Federal Energy Regulatory Commission

This report has been prepared at the request of EPA to provide an economic analysis of: 1) the costs to Tacoma of the mitigation measures I have been asked by EP to analyze (the "EPA straw man" mitigation measures), 2) how those costs would affect the total cost of Cushman Project generation and any required replacement generation, and 3) the consequences for TCL and its ratepayers of those costs. This report does not address either the environmental or economic benefits of the proposed mitigation measures, such as fishery and recreation benefits, which FERC will be obligated to consider in any Cushman licensing decision.
The proposed mitigation package would increase the cost of electricity produced at Cushman and reduce the amount of electricity generated at Cushman, without substantial rate increases and without jeopardizing Tacoma's competitive position in a deregulated market.

The two methods [FERC] now uses to evaluate the economic value of power from hydro projects have evolved through the years and generally conform to techniques set forth in the Principles and Standards, which the Water resources Council published as final rules in September 1980. Both methods attempt to quantify how an electric power system's future costs would differ with and without a proposed or existing hydro project. The two methods: 1. Simulated market price (often called marginal price, avoided cost, or incremental cost in the electric utility industry) 2. Cost of the most likely thermal alternative