Cost of Generation Model

CALIFORNIA
ENERGY
COMMISSION
COST OF GENERATION MODEL

USERS GUIDE
VERSION 2
BASED ON VERSION 2 OF
THE COST OF GENERATION MODEL
STAFF REPORT
March 2010
CEC-200-2010-002
Arnold Schwarzenegger, Governor
CALIFORNIA
ENERGY
COMMISSION
Joel Klein
Principal Author
Joel Klein
Project Manager
Ivin Rhyne
Manager
ELECTRICITY ANALYSIS
OFFICE
Sylvia Bender
Deputy Director
ELECTRICITY SUPPLY
ANALYSIS DIVISION
Melissa Jones
Executive Director
DISCLAIMER
This report was prepared by a California Energy Commission staff person. It does not necessarily represent the
views of the Energy Commission, its employees, or the State of California. The Energy Commission, the State of
California, its employees, contractors and subcontractors make no warrant, express or implied, and assume no
legal liability for the information in this report; nor does any party represent that the uses of this information will
not infringe upon privately owned rights. This report has not been approved or disapproved by the California
Energy Commission nor has the California Energy Commission passed upon the accuracy or adequacy of the
information in this report.
ACKNOWLEDGEMENTS
Manythanksareduetothefollowingindividualsfortheircontributionsandtechnical
supporttothisreport:
EnergyCommissionStaff:
AlAlvarado
PaulDeaver
BarbaraCrume
StevenFosnaugh
ChrisMcLean
MargaretSheridan
AspenEnvironmentalGroup:
WillWalters
RichardMcCann
DepartmentofWaterResources:
AnithaRednam
Pleaseusethefollowingcitationforthisreport:
Klein,Joel.2010.CostofGenerationModelUsersGuideVersion2.CaliforniaEnergy
Commission.CEC2002010002
TABLE OF CONTENTS
Page
ACKNOWLEDGEMENTS.................................................................................................................i
ABSTRACT........................................................................................................................................vi
EXECUTIVESUMMARY..................................................................................................................1
OverviewoftheCostofGenerationModel.................................................................................2
ImprovementstotheModel...........................................................................................................5
OrganizationofUsersGuide..........................................................................................................5
CHAPTER1:Introduction................................................................................................................9
CHAPTER2:CostofGenerationModelOverview...................................................................11
InputOutputWorksheet..............................................................................................................15
AssumptionsWorksheets.............................................................................................................15
PlantTypeAssumptions..........................................................................................................15
FinancialAssumptions.............................................................................................................16
GeneralAssumptions................................................................................................................16
DataWorksheets............................................................................................................................16
Data1...........................................................................................................................................17
Data2...........................................................................................................................................17
FuelPriceForecasts...................................................................................................................18
Inflation.......................................................................................................................................18
IncomeStatementWorksheet......................................................................................................18
CHAPTER3:UsingtheCostofGenerationModel...................................................................19
AdmonishmenttoAllCostofGenerationModelUsers..........................................................19
OpeningtheCostofGenerationModel.....................................................................................19
UsingtheCostofGenerationModelWithItsPresetData......................................................20
EnteringUserSpecifiedData.......................................................................................................22
SavingandRecallingNewScenarios..........................................................................................23
ii
SavingaNewScenario.............................................................................................................23
UsingaNewScenario...............................................................................................................23
ReadingtheResults.......................................................................................................................24
SummaryDataTables...................................................................................................................24
AnnualCostSummary.................................................................................................................27
UsingtheScreeningCurveFunction..........................................................................................29
UsingtheSensitivityCurveFunction.........................................................................................31
CHAPTER4:DetailedDescriptionofWorksheets....................................................................33
InputOutputWorksheet..............................................................................................................33
Data1Worksheet..........................................................................................................................36
PlantCapacityandEnergyData.............................................................................................36
OperationalandPerformanceData........................................................................................40
FuelUseData.............................................................................................................................42
FinancialInformation................................................................................................................45
TaxInformation.........................................................................................................................47
RenewableTaxBenefitsInformation......................................................................................47
Data2Worksheet..........................................................................................................................48
ConstructionCosts....................................................................................................................48
OperationandMaintenanceCost...........................................................................................51
CostFactors................................................................................................................................53
IncomeStatementWorksheet......................................................................................................54
LevelizedFixedCosts...............................................................................................................55
LevelizedVariableCosts..........................................................................................................56
CostofGenerationModelMechanicsandDefinitions........................................................56
ModelingAlgorithms................................................................................................................57
OverhaulWorksheet.....................................................................................................................61
Glossary..........................................................................................................................................67
APPENDIXA:Definitions............................................................................................................A1
iii
APPENDIXB:FederalTaxIncentives........................................................................................B1
ATTACHMENTA:ReferenceforDegradationFactors...........................................................11
ATTACHMENTB:AssetRentalPrices......................................................................................21
LIST OF FIGURES
Page
Figure1:IllustrationofLevelizedCosts...........................................................................................4
Figure2:FlowChartforCostofGenerationModel.....................................................................12
Figure3:CostofGenerationModelWorksheets..........................................................................13
Figure4:BlockDiagramforCostofGenerationModel..............................................................14
Figure5:ColorCodingforAssumptionsWorksheets.................................................................15
Figure6:InputSelectionTable........................................................................................................21
Figure7:ColorCodingforAssumptionsModification...............................................................23
Figure8:OutputSummaryTable...................................................................................................25
Figure9:GraphicalSummaryofOutputTable.............................................................................26
Figure10:KeyCapitalandOperatingCostSummary.................................................................26
Figure11:CapacityandEnergySummary....................................................................................26
Figure12:SummaryofOperationalPerformanceFactors..........................................................27
Figure13:FuelUseSummary..........................................................................................................27
Figure14:AnnualCostsMerchantCombinedCyclePlant......................................................28
Figure15:AnnualCostsBasedonAssetRentalPrice..................................................................28
Figure16:ScreeningCurve($/MWh).............................................................................................29
Figure17:InterfaceWindowforScreeningCurve.......................................................................30
Figure18:SampleSensitivityCurve...............................................................................................31
Figure19:InterfaceWindowforSensitivityCurves....................................................................32
Figure20:PlantCapacityandEnergyData...................................................................................37
Figure21:OperationalandPerformanceData..............................................................................41
Figure22:FuelUseTable.................................................................................................................42
iv
Figure23:HeatRateDegradationSimpleCycle........................................................................44
Figure24:HeatRateDegradationCombinedCycle..................................................................45
Figure25:FinancialInformation.....................................................................................................46
Figure26:TaxInformation...............................................................................................................47
Figure27:TaxBenefits......................................................................................................................48
Figure28:InstantCosts.....................................................................................................................50
Figure29:ConvertingInstanttoInstalledCost............................................................................51
Figure30:ConvertingInstanttoInstalledCost............................................................................51
Figure31:FixedO&MCost..............................................................................................................52
Figure32:VariableO&MCost.........................................................................................................53
Figure33:CostFactors......................................................................................................................54
Figure34:AnnualRevenueStreamforRevenueRequirementAccounting.............................59
Figure35:AnnualRevenueStreamforCashFlowAccounting.................................................60
Figure36:LevelizedCashFlowsPeriodicCosts..........................................................................66
FigureB1:SummaryofTaxCredits2009IEPR.......................................................................B1
LIST OF TABLES
Page
Table1:FinancialAssumptions.......................................................................................................46
Table2:SampleOverhaulCalculation...........................................................................................65
TableA1:CapitalCostData..........................................................................................................A6
ABSTRACT
TheCostofGenerationModelUsersGuideisamanualforusingtheCaliforniaEnergy
CommissionsCostofGenerationModel.TheEnergyCommissionsCostofGeneration
Modelcalculateslevelizedcoststhetotalcostsofbuildingandoperatingapowerplant
overitseconomiclifeconvertedtoequalannualpayments,indollarspermegawatthour
anddollarsperkilowattyear.Thelevelizedcostsprovideabasisforcomparingthetotal
costsofonepowerplantagainstanother.Thesecostsandthesupportingdataareessential
inputstomanygenerationandtransmissionstudies.
TheCostofGenerationModelwasfirstdevelopedfortheEnergyCommissions2003
IntegratedEnergyPolicyReportandsubsequentlyupdatedforthe2007and2009policyreport
cycles.ThepresentCostofGenerationModelandUsersGuideweredevelopedtosupport
the2009ComparativeCostofCaliforniaCentralStationElectricityGenerationTechnologiesReport.
ThepresentversionoftheCostofGenerationModelhaspresetdatafor21centralstation
generationtechnologies6gasfired,13renewable,nuclear,andcoalintegratedgasification
combinedcyclebuthastheabilitytoprovidemodifiedscenariodataonexisting
technologiesortoaddadditionaltechnologies.
TheUsersGuidedescribestheCostofGenerationModel,itsfeatures,andhowtousethe
CostofGenerationModel.TheCostofGenerationModelhastheabilitytomodelall
physicalfeaturesincludingpowerplantandtransmissionlosses,capacityandheatrate
degradation,andemissionfactors.Calculatedcostsincludecapitalcost,operationand
maintenancecosts,insurance,advalorem,environmentalcompliancecosts,construction
cost,andtaxes.TheCostofGenerationModelhasthreeadditionalfeaturesnotcommonly
foundinothercostofgenerationmodels:screeningcurves(levelizedcostsasafunctionof
capacityfactor),sensitivitycurves(levelizedcostsasafunctionofvariousinputcosts),and
wholesaleelectricityprices.
Keywords:CostofGeneration,levelizedcost,instantcost,overnightcost,installedcost,
fixedoperationandmaintenance,O&M,fixedcosts,variablecosts,heatrate,transformer
losses,transmissionlosses,technology,annual,alternativetechnologies,renewable
technologies,combinedcycle,simplecycle,combustionturbine,integratedgasification,
coal,fuel,naturalgas,nuclearfuel,capacitydegradation,heatratedegradation,financial
variables,capitalcoststructure,screeningcurves,sensitivitycurves,riskfactors,cost
variations,modelingalgorithms,electricgenerationdefinitions,assetrentalprices,and
wholesaleelectricityprices
vi
EXECUTIVE SUMMARY
ThisUsersGuideisthemanualfortheCostofGenerationModelusedinthe2009Integrated
EnergyPolicyReportproceedingtodevelopthe2009ComparativeCostofCaliforniaCentral
StationElectricityGenerationTechnologiesReport.Thereportcanbefoundat:
www.energy.ca.gov/2009publications/CEC2002009017/CEC2002009017SF.PDF.The
UsersGuide,alongwiththeCostofGenerationModelisbeingmadepublicallyavailablefor
otherstateagenciesandinterestedusers.
Thegoalofthecostofgenerationprojectistohaveasinglesetofthemostcurrentlevelized
costestimatesandsupportingdataforuseinenergyprogramstudiesattheCalifornia
EnergyCommissionandotherstateagencies.Thelevelizedcostofgenerationrepresentsa
constantcostperunitofgenerationoverafixedtimehorizon.Theselevelizedcostsare
usefulincomparingthecostofonetechnologyagainstanother,andforevaluatingthe
financialfeasibilityofanelectricitygenerationtechnology.Sincemoststudiesinvolvingnew
generationrequireanassessmentofcosts,accurateandreadilyavailablelevelizedcostof
generationestimatesandaccompanyingdataareessentialformostresourceplanning
studies.
Therearenumerousstudiesthatprovidelevelizedcostestimatesforindividualgeneration
technologies,butitisdifficulttocomparethemeritsofthesedifferentestimateswithout
understandingtheunderlyingassumptions.Sinceplantcharacteristics,capitalcosts,plant
operations,financingarrangements,andtaxassumptionscanvary,differentassumptions
willproducesignificantlydifferentlevelizedcostestimates.Itis,therefore,importantto
haveaconsistentsetofassumptionstobeabletocomparethemeritsofeachgeneration
technology.
The2009ComparativeCostofCaliforniaCentralStationElectricityGenerationTechnologiesReport
isintendedtoprovideabasicassessmentofsomeofthefundamentalattributesthatare
generallyconsideredwhenevaluatingthecostofbuildingandoperatingdifferentelectricity
generationtechnologyresources.However,carefulconsiderationmustbetakenonhowthe
levelizedcostsareusedforevaluatingelectricitygenerationoptions.Singlevaluelevelized
costsaretypicallyvalues,notpreciseestimatesthatareapplicabletoallstudies.Atypical
costestimateisbasedonaspecificsetofassumptions,butinrealitythecostofanactual
generationprojectwillvarydependingonthatparticularproject.Comparingthelevelized
costofonegenerationtechnologyagainstanothermaybeusefulwhenlevelizedcostsareof
significantlydifferentmagnitudes,butproblematicwherelevelizedcostsareclose.
Thelevelizedcostanalysisdoesnotcaptureallofthesystem,environmentalorother
relevantattributesthatwouldtypicallybeexaminedbyaportfoliomanagerwhen
conductingacomprehensivecomparativevalueanalysisofavarietyofcompeting
resourceoptions.Thelevelizedcostestimatesdonotaccountforthegenerationservice
attributes,thevaluethatdifferenttechnologieshavetotheelectricitysystemorrepresent
thenegotiatedmarketpricesforshorttermorlongtermpowerpurchasecontracts.These
estimatesdonotpredicthowtheunitswillactuallyoperateinanelectricsystem,howthe
1
unitswillaffecttheoperationofotherfacilities,ortheireffectontotalsystemcosts.Finally,
thelevelizedcostestimatesdonotaddressenvironmental,systemdiversityofresource
types,orriskfactorsthatareavitalplanningaspectforallresourcedevelopmentstudies.
ThedatathatisincludedintheCostofGenerationModelisthemostcurrentsetof
generationtechnologycharacterizationsavailable,basedonsurveysofrecentlyconstructed
projectsandinformationfromindustryexperts.TheCostofGenerationModelhasbeen
modifiedtocapturetheattributesofdifferentdevelopersandexaminearangeofpossible
costdriversthatmayaffectlevelizedcostcalculations.Therefore,itisimportanttousethe
Modelandtheinformationinthisreportcarefully.Thefollowingguidelinesandsubsequent
issuesareintendedtoprovideclarityontheproperuseofthisreport:
Levelizedcost,orforthatmatteranygenerationortransmissionstudy,shouldnotrely
onsinglepointestimates.Thereiswidevariationinoperationalandcostdata.Single
pointvaluesarebasedononesetofconditionalassumptionsaresimplisticandwillnot
representtherangeofcoststhatadevelopermayencounter.Allstudiesshouldbebased
onarangeofdatatocapturetheuncertaintiesthatdevelopersandratepayerswilllikely
encounter.
Wheretheuseofsinglepointestimatesbecomeunavoidable(forexample,setting
contractualterms),therisksassociatedwithanincorrectestimatealongwiththe
sensitivityoftheresultsshouldbeconsidered.Theassumptionsshouldbecarefully
documentedtoallowreplicationandunderstandingoftheresults.
Overview of the Cost of Generation Model

TheCostofGenerationModelcalculatestotallevelizedcosts,whicharethesumofthe
followingfixedandvariablecostcomponents:
FixedCosts:
CapitalandFinancingTotalcostofconstruction,includingfinancingtheplant.
InsuranceCostofinsuringthepowerplant.
AdValoremPropertytaxes.
FixedOperationandMaintenanceStaffingandothercoststhatareindependentof
operatinghours.
CorporateTaxesStateandfederaltaxes.
VariableCosts:
FuelCostCostofthefuelused.
VariableOperationandMaintenanceOperationandmaintenancecoststhatarea
functionofthenumberofoperatinghours.
TransmissionServiceCosts.
Thelevelizedcostformulausedinthismodelfirstsumsthenetpresentvalueofthe
individualcostcomponentsandthencomputestheannualpaymentwithinterest(or
discountrate,r)requiredtopayoffthatpresentvalueoverthespecifiedperiodT.The
formulaisasfollows:
Cost t
r * (1 + r ) T
Levelizedcost=
*
t
((1 + r ) T 1)
t =1 (1 + r )
T
Theseresultsarepresentedasacostperunitofgenerationovertheperiodunder
investigation.Thisisdonebydividingthecostsbythesumofalltheexpectedgeneration
overthetimehorizonbeinganalyzed.Themostcommonpresentationoflevelizedcostsisin
dollarspermegawatthourorcentsperkilowatthour.
LevelizedcostisgeneratedbytheCostofGenerationModelusingmultiplealgorithms.
Usingdozensofcost,financial,andtaxassumptions,theCostofGenerationModel
calculatesthecostsforatechnologyonanannualbasis,findsapresentvalueofthose
annualcosts,andthencalculatesalevelizedcost.Figure1isafictitiousillustrationofthe
relationshipbetweenannualcostsandlevelizedcosts.Thisrelationshipisdefinedbythe
factthatlevelizedcostvaluesareequaltothenetpresentvalueofthecurrentandfuture
annualcosts.Thisannualized(orlevelized)costvalueallowsforthecomparisonofone
technologyagainsttheother,whereasthedifferingannualcostsarenoteasilycompared.
Figure 1: Illustration of Levelized Costs

ANNUAL vs. LEVELIZED COSTS
$40.0
$38.0
$36.0
Cost ($/MWh)
$34.0
$32.0
$30.0
$28.0
Annual Costs
Levelized Costs
$26.0
$24.0
$22.0
$20.0
2004
2006
2008
2010
2012
2014
2016
2018
2020
Source: Energy Commission
Insurance,advalorem,andtheoperationandmaintenancecostsareessentiallyamatterof
estimatingthefirstyearcostandthenescalatingthatcostoverthelifeofthestudyto
accountfornominalandrealinflation.Annualfuelcosts(dollarpermegawatthour)area
functionofthecostofthefuelcostpriceforecast(dollarspermillionBritishthermalunit)
andanydegradationoftheheatratethatmightoccur.
Capitalfinancingandcorporatetaxesaremorecomplicatedinthattheamountoffinancing
cannotbeestimatedwithoutknowingthetaxes,andthetaxescannotbeknownuntil
amountoffinancingisknown.Thisrequiresasetofsimultaneousequations.
Withtheexceptionoffixedandvariableoperationandmaintenance,alloftheseestimates
areafunctionofwhothedeveloperis:merchant,investorownedutilityorpubliclyowned
utility.Thefinancingcostsareparticularlydifferentforthethreedevelopers.Publicly
ownedutilitiesfinancesolelythroughdebt,whereasmerchantandinvestorownedutilities
developersraisemoneythroughdebtandequity(stocks).However,eachdevelopertype
makesdebtandequitypaymentsindifferentways.Debtpaymentsareconstantfor
merchantplantsbutafunctionofbookvalueforinvestorownedutilities.Equitypayments
formerchantplantsarecalculatedbasedoncashflowaccountingbutbasedonrevenue
requirementaccountingforinvestorownedutilities.
TheCostofGenerationModelhasanumberoffeatures.TheCostofGenerationModel
calculateslevelizedcostsbycomponentindollarspermegawatthouranddollarsper
kilowattyear.Thetoolincludestheabilitytomodelallphysicalfeatures,includingpower
plantandtransmissionlosses,capacityandheatratedegradation,andemissionfactors.The
costsincludecapitalcost,operationandmaintenancecosts,insurance,advalorem,
environmentalcompliancecosts,constructioncost,andtaxes.TheCostofGenerationModel
4
hasthreeadditionalfeaturesnotcommonlyfoundinothercostofgenerationmodels:
screeningcurve,sensitivityandwholesaleelectricityprices.
Improvements to the Model

