August 10, 1978
Page 25351
Mr. MARK O. HATFIELD. I am happy to yield 4 minutes to the Senator from Maine.
Mr. MUSKIE. I thank my good friend from Oregon.
Mr. President, I am pleased to support H.R. 12928, the energy and water development appropriations bill for fiscal year 19'79. I commend the chairman of the Public Works Subcommittee for his efforts in shaping and reporting this bill, which is consistent with the second budget resolution.
There are several provisions in the bill of particular interest to my State and my region.
The bill provides $1.76 million to fund preconstruction engineering and planning efforts on the Dickey-Lincoln hydroelectric and flood control project on the St. John River in northern Maine, to which the Senator from Vermont referred. The funds were requested by the President in his budget for fiscal year 1979 and will assure continued efforts on the project as we complete the required environmental studies and proceed toward construction.
I do not believe there can be many Senators who have not heard me express my support for the Dickey-Lincoln project. I will not repeat the entire case here today. I am delighted that the Appropriations Committee has again supported this project. I congratulate and thank the committee for their continued support. The project has been before the Senate many times in the past years and we have continued to support it each time.
The project has been under intensive scrutiny in recent years as the environmental impact statement is prepared. The environmental impact statement will be completed and filed this fall but the preliminary findings reaffirm my conviction that Dickey-Lincoln offers the best opportunity for development of an indigenous energy resource available to Maine and New England. There are, of course, necessary trade-offs required but I am firmly persuaded that economically and environmentally Dickey-Lincoln is the best option available to Maine and an opportunity which we can not afford to pass up.
A final decision to proceed with construction of Dickey-Lincoln has not been made and should not be made until the environmental review required under the National Environmental Policy Act has been completed. Provision of these funds, however, is necessary to assure that continuity of efforts is maintained and that unnecessary delays and related costs are avoided.
Dickey-Lincoln has one of the highest benefit-cost ratios of any major Federal hydro project that I have seen approved by the Senate in my tenure. The benefit-cost ratio, under the formula applied by law to this project, is 2.1 to 1. More than $2 will be returned to the Federal Government for every dollar invested. If one uses the current cost of money to the Federal Government the return to the Government for funds invested remains impressive — 1.2 to 1.
Following the return of capital the project will continue to produce power at inflation-proof costs and continue to provide revenues to the Government. The annual savings in electricity costs in Maine alone is estimated to be at least $15 million annually. The benefits to other New England States will be similar, depending on the ultimate distribution network.
Environmentally, the project is the most acceptable of the choices facing Maine. It is given, that a portion of the St. John River will be flooded and thousands of acres of forest land inundated. But one must keep in perspective the fact that Maine has approximately 18 million acres of forest land and we are talking about less than one-half of 1 percent of that forest land being flooded. The lakes created will make forests and streams now inaccessible from Maine accessible for recreational and other uses and will discourage the exporting of our raw forest products to Canada, enhancing their availability for processing in Maine.
Mr. President, I think there is little doubt that from any realistic perspective Dickey-Lincoln offers a great opportunity to Maine, New England and the country. I again commend the committee for supporting it and urge my colleagues to do the same.
The bill, as reported by the Appropriations Committee also provides $610,000 under general investigation for continuing studies of the Passamaquoddy tidal power project in eastern Maine. I welcome the committee's funding of this study which is being conducted pursuant to a resolution I introduced in the Senate Public Works Committee in 1975. Passamaquoddy offers an additional source of nonpolluting renewable energy which I have long been persuaded we should develop. I am hopeful that this study will provide the groundwork to harness the tremendous energy potential of the tides in eastern Maine.
The bill also appropriates $28,000,000 to providing technical assistance and loans for the development of low-head hydroelectric sites and retrofit of existing sites. This provision, as the report notes, can be of benefit to New England where more than 2,600 dams and reservoirs are without generating capacity.
Mr. President, I ask unanimous consent that certain documents relating to this subject be printed in the RECORD.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
DICKEY-LINCOLN SCHOOL LAKES, MAINE:
FACT SHEET
PROJECT SETTING
The purpose of the proposed Dickey-Lincoln School Lakes Hydroelectric Project is to convert the natural energy of the upper St. John River in northern Maine for use as a source of electricity to meet future needs of New England consumers.
The project, which would be financed by the Federal Government, is located in a remote part of Aroostook County in the St. John River Valley, adjacent to the Canadian border. The proposed project would involve about 127,000 acres, including approximately 8,000 acres of water and wetland areas. The land area is presently utilized principally for commercial lumbering operations and wildlife habitat.
Electricity would be produced by capturing the annual spring runoff of the river in a large reservoir behind a 335-foot high earth-fill dam located in the village of Dickey. The power plant at Dickey Dam would be capable of generating 1,183 million kilowatt-hours of electricity annually for use during periods of peak energy demand.
