AI.ASKA I O'VI~R l,"ijtiioritt LAKE ELVA HYDROELECTRIC PROJECT FEASIBILITY STUDY FINDINGS AND RECOMMENDATION Apri 1 30, 1981

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1 AI.ASKA I O'VI~R l,"ijtiioritt LAKE ELVA HYDROELECTRIC PROJECT FEASIBILITY STUDY FINDINGS AND RECOMMENDATION Apri 1 30, 1981 A preliminary assessment of the Lake Elva Hydroelectric Project was initially made and presented in the "Bristol Bay Energy and Electric Power Potential" study conducted by Robert W. Retherford Associates for the Alaska Power Administration in This study prompted a "Reconnaissance Study of the Lake Elva and Other Hydroelectric Power Potentials in the Dillingham Area" which was conducted for the Alaska Power Authority by Robert W. Retherford Associates, also in For the community of Dillingham, the reconnaissance study indicated that the Lake Elva Project was the most cost effective option, although the cost of Lake Elva power was projected to be slightly higher than would result from development of a significantly larger regional project on the Tazimina River. The ensuing feasibility study was prompted by the reconnaissance study recommendation and from strong local support for the Lake Elva Project. Funding for this feasibility study was made available to the Power Authority in July of 1980 and R. W. Beck and Associates was the engineering firm selected to conduct the investigations. If developed, the Lake Elva Project would feed into the Nushagak Electric Cooperative distribution system which currently supplies diesel power to the communities of Aleknagik and Dillingham. The 1980 load for the Cooperative was approximately 7,632,000 KWH with a peak demand of 1,452 KW. PROJECT DESCRIPTION: The Project site ;s located in Southwest Alaska within the Wood ikchik State Park approximately 45 air miles NNW of Dillingham, and is situated between Little Togiak Lake on the south and Amakuk Arm of Lake Nerka on the north. Hydrologic investigations conducted for the project indicate that the basin yields an average of 39,800 acre-feet (55 cfs) of runoff in an average year. The Project would include a 120-foot high rockfill dam located about 8,500 feet downstream from the outlet of the existing Lake Elva; a reservoir which would provide 26,800 acre-feet of active storage; a 6,700-foot long power conduit comprised primarily of buried concrete cylinder pipe; a steel-framed powerhouse containing two horizontal shaft Crossflow-type turbines each capable of delivering 750 KW under a rated net head of 280 feet; a 10-mile temporary construction road leading from the north end of Lake Aleknagik to the dam and powerhouse sites; about 1.5 miles of permanent site access roads; and approximately 33 miles of new 34.5-KV transmission line extending from the Project to the Village of Aleknagik, plus upgrading of approximately 22 miles of existing single-phase transmission line which extends from Aleknagik to Dillingham. i '~

2 The 1,500 KW Project, as planned, would provide dependable capacity of 1,200 KW. It would be capable of delivering 7,961,000 kwh of energy in an average year, and 7,769,000 kwh of firm annual energy, to the load center in Dillingham. FIND The Lake Elva Hydroelectric Project has been found to be feasible from a technical and environmental standpoint and could provide a reliable source of electricity for Nushagak Electric Cooperative, Inc. by early Field investigations and studies revealed nothing unusual about the project site with respect to hydrological, geotechnical and other technical aspects. The project design concept is straightforward and typical of designs for similar size projects of this type. Environmental concerns identified in the study include the impacts of flow interruptions, flow regime changes, and the loss of flow over a portion of Elva Creek. These impacts could alter groundwater flows to the Lake Nerka beaches where salmon spawn and could change water quality, most notably temperature and possibly cadmium concentrations. Other concerns include the impacts of access road and transmission line corridors upon anadromous waterways, accessability to prime moose habitat, and visual resources. The total estimated construction cost of the project is high, primarily due to its remote location. The estimated total construction cost based on January 1981 price levels is $29,449,000. According to Power Authority criteria for conducting economic analyses using discounted life cycle costs, the Project is equal in cost to the alternative of continued expansion of NEC's diesel electric generation system. In other words, the benefit-to-cost ratio is 1 to 1. The Project cannot be financed without state assistance. The Governor's financing program contained in HB 310 permits the project to be financed while minimizing state financial assistance. Of the three state assisted financing plans evaluated, a three percent loan for a 35-year term would provide the lowest cost energy to consumers, but the greatest cost to the State. RECOMMENDATIONS: If the Lake Elva Hydroelectric Project is to be pursued, the next step would be preparation and submittal of a license application, followed by continued environmental studies and project design. Construction could begin immediately after receipt of the license which can be anticipated not earlier than July The Lake Elva Project would provide 74 percent of the projected Dillingham electrical energy demand in 1985 and a decreasing proportion thereafter. The project was found to be marginally feasible with the same life cycle cost as continued use of diesel, utilizing established Power Authority economic criteria. These criteria include an assumption of 3.5 percent diesel fuel escalation over and above the rate of inflation for twenty years. The Lake Elva Project does have the benefit, however, of producing inflation free renewable energy so that in the event fossil fuels escalate at higher rates than those assumed in the economic analysis, the cost of Lake Elva power would be less than continued diesel generation. The project also has the benefit of providing power on line three or more years earlier than the larger regional Tazimina River Hydroelectric Project.