TheCostofGenerationModelusedforthe2009IntegratedEnergyPolicyReportisan
improvementovertheoriginalCostofGenerationModelusedforthe2007IntegratedEnergy
PolicyReportinfiveways.First,theCostofGenerationModelhastheabilitytoprovidea
rangeoflevelizedcostestimates(low,medium,andhigh)asoptionsettings.Second,the
CostofGenerationModelcapturesthechangeinvariablesovertime,suchasinstantcost.
Third,theCostofGenerationModelnowcalculateslevelizedcostsusingacashflow
accountingmethodformerchantprojects,insteadoftherevenuerequirementapproachthat
wasusedinthepreviousversion.Therevenuerequirementaccountingmethodcan
overstatethecostofmerchantalternativetechnologiesbyasmuchas30percent.Fourth,the
CostofGenerationModelestimatestransmissiontransactioncostsandthecostof
transmissiontothefirstpointofinterconnection.Fifth,theCostofGenerationModelhasthe
optiontocarryforwardtaxestothefollowingyearsinadditiontothetraditionaloptionof
takingthefulltaxbenefitsinthecurrentyear.
Organization of Users Guide

TheUsersGuideprovidesadescriptionoftheCostofGenerationModel,asummaryofits
features,adetaileddescriptionofitsalgorithms,andinstructionsonhowtousetheCostof
GenerationModel.
Chapter1describesthepurposeoftheUsersGuideandprovidesabriefhistoryoftheCost
ofGenerationModelandabriefdescriptionoftheCostofGenerationModel.
Chapter2providesanoverviewoftheCostofGenerationModel.Thissectiondescribesthe
structureoftheCostofGenerationModelanditsvariousworksheets,themostimportantof
whichare:
InputOutputWorksheet,whichisusedfordataentryandlevelizedcostreporting.
Data1and2Worksheets,whichcollectandprocessthetechnologyspecificdata.
IncomeStatementsWorksheets,whichcalculatethelevelizedcosts.
AssumptionsWorksheetsthatprovidethetechnologyspecificdatafortheData1and2
worksheets:
PlantTypeAssumptionsWorksheetsthatsummarizetheaverage,high,andlow
plantspecificperformanceandcostdataforeachofthetechnologies
5
FinancialAssumptionsWorksheetthatprovidesthecapitalstructureandcostof
debtandequityassumptions.
GeneralAssumptionsTaxrates,taxbenefitdata,andaverageratesofnominaland
realinflation.
Chapter2alsodescribesthespecialfeaturesoftheCostofGenerationModel:
AnnualCostsYearlycostsindollarsperkilowattordollarspermegawatthourtobe
usedinscenariostudies.
ScreeningCurvesLevelizedcostasafunctionofcapacityfactor.
SensitivityCurvesLevelizedcostasafunctionofpercentagechangeofcost
assumptions.
WholesaleElectricityPriceForecastEstimatesthefuturecostofwholesaleelectricity.
Chapter3instructstheuseronhowtousetheCostofGenerationModel:
Howtoselectthepresettechnologyassumptions.
Howtocreate,save,andrecallscenarios.
Howtoreadandinterprettheresults.
Howtoreadandinterpretsummarytables.
HowtousethespecialfeaturesoftheCostofGenerationModel.
Chapter4providesadetaileddescriptionofthemorecomplexworksheets:
InputOutputWorksheetanditsdatasummarytables.
Data1Worksheetanditscapacity,energy,fueluse,heatrate,financial,andtaxrate
calculations.
Data2Worksheetanditsinstant,variableandoperationandmaintenancecosts
calculations.
IncomeStatementWorksheetsandtheiralgorithms.
OverhaulWorksheetanditsnewlydevelopedalgorithmsforestimatingthecostsof
overhauls.
AppendixAprovidesacompletelistofrelateddefinitions.
6
AppendixBisasummaryoffederaltaxincentives.
AttachmentAisasourcereferencefortheheatrateandcapacitydegradationcalculationsin
Chapter4.
AttachmentBprovidesadescriptionofAssetRentalPrices.
CHAPTER 1: Introduction
TheCostofGenerationModel(COGModel)isaspreadsheetmodelthatcalculateslevelized
costforcentralstationelectricgeneratingtechnologieslargepowerplantsthatserve
Californiaselectricityneedsasopposedtosmallpowerplantsthatserveindividual
residentialorcommercialneeds.Theselevelizedcostsprovideamechanismtocomparethe
costofonepowerplanttoanothertheobjectbeingthatthepowerplantwiththelower
levelizedcostismoreeconomical,andthereforepreferableasagenerationaddition.The
costestimatesarealsousefulinmanygenerationandtransmissionstudies.
Caremustbetaken,however,nottomisusetheselevelizedcosts.TheCOGModelproduces
averagelevelizedcostsforvarioustechnologiesbutrecognizesthattheactualcostsvary
widely.Indeferencetothatconcern,theCOGModelproduceshighandlowestimatesto
capturetheuncertaintyofthelevelizedcosts.Acomparisonofaveragelevelizedcosts
betweentechnologiesissimplisticandcanleadtopoorplanningdecisions.Theseestimates
donotincludeanevaluationofhoweachunitmayfunctioninthesystemorhoweachof
theunitsmayaffectthesystemcosts,whichisimportantforasystemcostsstudy.Such
estimatesrequireamoresophisticatedmodel,suchasamarketmodel.Finally,theuser
mustkeepinmindthatthesecostestimatesdonotaddressenvironmental,systemdiversity,
orriskfactors,whicharevitalplanningaspectsofallresourcedevelopment.
TheCaliforniaEnergyCommissionsCOGModelwasfirstusedinthe2003Integrated
EnergyPolicyReport(2003IEPR)andatthattimeconsistedof25separatespreadsheets.For
the2007IEPR,the25spreadsheetswerecondensedintoasinglemodelthatwasboth
transparentanduserfriendly.Moreimportantly,theCOGModelwasalsomademore
accuratethroughimprovedalgorithmsandimproveddatacollectionbasedonactualsurvey
data.The2009IEPRversionisfurtherimprovedtoprovideaverage,high,andlowcost
scenarios.TheCOGModelalsoprovidesamoreaccurateassessmentofthetrendsincosts
overtime.TheCOGModelhasimprovedalgorithmstoapplybothcashflowandrevenue
requirementaccountingmethods.Thetoolalsoincludesestimatesoftransmissioncostsand
animprovedtaxcreditemulation.
TheCOGModelcontinuestohavetheanalyticalfunctionsofscreeningcurvesand
sensitivitycurvesthatallowuserstoevaluatetheeffectofthevariousoperationalandcost
factorsonlevelizedcosts.TheCOGModelalsohasawholesaleelectricityprice(WEP)
forecastingfunction.ThisfeatureestimatesthefixedcostcomponentfromtheCOGModel
andappliesthevariablecostcomponentfromaproductioncostormarketmodeltoproduce
aWEPforecast.WEPforecastsarenecessaryformanyoftheresourceplanningstudies.
ThedocumentationwithintheCOGModelissufficienttorunthetool.However,fora
completeunderstandingoftheCOGModelandthedesignsubtleties,itisnecessarytouse
theUsersGuide.
TheCOGModelandthedraftAugust2009ComparativeCostofCaliforniaCentralStation
ElectricityGenerationTechnologiesReportwerethesubjectofanAugust25,2009,workshop.
SeveralcommentswerereceivedandincorporatedintotheCOGModelandthefinal
January2010ComparativeCostofCaliforniaCentralStationElectricityGenerationTechnologies
Report.ThefinalComparativeCostofCaliforniaCentralStationElectricityGeneration
TechnologiesReport,theCOGModel,andthisUsersGuideareallavailableonlineatthe
EnergyCommissionswebsite.
10
CHAPTER 2: Cost of Generation Model Overview

AsimplifiedflowchartoftheCOGModelisshowninFigure2.
Usingtheinputsontheleftsideoftheflowchart,whicharedescribedindetaillaterinthis
chapter,theCOGModelcanproducetheoutputsshownontherightsideoftheflowchart.
Thetopsetofoutputboxesontherightshowthelevelizedcosts:
LevelizedFixedCosts
LevelizedVariableCosts
TotalLevelizedCosts(Fixed+Variable)
Theselevelizedcostsareprovidedbothindollarsperkilowattyear($/kWYr)anddollars
permegawatthour($/MWh)andcanbeusedinmanystudiesthatinvolvethecostof
generation.Theycanbeusedtocomparethedifferencesbetweengenerationtechnologiesor
asapartoflargesystemgenerationortransmissionstudies.
TheEnergyCommissionsCOGModelismoresophisticatedthanthetraditionalmodel
sinceitcancreatefourotheroutputsnotcommonlyprovidedinamodelofthistype:
AnnualCostsThesecostsarenottraditionallydisplayedinsummaryform.However,
theseannualcostsarebecomingasusefultostudiesasthelevelizedcosts.Theyare
providedinthisCOGModelbothintabularandgraphicalformat.
ScreeningCurvesTraditionalCOGmodelsprovidelevelizedcostsforasingular
capacityfactor.ThisCOGModelprovidesscreeningcurves,whichshowthe
relationshipbetweenlevelizedcostandcapacityfactor.Thisismuchmoreusefulin
comparingonetechnologyagainstanother.
SensitivityCurvesTraditionalCOGmodelsprovidelevelizedcostsforonesetof
assumptions.ThisfunctionoftheCOGModelhastheabilitytoshowthechangein
levelizedcostinthreedifferentformats,asanyoftheinputvariablesarechanged.
WholesaleElectricityPriceForecastThefixedcostportionoftheCOGModelcanalso
beusedinconjunctionwithaproductioncostmodeltoforecastthecostofwholesale
electricity,whichisexplainedlaterinthechapter.Thishasbeenautomatedtothepoint
thathundredsofcomputationalhourscanbeavoided.
11
Figure 2: Flow Chart for Cost of Generation Model
OUTPUTS
INPUTS
Plant
Characteristics
Gross Capacity
Plant Side Losses

Transformer Losses
Transmission Losses
Forced Outage Rate
Scheduled Outage Rate
Capacity Factors
Heat Rate (if applicable)
Heat Rate Degradation
CapacityDegradation
Emission Factors
Deflator
Series
Levelized Fixed Costs

($/kW-Yr & $/MWh)
Capital & Financing
Insurance
Ad Valorem
Fixed O&M
Corporate Taxes
Levelized Variable Costs

($/kW-Yr & $/MWh)
Fuel
Variable O&M
Plant Cost Data
Instant Cost ($/kW)

Installed Cost ($/kW)
Construction Period (Yrs)
Fixed O&M ($/kW)
Variable O&M ($/MWh)
Total Levelized Costs
COST OF
GENERATION
MODEL
(Merchant, Muni & IOU)

% Debt
Cost of Debt (%)
Cost of Equity (%)
Loan/Debt Term (Years)
Econ/Book Life (Years)
O&M Escalation
Labor Escalation
Fuel Cost
Fuel Cost ($/MMBtu)

Heat Rate (Btu/kWh)
Screening Curves
($/kW-Yr & $/MWh)
Total Costs
Tax Information
(Merchant & IOU)

Federal Tax Rate (%)
State Tax Rate (%)
Federal Tax Life (Years)
State Tax Life (Years)
Tax Credits
Ad Valorem Tax
Sales Tax
12
Reports
Summary of Annual Costs

High & Low Costs
Revenue Requirement &
Cash Flow
Financial
Assumptions
General Assumptions
Insurance
($/kW-Yr & $/MWh)

Fixed Costs +
Variable Costs
Sensitivity Curves
(Lev Cost, % & %Change)
Plant Assumptions
Plant Costs
Fuel Costs
Financial Assumptions
Other
TheCOGModelisaspreadsheetmodelthatcanpotentiallycalculatetechnologycostsfor
anycentralsystemgeneratingtechnology,butatpresentithaspresetdatathatallowsitto
calculatelevelizedcostsfor21technologiesthroughasimpleselectionprocess.These
technologiesincludenuclear,combinedcycle(CC),integratedgasificationCC,simplecycle,
andvariousrenewabletechnologies.TheCOGModelisdesignedtoaccommodatechanges
inthepresetassumptionsthatcanbesavedasascenario,toberecalledforfutureuse.The
COGModeliscontainedwithinasingleExcelfile,orworkbookusingMicrosoft
terminology.ThisworkbookconsistsoftheworksheetsitemizedinFigure3.The
relationshipoftheseworksheetsisillustratedinFigure4.
Figure 3: Cost of Generation Model Worksheets

Changes
Tracks COG Model modifications using version numbers.
Instructions
General Instructions & COG Model Description.
WEP Forecast
Estimates Wholesale Electric Price Forecast
Input-Output
Data 1
Data 2
Income Statement
Income Cash-Flow
User selects Assumptions Levelized Costs are reported along with

some key data values.
Plant, Financial, & Tax Data are summarized User can override
data for unique scenarios.
Construction and O&M Costs are calculated in base year dollars.
Calculates Annual Costs and Levelizes those Costs Using
Revenue Requirement accounting
Calculates Annual Costs and Levelizes those Costs Using CashFlow accounting
Plant Type Assumptions
Summary of Data Assumptions summary for each plant type.
PTA - Average
Average Plant Type Assumptions
PTA - High
High Plant Type Assumptions
PTA - Low
Low Plant Type Assumptions
Data Assumptions summary of all Financial Data.
Tax Incentives
Summarizes tax incentives for central station technologies
General Assumptions
General Assumptions summary such as Inflation Rates & Tax Rates.
Plant Site Air & Water Data
Regional Air Emissions & Water Costs Used by Data 2 Worksheet.
Inflation
Calculates Historical & Forward Inflation Rates based on GDP Price

Deflator Series Used by Income Statement Worksheet.
Fuel Price Forecasts
Fuel Price Forecast Used by the Income Statement Worksheet.
Heat Rate Table
Shows the regression and provides the Heat Rate factors.
Labor Table
Calculates the Labor Cost components.
Overhaul Calcs
Calculates Overhaul & Equipment Replacement Costs Used by

Data 2 Worksheet.
13
Figure 4: Block Diagram for Cost of Generation Model
Labor Table
CSI Table
CC HeatRate
INPUT-OUTPUT
- Select Plant Type &

Assumptions
- Read Levelized Cost
Result
Income Statement
Calculates
Annual Values
Present Values
Levelized Values
MODEL
USER
Inflation
Data 1
Plant Characteristics
Financial Variables
Tax Variables
Data 2
Calculates
Construction Costs
O&M and Envir Costs
Overhaul Calculations
Plant Site Air & Water Data
14
MACROS
Plant Type
Assumptions
(Average,
High & Low
Financial
Assumptions
General
Assumptions
OnewaytobetterunderstandtheCOGModelistovisualizetheIncomeStatement
worksheetasamodel,visualizetheInputOutputWorksheetasthecontrolmodule(which
alsosummarizestheresults),andthinkoftheremainingworksheetsasdatainputs.Data1
and2canbeconsideredtobethedataset(brokenintotwopartsonlyforconvenience)that
gathersthetechnologyspecificdatafromthewarehouseofassumptionsinotherauxiliary
worksheets.
Thefollowingisabriefoverviewofthekeyworksheets.InChapter4theseworksheetsare
discussedinmoredetailtoexplainsomesubtleraspects.
Input-Output Worksheet
ThisworksheetisthemaininterfaceoftheCOGModel.Ithastwokeysections:anInput
SelectionSectionpaneltoselectatechnologyanditscharacteristicsandanOutputResults
Sectionpanelthereportsthelevelizedcostsincomponentdetail.Thatis,thisiswherethe
technologyisselectedandthelevelizedcostsarereported.
Thisisalsowheretheannualcosts,screeningcurvemodule,andsensitivitycurvemodule
canbefound.
Assumptions Worksheets
MostofthedatausedintheCOGModeliscompiledintothefollowingthreeworksheets,
whicharecolorcodedasshowninFigure5.Theseworksheetsstorethedataforthe
multitudeoftechnologiesanddataassumptionsthatgivetheCOGModelitsflexibility.
Figure 5: Color Coding for Assumptions Worksheets