Operating as a peaking plant, large surges of water would be released from Dickey Dam during short periods of time. A second dam, 11 miles downstream at Lincoln School, would be constructed to impound the releases from Dickey Dam and regulate discharges to the river before it travels through New Brunswick to the Bay of Fundy. Electrical generation at Lincoln School would supply 262 million kilowatt-hours of energy annually to Maine consumers.
Additional increased generation of 350 million kilowatt-hours per year would be realized at downstream hydroelectric plants in New Brunswick. One-half of this energy would be returned to the United States.
The impoundment of water during the spring snow melt would have the further benefit of protecting downstream communities from damaging floods which have been especially severe in recent years.
Development of the Dickey-Lincoln School Lakes Project would have an extensive impact on the natural environment, social and economic character of the immediate area. Some 267 miles of streams, including 55 miles of the free-flowing St. John River, would be flooded to create an 86,000-acre reservoir above the Dickey Dam.
The Dickey-Lincoln School Lakes facilities would be the largest public works project ever undertaken in New England. If ultimately built, it would cost $690.3 million to construct at March 1977 prices ($544 million for the dams and related features and $146.3 million for the transmission facilities). Approximately $676.6 million of this cost would be recovered through the sale of energy to consumers.
This Fact Sheet contains background information about the proposed project and its impacts. Because preconstruction planning and design activities are not complete, ongoing and future studies may suggest modifications to specific details. Consequently, this document is subject to revision as updated information warrants. Readers may verify details by addressing inquiries to the Chief, Engineering Division, New England Division, Corps of Engineers, 424 Trapelo Road, Waltham, Massachusetts 02154.
I. Genesis
Dickey-Lincoln School Lakes evolved as a result of a study of the Development of Tidal Power at Passamaquoddy, a system of tidal bays studied since 1919 by both private and public engineers. The most comprehensive report was that completed by the International Joint Commission in April 1961 after 3 years of study at a cost of $3 million. The Commission concluded that the project was not economically feasible under the then existing conditions. At the request of President John F. Kennedy, the Commission report was reviewed to determine if the project was feasible in view of the advanced engineering techniques and prevailing economic conditions. In July 1963, a report was submitted to the President, which concluded that application of a different use-concept of power coupled with advanced engineering techniques would result in a favorable project.
On 16 July 1963, the President directed the Departments of Interior and Army to make additional studies to supplement the July 1963 report. An Army-Interior Advisory Board on Passamaquoddy and upper St. John River was formed. Interior performed studies on power facilities, power transmission, marketing benefits and other economic aspects. The Corps of Engineers developed the physical components of the project.
The Study Committee completed its evaluation in August 1964, and submitted its report to the Secretary of the Interior. Recommendations included: early authorization of the Passamaquoddy Tidal Project and upper St. John River Developments and early construction of the project to develop low cost firm power for Maine and peaking power for the remainder of New England.
The Secretary of the Interior submitted a report on 9 July 1965 to President Johnson summarizing the August 1964 report. Subsequent to August 1964, a review was accomplished to update the power benefits. The power rates had decreased due to larger, more economical developments by the power industry since the previous analyses. The reduction caused the benefit-to-cost ratio for the Passamaquoddy Power Project to fall below unity (.86 to 1). However, the benefit-to-cost ratio for Dickey-Lincoln School Lakes remained above unity with a value of 1.81 to 1.
One recommendation included in the July 1965 report approved by President Johnson was:
"Immediate authorization, funding, and construction of the Dickey and Lincoln School Projects on the St. John River and their associated transmission system. Construction would be contingent upon completion of necessary arrangements with the Canadian Government. This would also have the immediate and major by-product of preserving the famed Allagash River in Maine, one of the few remaining wild rivers east of the Mississippi River."
The Dickey-Lincoln School Lakes Project was authorized by the 1965 Flood Control Act, Public Law 89–298 dated 27 October 1965, substantially in accordance with the plans included in the August 1964 report.
II. Project description
A. Physical Characteristics
Dickey Dam is located on the upper St. John River immediately above its confluence with the Allagash River, near the village of Dickey in the Town of Allagash, and 28 miles above Fort Kent in Aroostook County, Maine. As authorized, the dam would be an earth-fill structure impounding a reservoir with gross storage capacity of 7.7 million acre-feet (2,500 billion gallons) for power, flood control and recreation. The reservoir water area would total 86,000 acres (134.4 square miles) at maximum pool elevation of 910 feet mean sea level (msl). Five dikes would be located in saddle areas along the reservoir perimeter at Campbell Brook, Cunliffe Brook, Falls Brook, Hafey Brook and South Dike adjacent to the Dickey Dam, to prevent overflow into adjacent watersheds.
