Leaburg Canal Update – August 30th 2022

August 31, 2022

Leaburg Hydroelectric Project Community Discussions planned for September-October

EWEB invites our customer-owners to learn about and discuss the future of the Leaburg Hydroelectric Project Strategic Evaluation.

EWEB customers are invited to EWEB’s Roosevelt Operations Center (4200 Roosevelt Blvd.) for screenings of the “Determining the Future of the Leaburg Hydroelectric Project” video (below) and Q&A sessions on the following dates:

In addition, EWEB staff will present virtual webinars for “Lunch & Learn” sessions. Click on the dates below to register:

Watch: Determining the Future of the Leaburg Hydroelectric Project

Please watch this video to learn more about the history of the project, take a tour of the dam and canal, learn the four alternatives we’re proposing for the future of the project, and understand how our elected commissioners are making this decision based on a Triple Bottom Line Assessment of what makes sense financially, environmentally, and for our community.

Project Alternatives Baseline Cost Estimates and Net Present Values

On Tuesday, August 2, at 6:30 p.m., the Leaburg Project team presented the latest information (click to download their memo) to EWEB’s elected Commissioners.

The Board Meeting (Video Recording) included updated cost estimates for each of the four proposed alternative configurations of the Leaburg Project, as well as the net present value (NPV – the difference between future costs and incomes) of each based on three varying projections of future electricity prices and upfront capital costs.

BASELINE COST ESTIMATES

The team worked with engineering consultants to calculate the costs of carrying out the proposed configurations for each alternative, including construction, construction management, licensing and permitting, site restoration, and many other costs. The cost estimates include a contingency for going over by 50% or coming in up to 30% under budget, as recommended by the American Association of Cost Engineering due to the project being in the “study or feasibility” phase.

Given the project’s early stages and the uncertainties of future costs, the cost estimates are as follows:

The work required to bring the project safely to a decommissioned or operational state involves significant upfront capital costs. As a publicly owned utility, expenses are largely funded through rate increases to EWEB’s customer-owners. However, EWEB will look for federal, state, and other grants to help with the costs of any alternative. The team has proposed an extended project timeline to attenuate the impacts of the potential rate increases:

Regardless of the alternative, EWEB would have to increase electricity rates to finance the required capital spending. Due to the complex calculations and pending decisions on other projects that would affect EWEB’s borrowing power, the Finance department is still calculating the potential rate increases each alternative would entail and will present that information to commissioners in October.

NET PRESENT VALUES

The net present value (NPV) for each alternative is substantially negative. Even when accounting for future incomes from electricity generated in the Return to Service alternatives, and including the optimistic projection of higher-than-anticipated market electricity rate and lower-than-expected capital construction cost, losses of over $130M are anticipated:

The Project Team worked with EWEB’s Generation, Power Planning, and Finance departments to calculate the costs and incomes for each alternative. Calculation inputs consider initial build costs, operation and maintenance, generation potential based on varying river flows, generation revenue based on varying power market prices, and incomes from Renewable Energy Credit and carbon markets that provide financial benefits for renewable energy projects:

Based on expected, high market, and low market wholesale energy prices, the potential revenue generated by the Return to Service alternativeswould not outpace projected O&M costs. The retail price of selling electricity directly to EWEB customers would provide income to cover O&M costs after the construction period:

TRIPLE BOTTOM LINE ASSESSMENT

Commissioners will discuss the Triple Bottom Line Assessment in an open-form Board Meeting on October 25 and are expected to make a decision in December 2022.

Provide Public Comment

Please provide your feedback for how these decisions may impact you. Commissioners are evaluating the financial costs of their decision, the environmental impacts of each repair alternative, and the social impacts: how each decision would affect Leaburgers and EWEB customers.

http://eweb.org/LeaburgPublicComment

For a more in-depth refresher, you can start at the Leaburg Project Website: http://eweb.org/leaburgcanal