Overall Economics of Alternatives

1. Overall Economics of Alternatives Steering Committee Meeting April 29, 2004 - SLC

2. Comparative Economics of AlternativesWest-Wide Basis Compared to 2013 case w/o resource or transmission additions RMATS 2013 Alternatives

3. Estimating Cost & Benefits Ideally • We’d have estimates of both costs and benefits for each year of each asset’s useful life • Net present value of annual benefits less annual costs But • We have initial capital expenditure estimates and can approximate many fixed costs over time, but only first year running cost savings (VOM Savings) • VOM savings should increase over time • RMATS VOM savings are driven by substituting coal & wind generation for gas-fired generation, i.e. resources with no expected real fuel escalation for resources with expected real fuel price escalation RMATS 2013 Alternatives

4. Cost and Benefit Comparison RMATS 2013 Alternatives

5. Cost/Benefit Estimate With Only First Year Savings • If benefits (VOM savings) are increasing in real terms over time, do not compare to costs that decrease in real terms over time • Real levelized costs are relatively comparable to first year VOM savings that go up • Objective: a representative year of costs and savings • Capital charge concept: present value of depreciation, interest, ROE, taxes, G&A – levelized over life of resources or transmission • Applied to initial investment. Currently using 10 percent for all resource additions and 8 percent for transmission additions (source: CERA) – subject to update • Other issues: whether include CO2 adder and renewable resource tax credit; wear and tear assumptions on non-wind resources due to wind • Several data needs are still outstanding RMATS 2013 Alternatives