Dickey Dam would have a total length of 10,200 feet and a maximum height of 335 feet above the streambed. Its outlet works would include two 26-foot diameter concrete-lined tunnels, a low level tunnel 2,170 feet long at streambed elevation and an upper level tunnel 970 feet long, approximately 100 feet above the streambed. The power facilities would include four generating units at 190,000 kilowatts (kw) each, one of which would be a reversible unit, for a total initial installed capacity of 760,000 kw. This value reflects the manufacturer's generator capacity rating at minimum head. However, the dependable capacity of the units, i.e. the generating capacity of the units to meet maximum system load during the severest hydro-period, totals 874,000 kw. Basic provisions would be included in the initial project to accommodate the potential future installation of two additional reversible units at 190,000 kw each for an ultimate installed capacity of 1,140,000 kw (1,311,000 dependable capacity). These provisions would include excavation for the adjoining forebay and tailrace channels, construction of the adjoining headworks, construction of the powerhouse foundation and raising Lincoln School Dam an additional eight feet. The installation of the additional units would be subject to Congressional authorization and would not be added until required by future power demands and an adequate source of off-peak energy is available for pumping. The project would be operated to meet peaking power requirements.
Lincoln School Dam site is located on the upper St. John River, 11 miles downstream from Dickey Dam in the Town of St. Francis. It provides for an earth-fill dam impounding a reservoir with useable storage capacity of 32,450 acre-feet. The reservoir would serve principally to regulate releases from the Dickey Dam and as power pondage. The lake would also serve as afterbay storage for the Dickey Dam pumped-storage feature. Its reservoir would ultimately encompass 2,620 acres with 59,090 acre-feet of useable storage at its maximum pool elevation of 620 feet msl. However, until the installation of future reversible units at Dickey Dam is required and authorized, the maximum pool elevation would be 612 feet msl with an area of 2,240 acres.
Lincoln School Dam would be 2,100 feet long, including the powerhouse and spillway structures, and have a maximum height of 90 feet. Its power facilities would consist of two units at 30,000 kw each and one unit at 10,000 kw, for a total installed capacity of 70,000 kw. This facility would be operated as an intermediate load power plant.
The estimated construction first cost for the project totals $690.3 million based on 1 March 1977 price levels, consisting of $544.0 million for the darns and related features, and $146.3 million for the transmission facilities.
Real Estate Requirements— The total acreage required for the project is approximately 127,000 acres (environmental studies may suggest that additional acreage is needed to mitigate loss of wildlife habitat). Of this total, 106,000 acres is timberland. The acreage required for the Dickey Dam and reservoir is 124,000 acres, including 5,700 acres in Canada, and the requirement for the Lincoln School Dam and reservoir is 3,000 acres. The project would require the relocation of 161 year-round households (116 in Allagash; 45 in St. Francis). Also, 16 commercial properties and 14 miscellaneous properties would be displaced.
B. Operational Characteristics
The project would be operated principally as a peaking power plant. In this role, the project would not be a high energy producing (i.e. kilowatt-hours) facility. A peaking power plant is designed to operate for short periods of time, at high capacity, to meet critical daily peak demands. It has quick starting capability and provides spinning reserve for load protection.
Typical peaking plants are hydroelectric projects — both conventional and pumped storage — and gas turbine units. On the other hand, baseload power is provided by large fossil-fueled or nuclear steam plants which operate most economically on a continuous basis and as a result are high energy producing installations. However, these latter plants are not suitable for peaking use and load protection because of economic considerations and operational constraints. The 1970 National Power Survey, published by the Federal Power Commission notes that the current trend towards construction of very large fossil-fueled and nuclear steam-electric baseload units has increased the need for plants designed specifically for meeting daily peak demands.
In addition to its reliability, a hydroelectric facility has a lower operating cost than alternative power sources because it does not rely upon costly fuels. Water is a continuous and clean source of power. Beyond the economic aspects, there would also be an annual savings in natural resources. To produce an equivalent amount of electrical energy, annual fuel consumption — dependent upon the type of alternate — would total 2.3 million barrels of oil, 638,000 tons of coal or 16.6 billion cubic feet of gas.
C. Generating Time
The operating time of the project is very flexible and basically would be responsive to system power demands. Under normal operating conditions, the project would generate energy to meet varying demands 12 months per year. The electrical energy producing potential of the project is a function of the river basin hydrologic characteristics such as amount of annual discharge, reservoir storage and hydraulic head available at the dam site. This energy potential can either be realized through small power units operating for long periods of time, i.e. baseload operation, or through large size units for short periods of time, i.e. peak load operation. From the standpoint of economic and operational efficiency, hydroelectric sites have their greatest value as peaking plants, such as Dickey Dam.
The annual capacity factor for Dickey Dam is approximately 15%. In simplistic terms, this means the project is capable of being operated at full capacity for 15% of the time on an annual basis to meet peak power demands. The project would also have "load following"capability on a daily and seasonal basis with potential to operate for longer periods of time at reduced capacity.