3 The Tazimina Project has the potential of fully satisfying the electrical energy requirements of fifteen communities within the Bristol Bay Region, including Dillingham for at least 20 years. Furthermore, the Tazimina Project could possibly produce electrical energy at a lower unit cost than Lake Elva, primarily due to better site conditions and economies of scale. However, the Taz;m;na Project would not come on line until early 1988, provided no serious environmental problems are encountered. The Tazimina Project has not had the benefit of a detailed feasibility study as has the Lake Elva Project, so there is some degree of uncertainty as to its technical, economic and environmental feasibility. There appears to be a high degree of local support for both projects. Beginning in June 1981, the Power Authority will conduct a feasibility study of the Tazimina Hydroelectric Project, and an interim assessment of the project's feasibility will be available in February, In the event the Tazimina Project does not prove feasible, one year would be lost in advancing the Lake Elva Project if licensing is not pursued immediately. It is therefore the recommendation of the Power Authority that a license application for the Lake Elva Project be prepared and submitted to the Federal Energy Regulatory Commission. When the interim assessment of Tazimina's feasibility becomes available in February of 1982, a decision should be made at that time to proceed with final design and construction of the Lake Elva Project or instead to turn to Tazimina hydroelectric development or another more cost effective project. ~?~~ Eric P. Yould Executive Director

4 LAKE ELVA PLAN OF FINANCE Prepared by the Alaska Power Authority April, 1981

5 A plan of finance is prepared for any new power project identified in a feasibility study as the most feasible alternative for development. The purpose of a plan of finance is to present various alternatives available to finance the power project and to identify the most appropriate means to achieve the lowest cost electric power for consumers while minimizing the amount of state assistance required. The Lake Elva project is marginally feasible based upon a life cycle cost present worth analysis as compared to the base case plan of all diesel generation. The alternative means available to finance the projects are low interest loans from the Rural Electrification Administration (REA). Power Authority tax exempt revenue bonds, and state financing assistance in some form. REA loan funds may not be available due to federal budget reductions which may seriously impact the REA program. The Power Authority. under the current financing program, could not finance the project since the credit of the 1 oca 1 community is not suffi ci ent to provi de security to bond purchasers of its capacity to repay the large debt. Therefore, state assistance in some form will be necessary to finance the project. Table I presents the annual costs of the Lake Elva project under 35 year levelized debt service for interest rates of 8.5% and 10.0%. Cost of energy for the Lake Elva plan is reflected in Table II. The analysis is based upon hypothetical financing conditions including 7% general inflation. 8.5% interest rate, and 3.5% escalation of fuel prices above the general inflation rate for 20 years. Cost of energy for the base case plan of continued all diesel generation is reflected in Table III which is based on the same factors. The 8.5% interest rate used herein is the standard rate currently used by the Power Authority to make its cost of power analysis of projects. Since the project can not be financed without state assistance, the cost of energy was also analyzed based upon a financing interest rate of the previous years average from municipal bond yield rates reported in the 30 year revenue index of the Weekly Bond Buyer. which is currently approximately 10%. Table IV presents the cost of energy in i/kwh. Lake Elva Lake Elva and Diesel and Diesel All Diesel Year %/35 year 8.5%/20 year State assistance employed to finance the project could be accomplished in various ways, including direct grants, or equity investments, low interest loans. and graduated interest loans, or with a combination of financing measures as presented in HB 310. Three alternatives for state assistance will be analyzed.

