APPENDIX E. Red Deer Region Transmission Development. Economic Comparison

Transcription

1 APPENDIX E Red Deer Region Transmission Development Economic Comparison

2 Introduction. Using capital costs provided by the legal owner of transmission facilities (TFO), AltaLink, the AESO has conducted an economic comparison of the two alternatives considered to meet the need for transmission system development in the Red Deer Region. Included in the comparison is the estimated value of system losses. Final results are expressed as net present value (NPV) of the proposed alternative relative to the considered alternative.. The attached economic model contains results of these calculations. The text below summarizes these results. Capital Cost. Capital Cost estimates prepared by the TFO have been provided in this application under a separate cover.. The timing of capital outlay for the two alternatives considered is identical. Table - summarizes the amount and timing of cash flows, presented in inservice date dollars. Table -: Estimated Cash Flows (In-service date dollars, Millions, +/- 30%) Alternative (80L Alternative) (Hybrid Alternative) $0 $0 $4 $03 $0 $0 $5 $0 $0 $5 $30 $0 $0 $5 Losses is defined by the AESO Consolidated Authoritative Document Glossary to mean the energy that is lost through the process of transmitting electrical energy. The AESO Consolidated Authoritative Document Glossary is available at: This link is provided for ease of reference and does not form part of this Application. May, 0

3 3 Revenue Requirement 3. Revenue requirement calculations estimate annual amounts the TFO would likely seek to recover in return for constructing, owning, maintaining and operating proposed transmission system developments over a 0 year period. 3. Table - summarizes the present value of annual revenue requirement relative to that of the proposed alternative, discounted over a 0 year period. Table -: Present Value Revenue Requirement Relative to Alternative Discounted over a 0 year period to the year 0 (Millions, +/ 30%) Alternative Present Value Revenue Requirement Present Value Revenue Requirement Relative to that of Alternative (80L Alternative) (Hybrid Alternative) $6 +$35 $8-3.3 The revenue requirement of the proposed alternative is approximately $35 million lower than the rejected alternative. 4 System Losses 4. The economic comparison includes system loss estimate calculations that put a financial value to system loss estimates for each alternative development. 4. The methodology used to estimate system losses for each alternative is included in Attachment of this document. May, 0

4 4.3 Table 3- summarizes the estimated present value cost of system losses relative to that of the proposed alternative, discounted over a 0 year period. Table 3-: Present Value System Losses Relative to Alternative Discounted over a 0 year period to the year 0 (Millions) Alternative (80L Alternative) (Hybrid Alternative) Present Value System Losses Relative to that of Alternative + $5-4.4 The cost of system losses for the proposed alternative is approximately $5 million lower than the rejected alternative. 5 Sensitivity Analysis 5. Sensitivity analysis was not performed since the timing of capital outlay for the two alternatives is the same and neither alternative includes developments that would significantly change the overall system losses. 6 Conclusion 6. When performing an economic comparison of alternatives, the AESO compares the present value of estimated revenue requirements, plus the estimated financial value of system losses. 6. Table 5- summarizes the present value of the estimated revenue requirement, the estimated present value cost of system losses and the net present value cost of the rejected alternative relative to the preferred alternative. 3 May, 0

5 Table 5-: Present Value of Revenue Requirement, System Losses System and Net Costs Relative to Alternative (Millions, +/ 30%) Alternative Revenue Requirement Present Value Relative to Alternative System Losses Present Value Relative to Alternative Net Present Value Cost Relative to Alternative (80L Alternative) (Hybrid Alternative) + $35 + $5 $ When compared on a relative basis in terms of an equivalent value today, the NPV of the proposed alternative is approximately $40 million (+/-30%) lower than that of the considered alternative. 7 List of Attachments Attachment AESO Economic Model Attachment Estimated Annual System Losses 4 May, 0

6 ATTACHMENT AESO ECONOMIC MODEL 5 May, 0

7 A B C D E F G H I J Needs Identification Document Economic Comparison of the Options Considered Project Name: Need for Transmission System Development in the Red Deer Region Date: May, 0 6 Worksheet: Title Page