Indicates area for data modification
General Assumptions

ThePlantTypeAssumptions(PTA)worksheetstoresallofthepowerplantspecificdata,
suchasplantsize,fueluse,plantperformancecharacteristics,constructioncosts,operation
andmaintenancecosts,environmentalcosts,andwaterusagecosts.Therearemorethan200
oftheseitems,butthemostimportant,atleastforthermalunits,arethefuelcosts(fuelprice
15
andheatrate)andcapitalcosts.The2007IEPRCOGModelhadonePlantType
Assumptionsworksheet.The2009IEPRCOGModelhasthreeadditionalPlantType
Assumptionworksheets:PTAMid,PTAHi,andPTPLo.DependingontheCostScenario
selectedintheInputselectionpanel,thecorrespondingPTAsheettransfersitsdatatothe
mainPlantTypeAssumptionsworksheet.ThePTAMidworksheetreliesoncostsfromthe
followingworksheets.
CC Heat Rate
ThisworksheetcalculatestheheatrateforCCunit.Itshowstheresultsoftheregressionsof
theEnergyCommissionQuarterlyFuelandEnergyReport(QFER)datathatcreatedtheheat
rateformulasasafunctionofcapacityfactorfortheductfiredandnonductfiredCCunits.
Labor Table
ThisworksheetliststhelaborcoststhatareusedinthePlantTypeAssumptionssheetto
calculatethefixedoperationandmaintenance(O&M)laborcosts.
Thisworksheetstoresthecapitalstructureandcostofcapitaldataforthethreemain
categoriesofownership:merchant,investorownedutility(IOU),andpubliclyowned.The
worksheetprovidestherelativepercentagesofequityasopposedtolongtermdebt,aswell
asthecostofcapitalforthesetwobasicfinancingmechanisms.Italsoprovidesdataon
eligibilityfortaxcredits.Itshowsthefinancialassumptionsforaverage,high,andlowcost
scenarios.
General Assumptions
Theseareamultitudeofassumptionsthatarecommontoallpowerplanttypes,suchas
inflationrates,taxrates,taxcredits,aswellasstationservice,transformerlosses,and
transmissionlosses.
BasedontheuserselectionsintheInputOutputWorksheet,therelevantdatainthese
AssumptionsWorksheetsisautomaticallysenttotheDataWorksheets.
Data Worksheets
ThisiswherethemacrostoresthedataselectedfromtheAssumptionsWorksheets,and
basiccalculationsaremadetopreparedatafortheIncomeStatementWorksheet.Data1and
Data2Worksheetscanbeenvisionedastwopartsofthemaindatasettobeusedinthe
IncomeStatement.Theseareseparatedsolelytokeeptheworksheetstoareasonablesize.
Data1andData2alsoprovidetheopportunityfortheusertomodifyorreplacethedata
16
thatcamefromtheAssumptionsWorksheets.Careshouldbetakentomodifyonlythose
areasthatareshadedincolor.
Data 1
Thisworksheetsummarizeskeydata:plantcapacitysizeandenergydata,fueluse(suchas
heatrateandgeneration),operationalperformancedata(suchasforcedoutagerateand
scheduledoutagefactor),keyfinancialdata(suchasinflationratesandcapitalstructure),
andtaxinformation(suchastaxratesandtaxbenefits).Italsodoessomecomputationsto
calculatecertainnecessaryvariables.Thisworksheetreliesoncostsfromthefollowing
worksheet.
CSI Table
ThistableprovidesasummaryoftaxcreditsfortheCaliforniaSolarInitiative.
Data 2
Thisworksheetcalculatesthecapitalandoperatingcostsoftheapplicabletechnology:
Theinstantcost
Theinstalledcost
ThefixedO&Mcost
VariableO&Mcost
Thisworksheetsometimesreliesoncostsfromthefollowingworksheets,dependingon
whethertheO&Mdataiscalculatedbycomponentsaresimplyenteredassinglevaluesfor
fixedandvariableO&M.
Plant Site Air and Water Data

TheseareemissionandwatercostsonregionalbasisthatarelocatedoutsidetheData2
worksheet.TherearealsocalculationswithintheData2sheetitself.
Overhaul Calculations
ThesecostsarecalculatedoutsidetheData2worksheetsincetheyarenonperiodic
overhaulcoststhatrequirespecialtreatmenttoderivethenecessarybaseyearcostsneeded
bytheData2Worksheet.Thesearecomplexcalculationsthatareexplainedindetailinthe
OverhaulCalculationsworksheetdetail.Allthedataintheseworksheetsareforbaseyear
dollars.ThesecostsareusedbytheIncomeStatementworksheettocalculatetheyearly
valuesandaccountforinflation.
17

Thisworksheetprovidesthefuelprices(dollarspermillionBritishthermalunits[$/MMBtu])
totheIncomeStatementWorksheet.Fortheaveragecostcase,thenaturalgaspriceforecast
isprovidedbyutilityservicearea,aswellasaCaliforniaaveragevalue.Forthehighand
lowforecasts,itprovidesonlyanaveragenaturalgaspriceforecast.Italsohasthethreecost
scenariosforNuclear,CleanCoal(gasifiedcoalinaCCunit)andBiomass.Thisworksheet
allowsstorageofdifferentforecastsifneededtoconductvariousscenariostudies.These
forecastsshouldbeupdatedregularlytorepresentthemostrecentEnergyCommission
forecasts.Theinflationfactorsusedinthisworksheetcomefromandmustabsolutelybe
consistentwiththeInflationWorksheet.
Inflation
ThisworksheetprovidesinflationfactorsusedbytheIncomeStatement,Overhaul,and
Data2worksheetsneededtoinflatethevariouscapitalandO&Mcosts.Thisworksheet
calculatestwoinflationvaluestosimplifytheIncomeStatementcalculations:ahistorical
inflationrate,usedfortheperiodfromthebaseyeartothestartyear,andaforward
inflationrate,usedfortheperiodfromthestartyeartotheendofthestudy.
Income Statement Worksheet

Foreachofthefollowingcategories,thisworksheettakesthedatafromtheabovedata
sourcesanddevelopstheyearlyvalues,thenthepresentvalues,andfinallythenecessary
levelizedcosts.ThedetailsofthisworksheetareprovidedintheIncomeStatementdetails
section.
FixedCosts
CapitalandFinancingTotalcostofconstructionandfinancingplant.
InsuranceCostofinsuringthepowerplant.
AdValoremPropertytaxes.
FixedO&MStaffingandothercoststhatareindependentofoperatinghours.
TaxesFederalandstatetaxesinclusiveoftaxcredits.
VariableCosts
FuelCostCostofthefuelused.
VariableO&MO&Mcoststhatareafunctionofoperatinghours.
18
CHAPTER 3: Using the Cost of Generation Model

ThischapterdescribestheprocedureforusingtheCOGModelbothforthepresetdataand
userspecifieddata.Itprovidesinstructionforselectingtheassumptionsforthetechnologies
presentlyprovidedintheCOGModelandhowtoaddnewtechnologies,revise
assumptions,andsavethesenewentriesasscenariostoberecalledatalaterdate.
Admonishment to All Cost of Generation Model Users

Beforemakinganyrun,theusershouldreviewtheFuelPriceForecastsandInflation
Worksheetstobesurethattheyarecurrentoratleastknowntobeapplicableforthe
study.Thedataintheotherworksheetsmustalsobereviewedperiodicallytomakesure
thatitisreasonablycurrent.
Opening the Cost of Generation Model

TheCOGModelwillnotruncorrectlyunlessExcel2000orhigherisusedandthemacros
areactivated.Forearlierversions,theCOGModelwillfunction,buttheSaveNewScenario
featurewillnotfunctionproperly.Also,thecolorcodingontheworksheettabswillbe
absent.
TheEnergyCommissionisprovidingtwoversionsoftheCOGModel,oneforExcel2000,
2001,and2003(COGModelVer2.xls),andanotherforExcel2007(COGModel
Ver2.xlsm).Ifyoutrytousethe*.xlsmversionwithanearlierversionofExcel,theCOG
Modelwillrefusetoopen.Youmustusethe*.xlsversionoftheCOGModel.
ForExcel2007,amessagewillappearjustabovetheCOGModelworksheet:Security
WarningSomeactivecontenthasbeendisabledfollowedbyaboxOptions.Clickon
thatboxandawindowwillopen,withtwooptions.SelecttheEnablethiscontentoption,
clickontheOkaybox,andthewindowwillclosethusactivatingthemacros.
WhenopeningExcel2000,2001,and2003,selectEnableMacros.Ifyougetamessagethat
theMacrosaredisabled,setthesecuritytoMedium(UnderTools>Options>Security
>MacroSecurity,setsecurityleveltoMedium),thencloseandreopentheCOGModel
beingsuretoselecttheEnableMacrosoption.
Ifyoudonotactivatethemacros,theCOGModelmayappeartobeworkingbutwillnot
functionproperly.
19
Using the Cost of Generation Model With Its Preset Data

ThecentralinterfaceoftheCOGModelistheInputOutputWorksheet,becauseitisusedto
selectthetechnologyanditsassumptions,andreadtheresults.
SelecttheInputOutputWorksheet,andlookforthesectionofthisworksheetthatlookslike
Figure6,whichillustratesaCCunitwithductfiring.Selecteachassumptionasfollows:
PlantTypeAssumptions:Keytheturquoisewindow,whichprovidesadropdown
window,andselectthedesiredtechnology,inthisillustrativecase,acombinedcycle
unitwithtwoturbinesandductfiring(Note:Thischangesalldataintheworkbook
highlightedinturquoise.)Important:Thismustbereselectedafterallthefollowing
selectionsaredonetomakesurethattheCOGModelhasstabilized.
Financial(Ownership)Assumptions:SelectsOwnershipAssumptionsCapital
StructureandTaxCrediteligibilities,theoptionsaremerchant,IOUorpubliclyowned
utility(POU).Sincefossilmerchantplantshavedifferentfinancingassumptionsfrom
nonfossilfueledplants,therearetwofinanceoptions,(Note:Changesallitems
highlightedintan.)
Financial(Ownership)Assumptions:SelectsOwnershipAssumptionsForCapital
StructureandTaxCrediteligibilities,theoptionsaremerchant,IOU,orPOU.Sincefossil
merchantplantshavedifferentfinancingassumptionsfromnonfossilfueledplants,
therearetwofinanceoptions,(Note:Changesallitemshighlightedintan.)
OwnershipTypeforScenarios:IOU,Municipal,orMerchant.Typicallythisdefaultsto
thecorrectselectionaftertheFinancialAssumptionshavebeenselectedanddoesnot
needtobeset.Changethiscellonlyintheatypicalcasewhereyouwishtodefineanew
setofFinancialAssumptionswithadifferentOwnershipType.
GeneralAssumptions:Generally,thiswillbeDefaultuntilotherscenariosaredefined
bytheuser.(Note:Changesallitemshighlightedinyellow,includingNaturalGas
UtilityServiceAreaandPlantSiteRegion.)
StartDate:TheInServiceyearofthetechnologyEntertheyearthattheunitis
assumedtocomeonlinenotethatthisdateisenteredbytheusernotselected.
LevelizedCostswillbeinnominaldollarsfortheselectedinserviceyearandinthat
yearsdollarsnominal2009dollarsfortheabovecase.
FuelPriceForecast:Thisaffectstheselectionofgasfiredunits,simplecycle(SCs)and
CCsonly.TheFuelTypeoptionoverridesallotherfuelselections.Note:Forgasfired
units,thismustbesetaftertheGeneralAssumptionsselections,oritwillbereset
backtoitsoriginalvalue.
20
Figure 6: Input Selection Table
PlantSiteRegion:Setscertaincoststoreflectregionalcosts.Note:Thismustbesetafter
theGeneralAssumptionsselections,oritwillberesetbacktoitsoriginalvalue.
StudyPerspective:Setsthelocationofthelevelizedcost.Itcanbesettocalculateatthe
outputofthegeneratingunit(thelowsideoftheuplifttransformer),thehighvoltage
sideoftheuplifttransformer,oratthedeliverypoint(customermeter).Thelocation
affectswhichlossesareenteredintothelevelizedcostcalculation:nolosses,transformer
losses,andtransmissionlosses.
ReportedConstructionCostBasis:SetstheData2capitalcostaseitherInstantor
Installed,dependingonhowthedataisentered.In2007,gasfiredunitswereenteredas
InstalledCosts,andallotherswereenteredasInstantCosts.Inthisversion,allcostsare
enteredasinstantcosts,buttheoptionisstillprovidedfortheusertoenterinstalled
costsintotheCOGModel,shouldthisbedesired.
TurbineConfiguration:ThestandardconfigurationoftheCCissetattwoturbines(two
onone).Thisoptionallowstheusertoselectotheroptionsandthenautomatically
correctsthecosts.Thevalueissetequaltothenumberofsimplecycleunitsregardlessof
thenumberofsteamboilerunits.
21
CarbonPriceForecast:Setsthepriceofcarbon.Althoughthisfeatureisinthemodel,the
actualpriceshavenotbeendeterminedbytheEnergyCommission.Itisuptotheuserto
definethesecostsifthisfeatureistobeused.
CostScenario:Setsthecostscenarioasaverage,highorlow.Thischangesalltechnology
andfinancingassumptions.
TaxLossTreatment:Setstheassumptiononwhetherthetaxbenefitsaretoberealizedin
asingleyearorareassumedtohaveaminimumtaxsetatzerowithtaxlossescarried
forward.
YoucannotsetBaseYear,FuelType,andDataSource,astheyaresetbytheCOGModel
whenyouselectthePlantTypeAssumptions.
Warning:
Evenifsomeoftheabovedescribedoptionsarealreadyselected,theyshouldbeselected
againatthebeginningoftherun.Thisisnecessarytoensurethattheappropriatemacros
areactivated.
ToensurethattheCOGModelhasreacheditsmoststablepoint,itisdesirabletoreselect
thePlantTypeAssumptionoptionattheend.Forgasfiredunits,itisdesirabletoreselect
thePlantTypeAssumptions,reselecttheFinancialAssumptions,thenreselectthePlant
TypeAssumptionsonemoretime.
Entering User-Specified Data

TheusermayoverrideanyofthedataintheCOGModelbyenteringalternativedatainany
cellthatisshadedinturquoise,tan,oryellowasshowninFigure7.Thiscanbeillustrated
forthemostcommoncasewheretheuserwantstousealternativecapital,fixedO&Mand
variableO&McostswhichareallPlantTypeAssumptions.Capitalcostintotaldollars
maybesetinData2inCellC54,eitherasinstantcostorinstalledcost,consistentwiththe
InputSelectionTableReportedConstructionCostBasis.Alternatively,theinstalledCost
canbeenteredasdollarsperkilowatt($/kW)inCellG22.ThefixedandvariableO&Mcan
besetinK17($/kWYr)andK35($/MWh)inthesameworksheet.Caremustbetakento
ensurethattheentereddataisinnominaldollarsfortheinserviceyearspecifiedinthe
InputSelectionTable.Ifnot,thenitwillbenecessarytomodifytheInServiceYearwhich
isnormallysetbythetechnologyassumptionforthepresettechnologyassumptions
describedabove.ThenewlevelizedcostswillimmediatelyappearintheOutputResults
tableontheInputOutputsheet.
22
Figure 7: Color Coding for Assumptions Modification

General Assumptions
Saving and Recalling New Scenarios

Onceanewscenariohasbeencreatedasdescribedabove,theusermaywanttosavethis
newscenarioforfutureuse.
Saving a New Scenario

Tosaveanewscenario:
ClickSaveAsNewScenarioButton.
AnAddNewScenariowindowopensup.
SelecttheScenarioTypeinthiscase,PlantTypeAssumptions.
EnteradescriptivenamesuchasAlternativeCostStudy.
ClicktheAddButton.
Thescenariohasbeensaved.Toviewitatitssavedlocation,gotothePlantType
AssumptionsWorksheetandlookforthedescriptivename(AlternativeCostStudy).
Similarly,OwnershipandGeneralAssumptionscanbestoredintheirrespective
worksheets.
Using a New Scenario

Thesavedscenarioscanberecalledlaterbylookingforthemintheirrespectiveselectionof
options.Forexample,sincetheAlternativeCostStudyintheaboveexamplewasaPlant
TypeAssumption,codedinturquoise,thescenariocanbefoundasaPlantType
Assumptionsoption.Keepinmindthatthesavedscenarioisforonesetofassumptions.
Youcannot,forexample,settheInputSelectionCostScenariotoadifferentcostscenario
andexpectthecostofthisscenariotobeaffected.
23
Reading the Results

Afterinputtingdata,theresultscanbefoundontheInputOutputWorksheetintheCost
SummaryTable.
Figure8showstheOutputSummaryTablecorrespondingtoInputSelectionofPlantType
Figure6.Thatis,itisaDuctFiredCombinedCycleunitbeingbuiltasaMerchantPlant
withCaliforniaAverageGasPricesandPlantCosts,andstartingoperationin2009.
ThistablegivesLevelizedCostsbothin$/kWYrand$/MWh.Thedifferenceisinunitsonly
andonecanbeconvertedtoanotherusingthefollowingconversionfactors:
$/MWh=$/kWYr*GrossCapacity(MW)/LoadCenterGeneration(gigawatthour
[GWh)])
UsingthisformulaandthedatafoundontheaccompanyingOperationalPerformance
Summarytable,shownasFigure8,wecanconvertTotalLevelizedCostfrom$/kWYrto
$/MWh:
129.82$/MWh=743.48$/kWYr*550MW/3149.92GWh
TheInputOutputWorksheetalsoprovidesgraphicalrepresentations.Figure9showsthe
ComponentCostsasapercentageofTotalLevelizedCost,basedonthedataselection
showninFigure8.Fortheillustrativetechnology,CCunit,FuelandCapitalCostsaccount
for85percentoftheTotalCosts.Thissortofinformationisusefulindeterminingwhereto
focusonimprovingaccuracy,aswellasanalyzingtheresultsofastudy.Taxesaretheonly
othercostcomponentthatsignificantlycontributestocosts.
Summary Data Tables

Asaconveniencetotheuser,anumberofkeydatavariablesarebroughtforwardfrom
otherworksheetstotheInputOutputworksheet.
Figure10illustratestheCapitalandOperatingCosttable,whichsummarizestheinstant,
installed,fixed,andvariablecosts.
InstantandInstalledCostsfortheillustrativeCombinedCycleunitwithDuctFiringare
showninboththeBaseYear(2009dollars)andtheStartYear(2009dollars).InstantCost,
sometimesreferredtoasovernightcost,assumesthattheplantcanbebuiltinstantly,which
ofcourseisnotreasonablebutisnonethelessthewayinwhichmuchdataispublished.
InstalledCostaccountsforthesalestaxandtheconstructionloan.Itdoesnotincludeany
otherconstructioncost.
24
Figure11showstheeffectofstationserviceandtransformerandtransmissionlossesonthe
CapacityandEnergyvalues.
Figure12summarizesoperationalperformancefactors.Figure13isthefuelcostsummary.
Figure 8: Output Summary Table
OUTPUT RESULTS
SUMMARY OF LEVELIZED COSTS
Combined Cycle Standard - 2 Turbines, Duct Firing
Start Year = 2009 (2009 Dollars)
Capital & Financing - Construction
Insurance
Ad Valorem Costs
Fixed O&M
Corporate Taxes (w/Credits)
Fixed Costs
Fuel & GHG Emissions Costs
Variable O&M
Variable Costs
Transmission Service Costs
Total Levelized Costs
$/kW-Yr
$172.85
$8.35
$11.36
$9.52
$56.84
$258.91
$418.13
$20.88
$439.01
$29.74
$727.66
25
$/MWh
$30.26
$1.46
$1.99
$1.67
$9.95
$45.32
$73.19
$3.66
$76.85
$5.21
$127.38
Figure 9: Graphical Summary of Output Table