6 1. A state grant of 60% of the Total Construction Cost and Power Authority revenue bond financing of 40% of the Cost at a rate estimated to be 11% in the current market. 2. A state loan for a 35 year term at a subsidi the unpaid balance. interest rate of 3% on 3. A state grant of $4,707,500 based upon $2,500 per capita for the 1656 residents of Dillingham and 227 residents of Aleknagik, revenue financing at 10.5 of the remaining construction costs (improved interest rate based upon the completion fund feature of HB 310 and the debt adjustment funding of the project, which is also a characterization of HB 310), and an appropriation of $12,000,000 for a debt assistance loan fund for the project. FINANCING ALTERNATIVE 1. Total Construction Cost (1/81 Bid) Grant (60% of TCC) To be Financed Escalation (7% per year) Total Remaining Construction Cost Interest During Construction (11%) Total Investment Cost Financing Expenses Reserve Fund Total Capital Requirements Annual Debt Service Annual O&M, Administration, Insurance and Interim Replacements TOTAL ANNUAL COST $29,499,000 17,699,400 $11,799,600 1,498,400 $13,298,000 1,732,000 $15,030, ,000 1,976,000 $17,500,000 $ 1,976, ,000 n,307,000 Table V presents the cost of energy for financing alternative 1. The present worth cost of the state assistance is the value of the grant which is $17,699,400. ING ALTERNATIVE 2. Total Construction Cost (1/81 Bid) State Loan (3% for 35 years) To Be Financed Interest During Construction and Construction Inflation could be paid from investment earnings on the loan amount. Annual Debt Service Annual O&M, Administration, Insurance and Interim Replacements TOTAL ANNUAL COST $29,499,000 29,499,000 $ 1,373, ,000 $ 1,704,000

7 ---~--"----.~. 1 Table VI presents the cost of energy for financing alternative 2. The present worth of the state assistance is the present value of the difference between the annual debt service presented in Table IV and the annual debt service for financing alternative 2 for the 35 years of debt service repayment. The effective debt service in Table IV is the annual debt service of $4,360,000 less the interest earnings on the reserve fund, or $3,924,000. Therefore, the annual difference is $3,924,000-$1,373,000 = $2,551,000. The present worth value at 10% of $2,551,000 of annual assistance over 35 years discounted at 10% is $24,602,000. FINANCING ALTERNATIVE 3. Total Construction Cost (1/81 Bid) Grant To Be Financed Escalation (7% per year) Total Remaining Construction Cost Interest During Construction (10.5%) Total Investment Cost Financing Expenses Reserve Fund TOTAL CAPITAL REQUIREr~ENTS Annual Debt Service Annual O&M, Administration, Insurance, and Interim Replacements TOTAL ANNUAL COST $29,499,000 4,707,500 $24,701,500 3,173,500 f27,965,000 3,535,000 $31,500,000 1,036,000 3,964,000 $36,500,000 3,964, ,000 $ 4,295,000 Table VII presents the cost of energy for financing alternative 3. The present worth cost of state assistance for this alternative is the value of the per capita grant, or $4,707,500. Table VIII illustrates the rate impacts and funding provided by the debt assistance feature of the financing program in HB 310. Each year a loan is made to the utility to lower the cost of energy sold to utility consumers to the rate which would have been charged for continuation of the present diesel generation. The loan interest rate is the same as the revenue bond yield rate (assumed to be 10.5% in this alternative), and principal and interest payments are deferred as necessary to permit the utility and consumers to repay the debt assistance loans when the benefits of the project are realized. Since the return to the state is ultimately realized at market rates, the present value of the assistance provided by this financing feature over the full term of this loan is zero. The debt assistance fund must be capitalized at $12,000,000 for the project. This should be sufficient, together with assumed investment earnings of 12%, to fund the annual debt assistance loans. SUMMARY AND CONCLUSIONS Summarized below is the estimated system cost of energy ( /kwh) for various years for the three state assisted financing options analyzed and the estimated present value of the state assistance. This can be compared to the previously summarized cost of energy examples wherein no state assistance is provided.

