Opinion ID: 353770
Heading Depth: 3
Heading Rank: 2

Heading: The Commission's 29 March 1976 Orders

Text: 16 On 29 March 1976 the Commission issued two separate orders granting Vanceburg licenses for the two proposed projects. 17 17 Pursuant to Section 10(a) of the Act, the Commission determined that each of the proposed projects was economically feasible. This determination was based in part on a costing study which compared the projected annual costs of operating the proposed projects with the estimated annual costs of operating a hypothetical steam plant alternative. The order granting a license for the Cannelton Project stated: 18 18 Based on our studies, a fossil fueled steam-electric generating facility, which is the least expensive alternative energy source, could provide capacity and energy equivalent to that estimated to be generated at the project, at an annual cost of $4,457,700. The annual cost of producing power from the project is estimated to be $3,970,300. In light of the facts that the estimated cost of producing power from the project is less than the estimated cost of producing an equivalent amount of power from a suitable alternative and that an adequate market for the power has been demonstrated, we conclude that the project is feasible from an economic standpoint. 19 Similarly, the order granting a license for the Greenup Project stated: 19 20 Based on our studies, a fossil fueled steam-electric generating facility, which is the least expensive alternative energy source, could provide capacity and energy equivalent to that estimated to be generated at the project at an annual cost of $4,418,800. The annual cost of producing power from the project is estimated to be $3,963,000. In light of the facts that the estimated cost of producing power from the project is less than the estimated cost of producing an equivalent amount of power from a suitable alternative and that an adequate market for the power has been demonstrated, we conclude that the project is feasible from an economic standpoint. 21 In addition, as required by Section 10(e) of the Act, each order assessed annual charges against Vanceburg for the cost of administration, the use of Federal land, and the use of a Government navigation dam. 20 These latter dam-use charges were computed according to the sharing-of-net-benefits method. The Commission subtracted the estimated annual cost of operating each hydroelectric project from the estimated annual cost of operating the least expensive alternative, thereby computing the net benefit accruing to the licensee from use of each of the Government dams, and then assessed against Vanceburg as annual dam-use charges one half of each net benefit. In computing these charges, the Commission employed the same cost figures that it had used in determining the economic feasibility of the respective projects whence arises this controversy. It set forth in detail these computations in an appendix to each order. 21 22 With respect to the Cannelton Project No. 2245, the Commission assessed an annual dam-use charge of $243,700. The Commission's full calculations are set forth and explained in the margin, 22 but, briefly, this figure was arrived at as follows: 23 Step 1. Estimate annual cost of operating Cannelton hydroelectric project ............ $3,970,300 Step 2. Estimate annual cost of operating hypothetical steam plant alternative ................ $4,457,700 Step 3. Calculate net benefit accruing to licensee Vanceburg ($4,457,700--$3,970,300) ......... $ 487,400 Step 4. Assess one half of net benefit as annual charge ......... $ 243,700 24 With respect to the Greenup Project No. 2614, the Commission assessed an annual dam-use charge of $227,900. The Commission's calculations closely paralleled those made for the Cannelton Project: 23 25 In sum, then, the Commission's 29 March 1976 orders granting licenses to Vanceburg for the two proposed hydroelectric projects were based on a costing study which calculated the cost differential between the proposed hydroelectric projects, on the one hand, and steam plant alternatives on the other. The costing study arrived at cost differential figures of $487,400 and $455,800 for the Cannelton and Greenup projects respectively. These figures theoretically represented the cost savings which the licensee would achieve from using the government dams, and they were used by the Commission for two purposes: first, to ascertain the economic feasibility of the projects under Section 10(a) of the Act; and second, to serve as the basis for computing annual dam-use charges under Section 10(e) of the Act.