Levelized Cost Components
By Percentage
VariableO&M
3%
Capital&
Financing
Construction
25%
Insurance
1%
AdValorem
Costs
2%
Fuel&GHG
EmissionsCosts
60%
CorporateTaxes
(w/Credits)
8%
FixedO&M
1%
Figure 10: Key Capital and Operating Cost Summary

Base Yr
Start Yr
Levelized
2009
2009
2009
Instant Cost ( $/kW)
$1,078
$1,078
N/A
Installed Cost ( $/kW)
$1,256
$1,256
N/A
Fixed O&M Cost ( $/kW-Yr)
$8.30
$8.30
$9.52
Variable O&M Cost ( $/MWh)
$2.97
$2.97
$3.66
Capital & Operating Costs
Figure 11: Capacity and Energy Summary

Capacity & Energy Summary
Capacity
Effective
Energy
(MW)
(MW)
(GWh)
Gross (Dependable)
550.0
550.0
3,321.5
Net Capacity - Plant Side
534.1
534.1
3,225.1
Net Capacity - Transmission Side
531.4
531.4
3,209.0
To Delivery Point
520.3
520.3
3,141.9
2009
26
Figure 12: Summary of Operational Performance Factors

Operational Performance
Factor
Hours
Scheduled Outage Factor
6.02%
527.4
Forced Outage Rate (FOR)
2.24%
140.5
Operational (Service) Hours Per Year
6,132.0
Equivalent Availability Factor
91.87%
Capacity Factor
70.00%
Figure 13: Fuel Use Summary

Fuel Use Summary
2009
Levelized
Average Heat Rate (Btu/kWh)
7,050
7,159
23,776,830
23,776,830
$6.56
$9.67
Fuel Use (MMBtu)

Fuel Price ($/MMBtu)
Annual Cost Summary

AspecialconvenienceoftheCOGModelisitsupfrontsummaryofannualcosts.Although
levelizedcostisthemostcommonlyusedoutputoftheCOGModel,manystudiesrelyon
actualyearlycosts.ThesecostsaresummarizedintheInputOutputWorksheettopromote
(ormakeeasier)thesetypesofstudies.
Figure14showstheactualannualcoststhatwereusedtocalculatethepresentvaluesand
thenthelevelizedcosts,inbothgraphicalandnumericalformat.
Figure15showsthecorrespondingAssetRentalPrices,whichisnotusedotherwiseinthe
COGModel.Itisasophisticatedconceptthatisnotcommonlyused,asexplainedin
AttachmentB.
TheInputOutputworksheetalsohastwoancillaryfunctions:ScreeningCurvesand
SensitivityAnalysisCurves.
27
Figure 14: Annual Costs Merchant Combined Cycle Plant

Annual Fixed and Variable Power Plant Costs
$/MWh
$200
$180
$160
$/MWh
$140
Total Costs
$120
Variable
Costs
$100
$80
Fixed Costs
$60
$40
$20
$0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Year
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Fixed Costs
Levelized
$45
$374
NPV
$42
$42
$43
$43
$44
$44
$45
$46
$46
$47
$47
$48
$49
$49
$50
$51
$51
$52
$53
$53
Variable Costs
$82
$677
$58
$61
$63
$68
$71
$75
$77
$82
$86
$92
$99
$102
$106
$113
$117
$122
$122
$127
$130
$133
Total Costs
$127
$1,051
$99
$103
$106
$111
$115
$119
$122
$128
$132
$139
$146
$150
$154
$163
$167
$173
$173
$179
$183
$187
Figure 15: Annual Costs Based on Asset Rental Price
28
2028
Using the Screening Curve Function

Screeningcurvesallowausertoviewthelevelizedcostforvariouscapacityfactors,rather
thanthesingularcapacityfactorthatistypicalofcostofgenerationmodels.Thisisusefulin
manyways.Themostobviousisthatitallowstheusertoestimatelevelizedcostsfortheir
specificassumptionofcapacityfactor.Italsoallowstheusertoassessthecostriskof
incorrectlyestimatingthecapacityfactor.Itallowsforthecomparisonofvarious
technologiesasafunctionofcapacityfactorthatis,atwhatcapacityfactoronetechnology
becomeslesscostlythananother.
Thelevelizedcostsofthescreeningcurvescanbeshownas$/MWhor$/kWYr.Figure16is
anillustrativeexampleofa$/MWhscreeningcurveforadvancedcombustionturbineanda
CCunitwithductfiring.Figure17showsthecorrespondinginterfacewindow.This
screeningcurveshowstheadvancedcombustionturbinetobelessexpensiveuntila
capacityfactorequalto65percentasurprisingfinding.
Figure 16: Screening Curve ($/MWh)

SCREENINGCURVE StartYear2009(Nominal2009$)
1,000
900
LevelizedCost($/MWh)
800
CombustionTurbine 49.9
MW
CombinedCycleStandard 2
Turbines,DuctFiring
Biomass CogasificationIGCC
(2018)
Geothermal Binary
700
600
500
Solar ParabolicTrough
400
Solar Photovoltaic(Single
Axis)
300
200
100
0
10%
20%
30%
40%
50%
60%
CapacityFactor
29
70%
80%
90%
100%
Figure 17: Interface Window for Screening Curve
30
Using the Sensitivity Curve Function

Althoughthescreeningcurvesareuseful,theyaddressonlyonevariabletothebasecase
assumptionswhenestimatinglevelizedcoststhecapacityfactor.Staffsnewsensitivity
curvesaddressamultitudeofassumptions:capacityfactor,fuelprices,installedcost,
discountrateweightedaveragecostofcapital(WACC),percentequity,costofequity,cost
ofdebt,andanyothervariablethatshouldbeconsidered.Sensitivitycurvesshowtheeffect
ontotallevelizedcostbyvaryinganyoftheseparametersinthreeformats:
Levelizedcost($/MWhor$/kWYr)
Changeinlevelizedcostasapercentage
Changeinlevelizedcostasincrementallevelizedcostfromthebasevalue($/MWhor
$/kWYr).
Figure18showsanillustrativeexampleofasensitivitycurve.Figure19showstheinterface
windowfortheabovesensitivitycurve.
Figure 18: Sample Sensitivity Curve

Effect on Levelized Cost of Input Assumptions
Combined Cycle Standard 2 Turbines, No Duct Firing
180
160
140
Capacity Factor
Fuel Price
Levelized Cost ($/MWh)
120
Installed Cost
Discount Rate (WACC)
100
Percent Equity
Cost of Equity
80
Cost of Debt
Fixed O&M
60
Variable O&M
Loan Term
40
Book Life
20
0
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Relative Change
31
50%
60%
70%
80%
90%
100%
Figure 19: Interface Window for Sensitivity Curves
32
CHAPTER 4: Detailed Description of Worksheets

ThischapterprovidesdetaileddescriptionsoftheCOGModelworksheetsnotprovided
elsewhere.Thisdoesnotincludeeveryiteminthemodelassomeentitiesareeitherself
evidentoraredefinedintheDefinitionsAppendix(AppendixA).
Input-Output Worksheet
ThefollowingaredetaileddescriptionsofthetermsusedintheInputSelectionPanel.
PlantTypeAssumptionsUsingmacros,thisselectionoptioncollectsdatafromthe
PlantTypeAssumptionsworksheetfortheselectedtechnology.Allsuchselecteddata
appearsintheCOGModelasshadedinturquoise.Thisversionismoresophisticated
thanthe2007versioninthatitprovideshighandlowdatainadditiontotheaverage
datapreviouslyprovided.Todothis,therearethreecorrespondingPlantType
Assumptionsworksheets:
PlantTypeAssumptionsMidrange(PTAMid)
PlantTypeAssumptionsHirange(PTAHi)
PlantTypeAssumptionsLorange(PTALo)
ThePlantTypeAssumptionsworksheetselectsthedatafromoneoftheabovethree
PTAworksheets,dependingonwhichCostScenarioisselectedintheInputSelection
Table.
FinancialAssumptionsUsingmacros,thisselectionoptioncollectsdatafromthe
FinancialAssumptionsworksheetfortheselectedownership.Allsuchselecteddata
appearsintheCOGModelasshadedintan.
OwnershiptypeThiscellislargelyanExcellimitationandisignoredformost
purposes.
GeneralAssumptionsUsingmacros,thisselectionoptioncollectsdatafromthe
GeneralAssumptionsworksheetfortheselectedownership.Allsuchselecteddata
appearsintheCOGModelasshadedinlightyellow.Generally,thiswillbeDefault
untilotherscenariosaredefinedbytheuser.
BaseYearThisisreporteddatafromtheCOGModelandisnotselectedbytheuser.It
istheyearthatcorrespondstothedatainthePlantTypeAssumptionsworksheet.This
datamustthenbeescalateduptotheinserviceyear.
FuelTypeThisisalsoreporteddataandissetbasedonthePlantTypeAssumption
selection.
33
DataSourceThisisinformationalastothesourceanddateofthedataandalsocomes
fromthePlantTypeAssumptionsWorksheet.
StartDateThisisenteredbytheuser,notselected.Itistheyeartheplantistocome
onlineanddeliverspower.Itsetsthebeginningofthestudyperiodandtheyearfor
whichthelevelizedcostsarereported.
FuelPriceForecastThisaffectstheselectionofgasfiredunits(SCsandCCs)only.It
allowstheCOGModeltoberunonutilityspecificgasprices.TheFuelTypeoption
overridesallotherfuelselections.Note:Forgasfiredunits,thismustbesetafterthe
GeneralAssumptionsselections,oritwillberesetbacktoitsoriginalvalue.
StudyPerspectiveThisisthepointwherethelevelizedcostsarecalculated.Ifthe
powerdeliveredismeteredrightattheplant,theuserselectsAtBusbarPlantSide.
Thisisassumedtobethelowsideoftheuplifttransformer.Thisresultsinthe
transformerandtransmissionlossesintheData1worksheetbeingsettozero.Iftheuser
selectsAtBusbarTransmissionSide,itisassumedtobethehighsideoftheuplift
transformer.ThisresultsinTransformerlossescollectedfromtheGeneralAssumptions
sheetandsetintotheData1Worksheet.IftheuserselectsToDeliveryPoint,thenthe
transmissionandtransformerlossesarecollectedfromtheGeneralAssumptions
WorksheetandaresetintotheData1Worksheet.Forthistoworkcorrectly,the
GeneralAssumptionsoptionhastobeselectedaftertheStudyPerspectiveoptionhas
beenset.
ReportedConstructionCostBasisSetstheData2capitalcostaseitherInstantor
Installed,dependingonhowthedataisentered.In2007,gasfiredunitswereenteredas
InstalledCosts,andallotherswereenteredasInstantCosts.Inthisversion,allcostsare
enteredasinstantcosts,buttheoptionisstillprovidedfortheusertoenterinstalled
costsintotheCOGModelshouldthisbedesired
TurbineConfigurationThisisforCCunitsonly.Thebaselineconfigurationinthe
COGModelisfortwocombustionturbineunitswithonesteamturbine.Thisoption
allowstheusertosetthecostforotherconfigurations.Thisnumberistobesettothe
totalnumberofcombustionturbinesregardlessofthenumberofsteamturbines.
CarbonPriceForecastSetsthepriceofcarbon.Althoughthisfeatureisinthemodel,
theactualpriceshavenotbeendeterminedbytheEnergyCommission.Itisuptothe
usertodefinethesecostsifthisfeatureistobeused.
CostScenarioSetsthecostscenarioasaverage,high,orlow.Thischangesall
technologyandfinancingassumptions.
TaxLossTreatmentSetstheassumptiononwhetherthetaxbenefitsaretoberealized
inasingleyearorareassumedtohaveaminimumtaxsetatzerowithtaxlossescarried
forward.
34
ThefollowingaredefinitionsforthetermsusedintheOutputSummaryTable,which
providesthedesiredlevelizedcosts.ThelevelizedcostsarecollectedfromtheIncome
Statement(CellsD47D53).
CapitalandFinancingCostsThecapitalcostisthetotalcostofconstruction,including
landpurchase,landdevelopment,permitting,interconnection,environmentalcontrol
equipment,andcomponentcosts.Thefinancingcostsarethoseincurredthroughdebt
andequityfinancingandareincurredbythedeveloperannually,similarinstructureto
financingahome.Theseannualcosts,therefore,areessentiallylevelizedbythiscost
structure.
InsuranceCostThisisthecostofinsuringthepowerplant,similartotheinsuringofa
home.ForaMerchant/POUthefirstyearcostisestimatedasapercentageofthe
installedcostperkWandthenescalatedbyforwardinflationthroughoutthebooklife
(periodofthecalculations).ForanIOUplant,theannualcostisapercentageofthebook
value/ratebase,andthesubsequentyearlycostdecreasesovertime.
AdValoremCostThecostofannualpropertytaxpaymentsthatarepaidasa
percentageoftheassessedvalueandusuallytransferredtolocalgovernments.POU
powerplantsaregenerallyexemptfromthesetaxesbutmaypayinlieufees.The
assessedvaluesforpowerplantsaresetbytheStateBoardofEqualization(BOE)asa
percentageofbookvalueforanIOUandasdepreciationfactoredvalueforamerchant
facility.
FixedO&MCostsThesearethecoststhatoccurregardlessofhowmuchtheplant
operates.Thesearenotuniformlydefinedbyallinterestedpartiesbutgenerallyinclude
staffing,overheadandequipment(includingleasing),regulatoryfilings,andotherdirect
costs.
CorporateTaxesThesearestateandfederaltaxes,whicharenotapplicabletoaPOU.
Thefederaltaxesareadjustedforthestatetaxessimilartoadjustmentratesfora
homeowner.
FuelCostThecostoffuelusedbythepowerplantismostcommonlyexpressedin
$/MWh.Forathermalpowerplant,itistheheatrate(Britishthermalunitperkilowatt
hour(Btu/kWh)]multipliedbythecostofthefuel($/MMBtu).Thisincludesstartupfuel
costsaswellastheonlineoperatingfuelusage.Allowanceismadeforthedegradation
oftheheatrateovertime.
VariableO&MThesecostsareafunctionofthehoursofoperationofthepowerplant.
Mostimportantly,thisincludesyearlymaintenanceandoverhauls.VariableO&Malso
includesrepairsforforcedoutages,consumables,watersupply,andannual
environmentalcosts.
TheInputOutputWorksheetalsodisplaysannual(unlevelized)costs,whichareshown
aboveinFigure14.
35
TheInputOutputworksheethasthreeadditionalfunctions:
Savescenarios
Screeningcurves
Sensitivityanalysiscurves
Thesearedescribedinthepreviouschapter.
Data 1 Worksheet
ThisworksheetholdskeydatathatthemacrocollectsfromtheAssumptionsworksheets,as
wellasperformingsomeminorcalculations.Thedatacategoriesare:
PlantCapacity&EnergyDataCapacity,Energy&Losses
OperationalPerformanceDataPercentOutput,PercentofYearOperational,Outage,
Capacity&AvailabilityFactors
FuelUseDataHeatRatesandDegradationFactorsandStartupFuelUse
FinancialInformationCapitalStructure,InflationFactors,Life&Taxes
TaxInformationTaxRates
AlternativeTechsTaxBenefits
BusinessEnergyTaxCredit(BETC)
RenewableEnergyProductionTaxCredit(REPTC)
GeothermalDepreciationAllowance(GDA)
RenewableEnergyProductionIncentive(REPI)
Plant Capacity and Energy Data

Figure20showsthePlantCapacityandEnergytablefortheCCwithductfiring
technology.Allbutthelastitemcapturesthecapacityandenergyatthreelevels:
GrossCapacityCapacityatthegenerationlevel.
NetCapacityPlantSideCapacityatthepowerplantbusbar,allowingforstation
service.Thisisatthelowsideoftheuplifttransformer.
NetCapacityTransmissionSideCapacityatthetransmissionbusbar,whichisthehigh
sideoftheuplifttransformer.
36
LoadCenterCapacityCapacityatthepointofdelivery,allowingfortransformerand
transmissionlosses.
Figure 20: Plant Capacity and Energy Data
550.00
Average
Annual
Energy
(GWh)
3329.89
534.05
3233.33
531.38
3217.16
520.27
3149.92
520.27
3149.92
Effective
Capacity
(MW)
Plant Capacity & Energy Data

Gross Capacity (MW)
Plant Losses
Net Capacity (MW) - Plant Side
Transformer Losses
Net Capacity (MW) - Transmission Side
Transmission Losses
Delivered Capacity (MW)
Annual Capacity Degradation Rate
STUDY PERSPECTIVE
550.00
2.90%
534.05
0.50%
531.38
2.09%
520.3
0.20%
520.27
Treatment of Losses
Theabovedifferencesincapacityareduetolosses.Sincethetreatmentoflossesisabit
subtle,itisexplainedindetailherein.TheCOGModelhasthreecategoriesoflosses:
PlantLosses(ParasiticLosses)Lossesduetoonsitepoweruses.
TransformerLossesLossesintheuplifttransformer,betweentheplantbusbar(low
sideofthetransformer)andthetransmissionbusbar(highsideofthetransformer).
TransmissionLossesLossesbetweenthetransformerandtheDeliveryPoint.
Thesiteloadlossesvarydependingonthetechnology.TheCOGModelallowsfordifferent
sitelossesforeachcostbasis.LossesforthegasfiredunitswereestimatedbyAspenand
lossesfortheotherunitswereestimatedbyKEMAConsultingFirm.Forthestaffs
illustrativeCCunit,theaveragelossesareestimatedas2.9percent.Thusthe550MWis
reducedto534.05MW(550[100%2.9%]).
TransformerLossesarethelossesinupliftingthepowerfromthelowvoltagesideofthe
transformer(GeneratorVoltage)tothehighvoltagesideofthetransformer(Transmission
Voltage).ForstaffsillustrativeCCunit,thisisestimatedusingtheCPUCMarketPrice
Referent(MPR)valueof0.5percent,whichwasreconfirmedasreasonable.Transmission
LossesrepresentthepowerlostingettingthepowerfromthehighsideoftheTransformer
totheDeliveryPoint.ForstaffsillustrativeCCunit,thisvalueisestimatedas2.09percent.
37
Annual Capacity Degradation Rate