8 Alternative Alternative 2 Alternative 3 Year Grant 3% Loan HB 3 19S SO.l Present Value of state Assistance $17,699,400 $24,602,000 $4,707,500 In the early years of project operation, Alternative 3 provides lowest system cost of energy and minimized the amount of state assistance. Alternatives 1 and 2 provide a higher cost of energy in the first 5 years of project operation due to the particular terms of the respective financing plans. In Alternative 1, the percentage of the total construction cost of Lake Elva to be financed by a grant could be increased. In Alternative 2, the state loan to finance construction could be made at lower interest rates. Either of these scenarios, which would lower the cost of energy in the early years, would also consequently increase the present value of the state assistance. A feature of Alternative 3 which is less attractive is that the local consumers may not realize the benefits of the hydroelectric project until beyond the 40th year of project operation, when all state debt assistance loans are repaid. This time period for realizing the benefits would be advanc in relation to the actual increases in the cost of diesel generation. Table VIII illustrates the relationship between the cost of energy and the rate of repayment of the state debt assistance loans. If diesel fuel costs escalate above 3.5% over the rate of general inflation for a period in excess of 20 years, the state debt assistance loans would be repaid more rapidly. Alternative 3 assumes that the cost of energy to be charged consumers would be equivalent to the cost of energy with an all diesel system. Table VIII shows that an all diesel system would generate power cheaper than the system with Lake Elva for the first 13 years of Lake Elva operation, therefore, annual state debt assistance loans would be necessary. In succeeding years, the higher cost of energy associated with an all diesel system would be charged to customers in order to achieve a revenue return to repay the state debt assistance loans. The analysis was based upon nominal dollars which illustrate the impacts of a general inflation rate of 7% per annum and a fuel escalation rate of 3.5% for only 20 years. If the cost of energy in future years is discounted at 7% the assumed rate of inflation, the real cost of energy in the market area of the project would actually decrease for Alternatives 1 and 2, and only increases gradually due to the rising costs of diesel fuel and the repayment of the debt assistance loans in Alternative 3. The discounted cost of energy would be:

9 Alternative Alternative 2 Alternative 3 Year 60% Grant 3% In conclusion, Alternative 2 provides the lowest cost energy, but with the greatest state assistance Alternative 3 minimizes state assistance but results in appreciably higher energy costs. The reason the project does not provide significant benefits to the market area is that the economic feasibility of the project based upon specific assumptions is marginal in that the benefit to cost ratio of the system with Lake Elva compared to an all diesel system is 1.0. The benefits of lower cost energy in future years from the project are largely based upon the state assistance or subsidy provided with each financing alternative. All other benefits derived from the renewable resource generation are provided by the inflation free nature of the investment of the project.

10 AI~ASliA I O\'I~I{ AIJ'l'1I0U.11'Y TABLE I LAKE ELVA PROJECT PROJECT ANNUAL COSTS COST OF POWER ANALYSIS CAPITAL COSTS; Interest Rates Total Construction Cost.... (January 1981 Bid) Escalation (7% per year).... Total Construction Cost.... (January 1983 Bid) Net Interest during Construction.... Total Investment Cost.... Financing Expenses (2.5% of TCR).... Reserve Fund (One Year's Debt Service).... TOTAL CAPITAL REQUIREMENTS (TCR) % $29,449,000 3, 701, 000 $33,150,000 _2!978,000 $36,128,000 1,021,000 $40,832, % $29,449,000 _3,701,000 $33,150,000 ~93,000 $36,653,000 1,050,000 ~360,000 $42,063,000 ANNUAL COSTS: (1) Net Debt Serv i ce.... Operating Costs: Operation and Maintenance.... Administrative and General (34% of O&M).... Insurance (0.15% of TCR).... Interim Replacements (0.14% of TCR).... TOTAL ANNUAL COST $ 3,683, ,000 54,000 61,000 57,000 $ 4,014,000 $ 4,360, ,000 54,000 62,000 59,000 $ 4,694,000 (1) - Annual Costs for Operation in 1985.