The operational time should not be viewed on a uniform daily basis, i.e. three to four hours each and every day. Rather the project would be a very flexible installation capable of generating for varying periods of time dependent upon the demand placed upon the New England system. For example, the spring season is a historical period of minimum power demand, accordingly the project generation would be minimal. Weekends and nights are also times of minimum demand during which the project would usually not generate electricity. On the other hand during periods of maximum power demand, December and January, the project could be operated for long periods extending up to eight to nine hours daily. The quick starting, flexible and reliable nature of a hydroelectric plant are assets to a coordinated power system.
The Lincoln School re-regulating dam with an annual capacity factor of approximately 48 percent would normally operate 10 hours per day, 7 days a week. With the Dickey facility operating 7 or more hours per day, the Lincoln School facility would be capable of generating energy 24 hours per day at full capacity.
In addition, the project would benefit the New England system in a reserve capacity. In the event of an electrical blackout emergency, the project is capable of generating electricity for a continuous period of up to 35 days.
D. Construction Period
Construction of the project, including all necessary land acquisition, would require approximately eight years. Initial power online would be scheduled some six years after limitation of construction and incrementally increased until total power-on-line capability would be realized approximately 1¼ years later.
III. Project economics
A. General
The project economics have been computed on the basis of both the 3¼ percent rate authorized for the project and at 6% percent which was the prevailing water resource development rate prescribed by the Water Resources Council for Fiscal Year 1977 (1 Oct. 1976-30 Sept. 1977). An explanation of the history of the authorized 3¼ percent interest rate is presented in Section III C, Economic Analyses.
The benefit-to-cost ratio for the initial planned development is 2.1 to 1 at the ¼ percent interest rate. At the 6% percent rate, the benefit-to-cost ratio is 1.2 to 1.
B. Benefits
The project's average annual benefits (1 March 1977 Price Levels) are summarized on the following page. A description of each benefit follows:
1. Power
Power would be the principal benefit realized through implementation of the Dickey-Lincoln School Lakes Project. On-site annual power generation of 1.45 billion kilowatt-hours (kwh) would result from the total initial installed capacity of 830,000 kw (944,000 kw dependable capacity) of which 190,000 kw would be of pumped-storage capability. Additional annual power generation of 350 million kwh would also be gained at down-stream Canadian power plants due to seasonally regulated flows from the project.
The power generation at the Dickey facility would be peaking power amounting to 1,182,600,000 kwh annually from a dependable capacity of 874,000 kw. The Lincoln School facility would generate intermediate power amounting to 262,800,000 kwh annually from a dependable capacity of 70,000 kw. The increased generation at downstream Canadian plants is assumed to be off-peak energy.
The power benefits for Dickey-Lincoln School Lakes are equated to the cost of the most feasible privately-financed equivalent alternative sources of power likely to develop in the absence of the Federal project. The at-market unit power values, furnished by the Federal Power Commission, are based on gas turbines for the portion of project power expected to be marketed for peaking purposes and a combined cycle generation plant as an alternative for that portion to be marketed as intermediate power. The downstream energy is assumed to be off-peak energy and equivalent to fuel saving costs.
2. Flood Control
The Dickey-Lincoln School Lakes Project would substantially reduce flooding along the St. John River between Allagash and Hamlin, Maine. Spring floods caused by snow melt runoff or snow melt runoff combined with rainfall currently result in damages to urban structures, crops and erosion of land along the riverbanks. Urban flooding consists of damages to structures, contents, and associated lands due to overland inundation. Crop loss refers to potato crops lost in the field because of sustained flooding. Bank erosion is the loss of land of varied use (idle, forest, urban, crop) as a result of the force of high velocity water flows.
Three economic damage zones (determined by correlation with hydrological data) were employed for computing benefits, namely I, St. John and St. Francis; II, Frenchville and Fort Kent; and III, Van Buren, Grand Isle, Hamlin and Madawaska. In addition, the Fort Kent flood-prone areas in Zone II above the 100-year level of protection afforded by the local protection project under construction have been treated separately inasmuch as the proposed Dickey-Lincoln School Lakes Project was credited only with those damages prevented acting after the local protection dike.
Flood control benefits would accrue from the prevention of the urban, crop, and bank erosion losses. Flood damage prevention to urban structures with the project applies to the currently unprotected flood-prone area along the St. John River downstream of Allagash and to the Fort Kent protected area for events rarer than the 100-year flood. The dollar value of this urban flood prevention at March 1977 price levels is $495,000. A reduction in crops lost in the field is estimated to be $170,000. Finally, stream bank erosion control is estimated to effect a modest reduction of 10% of current annual losses. This latter reduction provides a benefit of $31,000 at the authorized interest rate of 3¼ % or 821.000 at the 6% % rate. Total tangible flood control benefits amount to $896,000 at 3¼ and $686,000 at 6% %.
3. Redevelopment
Redevelopment benefits represent the value of local labor within reasonable commuting distance that would be used in project construction and which, in the absence of the project, would otherwise be unemployed or underemployed, i.e., direct hires and/or transfers.
