MINIMUM REVENUE REQUIREMENTS

The Boulder Canyon project act requires, in advance of construction appropriations, assured revenues adequate to effect repayment with 4 per cent interest, within 50 years after completion, of the cost of the dam and power plant, exclusive of an allocation of $25,000,000 for flood control.

The plan now under discussion contemplates that the United States will provide, operate, and maintain the dam and power house, while the power machinery and equipment is to be provided, operated, and maintained by the lessees. The table immediately following is on this basis and presents the resulting requisite power rates with the flood-control cost included in one case and excluded in the other. No allowance has been made for revenues from the sale of water in either case. An arbitrary increase of 10 per cent has been made in the tentative costs to allow for units being out of service and for contingencies. The results are also graphically presented as lines A and B on Plates 1 and 2. In developing the necessary rate to repay the flood-control allocation of $25,000,000, it becomes necessary to give consideration to section 2 of the Boulder Canyon project act, which dedicates to that purpose only 62%1⁄2 per cent of the revenues not required to repay costs with the flood-control allocation omitted, automatically providing revenues for the States of Arizona and Nevada.

Plate 3 presents, graphically, the financial operation of the power development, as to Government costs and revenues, for a 12-unit power plant with a 55 per cent load factor on the basis of flood-control costs repaid, assuming minimum power rates for this purpose and no other revenue.

NOTE.-Interest and repayment on flood control is taken out of 621⁄2 per cent of annual surplus.

REVENUE FROM SALE OF WATER

Section 1 of the Boulder Canyon project act reads in part as follows: "That no charge shall be made for water or for the use, storage, or delivery of water for irrigation or water for potable purposes in the Imperial or Coachella Valleys" and the first paragraph of section 5 authorizes the Secretary of the Interior "To contract for the storage and delivery of water for irrigation and domestic uses upon charges that will provide revenue which, in addition to other revenue accruing under the Reclamation law and under this act, will, in his judgment, cover all expenses of operation and maintenance incurred by the United States on account of works constructed under this act and the payments to the United States under subdivision (b) of section 4."

Since there is to be no charge for water used in the Imperial and Coachella Valleys the revenue derived from water other than that used by the Metropolitan Water District of southern California will be small.

The Metropolitan Water District estimates that it will require, during the first 10-year period of use, at least 750,000 acre-feet per annum to meet current domestic needs; to protect underground domestic supplies against salt-water invasion and to replenish and restore underground water levels upon which domestic consumption depends. It is understood that the district may desire to contract for 1,000,000 acre-feet per annum.

The district has suggested that a fair charge for storage and delivery service for domestic water from Boulder Canyon reservoir may be determined by assuming that the income from stored water, if such service be furnished on a uniform basis, must be sufficient to pay the cost of all features of the project directly involved in providing such storage and delivery service. Studies made by the Bureau of Reclamation indicate that approximately 10,000,000 acre-feet of additional water per year could be diverted from the Colorado River by virtue of the Boulder Canyon reservoir under present upstream development and that in the distant future about 5,000,000 acre-feet of additional water could be diverted per year.

The estimated cost of the dam is $98,000,000 and the estimated annual cost of operation and maintenance of the dam including depreciation is $291,000. The total annual charge to provide for operation and maintenance, depreciation, and repayment in 50 years with interest at 4 per cent amounts to $4,857,000. Assuming that 5,000,000 acre-feet of Boulder Canyon reservoir is allocated to silt storage and 4,400,000 acre-feet is dead storage serving to create a minimum head for power, the active storage would be the difference between 26,000,000 and 9,400,000 or 16,600,000 acre-feet and the annual cost 16,600,000 chargeable to active storage would be X $4,851,000= 26,000,000 $3,100,000. The annual cost of additional water on this basis would $3,100,000 62 cents per acre-foot. It is suggested that 50 to 5,000,000 60 cents per acre-foot would be a fair price to be charged for storage and delivery service from Boulder Canyon reservoir and at this rate a revenue of $375,000 per annum would be derived from the Metropolitan Water District on the assumption that the district will contract for 750,000 acre-feet per annum.

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BOULDER CANYON DAM AND POWER HOUSE CONSTRUCTED BY GOVERNMENT, AND POWER PLANT MACHINERY AND EQUIPMENT PURCHASED, INSTALLED AND OPERATED BY LESSEE.

A...... Rate necessary to repay all costs including Flood Control +10% for contingencies.

B......Rate necessary to pay all costs including Flood Control + 10% for contingencies, assuming $375,000 derived from sale of water. C.......Rate necessary to pay all costs except Flood Control +10% for contingencies.

D. E and F.....Value of energy at Boulder Canyon based on cost of equivalent steam energy, and including steam standby for Boulder Canyon Power, for fuel costs as noted.

Boulder Canyon Output assumed at 3,600,000,000 Kw. Hrs. per annum.

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