11 TABLE II LAKE ELVA PROJECT COST OF PROJECT GENERATION 8.5% LOAN FOR 35 YEARS Total Annual Project Diesel Diesel Total Generation Debt Interest Project Generation Diesel Fuel Annual Cost of Required Service Earnings O&M Cost Required O&M Cost Cost Cost Power Year (Mwh) ($000) ($000) ($000) (Mwh) ($000) ($000) ($000) ( /kwh) ,692 9,844 3,683 (313 ) 331 2, , ,219 10,324 3,683 (313) 354 3, , , ,683 (313 ) 379 3, , ,317 11,323 3,683 (313 ) 405 4, , ,888 11,840 3,683 (313 ) 434 4, , ,472 12,368 3,683 (313 ) 464 5, ,235 5, ,982 12,834 3,683 ( 313) 497 6, ,491 6, ,487 13,293 3,683 (313) 532 6, ,786 6, ,989 13,750 3,683 (313) 569 7, ,125 7, ,498 14,213 3,683 ( 313) 609 7,537 1,014 2,518 7, ,003 14,671 3,683 (313) 651 8,042 1,085 2,969 8, ,430 15,057 3,683 ( 313) 697 8,469 1,161 3,455 8, ,848 15,433 3,683 (313 ) 745 8,887 1,243 4,006 9, ,257 15,801 3,683 (313 ) 798 9,296 1,329 4,630 10, ,647 16,149 3,683 (313 ) 853 9,686 1,423 5,331 10, ,032 16,492 3,683 (313 ) ,071 1,522 6,125 11, ,400 16,820 3,683 (313) ,439 1,629 7,015 12, ,750 17,100 3,683 (3l3 ) 1,046 10,789 1,743 8,012 14, ,100 17,350 3,683 (313 ) 1,119 11,139 1,865 9,140 15, ,500 17,725 3,683 (313 ) 1,197 11,539 1,995 10,463 17,

12 TABLE III COST OF DIESEL GENERATION Total New New Annual Total Diesel Diesel Diesel Diesel Total Generation Annual Interest Capacity Generation Debt Diesel Fuel Annual Cost of Required Sales Earnings Required Required Service O&M Cost Cost Cost Power Year (Mwh) (Mwh) ($000) (kw) (Mwh) ~_$OOO) ($000) ($000) ($000) ( /kwh) ,692 9, , ,454 2, ,219 10, , ,686 2, ,761 10, , ,953 2, ,317 11, , ,260 2, ,888 11, , ,614 3, ,472 12, , ,019 3, ,982 12,834 (22) 1,250 13, ,052 3,462 4, ,487 13,293 (22) 0 14, ,172 3,964 5, ,989 13,750 (22) 0 14, ,256 4,532 6, ,498 14,213 ( 22) 0 15, ,344 5,178 6, ,003 14,671 (22) 0 16, ,438 5,908 7, ,430 15,057 (22) 0 16, ,538 6,702 8, ,848 15,433 (22) 0 16, ,646 7,594 9, ,257 15,801 (22) 0 17, ,761 8,596 10, ,647 16,149 (22) 0 17, ,884 9,713 11, ,032 16,492 (22) 0 18, ,016 10,967 13, ,400 16,820 (22) 0 18, ,157 12,365 14, ,750 17,100 (22) 0 18, ,309 13,924 16, ,100 17,350 (22) 0 19, ,470 15,673 18, ,500 17,725 (22) 0 19, ,643 17,681 20,