8 A B C D E F G H I J K Variables 3. Description of development alternatives considered Alternative Description Alternative Development - 80L Alternative Alternative Development - Hybrid Alternative 8 9. List of variables Variable Value Reference After-tax Return on Equity 9% AUC Decision Generic Cost of Capital Equity percent 36% AUC Decision Generic Cost of Capital Debt Percent 64% Cost of Debt 4.75% Bank of Canada - L/T Bond Rate +% (March, 0) Federal Corporate Tax Rate 6.5% Canada Revenue Agency Alberta Corporate Tax Rate 0% Alberta Tax Act, Section (o) Total Tax Rate 6.5% Annual Depreciation Rate.88% Average of AltaLink 07/08 GTA & ATCO 09/0 GTA rates Annual Operating & Maintenance.50% Based on feedback from Transmission Facility Owners 3. Discount rate calculation Before-tax Weighted Average Cost of Capital 7.45% 4. Forecast Alberta power price Alberta Power Price $78. $88.8 $80. $76.0 $79.8 $03.6 $4. $94.5 $93.0 (Source: EDC Associates Ltd., Quarterly Forecast Update, March 4, 0) 7 Worksheet: Assumptions

9 L M N O P Q R S T U V [Continued] 4. Forecast Alberta power price $9. $96.3 $97.0 $0. $99. $0.3 $0.3 $0.3 $0.3 $0.3 $ Worksheet: Assumptions

10 A B C D E F G Results Table. Summary of Results Relative to Alternative Alternative Description Present Value Revenue Requirement Relative to Alt Present Value System Losses Relative to Alternative Net Cost Relative to Alternative Alternative Development - 80L Alternative $35 $5 $40 Alternative Development - Hybrid Alternative Worksheet: Net Cost-Results

11 3 4 A B C D E F G H I J K Capital Cost and Revenue Requirement Table. Capital Cost Estimates and Present Value of Revenue Requirement (millions) Alternative Description Present Value Revenue Requireme nt Present Value Revenue Requireme nt Relative to Alt Alternative Development - 80L Alternative Alternative Development - Hybrid Alternative. Cost in-service date dollars ($ millions) 0 $6.07 $ $ Alternative 3 Alternative 4 $0 $0 $0 $0 $4 $5 $03 $30 $0 $0 $0 $0 $5 $5 0 Worksheet: Capital Cost

12 A B C D E F G H I J K 5. Revenue Requirement Calculations (millions) 6 7 Alternative Development - 80L Alternative Operating expense Depreciation Income Tax Debt Costs Equity Return Total Revenue Requirement Year 0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Year 0 $0.3 $0.3 $0. $0.6 $0.6 $.0 Year 3 03 $0.6 $0.9 $0.4 $0.9 $.0 $3.8 Year 4 04 $3.7 $4. $.7 $4.3 $4.6 $8.4 Year 5 05 $3.7 $7. $.8 $7. $7.7 $8.5 Year 6 06 $3.7 $7. $.7 $7.0 $7.5 $7.9 Year 7 07 $3.9 $7.3 $.7 $7.0 $7.5 $8.4 Year 8 08 $3.9 $7.5 $.7 $7.0 $7.5 $ Plant & Equipment Beginning Plant & Equipment $0.0 $0.0 $9.6 $43.3 $46.3 $46.3 $46.3 $6.3 Capital Outlay During the Year $0.0 $9.6 $3.7 $03.0 $0.0 $0.0 $5.0 $0.0 Ending Plant & Equipment $0.0 $9.6 $43.3 $46.3 $46.3 $46.3 $6.3 $6.3 Accumulated Depreciation Beginning Accumulated Depr. $0.0 $0.0 $0.3 $. $5.4 $.4 $9.5 $6.9 Annual Depreciation $0.0 $0.3 $0.9 $4. $7. $7. $7.3 $7.5 Ending Accumulated Depr. $0.0 $0.3 $. $5.4 $.4 $9.5 $6.9 $34.4 Year End Rate Base Plant and Equipment $0.0 $9.6 $43.3 $46.3 $46.3 $46.3 $6.3 $6.3 Accumulated Depreciation $0.0 $0.3 $. $5.4 $.4 $9.5 $6.9 $34.4 Net (Plant less Acc. Depr.) $0.0 $9.3 $4. $40.9 $33.8 $6.7 $34.4 $6.9 Previous Net Plant $0.0 $0.0 $9.3 $4. $40.9 $33.8 $6.7 $34.4 Subtotal (Net + Prior Year) $0.0 $9.3 $6.4 $83.0 $474.8 $460.6 $46. $46.3 Year End Rate Base (subtotal/) $0.0 $9.3 $30.7 $4.5 $37.4 $30.3 $30.6 $30.6 Worksheet: Capital Cost