Aroostook County has had areas of substantial and persistent unemployment since 1966. The five major labor market areas in Aroostook County are presently designated by the Economic Development Administration, Department of Commerce as Title IV Redevelopment Areas under Public Law 89-136.
The current supply of available local workers is insufficient to satisfy total demand over the construction period of the project. However, as much as 90% of the unskilled workers and 24% of the skilled workers required during peak years could be supplied from Aroostook County through direct hire of the unemployed or transfer of those underemployed.
Redevelopment benefits include both initial construction work and future operation and maintenance. The operation and maintenance period has been limited to the initial 20 years for purposes of claiming redevelopment benefits.
4. Recreation
The Dickey-Lincoln School Lakes Project would alter the existing recreation patterns within the project area. At the present time, this area is valued for its semi-wilderness quality with hunting, white-water canoeing. and stream fishing especially valued. The project would reduce these wilderness activities within the project site (canoeing would be eliminated) and substitute, in their place, flat-water recreation and increased day-activity usage.
A comparison of the projected recreational usage of the area without-the-project with the estimate future recreational use with-the-project was used as a basis for developing the recreational benefit. On this basis at the 3¼ % interest rate, the average annual recreation benefit without Dickey-Lincoln School Lakes totals $388,000 as compared to $374.000 with the proposed full development for a net annual loss of $14,000. At the 6 % interest rate, the relative values are $307,000 without and $329,000 with the project for a net annual gain of $22,000.
In order to evaluate the economic justification of providing recreational facilities — should the project proceed to construction — the procedures described in the following paragraphs were used to record the benefits that would be realized through site development and to properly reflect the lost opportunity cost due to benefits foregone.
To measure the incremental benefits associated with full development of the project, annual recreational usage and related benefit values were also estimated for a project with minimum required facilities (those basic facilities required for the health and safety of visitors). The pertinent data is summarized as follows:
[Table omitted]
The annual recreation benefit for the project is defined as the difference in benefits between full development and the minimal required facilities, i.e. $374,000-$202,000 or $172,000. This value has been used to evaluate the economic justification for the proposed recreational development.
The net loss of recreational opportunity has been reflected as an annual cost. The loss is measured as the difference between without project conditions and with project with minimal facilities, i.e. $388,000-$202,-000 or $186,000. In addition, the lost opportunity during construction equating to an average annual value of $7,000 has been included in a total annual cost of $193,000.
The above values are based on the authorized 3¼ % interest rate. The corresponding values at the 6% rate are $145,000 for the recreational benefit and an annual cost of $136,000 representing the lost recreational opportunity.
C. Economic Analyses
The justification for authorization of all Corps of Engineers' projects is measured in terms of the benefit-to-cost ratio. The economic analysis used to develop this yardstick for Dickey-Lincoln School Lakes is based on standards prescribed by Senate Document No. 97, 87th Congress, entitled Policies, Standards and Procedures in the Formulation, Evaluation and Review of Plans for Use and Development of Water and Related Land Resources. As previously noted, total project benefits for Dickey-Lincoln School Lakes are comprised of at-market power, total downstream energy, flood control, recreation and area redevelopment type benefits.
The project cost is evaluated on an annual basis reflecting amortization of the investment and annual operation and maintenance expenses over a 100-year project life. The cost has been increased to provide for the transmission of power by adding the total annual cost of a line between the project and the New England Power Pool (NEPOOL) System Transmission Grid. Attached as Table I is a summary of the economic analysis for both interest rates.
The 3¼ % interest rate used in the economic analysis has been the subject of considerable discussion. Accordingly, an explanation of the derivation of this rate is appropriate. The interest rate is in accordance with a Water Resources Council (WRC) regulation implemented in December 1968. This regulation revised the method of computing the interest rate as previously outlined in Senate Document 97. The regulation permitted an exception, however, for those projects already authorized such as Dickey-Lincoln School Lakes which was authorized in 1965. The exception noted that if an appropriate non-Federal agency provided — prior to 31 December 1969 — satisfactory assurances that requirements of local cooperation associated with the project would be met, then the previous interest rate would be retained. At Dickey-Lincoln School Lakes, local cooperation would be required for the cost-sharing of recreational facilities. Assurances were received from the Governor of Maine by letter, dated 24 February 1969, that the non-Federal requirements would be fulfilled at the appropriate time. As a result, the interest rate was retained at 3¼ %.
The WRC subsequently established new principles and standards for water resource planning effective in October 1973. A section of these new standards included the provision for increasing the interest rate to 6 %. However, the Water Resources Development Act of 1974, enacted by the Congress on 7 March 1974, included a section which requires that interest rates used for water resource projects be consistent with the implementation of the December 1968 WRC regulation. Accordingly, the 3¼ % interest rate remains applicable to Dickey-Lincoln School Lakes.