13 TABLE IV LAKE ELVA PROJECT COST OF PROJECT GENERATION 10% LOAN FOR 35 YEARS Total New Annual Total Project Diesel Diesel Total Generation Annual Debt Interest Project Debt Diesel Fuel Annual Cost of Required Sales Service Earnings O&M Cost Service O&M Cost Cost Cost Power Year ( Mwh'l U~wh) ($000) ($000) _($OOQL ($000) ($000) ($000 ) ($000) ( /kwh) ,692 9,844 4,694 (436) 331 2, , ,219 10,324 4,694 (436) 354 3, , ,761 10,818 4,694 (436) 379 3, , ,317 11,323 4,694 (436) 405 4, , ,888 11,840 4,694 (436) 434 4, , ,472 12,368 4,694 (436) 464 5, ,235 6, ,982 12,834 4,694 (436) 497 6, ,491 7, ,487 13,293 4,694 (436) 532 6, ,786 7, ,989 13,750 4,694 (436) 569 7, ,125 7, ,498 14,213 4,694 (436) 609 7, ,014 2,518 8, ,003 14,671 4,694 (436) 651 8, ,085 2,969 8, ,430 15,057 4,694 (436) 697 8, ,161 3,455 9, ,848 15,433 4,694 (436) 745 8, ,243 4,006 10, ,257 15,801 4,694 (436) 798 9, ,329 4,630 11, ,647 16,149 4,694 (436) 853 9, ,423 5,331 11, ,032 16,492 4,694 (436) , ,522 6,125 12, ,400 16,820 4,694 (436) , ,629 7,015 13, ,750 17,100 4,694 (436) 1,046 10, ,743 8,012 15, ,100 17,350 4,694 (436) 1,119 11, ,865 9,140 16, ,500 17,725 4,694 (436) 1,197 11, ,995 10,463 17,

14 TABLE V LAKE ELVA PROJECT COST OF PROJECT GENERATION Financing Alternative 1 Total Annual Total Proj ect Diesel Diesel Total Generation Annual Debt Interest Project Generation Diesel Fuel Annual Cost of Required Sales Service Eal~ni ngs O&M Cost Required 0&~1 Cost Cost Cost PO\ver Year (Mwh) (Mwh) ($000) ($000) (Mwh) ($000) ($000) ($OOO} ( / kwh) ,692 9,844 1,976 (197) 331 2, , ,219 10,324 1,976 (197) 354 3, , ,761 10,818 1,976 (197) 379 3, , ,317 11,323 1,976 (197) 405 4, , ,888 11,840 1,976 (197) 434 4, , ,472 12,368 1,976 (197) 464 5, ,235 4, ,982 12,834 1,976 (197) 497 6, ,491 4, ,487 13,293 1,976 (197) 532 6, ,786 4, ,989 13,750 1,976 (197) 569 7, ,125 5, ,498 14,213 1,976 (197) 609 7,537 1,014 2,518 5, ,003 14,671 1,976 (197) 651 8,042 1,085 2,969 6, ,430 15,057 1,976 (197) 697 8,469 1,161 3,4 7, ,848 15,433 1,976 (197) 745 8,887 1,243 4,006 7, ,257 15,801 1,976 (197) 798 9,296 1,329 4,630 8, ,647 16,149 1,976 (197) 853 9,686 1,423 5,331 9, ,032 16,492 1,976 (197) ,07l 1,522 6,125 10, ,400 16,820 1,976 (197) ,439 1,629 7,015 11, ,750 17,100 1,976 (197) 1,046 10,789 1,743 8,012 12, ,100 17,350 1,976 (197) 1,119 11,139 1,865 9,140 13, ,500 17,725 1,976 (197) 1,197 11,539 1,995 10,463 15,

15 TABLE VI LAKE ELVA COST OF PROJECT GENERATION Financing Alternative 2 Total Annual Total Project Diesel Diesel Total Generation Annual Debt Interest Project Generation Diesel Fuel Annual Cost of Required Sales Service Earnings O&M Cost Required O&M Cost Cost Cost Power Year Mwh (Mwh) ($000) ($000) ($000) (Mwh) ($000) ($000) ($000) ( lkwh) ,692 9,844 1, , , ,219 10,324 1, , , ,761 10,818 1, , , ,317 11,323 1, , , ,888 11,840 1, , , ,472 12,368 1, , ,235 3, ,982 12,834 1, , ,491 4, ,487 13,293 1, , ,786 4, ,989 13,750 1, , ,125 5, ,498 14,213 1, ,537 1,014 2,518 5, ,003 14,671 1, ,042 1,085 2,969 6, ,430 15,057 1, ,469 1,161 3,455 6, ,848 15,433 1, ,887 1,243 4,006 7, ,257 15,801 1, ,296 1,329 4,630 8, ,647 16,149 1, ,686 1,423 5,331 8, ,032 16,492 1, ,071 1,522 6,125 9, ,400 16,820 1, ,439 1,629 7,015 10, ,750 17,100 1, ,789 1,743 8,012 12, ,100 17,350 1, ,139 1,865 9,140 13, ,500 17,725 1, ,539 1,995 10,463 15,