Thisvaluecapturesthedegradationofcapacityaveragedoverthelifeofthepowerplant.It
accountsforboththedegradationofcapacityduetowearandtearandtheincreasesin
capacityduetoperiodicoverhauls.Itisanaverageastheplantcapacitydegradesandthen
partiallyrestoredduetothemanyoverhaulstheplantexperiencesduringitslifetime.
CapacityDegradationisprovidedasanannualpercentageandislocatedinCellC26ofthe
Data1WorksheetandisbroughtforwardfromthePlantTypeAssumptionsWorksheet,
Row9.
Theimplementationofthecapacitydegradationfactorisdonebymakingtwosimplifying
assumptions.Thefirstassumptionisthatthecapacitydegradationcanbeignoredinthe
calculationof$/kWYroftheIncomeStatementWorksheet,basedontheassumptionthat
the$/kWYrshouldbeconsideredtobebasedontheoriginalinstalledgrosscapacity,
similartoinstalledcost.Thatis,itshouldnotbebasedontheaveragevalueofthedegraded
capacity(forexample,thegeometricmeanoftimeweightedcapacitiesoverthestudy
period).Theeffectofcapacitydegradationiscapturedonlyontheenergyside.
Thesecondassumptionisthattheimpactontheenergygeneratedcanberepresentedbya
constantannualaveragevalue,ratherthanasactualannualvaluesthatdecreaseoverthe
years.Theimplementationofthiscapacitydegradationiscapturedintheaverageenergy
valuesofCells19,21,23,and25(Data1Worksheet),usingthefollowingExcelformulas,
wherePMTistheannualpayment,whichisthelevelizedcost.
AverageAnnualEnergyforGrossCapacityPMT(rate,nper,pv)
rate(InterestRate)=DiscountRate
nper(numberofperiods)=BookLife
pv(PresentValue)=PV((1+DiscountRate)/(1AnnCapDegredationRate)1,BookLife,
OpHrsPerYr*GrossMW/1000*AverageOutputPct))
AverageAnnualEnergyforNetCapacityPlantSide:PMT(rate,nper,pv)
rate(interestrate)=DiscountRate
pv(PresentValue)=PV((1+DiscountRate)/(1AnnCapDegredationRate)
1,BookLife,OpHrsPerYr*OpCapMW/1000))
AverageAnnualEnergyforNetCapacityTransmissionSide:PMT(rate,nper,pv)
38
1,BookLife,OpHrsPerYr*OpCapMW*TransformerLosses/1000))
AverageAnnualEnergyatLoadCenterPMT(rate,nper,pv)
1,BookLife,OpHrsPerYr*EffectiveMW/1000))
Ineachoftheabovecases,anaverageenergyvalue,PMT,iscalculatedbyfirstcalculatinga
presentvalue(PV)oftheactualenergyvaluesandthenusingthatPVtofindthelevelized
energyvalue,PMT,similartowhatisdoneintheIncomeStatementWorksheetfordollar
values.ThiscalculationofthePVissubtleandcanbestbeillustratedusingsimplified
nomenclature.IfEtaretheannualdecreasingenergyvaluesforyears(t),0throughN,then
Et=EC(1CD)t,whereECistheannualenergyintheabsenceofcapacitydegradationandCD
istheCapacityDegradationFactor.Eachoftheannualdegradedvaluesofthisenergyseries
canbeconvertedtoapresentvaluebydividingbythefactor(1+DR)t,whereDRisthe
discountrateandtisnumberoftheyear.Thepresentvalue(PV)oftheentireseries,
therefore,canberepresentedas:
N
Et
EC (1 CD)t
PV =
=
t
(1 + DR)t
t =1 (1 + DR)
t=
N
Thiscanbeeasilyrearrangedto:
N
PV =
t=
N
EC
EC
t
t
t
(1 + DR) /(1 CD)
t =1 [(1 + DR)/(1 CD)]
Adding1andsubtracting1inthedenominator,asshown,doesnotchangethevaluebut
allowstheusertoputthisinamoreusableform:
N
PV =
t =1
N
EC
EC
=
; where : i = [(1 + DR)/(1 CD)] 1
t
t
[1 + (1 + DR)/(1 CD) 1]
t =1 (1 + i)
TheformulaisnowapresentvalueofconstantvalueEC,wheretheinterestrateisequalto
[(1 + DR)/(1 CD)] 1 .

TheimplementationofthisintoExcelcanbeillustratedfortheaboveGrossMWenergy
case:
pv=(rate,nper,pmt)
39
rate= i = [(1 + DR)/(1 CD)] 1 =[(1+DiscountRate)/(1AnnCapDegradationRate)]

1
nper=BookLife
pmt=EC=OpHrsPerYr*GrossMW/1000*AverageOutputPct))
AverageAnnualEnergyforGrossCapacityPMT(rate,nper,pv)
rate(InterestRate)=DiscountRate
nper(numberofperiods)=,BookLife,
pv(PresentValue)=PV((1+DiscountRate)/(1AnnCapDegredationRate)1,BookLife,
OpHrsPerYr*GrossMW/1000*AverageOutputPct))
Thefinaldivisionby(1AnnCapDegradation)isforaligningtheyearlyvaluesofthe
degradationfactorwiththoseofthediscountrate.
Operational and Performance Data

Figure21showstheOperationalandPerformanceDatatablefortheCCwithductfiring
technology.
Average Percent Output

Thisfactorisusedforgeneratingtechnologies,suchassolarandwind,whichhavevariable
outputs.ThisfactorestimatestheaverageMWsfortheseunits.Forexample,SolarPhoto
Voltaicmayhavethepotentialtoachieve50MWbutwilltypicallybebelowthatvalueso
thatithasanaverageof12.5MWovertheyear.Accordingly,theAveragePercentOutputis
25percent(12.5/50=0.25=25%).
Planned Percent of Year Operational

Thisfactorisusedtocapturetheeffectofeconomicdispatch.Itisusedtoadjustthecapacity
factorforanyunitthatwillhaveitsoperationalhourslimitedduetoeconomicdispatch
primarilyusedfortheconventionalgeneratingunits.Itsfunctioncanbeillustratedfora
combustionturbine,whichistypicallyexpectedtooperateonly5percentoftheyear,sothat
itsPlannedPercentofYearOperationalFactoris5percent.Actually,thisissimplisticasthe
CapacityFactoralsodependsontheForcedOutageandScheduleOutageFactor.Fora
combinedcycleunit,thePlannedPercentageofYearOperationalFactorissetat71.6percent
toachievetheknownaveragecapacityfactorforacombinedcycleunitof70percent.
40
Figure 21: Operational and Performance Data

Operational Performance Data
Hours/Yr
Average Percent Output

Planned Percent of Year Operational
Number Of Annual Starts
Scheduled Outage Hours
OR Scheduled Outage Factor
100.00%
71.6%
25
6.02%
6.0%
Modeled Scheduled Outage Factor

Final Planned Operational Hours
Forced Outage Rate (FOR)
Operational (Service) Hours Per Year
Total Operating Hours Over Life Of Plant
Net Capacity Factor (NCF)
2.24%
91.87%
70.00%
6,273
527
6,273
141
6,132
122,640
Scheduled Outage Hours and Factor

ScheduledOutageHours(SOH)arethosehourswhenthepowerplantisonscheduled
maintenance.Thisincludesnotonlyannualmaintenancebutalsoforcedoutagesthatcanbe
delayedbeyondthenextweekend,calledMaintenanceOutages.TheseareNorth
AmericanReliabilityCouncil(NERC)definitionsthatarecreatedbyitsGenerating
AvailabilityDataService(GADS)unit.Thesedefinitionsaremorecarefullyexplainedinthe
DefinitionssectionattheendofthisUsersGuide.Theseoutagescalculatedasapercentage
ofthetotalyeararecalledScheduledOutageFactor(SOF).IntheCOGModel,SOF=SOH/
8,760hours.
Forced Outage Hours and Rate

TheForcedOutageHours(FOH)andForcedOutageRate(FOR)areameasureofthepower
plantsreliability.FOHarethosehourswhenapowerplantisforcedoutofoperationdueto
equipmentfailure.FORistheratiooftheFOHtothosehourswhentheplantattemptstobe
operational.Hourswhentheplantisnotcalledontooperatearenotapplicabletothe
calculation.Accordingly,FOR=FOH/(FOH+SH),whereSHistheServiceHours.For
purposesofsimplification,thesetermsareusedintheCOGModel,buttheyarenotstrictly
accurateinthattherearepartialoutageswheretheplantisabletooperateatpartialpower.
Tocapturethissubtlety,EquivalentFOHandFORshouldbeenteredintothemodel.FOR
becomesEFORandtheformulabecomesprogressivelymorecomplicated,butinits
simplestform,itisEFOR=(FOH+EFDH)/(FOH+SH+EFDHRS).Theexactformulahasbeen
furthercomplicatedbyrecentNERC/GADSdefinitions.Togettheexactformulaand
completeunderstanding,oneneedstogototheDefinitionssection.
41

ThisindicatestheAvailabilityofthePowerPlantasthepercentageoftheyearthattheplant
isnotonmaintenanceandnotforcedout.Thisfactorrepresentswhentheplantisavailable,
notwhenitisrunning,whichischaracterizedbythecapacityfactordescribedbelow.
AvailabilityFactor(AF)iscalculatedasAF=(1FOR)*(1SOF).Onemustremember,
however,thatFORisreallyEFORandSOFisreallyESOF.Forthismoreexactcase,AF
becomesEquivalentAvailabilityFactor(EAF).Asbefore,itisnecessarytogotothe
Definitionssectionforacompleteunderstanding.
Net Capacity Factor

TheNetCapacityFactor(NCF)isameasureofhowmuchtheplantisused.Insimplest
terms,itisequaltotheratiooftheenergygeneratedbythepowerplanttotheenergythat
couldbegeneratedifitoperatedatfullpowerfortheentireyear.ThewordNetsignifies
thatthenetcapacityisused.TheexactformulathattheCOGModelusesis:NetCapacity
Factor(NCF)=(OperationalHrs/Yr*EffectiveOperatingCapacity[MW])/([8760*Net
Capacity[MW]).
Fuel Use Data

Figure22showstheFuelUseDatatablefortheCCwithductfiringtechnology.
Figure 22: Fuel Use Table

Efficiency
Fuel Use
Annual Average Heat Rate (HHV)
Adjusted for Capacity Factor
Adjusted Net Of Startup
7,050 Btu/kWh
7,039 Btu/kWh
Annual Heat Rate Degradation

Fuel Consumption/Hour
Start Up Fuel Use
Average Annual Fuel Use
48.4%
48.5%
0.20%
3,871 MMBtu/Hr
1,540 MMBtu/Start
23,776,830 MMBtu
Therearetwoaverageannualheatrates.
Adjustedforcapacityfactor
Adjustedforstartupenergy
Adjusted for Capacity Factor

BaseYearHeatRatesareprovidedinthePlantTypeAssumptionsWorksheetandare
forwardedtotheData1worksheetbythemacros.OnlytheCCheatratesareadjustedfor
42
capacityfactorintheCOGModel.ThebaseyearheatrateiscalculatedinthePlantType
AssumptionsWorksheetusingaregressionoftheEnergyCommissionsQFERdata.This
regressionisshowninaworksheetoftheCOGModel,called,CC_HeatRateasafunction
ofCF.ThedefaultCCunitwithductfiringhasacapacityfactorof70percent.Thisvalueis
variedforthescreeningcurvefunction.
Adjusted for Startups

Thisistheestimatedheatratewithouttheenergyusedinstartupsandassuchisabetter
heatrate.Thisisestimatedbyassumingtheannualnumberofstartupandthefuelusedin
eachstartupandincreasingtheheatrateaccordingly.Theestimatehasnoeffectonthe
actualaverageheatrateasitiscalculatedbasedonQFERdata,whichinherentlycapturesall
fuelusagesincludingstartupfuel.Theheatratenetofstartupsiscalculatedbybackingout
theestimatedstartupfuelusage.

TheheatratedegradationfortheunitsotherthantheCCandSCwasprovidedbyNCI
consultingcompany.Thesomewhatlimiteddocumentationforthisisprovidedinthe2009
IEPRCostofGenerationReport.Theheatratedegradationforthegasfiredunitsisasfollows:
ForSimpleCycleUnits:0.05percentperyear
ForCombinedCycleUnits0.2percentperyear
ThesedegradationestimatesarebasedonaDecember7,2005,emailfromJames
ShoonmakertoWillWalters,whichincorporatesaGeneralElectricTechnicalBulletinGER
3567H,Lastupdate2000,whichareincludedasAttachmentA.
GeneralElectricsruleisthatSCunitsdegrade3percentevery24,000hours,atwhichtime
theyreceiveanoverhaulandreturnto1percentdegradationthatis,theyrecovertwo
thirdsofthedegradation.Assumingthattheyoperateatanaverageof5percentcapacity
factor,anoverhaulwillnotbenecessaryfor55years,whichisbeyondthebooklife
(24,000hrs/(8760*0.05hrs/yr=54.8yrs).Thisisequivalentto0.05percentdegradationper
year(3%/55years=0.05%).ThisisillustratedinFigure23.
ThecomputationfortheCCunitsismorecomplexduetoitshighercapacityfactor
estimatedtoberoughly70percentforductfiredand75percentfornonductfired,based
ontheQFERdataandotherhistoricalinformation.The70percentcapacityfactorcallsfor
anoverhaulevery3.9yearsandthenonductfiredunitevery3.6years.Approximating
bothoftheseas4yearsresultsinfourmajoroverhaulsduringits20yearbooklife,as
showninFigure24.Sincethesteamgeneratorportionremainsessentiallystable,theoverall
systemdeteriorates2.4percentduringthefouryearperiodandrecoverstwothirdsofits
deteriorationduringtheoverhaul.Eachsubsequentendofdegradationpointandrecovery
pointis0.667percenthigherthanthelast.Thisgivesanendpointat20yearsof4.67percent.
43
Theequivalentdegradationof0.24percentcanbecalculatedastheslopeofthelinethathas
theequivalentareaunderthecurve,0.24percentperyear(4.67%/20=0.24%).
Theseapproximationsarequiteadequateastheeffectonlevelizedcostisquitesmall;in
fact,theeliminationofthisfactorhasasmalleffect:0.5percentforsimplecycleunitsand
0.9percentforCCunits.
Figure 23: Heat Rate DegradationSimple Cycle

E Q U IVALE N T H EAT R AT E D EG R AD AT IO N
O F S IM P LE C Y C LE U N IT @ 5% C F
4.0%
De g ra d a tio n
3.5%
3.0%
Equiv alent SC Degradation
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
0
10
12
14
16
18
20
Ye a rs of Ope r a tion
44
Figure 24: Heat Rate Degradation Combined Cycle

5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
Actual Degradation
1.0%
Equivalent Degradation
0.5%
0.0%
0
12
16
20
Years of Operation
Financial Information
Figure25showstheFinancialInformationtablefortheCCwithductfiringwithmerchant
financing.
Equity
Thevalueshownas60percentisthepercentageofcapitalraisedthatisfinancedthrough
stockinvestments.Thevalueshownas14.47percentistheinterestpaidtotheinvestors.
Debt
Thevalueshownas40percentisthepercentageofcapitalraisedthatisfinancedthrough
bankloans,andthevalueshownas7.49percentistheaverageinterestpaidontheloan.
Discount Rate
Thevalueshownas10.46percentisthediscountrateandisassumedtobeequaltothe
weightedaveragecostofcapital(WACC).TheWACCisadjustedfortaxreductionin
federaltaxesforstatetaxesandiscalculatedas:
WACC=CapitalStructureEquity%*CostofCapitalEquity%+CapitalStructure
DebtFinanced%*CostofCapitalDebtFinanced%*(1TotalTaxRate)
Real Discount Rate

Thevalueshownas8.76percentistherealdiscountrate,whichisusedintheoverhaul
calculationthatisdescribedindetailinthesectionontheOverhaulWorksheet.
45
Figure 25: Financial Information

Financial Information
Capital Structure Cost of Capital
60.0%
14.47%
40.0%
7.49%
10.46%
8.76%
Equity
Debt
Discount Rate (WACC)
Inflation Rate From Base Yr. To Start Yr.