The Corps of Engineers also uses a procedure referred to as an "Economic Efficiency Test". The objective of an ideal system operation is to meet area power demands at least cost to consumers. Therefore, the least costly addition to a region's capacity could be considered as a yardstick for purposes of making a decision regarding such additions. The "Economic Efficiency Test" provides for such a determination. Basically, the test provides for a comparison of the costs of providing an equivalent amount of power from the most feasible alternatives likely to develop in the absence of the Federal project, evaluated on a basis comparable with the determination of the project costs (with respect to interest rate, i.e., 3¼ %, taxes and insurance). The Corps' "Economic Efficiency Test" indicates that the annual cost for Dickey-Lincoln School Lakes amounts to $37.696,000 while alternative equivalent costs, with an appropriate adjustment for benefits foregone, amount to $60,333.000. This results in a favorable comparability ratio of 1.6 to 1. At the 6% interest rate, the comparability ratio is 1.02 to 1. The attached Table II illustrates the derivation of the "Economic Efficiency Test" for each interest rate.
D. Repayment Analysis
The above analyses are used to define the economic worth of the project. The financial value of power, however, is determined through the repayment analysis. Marketing of electric power from Federal projects is the basic responsibility of the Secretary of Interior as authorized by Section 5 of the 1944 Flood Control Act. Repayment rates must be sufficient to recover costs of power production and transmission including annual operation and maintenance expenses. The total investment allocated to power must be repaid over a reasonable period of years. As a matter of administration policy, this period has been specified as 50 years. On 29 January 1970, the Secretary of Interior, under his administrative discretion to establish power rates, instituted new criteria for determining interest rates for repayment purposes for projects not yet under construction. The interest rate for Fiscal Year 1977 was 7 percent. This rate has been used for the Dickey-Lincoln School Lakes repayment analysis.
A financial feasibility study has been completed by the Department of Interior. The results indicate that the project's power costs can be recovered through power revenues at rates competitive with existing rates in New England.
The difference between the economic analyses previously described and the repayment analysis warrants further clarification. This has caused a considerable amount of misunderstanding and misinterpretation. The economic analyses — both for the benefit-to-cost ratio determination and the "Economic Efficiency Test" — are economic parameters measuring a project's worth. These analyses are not unique to Dickey-Lincoln School Lakes. The benefit-to-cost ratio is employed universally by the Corps in measuring a project's economic justification. The "Economic Efficiency Test"is also universally used by the Corps in conjunction with projects having generation of electric power as a project purpose. The economic analyses utilize 3¼ percent and 6% percent interest rates and 100-year period of evaluation. On the other hand, the repayment analysis — which is computed by the Department of Interior — is a financial measure which determines the appropriate price at which bulk power must be marketed to return the total annual investment allocated to power. For this analysis, an interest rate of 7.0 percent and a 50-year repayment period have been used.
IV. Environmental studies
Detailed data essential to a comprehensive environmental evaluation consistent with the National Environmental Policy Act of 1969 (NEPA) were not developed for Dickey-Lincoln School Lakes during earlier preconstruction planning which was terminated in the fall of 1967, prior to passage of NEPA. With the resumption of activity in 1974, environmental studies and preparation of an Environmental Impact Statement (EIS) received priority attention.
An initial activity in environmental studies was the preparation of a scope-of-work for the EIS, completed in August 1975. This scope-of-work was the plan of action for developing a comprehensive EIS. It identified all significant environmental, social and economic impacts induced by the project and recommended methodology for measuring and evaluating these impacts. Subsequent studies to develop data and analyze the various impacts have been accomplished by private consulting firms, academicians, the Corps of Engineers and other applicable Federal and State agencies. The results of these studies have been presented in the project's draft EIS distributed for public review on September 1, 1977.
Copies of the draft EIS are available by writing to: Division Engineer, U.S. Army Corps of Engineers, New England Division, 424 Trapelo Road, Waltham, Massachusetts 02154.
The draft EIS is supported by a series of 14 detailed documents — 10 Appendices and 4 technical Design Memoranda. Copies of the Appendices and Design Memoranda have been distributed to depositories throughout New England for public review. A list of these depositories is included as an attachment to this Fact Sheet.
V. Marketing of power
The Department of Interior would be responsible for marketing the electric power from Dickey-Lincoln School Lakes per authority of Section 5 of the 1944 Flood Control Act. This statute requires that power be sold in such a manner as to encourage the most widespread use thereof at the lowest possible rates consistent with sound business practice. Section 5 further directs that preference in the sale of power and energy is to be given to public and cooperative power interests.
A Financial Feasibility Study for the project power, addressing the marketing aspects, has been prepared by the Department of Interior. The report notes that after considering transmission losses and offsetting load diversities, approximately 900,000 kw of capacity and 1.2 billion kwh of streamflow energy would be available for sale at the customers' premises. The energy value excludes about 290 million kwh from the initial pumped-storage operation which is proposed to be marketed on a split-the-savings arrangement. The present concept envisions marketing of 700,000 kw (667 million kwh) as peaking power to New England outside of Maine and marketing of 200,000 kw in Maine, 50% as intermediate load power (438 million kwh) and 50% as peaking power (95 million kwh). These allocations include the United States portion of additional energy generated at downstream Canadian projects.