16 TABLE VII LAKE ELVA PROJECT COST OF PROJECT GENERATION Financing Alternative 3 Total Annual Total Project Diesel Diesel Total Generation Annual Debt Interest Project Generation Diesel Fuel Annual Cost of Required Sales Service Earnings O&M Cost Required O&M Cost Cost Cost Power Year (~1wh 1 _( Mwh) ($000) ($000) ($000) (~1wh ) ($000) ($000) ($000) (It/kwh) ,692 9,844 3,964 (404) 331 2, , ,219 10,324 3,964 (404) 354 3, , ,761 10,818 3,964 (404) 379 3, ,OlD ,317 11,323 3,964 (404) 405 4, , ,888 11,840 3,964 (404) 434 4, , ,472 12,368 3,964 (404) 464 5, ,235 5, ,982 12,834 3,964 (404) 497 6, ,491 6, ,487 13,293 3,964 (404) 532 6, ,786 6, ,989 13,750 3,964 (404) 569 7, ,125 7, ,498 14,213 3,964 (404) 609 7,537 1,014 2,518 7, ,003 14,671 3,964 (404) 651 8,042 1,085 2,969 8, ,430 15,057 3,964 (404) 697 8,469 1,161 3,455 8, ,848 15,433 3,964 (404) 745 8,887 1,243 4,006 9, ,257 15,801 3,964 (404) 798 9,296 1,329 4,630 10, ,647 16,149 3,964 (404) 853 9,686 1,423 5,331 11, ,032 16,492 3,964 (404) ,071 1,522 6,125 12, ,400 16,820 3,964 (404) ,439 1,629 7,015 13, ,750 17,100 3,964 (404) 1,046 10,789 1,743 8,012 14, ,100 17,350 3,964 (404) 1,119 11,139 1,865 9,140 15, ,500 17,725 3,964 (404) 1,197 11,539 1,995 10,463 17,

17 TABLE VIII LAKE ELVA PROJECT COST OF POWER GENERATION Financing Alternative 3 Debt Assistance Cost of Annual Deferred Loan Balance Annual Power Debt Ass i st. Interest or Accrued Payment on w/lake Elva Loan Amount 10.5% Principal Loans Year ( lkwh) ($000) ($000) ($OOO) ($000) , , , , , , , , , , , , , ,155 1,185 14, , ,004 1,536 18, , ,630 1,907 21, , ,396 2,279 25, , ,183 2,665 29, , ,069 33, , ,491 37, , ,928 41, , ,382 46, , ,581 50, , ,588 55, , ,725 60,085 1, , ,745 64,830 1, , ,704 69,534 2, , ,612 74,146 2, , ,435 78,581 3,350 Continuation of this schedule beyond 2004 reflects an ability of the utility to increase annual loan payments based upon the general rate of inflation and the diesel generators in the all diesel system.

18 Debt Assistance (Cant.) Cost of Total Cos t of Annual Deferred Loan Balance Annual Power Annual Power De b t Ass; s t. Interest or Accrued Payment on w/lake Elva Sales Diesel Only Loan Amount 10.5% Pri nci pa 1 Loans Year { /kwh) (Mwh) { /kwh 1 ($OOO} ($000) ($000) ($000) , ,453 83,034 3, , ,412 87,446 4, , ,354 91,800 4, , ,239 96,039 5, , , ,100 6, , , ,942 6, , , ,503 7, , , ,678 8, , , ,388 8, , , ,528 9, , , ,961 10, , ,576 11, , ,211 12, , ,667 13, , ,764 15, * , ,018 24, , ,718 22, , ,568 23, , ,356 25, ** , ,217 23, ** , ,984 19, ** , ,103 15, ** , ,107 11, , , , * An increased amount of funds are available in year 2020 for repayment of state debt because revenue bond debt service has expired, and the Reserve Fund is also used to reduce the state loan balance. ** Rates are held constant at $4.00/kwh until the debt service on state debt assistance loans is repaid. The rate increases beyond year 2020 after retirement of Revenue bond debt service could be decreased if it is desirable to extend the repayment period on state debt beyond 44 years.