Inflation Rate From Start Year Forward
Debt Coverage Ratio - Minimum
Debt Coverage Ratio - Average
Loan/Debt Term (Years)
Equipment Life (Years):
Economic/Book Life (Years)
Federal Tax Life (Years)
State Tax Life (Years)
1.76%
1.56%
1.5
1.8
12
20
20
20
20
12/31/2028
Table1summarizesthefinancialassumptionsbeingusedintheCOGModelnow.Notethat
thedebttoequitysplitisdifferentformerchantgasfiredplantsthanmerchantnongas
firedplants(cleancoal,advancednuclear,andalterativetechnologies).Thefinancial
assumptionsforgasfiredplantsareavailablefromtheBOEandareknownwithahigh
degreeofcertainty.Thecorrespondingassumptionfortheotherplantsisbasedon2009
IEPRKEMAestimates.
Table 1: Financial Assumptions

Merchant
Gas-Fired
Merchant
Non Gas-Fired
IOU
POU
% Debt
40.0%
60.0%
48.0%
100.0%
% Equity
60.0%
40.0%
52.0%
0.0%
Cost of Debt (%)

Cost of Equity (%)
7.49%
7.49%
5.4%
4.67%
14.47%
14.47%
11.85%
0.0%
Therestofthesetermsareselfexplanatoryandwillnotbeexplainedfurtherherein.
46
Tax Information
Figure26showsthetaxinformation.Stateandfederaltaxesarecommontomerchantand
IOUpowerplantsbutnottoPOUplants,whichareexemptfrombothtaxes.AdValorem
taxesarecomplexinthattheyarecalculateddifferentlyforallthethreedevelopers.
Merchantplantspaytheshownratebasedoninstalledcost,butIOUplantspaytheshown
ratebasedonitsratebasevalue,whichdepreciatesoverthelifetimeofthepowerplant.
POUpowerplantsarenotrequiredtopayAdValorembutgenerallymakegratuitousin
lieupayments.
Figure 26: Tax Information

Tax Information
Federal Tax =
CA State Tax =
Total Tax Rate =
CA Avg. Ad Valorem Tax =
Municipal in-lieu payment of property taxes
CA Sales Tax =
35.0%
8.84%
40.7%
1.10%
Y
7.94%
Renewable Tax Benefits Information

Figure27istheRenewableTaxBenefitstable.ItworksinconjunctionwiththeFinancial
WorksheettodefinedeductionsandtaxcreditsintheIncomeStatementWorksheet.
47
Figure 27: Tax Benefits

Tax & Production Incentives
Eligible For BEITC
ITC Expiration
Eligible For Geothermal Depletion Allowance
Eligible For REPTC
PTC Expiration
Y
N
Y
Eligible For REPI

REPI Expiration
Business Energy Investment Tax Credit (ITC)

BETC Limit ($)
BETC Depreciation Adjustment
BETC Limit (% Of Remaining Taxes)
BETC Calculation
Geothermal Depletion Allowance
Percentage Depletion
Limit (% Of Remaining Taxes)
Renewable Energy Production Tax Credit (REPTC)
Duration
REPTC Base Year
REPTC In Start Year $/kWh
REPI Tier
REPI Tier I Proportion Paid
REPI Tier II Proportion Paid
REPI Duration
REPI Base Year
REPI In Start Year $/kWh
California Property Tax Solar Credit
California Solar Initiative $/kWh
CSI Duration (years)
Solar installed capacity forecast at time of construction
California Self-Generation Incentive Program
100%
$0
N
0.000
19%
18%
0.000
50 MW
/kW
Data 2 Worksheet
TheData2WorksheetsummarizestheConstruction,Operation,andMaintenanceCosts.In
addition,itprovidessomefactorsforcalculatingthefixedandvariablecostsintheIncome
StatementWorksheet.
Construction Costs
Figure28showstheInstantCapitalCostpanelforaCCunitwithductfiring.Allcostsare
giveninbaseyeardollars.FortheCCandsimplecycleunits,thisisyear2005.
48
Notethattheresixcategoriesofcosts:
ComponentCostsGenerator,boilers,pipelineandcontrolsystemcosts
LandCostsAcquisitionandpreparationcost
DevelopmentCostsPredevelopment,insuranceandcommitmentfee
PermittingCostsBuilding,environmentalandemissionreductioncredits(ERC)costs
InterconnectionCostsTransmission,fuel/water/sewercosts
EnvironmentalControlCostsAiremissioncontrolsandwatertreatmentandcooling
controlscosts
Thecellabovethebottomlineinthispanel(shadedinturquoise)allowstheusertoinserta
singlevaluefortheinstant(orinstalled)costandnotprovidetheabovedetailed
componentsofthecost.
Figure29isthepanelthatconvertsinstantcosttoinstalledcost.Eachlineisinnominal
dollarsfortheyearshownandrepresentsthedollarsexpendedinthatyear.Thefinalvalue
(inred)isinstartyearnominaldollarsinthiscase,2009dollars.Theallowanceforfunds
duringconstruction(AFUDC)rateisassumedtobeequaltotheWACC.
49
Figure 28: Instant Costs

Instant Capital Costs ($)
Financial Transaction Costs
Component Cost
0.0%
Total Overnight Cost
$561,550,000
$0
Total Component Cost
$561,550,000
Land Costs
Acreage/MW
Acreage/Plant
Additional Occupied Acreage
Total Acres
Cost Per Acre
Acquisition Cost
Land Prep Costs/Acre
Total Land Prep Costs
Total Land Costs
Development Costs
Predevelopment Expenses
Construction Insurance & Installation
25.00
25
$0
$0
$0
Commitment Fee
Total Development Costs
$0
Permitting Costs
Local Building Permits
Environmental Permits
Emission Reduction Credits Costs
Total Permitting Costs
Interconnection Costs (Linears)
All connection costs
Transmission interconnection
Fuel / water / sewer costs
Total Interconnection Costs
Air Emission Controls
Installation Costs
Total Air Emission Controls Costs
Water Treatment & Cooling Controls
Installation Costs
Total Water Treatment & Cooling Controls Costs
Total Environmental Controls Costs
Total Component Cost
INPUT OVERRIDE CAPITAL COST - Instant
DEFAULT TOTAL CAPITAL COST - Instant
50
$5,500,000
$25,835,397
$31,335,397
$34,100,000
$34,100,000
$0
$0
$0
$0
$0
$561,550,000
$626,985,397
Figure 29: Converting Instant to Installed Cost

Capital Construction Costs by Year (Nominal $)
Escalation in Capital Costs
0.00%
AFUDC Rate
10.46%
Cumulative
Cost %/Year
Months in
Year
Construction
Construction
Year
Costs by Year
2004 (-5)
0%
$0
0
2005 (-4)
0%
$0
0
2006 (-3)
0%
$0
0
2007 (-2)
0%
$0
0
2008 (-1)
25%
$164,941,642
12
2009 (0)
75%
12
$677,014,118
Figure30convertstheinstantandinstalledcostsintotaldollarstoinstantandinstalledcost
in$/kW.Theturquoiseblock,InputOverride,allowstheusertooverrideallthecalculations
inFigure28andFigure29andentertheinstalledcostinstartyeardollarsdirectly.
Figure 30: Converting Instant to Installed Cost

Capital Costs (Nominal $/kW)
INPUT OVERRIDE
Installed Cost (2009 Dollars)
Instant Cost (2009 Dollars)
Instant Cost (2009 Dollars)
$1,140
$1,329
$1,140
$1,329
Ratio of
Installed to
Instant
1.16553
BoththeInstantandInstalledCosts($/kW)arecalculatedinbothBaseYearandStartYear
Dollars.First,thesumoftheseInstantCapitalCostsiscalculatedinBaseYearDollars($),
thenconvertedtoInstantCosts($/kW)bydividingbytheGrossMW.TheseBaseYearCosts
canthenbeinflatedtoStartYearCosts,usingtheDeflatorSeriesoftheInflationWorksheet.
BothoftheseInstantCostscanthenbeconvertedtoInstalledCosts($/kW)byallowingfor
ConstructionCosts.TheConstructionCostsarebasedonanestimatedperiodof
Construction,usingtheCostofCapitalforaConstructionLoan,whichisassumedtobe
equaltotheAFUDC.
Operation and Maintenance Cost

Thesecostsaredividedintotwocategories:
51
FixedO&MEmployeesalaries,overhead,andequipment(includingleasing),
regulatoryfilingsandotherdirectcosts,asshowninFigure31
VariableO&MTotalAnnualMaintenance,WaterSupply,PlantSchedulingandTotal
EnvironmentalCosts,asshowninFigure32
Figure 31: Fixed O&M Cost

FIXED O&M COSTS
Employees
Managers (Salary, $/Year))
FTE
Hours/Year
2.7
Plant Operators (Wage, $/Hour)

Mechanics (Wage, $/Hour)
Laborers (Wage, $/Hour)
Support Staff (Wage, $/Hour)
Total W-2 Wages, adjusted to Base Year
Overhead Multiplier
Annual Salary W/ Overhead ($)
Annual Salary W/ Overhead ($/kW-Yr)
Non-labor Fixed O&M including ODC $/kW/Yr
INPUT OVERRIDE
Fixed O&M ($/kW-Yr)
Total Fixed O&M ($/kW-Yr)
14.3
2.9
0.5
3.7
$2,132,275
1.593
$3,395,782
$6.174150
$2.13
2,080
2,080
2,080
2,080
Wages
$164,282
$34.95
$37.86
$29.28
$26.91
<-- Overrides above values.
$8.30
Forthegasfiredpowerplants,theemployeesalariesarecalculatedwithinthePlantType
Assumptionsworksheetandhavealsobeenbenchmarkedagainstthevaluesfromthedata
survey.Thenonlaboramountiscalculatedasanaveragevaluefromthesurvey.Forall
othertechnologies,thefixedO&Misgivenasatotalvaluethatincludesboththelaborand
nonlaboramounts.
Water Supply Costs

Calculatedasafunctionoftheregion.ThecostperacrefootistakenfromthePlantSiteAir
andWaterDataWorksheet.Thetotalcostofwateristhencalculatedascostperacrefoot
timestheacrefootconsumption,whichistakenfromtheTechnologyAssumptions
Worksheet,viaamacro.
Plant Scheduling Costs

Thecostsassociatedwithcoordinatingplantbidsandoperationalscheduleswithpower
marketersandtransmissionnetworkaccesscostswiththeCaliforniaISO.Theseinclude
transmissionaccessfees,wheelingcharges,andschedulercosts.Thesecostsmaybeashare
ofcostsspreadacrossaportfolioofplantsownedandmanagedbyasingleentity.
52
Figure 32: Variable O&M Cost

VARIABLE O&M COSTS
Water Supply Costs
Water Supply ($/Acre Foot)
Consumption (AF/MWh)
Water Supply Costs ($/MWh)
Make-Up Water (AF)
Reservoir Management
$513
0.001
0.438
$0
Total Annual Maintenance Costs($/MWh)

Total Environmental Costs ($/MWh)
INPUT OVERRIDE
Variable O&M ($/MWh)
Total Variable O&M ($/MWh)
$2.75
$0.00
<-- Overrides above values.
$3.19
Total Annual Maintenance Costs

Thesumofthreetypesofmaintenancecosts:
RoutinePeriodicmaintenancethatislessthanannual
ScheduledPeriodicmaintenance,bothannualandgreaterthanannual
UnscheduledMaintenancethatresultsfromaforcedoutage
Total Environmental Costs

ThesumofTotalAnnualEnvironmentalO&MCostsandVariableReclaimTrading
Credits(RTC)andMitigationFees.
Total Annual Environmental Operation and Maintenance Costs

Thesumofthreecomponents:
TotalAnnualAirEmissionsCosts(ExcludingCapital)Annualcostsofreplacement,
consumablesandlabor
TotalAnnualWaterTreatmentCosts(ExcludingCapital)Annualcostsofreplacement,
consumables,andlabor
TotalAnnualSolidWasteDisposalCostsCollection,hauling,landfilltipping,and
dumping
Cost Factors
Figure33showsthecostfactorsthatareusedintheIncomeStatementworksheet:
RealLaborEscalation(percentage)Estimatestherealescalationoflaborcostsforusein
calculatingFixedO&MCostsintheIncomeStatementWorksheet
53
RealO&MEscalation(percentage)EstimatestherealescalationofO&Mcostsforuse
incalculatingVariableO&MintheIncomeStatementWorksheet
InsuranceCosts(percentage)EstimatesthecostofiIsuranceusedintheFixedCost
calculationintheIncomeStatementWorksheet
Figure 33: Cost Factors

Cost Factors - Used in Income Statement
Labor Escalation Cost (Above Inflation)
O&M Escalation (Above Inflation)
0.500% (Fixed Costs)

0.500% (Variable Costs)
Insurance
0.600% (Fixed Costs)
Income Statement Worksheet

ThissectiondescribestheIncomeStatementWorksheetindetail.Itdefinesthecomponents
andexplainsthemechanics,includingadetaileddescriptionofthealgorithms.Duetothe
immensesizeofthisworksheet,figuresarenotshown.
ItistheIncomeStatementWorksheetthatcalculatesthefinalLevelizedCostscalculatedby
theCOGModel.Thesecostsarebrokenoutintothefollowingcategories:
LevelizedFixedCosts
Capital&Financing(ConstructionCosts)
Insurance
AdValorem(PropertyTaxes)
FixedO&MCosts
CorporateTaxes(Federal&State)
LevelizedVariableCosts
FuelCosts
VariableO&MCosts
Inallcases,yearlyvaluesmustbecalculatedfortheBookLifeofthepowerplant,whichare
thenconvertedtoPresentValuessothattheLevelizedCostcanbecalculated.
54
Levelized Fixed Costs
Capital and Financing

CapitalandFinancingcoversthecapitalcostoftheequipmentandfacilitiesplusthecostof
constructingandfinancingthepowerplant.ThecapitalcostiscalculatedintheData2
worksheet,firstasinstantcost,whichcoversthecostoftheequipmentandallrelated
facilitiesincludinglicensing,andthenasinstalledcost,whichcoverstheconstructioncosts.
Thesecostsarecalculatedbothinthebaseyearandtheinserviceyearas$/kWandareused
intheIncomeStatementWorksheettocalculatethefinancingcosts(debtandequity).
Insurance
Insuranceiscalculatedusingapercentageratethatispresentlysetat0.6percent.This
percentagerateisdesignatedasInsurancePctandcomesfromtheData1Worksheet,
whichinturngetsitsdatafromthePlantTypeAssumptionsWorksheet.
ForanIOU,thepercentagerateisappliedagainstthebookvalue,andsincethebookvalue
decreasesoverthelifeofthecalculation,theinsurancepaymentsarehigherintheearly
yearsandlowerinthelateryears.
ForaMerchantandMunicipalPlant,thepercentagerateisappliedagainsttheInstalled
Costperkilowatt.TheInstalledCostperkilowattiscalculatedontheData2Worksheetasa
BaseYearvalue.ThisproductisthenescalatedfirsttotheStartYearusingHistorical
InflationandthenthroughouttheBookLifeoftheprojectusingtheForwardInflation.
Ad Valorem
AdValorem,whichisthetraditionalnameforpropertytaxes,iscalculateddifferentlyfor
municipal,IOUandmerchantplants.ForaMunicipalPlantthepropertytaxesarezeroby
definition.ForanIOU,itiscalculatedastheAdValoremTaxRate(Data1)timestheRate
Base.ForamerchantplantitiscalculatedasaPercentageRate(Data1)timestheInstalled
CostperKilowatt.AlsoformerchantownedplantsInstalledcostisescalatedattheProp13
limit=2percent.
Fixed Operation and Maintenance

TheBaseYearvalueiscalculatedintheData2Worksheet,whichreliesondatainthe
OverhaulandPlantSiteAirandWaterDataWorksheets.Theyearlyvaluesarethen
escalatedtothestartyearusingtheHistoricalInflationandthenthroughouttheBookLife
usingtheForwardInflationRate.BothusethesameNominalInflation,buteachhasitsown
RealEscalationFactor:FixedO&MusesLaborEscalationRatewhereasVariableO&Muses
O&MEscalationRate.
Corporate Taxes
CorporateTaxesarestateandfederaltaxes.Theyareindividuallybutsimilarlycalculatedas
aTaxRate(Data1Worksheet)timesthequantityBeforeTaxIncome(OperatingIncome)
minusDeductions,thisquantitymustthenbereducedbytheTaxCreditssimilarto
55
personaltaxes.Thedeductionsforstateareinterestontheloananddepreciation.Itisthe
sameforthefederaltaxesexceptthatthereisalsothestandarddeductionforstatetaxes(so
thatstatetaxesarenotpaidtwice,similartopersonaltaxes).Inaddition,therearespecial
deductionsforfossilfueltechnologies,suchasTaxDeductionforManufacturingActivities
(TDMA),andsomealternativetechnologies,suchasGeothermalDepletionAllowance
(GDA).Therearealsotaxcreditsavailable,suchasBusinessExpenseTaxCredit(BETC),
RenewableEnergyProductionTaxCredit(REPTC),andRenewableEnergyProduction
Incentive(REPI).Conceptuallythisseemsstraightforwardbutiscomplicatedbythe
subtletiesinthecalculationoftheOperatingIncomeasexplainedbelow.
Levelized Variable Costs
Fuel Cost
FuelCostiscalculatedonlyforfossilfueledgenerators,nuclear,gasifiedcoal,andsome
biomassgenerators.Geothermalfuelcostisconsideredtobecapturedinthepurchaseprice.
ThenumberofBtuusediscalculatedonayearlybasisastheHeatRate(Data1)timesthe
EnergyGenerated(Data1).Theseyearlyvalueswouldbethesameexceptfortheyearly
HeatRateDegradationvalue(Data1).TheFuelCostiscalculatedastheNumberofBtu
timestheFuelPrice(FuelPriceForecastsWorksheet).
ThereisasubtletyinregardtothecalculationofFuelUseasitrelatestotheHeatRatefor
thegasfiredunits.ThemodelshowstheFuelUseforStartups.Thisisinformationalonly.It
isnotcalculatedandthenaddedtotherunningHeatRate.TheStartupHeatRateis
calculatedandthensubtractedfromtheTotalAverageHeatRatetoestimatetherunning
HeatRate.Theheatrateiscalculatedfromaregressionofactualfueluse(Btu)usedand
energygenerated(GWh),fromtheEnergyCommissionsQFERdatabase.
Variable O&M
ThisiscalculatedsimilarlytoFixedO&Mabove.
Cost of Generation Model Mechanics and Definitions

Alltheabovecostcategoriesarecalculatedinarelativelystraightforwardmannerexceptfor
corporatetaxes.Thisbecomesmorecomplicatedbecausethiscalculationisbasedon
revenuerequirement.TheCOGModel,however,doesnotknowthisinadvanceandmust
calculateitasthetotalofallcosts,whichisbytheway,thelevelizedcost.Toexplainthis
calculation,itisnecessarytounderstandanumberofstandardfinancialaccountingtermsas
wellastherelationshipbetweenthem.
56
Operating ExpensesOperating
ExpensesarealltheaboveitemsexceptCapital&FinancingCostsandCorporateTaxes.It
includesInsurance,AdValorem,Fixed&VariableO&MandFuelCost.
Revenue Requirement
Thisisthetotalincomefortheplantthatmustbesufficienttopayallcosts:Operating
Expenses,Taxes,debt,andequity(stockholders).Anotherwaytosaythisisthatthe
RevenueRequirementisequaltotheOperatingExpensesplustheOperatingIncome.Inthe
COGModel,theRevenueRequirementisnotknowninadvancesoitisdevelopedasthe
sumofallthecostsitmustcover.Thatis,theRevenueRequirementmustbeequaltothe
levelizedcostofgeneration.SeeModelingAlgorithmsbelow.
Operating Income/Before Tax Income

AkeyelementintheIncomeStatementisthecalculationoftheOperatingIncome.The
OperatingIncome,whichisthesamethingastheBeforeTaxIncome,isequaltothe
RevenueRequirementminustheOperatingExpenses.Thatis,itistheamountofmoney
thatthedevelopermusthaveonhandafterpayingoperatingexpensestobeabletopaythe
taxes,retirethedebtandpaythestockholders(equitypayments).ThewaytheCOGModel
isconstructed,therevenueisnotknowninadvancebutissetbysimultaneousequationsto
beequaltotheamountnecessarytopaytheoperatingexpenses,thetaxes,andthedebtand
equity(stockholderpayments).
After Tax Income

