better approach. I have copied Anita Lee and Eugene 

Chen on this email. I will be out of the office from 4/20 - 4/30, so if you 

could reply to all of us that will keep things moving even while I'm out. 

Thank you in advance for your assistance.

Colleen W. McKaughan

Associate Director, Air Division

USEPA, Region 9

(520) 498-0118

1. In NREL’s approach to estimating cost impacts of the SCR or 

SCR/baghouseinvestments, how were SCR and SCR + Baghouse capital expense 

applied with respect to timing (e.g years of installation/years of cost 

realization & cost recovery)?

3. In NREL’s development of baseline plant costs, how were the 

recent LNB/SOFA investments incorporated into existing plant cost?

7. NREL’s report indicates the use of a discount factor reflective 

of the various NGS utilities’ cost of capital. Two questions:

(a). Did the discount factor for each owner represent a weighted average cost 

of capital, WACC, (costs of debt & equity)?

(b). What rates did NREL assume for each owner’s specific WACC calculation?

12. Does NREL anticipate that the increase in the CAP pumping energy 

charge in Table4-10 would persist over time at the Table 4-10 level?

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