Marketing studies currently indicate that the 100,000 kw of peaking power allocated to Maine and 250,000 kw of the peaking power allocated to New England outside of Maine would initially be sold to private utilities. As preference customer loads grow, the sale of this power would be withdrawn from the private utilities and sold to preference customers. The proposed rates, required to repay all project costs allocated to power, were determined to be a $56 per kilowatt capacity charge and a 15 mills per kilowatt-hour energy charge. The Department of Interior noted that these values are competitive with existing rates in New England and would provide substantial savings to some customers today while providing modest savings to others. The Department of Interior concluded that sufficient power revenues could be obtained from the sale of power to repay all costs associated with the production and distribution of project power. The power features would, therefore, be financially feasible.
Historically, the Department of Interior does not proceed with definitive marketing and transmission plans until construction of the project is underway and the power-online data is relatively firm. Prior to that time, their studies are of sufficient depth to determine marketability and to evaluate the financial feasibility of the power installation.
The existence of NEPOOL — comprised of the major utilities within New England — provides an effective vehicle through which Dickey-Lincoln School Lakes output could be utilized to the mutual benefit of New England. A report dated 21 November 1974 submitted to the New England Planning Committee of NEPOOL stated that, "the Dickey project capacity would be fully effective capacity to the interconnected New England system if it were dispatched in a peaking assignment during the 1985-1986 power year. The enormous storage reservoir makes it possible to use Dickey with maximum flexibility. It can run at full capacity whenever it is needed and can sustain that power level for the duration of any peak that the system experiences. It makes an ideal source of reserve with quick response, a fact that is most valuable to have as an option open to those responsible for load dispatching."
VI. Current Status
A. General
Preconstruction planning resumed in November 1974, seven years subsequent to earlier post- authorization planning. Primary efforts to date have concentrated on preparation of an EIS, updating of project design to reflect current criteria and updating of the project cost estimate and economic justification. The draft EIS and the revised General Design Memorandum for the dams were respectively the responsibility of the Department of Interior which has statutory responsibility. .
In conjunction with Corps activity, the Department of Interior which has statutory responsibility for transmission and marketing of power from Federal projects, has been conducting studies of these two aspects. The Bonneville Power Administration has been assigned the task to define transmission requirements to tie into the existing NEPOOL grid system and to prepare an EIS for these facilities. The Southeastern Power Administration has been charged with the marketing analysis. The report on the transmission system requirements was completed in February1977 and the Financial Feasibility report, including the preliminary marketing concept, was completed in August 1977. The draft EIS for the transmission facilities is scheduled for release in February 1978.
Subsequent to release and review of the draft EIS for the transmission facilities, a final EIS combining the dams and transmission will be prepared. The scheduled date for filing the combined final EIS with the Council on Environmental Quality is August 1978.
B. Funding Summary
Prior 1966-67 ($2, 154, 000)
Current :
Fiscal year 1975 949,000
Fiscal year 1976 2,256,000
Transition quarter (July 1, 1976 to Sept. 30, 1976) 435, 000
Fiscal year 1977 (Oct. 1, 1976 to Sept. 30, 1977) 2,000,000
Fiscal year 1978 (Oct. 1, 1977 to Sept. 30, 1978) 1,000,000
Total current (6,640,000)
Total 8,794,000
C. Current Activities
Because of the controversial nature of the project, decisions on its future have awaited completion of environmental studies presented in the draft EIC and updated engineering plans and project economics included in the revised General Design Memorandum.
Pending future decisions, the preconstruction planning activities for this Fiscal Year (Oct. 1977- Sept. 1978) will essentially be limited to completion of added environmental studies resulting from review comments on the draft EIS and completion of specific feature design memoranda. With respect to the latter, only those memoranda that have input substantially advanced as a result of activities in support of environmental and general design studies will be completed.
Subsequent to public review of the project draft EIS, responses to the comments will be prepared for incorporation in the final EIS.
EASTERN MAINE ELECTRIC CO-OPERATIVE, INC.,
Calais, Maine,
September 12, 1977.
Mr. JOHN JOSEPH,
Maine State Planning Office,
State House,
Augusta, Maine.
DEAR JOHN: In response to your phone call of September 9, 1977, we have put together some calculations that pretty well support our estimates to you regarding the great power cost savings available to Maine consumers when Dickey-Lincoln power becomes available.
First, from 1970 to 1976, the Maine consumer-owned systems we checked increased their purchases from 157,481,000 KWH annually to 231,609,000 KWH annually. This shows as an annual percent increase of 6.64% during this period. In our area, we expect this increase to be sustained indefinitely due greatly to new consumer growth. Also, our usage at our Cooperative has been low due to the general low income of the area we serve. Maine population trends recently released tend to back up the population growth and new construction we have experienced recently. We might also add that rural areas all across the United States are experiencing a population shift back to the rural areas according to releases we have recently had an opportunity to review.