AfterTaxIncomeis,asitsnameimplies,theincomeremainingafterstateandfederaltaxes
arepaid.Thisresidualamountmustbesufficienttoretirethedebtandpaythestock
holders.Itisequaltotheoperatingincomeminusthetaxpayments.
Modeling Algorithms
ThealgorithmsfortheIncomeStatementWorksheetdependonwhethertheaccountingis
doneonaRevenueRequirementorCashFlowbasis.RevenueRequirementaccountingis
commontoIOUsandPOUsexceptPOUshaveneithertaxesnorequitypaymentsto
accountfor.CashFlowismostcommontomerchantplants.Thedifferencebetweenusing
RevenueRequirementorCashFlowissmallfortechnologieswithlittleornotaxbenefits
butcanbequitelargewheretaxbenefitsareapplicable.
Thecomplexityofthesealgorithmsgrowsoutofthemodelingassumptionthatsincethe
revenueisundefinedforthegeneralcase;itissettoanamountthatisjustadequatetomeet
allexpenses.Thisleadstothedilemmathatthestateandfederaltaxescannotbecalculated
beforetherevenueisknown,andtherevenuerequirementcannotbeknownuntilthestate
andfederaltaxesarecalculatedthustheneedforsimultaneousequations.
57
Inbothcases,therevenuerequirediscapturedintheIncomeStatementbyusingthe
followingrules:
Revenue(R)mustequalthesumof:
OperatingExpenses(OE):
FixedO&MCosts
InsuranceandAdValorem(PropertyTaxes)
FuelCost
VariableO&M
BeforeTaxIncome 1 (BTI):
AfterTaxIncome(ATI)isequaltothedebtandequitypayments
State(Ts)andFederal(Tf)Taxes
R = OE + BTI = OE + ATI + Tf + Ts
TaxableIncomeiscalculatedseparatelyforStateandFederalas:
TaxableStateIncome:BeforeTaxIncome(BTI)StateDeductions(Ds)
TaxableFederalIncome:BeforeTaxIncome(BTI)FederalDeductions(Df)State
Taxes(Ts)TaxDeductionforManufacturingActivities(TDMA)Geothermal
DepletionAllowance(GDA) 2
StateDeductions(Ds):StateDepreciationandInterestonLoan
FederalDeductions(Ds):FederalDepreciation,InterestonLoan,Manufacturing
Activities(TDMA),GeothermalDepletionAllowance(GDA)
FederalTaxCredits(Cf):BETC,REPTC&REPI
TaxesareequaltoTaxRatestimesTaxableIncomeTaxCredits(C)
FederalTaxes: Tf = t f (BTI Df Ts ) Cf = t f (ATI + Tf Df ) Cf

SolvingforTf: Tf =
t f (ATI Df ) C f
(1 t f )
StateTaxes: Ts = ts (BTI Ds ) Cs = ts (ATI + Tf + Ts Ds ) Cs
1BeforeTaxIncome(BTI)isalsocalledOperatingIncomeorEarningsBeforeInterest,Taxes,
DepreciationandAmortization(EBITDA).
2GDAisignoredinthemodelasdeveloperscannotusebothGDAandREPTC.UsingREPTCis
moreadvantageousasdefault.
58
SolvingforTs: Ts =
t s (ATI + Tf Ds ) Cs
(1 t s )
Atthispoint,thereisstillnodifferencebetweenRevenueRequirementandCashFlow.The
differencebetweenRevenueRequirementandCashFlowisinhowtheequitypaymentsare
calculated.Thisaffectsonlythefixedcostsandinonlytwocategories:Capitaland
FinancingCostandCorporateTaxes(stateandfederaltaxes).
Revenue Requirement
IntheRevenueRequirementIncomeSheet,theequityreturnpaymentsarecalculatedasa
percentageofthedepreciatedvalueofthetechnologyforeachyearthereisnolinkage
amongyears,unlikethecashflowanalysis.Sinceinvestmentanddepreciatedvalueis
knownapriori,calculatingthebeforetaxnetrevenueandequityreturnisstraightforward,
andtaxesaresimplyapercentageofthatincome.Thisresultsinrevenuepaymentssimilar
tothoseshowninFigure34.
Figure 34: Annual Revenue Stream for Revenue Requirement Accounting
$1,000.0
AnnualCost(Nominal$/MWh)
$500.0
$0.0
2009
2011
2013
2015
2017
2019
($500.0)
2021
2023
2025
2027
2029
100MWCT
SolarPV
SolarTrough
($1,000.0)
550MWCC
Nuclear
GeothermalFlash
($1,500.0)
WindCL5
($2,000.0)
Cash-Flow
IntheCashFlowIncomeStatement,theequitypaymentsmustbecalculatedusinga
minimizationmethod,whereauniformstreamofrevenuepayments(increasingor
decreasingdependingoncontractualterms)iscreatedwhilejustmeetingthenetpresent
valueoftheequitypaymentsovertheeconomiclifeoftheplantnecessarytocompensate
theinvestors.Becausetherevenuelevelisafunctionofaftertaxincomeplustaxes,and
59
taxesareafunctionofthebeforetaxincome,andtherevenueamountmustbearelatively
levelstreamovertheyears,themodelmustsolveforhowequityincomewillvaryamong
yearssoastoachievethenetpresentvaluetargetforequityreturnovertheentireperiod,
notoneyearatatime.Inotherwords,unliketherevenuerequirementmethod,theequity
returninanyyearisnotindependentofthereturninotheryears.Thecorrespondingannual
paymentsareshowninFigure35.
Figure 35: Annual Revenue Stream for Cash-Flow Accounting
$1,200.0
AnnualCost(Nominal$/MWh)
$1,000.0
100MWCT
SolarPV
$800.0
SolarTrough
Nuclear
$600.0
550MWCC
GeothermalFlash
$400.0
WindCL5
$200.0
$0.0
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
TheSouthernCaliforniaEdisonCostofGenerationModel,whichisnowbeingfurther
developedbyE3foruseintheCPUCMPR,usestheExcelGoalSeekfunctiontochange
theprojectedrevenuebychangingthecontractpricesothatthenetpresentvalueofthe
equityreturnequalsthetargetequityreturnafterpayingtaxes.TheBlack&Veatch(B&V)
CostofGenerationModel,usedfortheEnergyCommissionsRenewableEnergy
Transmission(RETI)studies,usestheExcelTablefunctionthatmakesalinearestimateof
howthenetrevenuefunctionchangeswiththecontractpricepaid.BothExcelfunctions
producesimilarresultsbecausetheGoalSeekfunctionusesasimilarlinearestimatemethod
duplicatedintheTablefunctionsetup.StaffelectedtousetheTablefunctionsimilartothe
B&VCostofGenerationmodelbecauseitallowsforautomaticadjustmentofthetarget
contractpricewithouthavingtorunGoalSeekseparatelyforeachchangeintechnology,
assumptions,orscenarios.However,stafffoundthatthechangeinnetrevenuewasnota
linearfunctionoverthefullrangeofcontractpricesduetothemorecomplexrepresentation
ofexpensesandtaxesintheEnergyCommissionCOGModelcomparedtotheB&VRETI
60
model.InsteadapiecewiselinearfunctionwascreatedusingtheTablefunctiontocapture
thenonlinearrelationship. 3
Fortworeasons,therevenuerequirementsandcashflowmaynotnecessarilyarriveatthe
samevalue.Thefirstreasonissincetherevenuerequirementcalculatestheannualrevenue
separatelyforeachyear,changesintherelationshipsamongyearsdoesnotaffectthe
revenuerequirementwithinanindividualyear.Theannualrevenuerequirementissimplya
functionoftheweightedaveragecostofcapitalthatequalsthediscountrateusedto
calculatethelevelizedcostofcapital.Forthecashflowmethod,costcomponentsare
discountedbythreediscountratestheinterestratefordebt,therateofreturnforequity
fortheprofit,andtheweightedaverageofthesetwoforexpenses.Theresultingnetpresent
valueofeachofthesestreamsofvaluesisanonlinearfunctionofeachdiscountrate.The
sumofnonlinearfunctionsdoesnotequalthenonlinearfunctionofthesums.Theformeris
thecashflowmethod,thelatteristherevenuerequirementfunction.Thesecondreasonis
thattaxincentivestypicallyareappliedtonominalvaluesassetvaluesandincomestreams.
Movingthenetpresentvalueofincomefromoneperiodtoanothercanhavesecondarytax
consequencesthatthenchangetherevenuetarget,whichinturnchangesthetaxlooping
backandforth.Typicallythedifferencebetweenthecashflowandrevenuerequirement
resultsisnotlarge,butittypicallybecomessignificantwherelargetaxincentivesare
applicabletoatechnology.
Overhaul Worksheet
TheOverhaulWorksheetisusedonlywherecomponentVariableO&Mcostsarecalculated.
Atpresent,thisisbeingdoneforthegasfiredtechnologies,only.Allothertechnologies
havetheirVariableO&Mreportedasasinglevalue.
TheOverhaulWorksheetrequiresspecialtreatmentduetotheinclusionofirregular
maintenanceintervals.Inaddition,theCOGModelhasaspecialrequirementofhavingto
developBaseYearvaluesforuseintheIncomeStatementWorksheet.Thissectiondescribes
howtheseirregularmaintenancecostsareconvertedintothenecessaryBaseYearvaluesfor
useintheIncomeStatementWorksheet.
TheIncomeStatementWorksheethasanitemcalledVariableO&M,whichrequiresBase
Yeardollarsasastartingpointforitscalculations.TheBaseYearisthemostrecentyearfor
whichthereisknowndata,andisthereforetheinitialpointofcalculation.VariableO&M
hasseveralcomponentcoststhatarecalculatedintheData2worksheet,andthencombined
togethertogetthetotalBaseYearCost.Fourofthesecomponentsarenotreadilyavailable
inBaseYeardollarsandrequireaspecialsomewhatsubtletreatmenttobeconvertedto
baseyeardollars:
3TheTablefunctioncalculationcanbefoundontheIncome_CashFlowworksheetinthemodel,
startingatcellB167.
61
MajorOverhaulCosts
MinorOverhaulsCosts
AirEmissionEquipmentReplacementCosts
WaterTreatment&CoolingEquipmentCosts
TheIncomeStatementWorksheettakestheBaseYearvalueandescalatesittocoverReal
Escalation(O&MEscalation&LaborEscalation)andNominal(Historical&Forward)
Inflation.ItthencalculatesthePresentValuesofalltheseyearlyvalues.Andthenfinally
calculatestheLevelizedCost.
TheOverhaulWorksheetfirstcalculatesthePVoftheirregularmaintenance,andthen
calculatesapaymentvalue,whichisthenecessaryBaseYearValue.
PMT((1+RealDiscountRate)/(1+OMEscalation)1,BookLife,SUM(E5:AE5)
/(1+DiscountRate))*((1+InflationRate)*(1+OMEscalation))
/((1+HistInflationRate)*(1+OMEscalation))(StartYrBaseYr)
Fordescriptivepurposes,thiscanbesimplisticallyrepresentedas:
PMT(InterestRate,BookLife,PV)/
((1+HistInflationRate)*(1+OMEscalation))(StartYrBaseYr)
ThedivisionofterminthesecondlinewhichistheinflationfromBaseYeartoStartyear,
((1+HistInflationRate)*(1+OMEscalation))(StartYrBaseYr),iseasilyunderstood.Thatis,since
multiplyingtheBaseYearvaluebythisterminflatesthevaluetotheStartYear,dividingby
thissamevaluedeflatesaStartYearvaluebacktotheBaseYear.Theexplanationofthe
necessaryInterestRateismoresubtlebutitessentiallytakesthePaymentValuebackto
theStartYear.Thatis,ithastoundotheInflationandRealEscalationsothatthesevalues
canbereconstructedintheIncomeStatementWorksheet.Itdoesthisbyfirstreducingthe
DiscountRatebytheInflationRate,whichgivesusRealDiscountRate,whichisthereal
portionoftheDiscountRate.Mathematically,theRealDiscountRateisconstructedas
follows:
(1+RealDiscountRate)=(1+DiscountRate)/(1+Inflation)
RealDiscountRate=[(1+DiscountRate)/(1+Inflation)]1
SimilarlytheRealEscalationmustberemoved:
(1+InterestRate)=(1+RealDiscountRate)/(1+OMEscalation)
InterestRate=[(1+RealDiscountRate)/(1+OMEscalation)]1
ThisfinalmanipulationwillberecognizedbysomeascalculatingtheAssetRentalValue
(CarltonandPerloff1990),butdefinitionsareoflessimportanceherethanunderstanding
theintentofthemanipulations.Onewaytohelpunderstandthisistorealizethatifthe
62
PresentValuecalculatedontheOverhaulWorksheetcouldbemoveddirectlytothePresent
ValuecellontheIncomeStatement,allthismanipulationwouldnotbenecessary.However,
itwouldcreateaninconsistencyintheformatandwouldbecomplicatedbythefactthat
thereareseveralcomponentsofVariableO&Mthatmustbefirstbeaddedtogetherand
thendividedbyannualenergyforthistobecomplete.
Thefollowingisamorerigoroustreatmentofthissameissue,whichwillbehelpfultothose
thatarecomfortablewithmathematicsbutwillsimplybeponderoustoothers.The
procedurefirstshowsthemechanismoftheIncomeStatementWorksheetandthenexplains
howtheOverhaulWorksheetpreparesthePresentValuesoftheOverhaulWorksheetto
createthenecessaryBaseYearvalue.
IntheIncomeStatementWorksheet,themodelgoesthroughthefollowingsteps.The
inflationisfirstcalculatedfromtheBaseYeartotheStartYear(InServiceYear),using
HistInflationforgeneralinflationandRealEscalationtocovertherealcomponentof
Escalation.ThetotalinflationofVariableO&Misthereforecalculatedas:
((1+HistInflationRate)*(1+RealEscalation)) (StartYrBaseYr)
ItistheninflatedyearbyyearfromtheStartYeartotheendoftheperiod(typically
20years,suchthattheexponentassumesvaluesfrom0to19):
((1+InflationRate)*(1+RealEscalation)(YearStartYr)
ForaBaseYearvaluedesignatedhereinasBaseYearVarO&M,eachyearlyvaluecan
thereforebecalculatedas:
BaseYearVarO&M*[(1+HistInflationRate)*(1+RealEscalation)](StartYrBaseYr)*
[(1+InflationRate)*(1+RealEscalation)](YearStartYr)
Ifthefollowingsubstitutionsaremade,thisformulacanbesimplifiedforillustration:
a=BaseYearVarO&M
b=[(1+HistInflationRate)*(1+RealEscalation)](StartYrBaseYr)
c=[(1+InflationRate)*(1+RealEscalation)]
Usingthedistributivelaw,theannualcostscanthenberepresentedbytheformula:
VariableO&M=a*b*(c0+c1+c2+c3+c4+c5cn1+cn)
AndthePresentValuecanbecalculatedusingDiscountRateDas:
PresentValueofa*b*(c0+c1+c2+c3+c4+c5cn1+cn)
=a*b*PresentValueof(c0+c1+c2+c3+c4+c5cn1+cn)
=a*b*{(c0/(1+D)0+c1/(1+D)1+c2/(1+D2+c3/(1+D)3+c4/(1+D)4+c5/(1+D)5
..cn1/(1+D)n1+cn/(1+)Dn}/(1+D)
63
=a*b*{[c/(1+D)]0+[c/(1+D)]1+[c/(1+D)]2+[c/(1D)]3+[c/(1+D)]4+[c/(1+D)]5+
.[c/(1+D)]n1+[c/(1+D)]n}/(1+D)
Thisismathematicallyequivalentto:(1vn)/(1/v1),wherev=c/(1+D)
=a*b*{1[c/(1+D)]n/1/[c/(1+D)]1}
=a*b*{1[c/(1+D)]n/[(1+D/c)]1}
Ifc/(1+D)canbereplacedwithatermcalledEquivDiscountRate=i,then
(1+i)=(1+D)/c=(1+D)/((1+InflationRate)*(1+RealEscalation))
i=[(1+D)/[(1+InflationRate)*(1+RealEscalation)]1
PresentValue=a*b*{1[c/(1+D)]n/[(1+D/c)]1}
=a*b*{1[1/(1+i)]n/[(i1)}
SolvingforagivesustheinverseofPV,whichisaLevelizedpayment(PMT):
a=1/b*1/{1[1/(1+i)]n/[(i1)}=1/b*1/PV=1/b*PMT
OrinExcelterminology:
a=1/b*PMT(i,Life,PV)
BaseYearVarO&M=1/[(1+HistInflationRate)*(1+RealEscalation)](StartYrBaseYr)*
PMT(i,Life,PV)
ThePVofirregularcostsiscalculatedintheOverhaulsWorksheet,andthenthePayment
Valueisalsocalculated,usingtraditionalPVtechniques.ThisPVisthencalculatedusing
thisformula,givingthecostinStartYeardollars.Andfinally,thatvalueisdividedbythe
escalation,[(1+HistInflationRate)*(1+RealEscalation)(StartYrBaseYr),tobringthevaluebacktoBase
Yeardollars.
Table2andFigure36illustratehowthisworks.
64
Table 2: Sample Overhaul Calculation

Nominal Discount Rate
Inflation Rate
Real Escalation Rate
Effective Discount Rate
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Nominal Cash
Flows w/Real
Escalation Rate
0.00
0.00
0.00
0.00
110.42
0.00
0.00
0.00
0.00
125.00
0.00
0.00
0.00
0.00
141.49
0.00
0.00
0.00
0.00
160.16
NPV-Nom
$174.43
10%
2%
0.5%
7.31%
26.19
Levelized
Cash Flows
with Nominal
Discount Rate
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$20.49
$174.43
$174.43
75.42
53.01
37.26
65
Levelized
Cash Flows
with Effective
Discount Rate
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
$17.28
LCFs w/RDR
Escalated at
Inflation + Real
17.28
17.72
18.16
18.62
19.08
19.56
20.05
20.56
21.07
21.60
22.15
22.70
23.27
23.86
24.45
25.07
25.70
26.34
27.00
27.68
$174.43
Figure 36: Levelized Cash Flows-Periodic Costs
$100
180
160.16
$90
141.49
$80
140
125.00
$70
$60
160
120
110.42
PeriodicAnnualCosts
$/Year
100
$50
80
$40
60
$30
$20
40
$10
20
$0
LevelizedCashFlowswithNominalDiscount
Rate
LevelizedCashFlowswithEffectiveDiscount
Rate
LCFsw/RDREscalatedatInflation+Real
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Years
66
Glossary
Acronym
Definition
AFUDC
allowance for funds used during

construction
BETC
business energy tax credit
Btu
British thermal unit
California ISO
California Independent System Operator
CC
combined cycle
COG Model
Cost of Generation Model, Version 2
CT
combustion turbine
DCR
debt coverage ratio
EBITDA
earnings before interest, taxes,

depreciation and amortization
EFOR
equivalent forced outage rate
EMDH
equivalent maintenance duration hours
Energy Commission
California Energy Commission
EPDH
equivalent planned duration hours
ERC
emission reduction credit
ESDH
equivalent scheduled duration hours
ESOF
equivalent scheduled outage factor
FO
forced outage
FOH
forced outage hours
FOR
forced outage rate
FTE
full time equivalent
GADS
generating availability data service
GDA
geothermal depletion limit
GW/GWh
gigawatt/gigawatt-hour
IEPR
Integrated Energy Policy Report
IOU
investor-owned utility
kW/kWh
kilowatt/kilowatt-hour
67
LC
levelized cost
MACRS
modified accelerated cost recovery

system
MMBtu
million British thermal units
MO
maintenance outages
MOH
maintenance outage hours
MOR
maintenance outage rate
MW/MWh
megawatt/megawatt-hour
NCF
net capacity factor
NOx
nitrogen oxide
NPV
net present value
O&M
operation and maintenance
PH
period hours
PM10
particles of 10 micrometers
PMT
payment
PO
planned outages
POH
planned outage hours
POU
publicly owned utility
PV
present value
QFER
Quarterly Fuel and Energy Report
RECLAIM
regional clean air incentives market
REPI
renewable energy production incentive
REPTC
renewable energy production tax credit
RS
reserve shutdowns
RTC
RECLAIM trading credits
SCAQMD
South Coast Air Quality Management