13 L M N O P Q R S T U V W [Continued] 3. Revenue Requirement Calculations - Alternative Year 9 Year 0 Year Year Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year $3.9 $3.9 $3.9 $3.9 $3.9 $3.9 $3.9 $3.9 $3.9 $3.9 $3.9 $3.9 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $.6 $.5 $.4 $.3 $.3 $. $. $.0 $.9 $.8 $.7 $.6 $6.8 $6.6 $6.3 $6. $5.9 $5.6 $5.4 $5. $5.0 $4.7 $4.5 $4.3 $7. $7.0 $6.7 $6.5 $6.3 $6.0 $5.8 $5.5 $5.3 $5.0 $4.8 $4.5 $8. $7.5 $6.9 $6.4 $5.8 $5.3 $4.7 $4. $3.6 $3.0 $.5 $.9 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $34.4 $4.9 $49.4 $56.9 $64.5 $7.0 $79.5 $87.0 $94.6 $0. $09.6 $7. $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $7.5 $4.9 $49.4 $56.9 $64.5 $7.0 $79.5 $87.0 $94.6 $0. $09.6 $7. $4.7 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $6.3 $4.9 $49.4 $56.9 $64.5 $7.0 $79.5 $87.0 $94.6 $0. $09.6 $7. $4.7 $9.4 $.8 $04.3 $96.8 $89.3 $8.7 $74. $66.7 $59. $5.6 $44. $36.6 $6.9 $9.4 $.8 $04.3 $96.8 $89.3 $8.7 $74. $66.7 $59. $5.6 $44. $446. $43. $46. $40. $386. $37.0 $356.0 $340.9 $35.9 $30.8 $95.8 $80.7 $3. $5.6 $08. $00.6 $93.0 $85.5 $78.0 $70.5 $6.9 $55.4 $47.9 $40.4 Worksheet: Capital Cost

14 A B C D E F G H I J K Alternative Development - Hybrid Alternative Year Year Year 3 Year 4 Year 5 Year 6 Year 7 Year Operating expense $0.0 $0.3 $. $3.0 $3.0 $3.0 $3. $3. Depreciation $0.0 $0.3 $.3 $3.9 $5.8 $5.8 $6.0 $6. Income Tax $0.0 $0. $0.5 $.5 $. $. $. $. Debt Costs $0.0 $0.6 $.3 $4.0 $5.8 $5.7 $5.7 $5.8 Equity Return $0.0 $0.6 $.4 $4.3 $6. $6.0 $6. $6. Total Revenue Requirement $0.0 $.0 $5.7 $6.8 $3. $.7 $3. $3.6 Plant & Equipment Beginning Plant & Equipment $0.0 $0.0 $9.6 $70.7 $00.6 $00.6 $00.6 $5.6 Capital Outlay During the Year $0.0 $9.6 $5. $9.9 $0.0 $0.0 $5.0 $0.0 Ending Plant & Equipment $0.0 $9.6 $70.7 $00.6 $00.6 $00.6 $5.6 $5.6 Accumulated Depreciation Beginning Accumulated Depr. $0.0 $0.0 $0.3 $.6 $5.5 $.3 $7.0 $3.0 Annual Depreciation $0.0 $0.3 $.3 $3.9 $5.8 $5.8 $6.0 $6. Ending Accumulated Depr. $0.0 $0.3 $.6 $5.5 $.3 $7.0 $3.0 $9. Year End Rate Base Plant and Equipment $0.0 $9.6 $70.7 $00.6 $00.6 $00.6 $5.6 $5.6 Accumulated Depreciation $0.0 $0.3 $.6 $5.5 $.3 $7.0 $3.0 $9. Net (Plant less Acc. Depr.) $0.0 $9.3 $69. $95. $89.3 $83.5 $9.5 $86.3 Previous Net Plant $0.0 $0.0 $9.3 $69. $95. $89.3 $83.5 $9.5 Subtotal (Net + Prior Year) $0.0 $9.3 $88.4 $64. $384.4 $37.9 $376. $378.8 Year End Rate Base (subtotal/) $0.0 $9.3 $44. $3. $9. $86.4 $88.0 $ Worksheet: Capital Cost