In addition to the historic KWH growth trend of 6.64%, we are including tables showing three other percent growth trends. Our recent growth trends, and National trend estimates showing that electricity will be used to a greater percent in the future, to deliver energy to the consumer, seem to suggest a higher than historic growth rate for future estimates.
[Tables omitted]
The combined MW loads of these same consumer owned systems is now in the order of 50 MW. By 1986 the MW load will be 95 MW based upon the historical growth rate. By the year 1990 the MW load will have increased to 123 MW. We believe that this trend is moderate and in actuality will be exceeded, but for the purposes to be shown here, it is sufficient.
Based upon the $50,000 capacity charge in 1976 and an energy charge of 15 mills, as designed by the Southeast Power Administration, and on a growth rate of 5 percent per year on the capital cost portion only, we come up with the following cost in 1986. Since the cost of falling water will not change over the years, we have placed all construction cost escalations into the capacity charge. The capacity charge will be $81.44 plus 15 mills in 1986. At a 50 percent load factor, the cost/KWH would be $.033594/KWH. Our Maine cost for 438 KWH, delivered, would be $14,000,000 per annum. Even if the growth rate goes to 6 percent the cost would be only $15,500,000 with savings only slightly less than calculated with the 5 percent growth rate. The projected power cost for Maine's newest plant in 1986, delivered, will be in the order of 6¢ per KWH. (See enclosure). The cost to our systems' consumers, therefore, would be $26,280,000. Dickey-Lincoln, thus, will save our systems on the order of $12,280,000 each and every year after 1986.
You brought up the subject that we will be utilizing other low cost Maine hydro electric plants and older less costly conventional power plants for our loads in 1986. In our Cooperative's case, very little such power is expected to be used in 1986 as we now buy most of our power outside Maine. Other consumer-owned systems purchase a Maine power mix. Our point is that the low cost power some consumer owned systems, in 1986, may obtain in their mix from other Maine plants will be returned for use by the power plant owner to serve other Maine loads. Reductions in the use of the more costly plants for Maine users can readily be scheduled in advance. Thus, it becomes evident that the entire $12,280,000 saving comes into Maine to help Maine citizens. In addition, the 100 MW of peaking power will benefit Maine citizens as will the emergency value of Dickey, the Lake, water control, jobs, etc. etc.
If you expand the $12.280,000 saving for 100 years, as some did with lumber, the total saving is an astronomical $1,228,000.000. But that's not all. That expands only the 1986 costs. It doesn't take much imagination to realize that conventional energy costs will increase after 1986 but falling water will not because Mother Nature will place the water above the dam each year at no cost. The savings indicated here, therefore, could be only the tip of the iceberg insofar as the total savings that Dickey-Lincoln represents for Maine citizens. Note also that we haven't even considered the 594,000 KW to be used in other New England states nor the emergency value of the project to all systems, in this letter. Nor did we discuss the benefit associated with the 100,000 KW of peaking power assigned to Maine.
We are not very well satisfied with the pricing arrangement designed by the Southeast Power Administration. We have no particular objection to the use of a 50 year amortization period and 7% interest on money in calculating the rate structures for Dickey-Lincoln which are the current figures used by the Southeast Power Administration. We don't object to the postage stamp rate principle. We do believe that the use of a 15 mill charge for the energy portion is unrealistically high for falling water. We also believe that the transmission charges are predominately associated with the capacity component rather than the energy component. Our suggestion is that the energy portion of the rate structure be established at 6 mills, which is certainly sufficient for energy cost produced by falling water (not fossil fuel), and the capacity factor set at $62.00. This new pricing would produce the same overall revenue and would provide a greater fairness in the pricing impact as the peaking power purchasers were getting a far better value than were the Maine purchasers of load factor power. We believe our Governor should insist upon this alternative pricing arrangement, or something close to it, to balance the benefits between the lower quantity of load factor power to be used in Maine and the much larger quantity of power, predominately peaking, to be used in other sections of New England.
With this change in rate structure, Maine's saving would increase to $17,500,000 per year. Again, if we expand this saving 100 years on the initial year's figure only, it results in an astronomical benefit of $1,750,000,000. Let us repeat that this benefit is an expanded 100 year reflection of savings during the first year of the Dickey-Lincoln plant operation and represents only the Maine load factor entitlement. It does not show how benefits increase each year after the first and does not include the benefits derived from peaking power purchases in Maine and New England. We don't necessarily subscribe to 100 year figures like this, but this type of calculation was made and published in headline form, we believe, for adverse Dickey effects on lumber value starting sometime after the turn of the century.
We are enclosing a sheet and cover from a Westinghouse Electric Corporation publication indicating power cost projections for 1986. These figures are the same as we have received from other sources. We hope this information helps.
Sincerely yours,
ROBERT V. CLARK,
General Manager.