15 L M N O P Q R S T U V W [Continued] 3. Revenue Requirement Calculations - Alternative Year 9 Year 0 Year Year Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year $3. $3. $3. $3. $3. $3. $3. $3. $3. $3. $3. $3. $6. $6. $6. $6. $6. $6. $6. $6. $6. $6. $6. $6. $. $. $.0 $.9 $.9 $.8 $.7 $.6 $.6 $.5 $.4 $.3 $5.6 $5.4 $5. $5.0 $4.8 $4.6 $4.4 $4. $4. $3.9 $3.7 $3.5 $5.9 $5.7 $5.5 $5.3 $5. $4.9 $4.7 $4.5 $4.3 $4. $3.9 $3.7 $3. $.6 $. $.7 $. $0.8 $0.3 $9.9 $9.4 $8.9 $8.5 $8.0 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $9. $35.5 $4.7 $47.9 $54. $60.3 $66.5 $7.7 $78.9 $85. $9.3 $97.5 $6. $6. $6. $6. $6. $6. $6. $6. $6. $6. $6. $6. $35.5 $4.7 $47.9 $54. $60.3 $66.5 $7.7 $78.9 $85. $9.3 $97.5 $03.7 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $5.6 $35.5 $4.7 $47.9 $54. $60.3 $66.5 $7.7 $78.9 $85. $9.3 $97.5 $03.7 $80. $73.9 $67.7 $6.5 $55.3 $49. $4.9 $36.7 $30.4 $4. $8.0 $.8 $86.3 $80. $73.9 $67.7 $6.5 $55.3 $49. $4.9 $36.7 $30.4 $4. $8.0 $366.4 $354.0 $34.6 $39. $36.8 $304.3 $9.9 $79.5 $67. $54.7 $4.3 $9.8 $83. $77.0 $70.8 $64.6 $58.4 $5. $46.0 $39.8 $33.5 $7.3 $. $4.9 4 Worksheet: Capital Cost

16 3 4 A B C D E F G H I J System energy Loss Table 3. Loss Estimates and Present Value of Losses (millions) Present Value System Alternative Description Losses Relative to Alternative Alternative Development - 80L Alternative Alternative Development - Hybrid Alternative. Estimated system energy loss (MWh) $ Alternative 0,96,43,960,83 0 3,098,56 3,097, ,35,694 3,33, ,37,85 3,370, ,509,957 3,506, ,647,088 3,643, ,784,0 3,780,0 08 3,9,35 3,96, Estimated system energy loss (MWh) - Relative to Alternative Alternative ,6 0 03, , , , , , Loss multiplied by forecasted power price (millions) Alternative 0 $0.05 $ $0. $ $0.5 $ $0.8 $ $0.4 $ $0.37 $ $0.48 $ $0.45 $ Worksheet: System Energy Loss

17 3 4 K L M N O P Q R S T U V Continued -. Estimated system energy loss (MWh) ,058,483 4,95,65 4,33,746 4,469,878 4,607,009 4,744,4 4,88,7 5,08,404 5,55,535 5,9,667 5,49,798 5,566,930 4,053,079 4,89,6 4,36,45 4,46,678 4,599, 4,735,745 4,87,78 5,008,8 5,45,344 5,8,877 5,48,40 5,554,944 Continued -. Estimated system energy loss (MWh) - Relative to Alternative ,404 6,003 6,60 7,99 7,798 8,396 8,995 9,593 0,9 0,790,388, Continued - 3. Loss multiplied by forecasted power price (millions) $0.50 $0.55 $0.64 $0.70 $0.79 $0.83 $0.9 $0.97 $.03 $.09 $.5 $. $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $ Worksheet: System Energy Loss

18 ATTACHMENT - ESTIMATED ANNUAL SYSTEM LOSSES 7

19 For each alternative, hourly system losses for years 009, 0 and 07 were calculated using an AESO model. For each of the three years, a power flow was run for each hour in the year to estimate the amount of system loss. Hourly values were averaged over a yearly period to obtain an average hourly loss for each year. Table A- summarizes average hourly losses for the years 009, 0 and 07. Table A-: Average Hourly Losses for 009, 0 and 07 (MW) Alternative (80L Alternative) (Hybrid Alternative) Results shown in Table A- were used as a set of data points in linear regression calculations to obtain a set of data points estimating average hourly losses for the years 0 through 030. Table A- summarizes estimated hourly losses for the study years 0 through 030. Table A-: Estimated Hourly Losses (MW) Year (80L Alternative) (Hybrid Alternative) May, 0

20 May, 0