District
SCR
selective catalytic reduction
SH
service hours
SL
straight line
68
SOF
scheduled outage factor
SOH
scheduled outage hours
SOR
scheduled outage rate
SOx
sulfur oxide
TDMA
tax deduction for manufacturing activities
UO
unplanned outage
UOH
unplanned outage hours
WACC
weighted average cost of capital
CSI
California Solar Initiative
SGIP
self-generation incentive program
FERC
Federal Energy Regulatory Commission
69
70
APPENDIX A: Definitions
AccumulatedDepreciation:Thisisarunningtotaloftheyearbyyeardepreciation.
AccumulatedDepreciation=BookValue/RateBase*Sum(Cumulative
YearlyBookDepreciation)throughYearN
AcquisitionCosts:Totalcostsforacquiringthenecessarylandfortheplantanddedicated
infrastructure.
AcquisitionCosts=TotalAcres*CostPerAcre
AdValoremTax:AlsocalledasPropertytaxes.InCalifornia,propertytaxisassessed
differentlybasedonownership.Utilityownedplantspaybasedonthevalueassessedby
theStateBoardofEqualization,andissettotheNetDepreciatedBookValue.Thevalue
reflectsthemarketvalueoftheasset,butmaynotincreaseinvalueataratefasterthan2
percentperannumperProposition13.Municipalownedplantsareexemptedfrompaying
propertytaxes,butmaypayanegotiatedinlieufee.ThecalculationofAdValoremforany
oneyearis:
IfOwnerType=Merchant,then:
AdValoremTax=AdValoremTaxRate*InstalledCost(YearCalculation
IsDone)*BOEPropertyTaxDepreciationFactor(1+Forward
InflationRate) (YearCalculationIsDoneStartYr)
IfOwnerType=IOU,then:
AdValoremTax=AdValoremTaxRate*BookValue/RateBase
AirControlAnnualConsumablesCatalyst:Thecostoftheconsumableinputs(for
example,ammonia)usedintheairemissioncontroldevice,usuallyselectivecatalytic
reduction(SCR).
AirEmissionsControlTechnologyCapitalCosts:ItistheCapitalCostofpurchasingand
installingtheAirEmissionsControlTechnologyEquipment.
AirEmissionsControlTechnologyCapitalCosts=AirEmissionsControl
InstallationCost*GrossCapacity*1000
AllowanceforFundsUsedDuringConstruction(AFUDC)Rate:Thecostofthe
constructionloan,insuranceandtaxesthatareassociatedwithconstructionperiodofthe
powerplant.Thesecostsarenotrecoveredimmediatelythroughratesorsales,butare
accumulatedandrecoveredlateralongwiththetotalcapitalinvestment.TheAFUDCrateis
usuallysetequaltotheweightedaveragecostofcapital(WACC),whichisthecaseinthe
EnergyCommissionsCOGModel.
A1
AnnualAverageHeatRate(Btu/kWh):Ameasureoftheefficiencyofpowerplants.Itisthe
amountofheatsuppliedinBtustogenerate1kWhofelectricity.Thesmallertheheatrate
thegreatertheefficiency.Theefficiencyofapowerplantcanbecalculatedas3,413divided
bytheheatrate(3,413beingtheconversionfactortoconvert1kWhintoBtu).Themodel
usesheatratesbasedonactualperformance,primarilyasreportedintheEnergy
CommissionsQFERdatabaseThereportedannualfueluse(Btu)isdividedbytheannual
energy(GWh).togettheAnnualHeatRateTherefore,heatratevariabilityandstartupfuel
areautomaticallycaptured.
SeeDefinitionbelow.
AnnualAverageOperatingHeatRateNetofStartups(Btu/kWh):Althoughthisquantity
doesnotaffectthecalculationofHeatRateintheCOGModelasexplainedabove,itis
providedasaconveniencetotheCOGModeluser,inordertoestimatetheeffectofstart
upsontheAverageAnnualHeatRate.Typically,thisissmallenoughastonotbe
important,butsometimesitbecomessignificantforacombustionturbine.Inanycase,the
effectisreportedinthemodelshouldtheuserwanttobecognizantofit.
AverageOperatingHeatRate(NetOfStartups)={(AnnualAverageHeat
Rate*GrossCapacity/1000)*Operational(Service)Hours/YearStartUp
FuelUse*NumberOfAnnualStarts)}/GrossCapacity/1000*Operational
(Service)Hours/Year
AnnualCapacityDegradationRate(percent):Theannualaveragerateatwhichapower
plantlosespeakgeneratingcapacity,averagedovertheexpectedlifetimeofthefacility.The
ratetypicallyissmallinitially,butaccelerateswithage.Thisdegradationcanbeoffsetby
regularmaintenanceandoverhauls.Althoughthisratevariesovertime,itiscapturedinthe
COGModelasaconstantvaluethroughoutthelifeoftheproject.Thisisexplainedinmore
detailinChapter4oftheUsersGuide.
AnnualFuelUse:Theestimatedannualfuelusedbyapowerplant.
AnnualFuelUse=GrossCapacity/(1+AnnualCapacityDegradation
Rate) (YearCalculationIsDoneStartYr)*AveragePercentageOutput*Operating
Hours/Year/1000*AverageOperatingHeatRate*(1+HeatRate
Degradation)(YearCalculationIsDoneStartYr)+StartUpFuel*NumberOfAnnualStarts.
AnnualHeatRateDegradation:Theannualincreaseinheatrateduetoagingofthe
equipmentiscalledHeatRateDegradation,butisoffsetbyperiodicmaintenance.Similarto
theCapacityDegradationRate,theHeatRateDegradationRateisgivenasasingular
averagevalue.IntheCOGModel,thismakesheatrateandfuelconsumptionincreaseover
time,butdoesnotaffectoutput(MW),whichremainsconstantunlessannualcapacity
degradationrateisenteredinthemodel.
A2
AnnualSalarywithOverhead($):AnnualSalarieswithoverheadincluded.Thisis
calculatedintheCOGModelbyapplyinganoverheadmultiplier.
AnnualSalaryw/Overhead={(ManagerFullTimeEquivalent(FTE)*
ManagerSalary+PlantOperatorFTE*PlantOperatorHrs*
PlantOperatorWage+MechanicsFTE*MechanicsHrs*MechanicsWage+
LaborerFTE*LaborerHrs*LaborerWage+SupportStaffFTE*SupportStaff
Hrs*SupportStaffWage)}*OverheadMultiplier
AnnualizedAirEmissionsReplacementCost:TheLevelizedCostofreplacingAir
Emissionequipment.Thisiscalculatedfirstasactualyearlycosts,thenasaPresentValueof
thoseannualcosts,andthenfinallyasaLevelizedCost.InExcelterminologytheactual
calculationis:
AnnualizedAirEmissionsReplacementCost=PMT((1+RealDiscount
Rate)/(1+OMEscalation)1,BookLife,Sum(IntermittentValues)/
(1+DiscountRate))*((1+InflationRate)*(1+OMEscalation))/((1+Historical
InflationRate)*(1+OMEscalation)^(StartYrBaseYr)
AnnualizedWaterCoolingReplacementCost:TheLevelizedCostofreplacingWater
Coolingequipment.Thisiscalculatedfirstasactualyearlycosts,thenasaPresentValueof
thoseannualcosts,andthenfinallyasaLevelizedCost.InExcelterminologytheactual
calculationis:
AnnualizedAirEmissionsReplacementCost=PMT((1+RealDiscount
Rate)/(1+OMEscalation)1,BookLife,Sum(IntermittentValues)/
(1+DiscountRate))*((1+InflationRate)*(1+OMEscalation))/((1+Historical
InflationRate)*(1+OMEscalation)^(StartYrBaseYr)
AssetRentalPrice:Analternativewayofvaluingproperty.Forexample,ifacompany
ownedatruck,itcouldvaluethetruckatthesamepriceitcouldrentthetruckfor.Thisis
explainedindetailinAttachmentB.
AssetRentalRate=ForegoneInterest+DepreciationPriceAppreciation
(orDepreciation)
AverageAnnualEnergy(GWh):Thisiscalculatedatthreepoints:powerplantlowsideof
theuplifttransformer,thehighsideoftheuplifttransformerandtheloadcenter.This
wouldbecalculatedasthecapacityateachpointtimestheoperatinghourstimesthe
averagepercentoutputexceptforthefactthatthisisthepointintheCOGModelwherethe
effectofcapacitydegradationiscaptured.Thisisacomplexcalculationthatisdescribedin
Chapter4.
AveragePercentageOutput(percent):Expectedaverageavailablecapacityduringhoursof
operation(forexample,100percentforaCombinedCycleUnit,66percentforaWindUnit,
100percentforacombustionturbineevenifunitisoperatedonlyduringpeaksummer
hours),includinganyperiodsofderatedoperationinthisfactor.
A3
BaseYear:Themostrecentyearforwhichthepowerplantdataisavailable.Datafor
subsequentyearsisscaledfromtheBaseYearusinginflationrates.
BeforeTaxIncome(OperatingIncomeor[EBITDA]):ThismeansEarningsBefore
Interest,Taxes,DepreciationandAmortization,butafterallproduct/service,salesand
overheadcostsareaccountedfor.ItisalsosometimesreferredtoasOperationalCashFlow
orOperatingIncomeanditservesasasortofstartingpointtosolvetheproblemthatthe
modelsdoesnotinherentlycomputerevenuesbecausenomarketpriceisprovided.
Instead,therevenuesarecomputedontheassumptionthattherevenuesjustequalthose
requiredtomakethepowerplantfinanciallyviableundertheassumedtermsincludedin
themodel.Itissolvedasthesimultaneoussolutionofequationsandisexplainedwithinthe
UsersGuide.Theformulainallitscomplexityis:
BeforeTaxIncome=AfterTaxReturnOnDebt&Equity+StateTaxes+
FederalTaxes
Also,
BeforeTaxIncome=RevenueOperatingExpenses
BookDepreciation:Anaccountingprocedurethatallocatesthecostofafixedassetoverthe
estimatedusefullifeoftheasset.Itistheamountofexpensechargedagainstearningsbya
companytowriteoffthecostofaplantormachineoveritsusefullife,givingconsideration
towearandtear,obsolescence,andsalvagevalue.Iftheexpenseisassumedtobeincurred
inequalamountsineachbusinessperiodoverthelifeoftheasset,thedepreciationmethod
usedforstatetaxesisstraightline(SL),andforfederaltaxesisMACRStables.
IfOwnerType=Merchant,BookDepreciation=0
IfOwnerType=IOU,Municipal,
BookDepreciation=InstalledCost(StartYear)*BookDepreciationRate
BookDepreciationRate:Therateatwhichbookdepreciationiscollected.IntheCOG
Model,thisisModifiedAcceleratedCostRecoverySystemforfederaland150percentof
decliningbalanceforstate.
BookLife(Years):Theprojectedlifeofanassetuponwhichadepreciationscheduleis
based.Fromanaccountingperspective,thisistheperiodoverwhichinvestorsexpectto
recovertheirinvestmentsplusreturns.Theactuallifeofthepowerplantwilllikelyexceed
thisbyanumberofyears.
BookValue:Abusinesshistoricalcostofassetslessliabilities.Thebookvalueofastockis
determinedfromacompanysrecordsbyaddingallassets(generallyexcludingsuch
intangiblesasgoodwill),thendeductingalldebtsandotherliabilities,plustheliquidation
priceofanypreferredstockissued.Thesumarrivedatisdividedbythenumberofcommon
sharesoutstandingandtheresultisthebookvaluepercommonshare.Bookvalueofthe
assetsofacompanymayhavelittleornosignificantrelationshiptomarketvalue.Tangible
A4
BookValueisdifferentthanBookValueinthatitdeductsfromassetvalueintangibleassets,
whichareassetsthatarenothard(forexample,goodwill,patents,capitalizedstartup
expensesanddeferredfinancingcosts).EconomicBookValueallowsforaBookValue
analysisthatadjuststheassetstotheirmarketvalue.Thisvaluationallowsvaluationof
goodwill,realestate,inventories,andotherassetsattheirmarketvalue.BookValueisalso
calledRateBase.SeeRateBase.
BusinessEnergyTaxCredit(BETC):Ataxcreditthatisavailabletobusinessesandis
applicabletomerchantfacilitiesonly.SeeAppendixD.
ByproductRevenuesandCosts:Incidentalincomeandcostsassociatedwiththepower
plantoperation.
CapacityandEnergy:Capacityistheabilitytogenerate,storeorreceiveEnergy.Thiscanbe
morevividlyillustratedintermsofaspecificexample:anelectricalgenerationpowerplant,
wherecapacity(MW)istheabilitytogenerateenergy(GWh).Ifapowerplantwitha
Capacityof1000megawatts(MW)operatesforonehour,itwillgenerate1000megawatt
hours(MWh)ofEnergyor1Gigawatthour(GWh).Ifitoperatesforoneyear(8,760hours)
atthisCapacity,itwillproduce8,760GWhofEnergy.
Capital&Financing(Construction)Costs($/kWYr):Thecostsofpurchasing,installing
andfinancingapowerplant.Itincludesthecostofequipmentandlandpurchases,any
EmissionReductionCredits,theconstructionloanandthesalestaxes.Allthesecostsare
ultimatelyfinancedthroughDebtandEquity,suchthatthesecostscanbedefinedas
follows:
Capital&FinancingCosts=DebtPayment+EquityRecovery
However,intheCOGModel,thiscostquantityiscalculatedintheData2worksheetasthe
sumoftheInstantCostsconvertedtoannualconstructioncoststhatareadjustedfor
inflationandsalestaxes.
CapitalConstructionCostsByYear($):Theconstructiontakesplaceoveraperiodofyears.
SotheCapitalConstructionCostsforeachyearistheconstructioncostintheyearalong
withthefinancing(AFUDC)associatedwiththeconstructionloanforthatyear.TheExcel
formulaiscalculatedas:
CapitalConstructionCostsByYear=Cost%/Year*TotalInstantCapital
Cost*IF(MonthsInConstructionYear>0,(1+AFUDCRate/(24/MonthsIn
ConstructionYear)),0)+CumulativeConstructionCostsByYear*(1+AFUDC
Rate),TotalInstantCapitalCost)*((1+HistoricalInflationRate)*(1+Capital
CostEscalationRate))^(StartYrBaseYr)
CapitalStructure(percent):Thisreferstothepercentageoffinancingapowerplantthatis
raisedthroughequityasopposedtodebtfinancing.Also,itsthepermanentlongterm
financingofacompany.Capitalstructurenormallyincludescommonandpreferredstock,
longtermdebtandretainedearnings.Itdoesnotincludeaccountspayableorshortterm
A5
debt.TableA1isasummaryofthepresent(2009IEPR)capitalcostdata.ForanIOU
ownership,52percentoftheCapitalisraisedthroughEquityand48percentthroughdebt;
thecostofequityis11.85percent,andthecostofdebtis5.40percent.
Table A-1: Capital Cost Data

Capital Structure
Owner Type
Cost Of Capital
Equity
Debt
Equity Rate
Debt Rate
Merchant Fossil
60.0%
40%
14.47%
7.49%
Merchant Alternatives
Default IOU
40.0%
52.0%
60%
48%
14.47%
11.85%
7.49%
5.40%
0%
100%
11.85%
5.40%
Default POU
Source:
Itshouldbeapparentthateitherthepercentagedebtorpercentageequitydefinestheother:
DebtFinanced(%)=1Equity(%)
CommitmentFee:Afeepaidtoadebtfinancingentitytoensurethatprojectfinancingis
committedtoaproject.
ConstructionInsurance:Thecostofinsurancetocovertheperiodduringtheconstruction
ofapowerplant.
Consumption(AcreFoot/MWh):ThewaterusedbythepowerplantperMWh.
CorporateTaxes(W/Credits)($/KWYr):Thetaxes,deductionsandinvestmentcredits
associatedwiththepowerplant.Thesearestateandfederaltaxes.SeeStateTaxesand
FederalTaxes.
CorporateTaxes=StateTaxes+FederalTaxes
CostofCapital(percent):Thecosttoacompanyofacquiringfundstofinancethe
companyscapitalinvestmentsandoperations.Ingeneral,therearetwocomponents,debt
andequity.SeeCapitalStructure,DebtandEquity.
Debt($):Financingthecostofthepowerplant.Also,raisingmoneythroughsellingbonds,
notes,ormortgagesorborrowingdirectlyfromfinancialinstitutions.Borrowedmoneyis
paidinfull,usuallyininstallments,withinterest.Alenderincursriskandchargesa
correspondingrateofinterestbasedonthatrisk.
DebtCoverageRatio:Thedebtcoverageratioistheratioofthecompanysoperatingprofit
toitsexpenses.Thisratioindicatesitsabilitytocoveritsexpensesusingitsprofitsfrom
operations.Ifitislow,thecompanymightencounterdifficultiesmeetingfinancialexpenses
A6
outofitscurrentactivities.Ahighratioindicatesrelativelylowexpensesandagood
financialposition.
Afinancialinstitutionoftenwillrequirebeforeissuingdebtthatafinancialprospectusshow
thattheaveragedebtcoverageratio(DCR)overthelifeofaloanwillexceedacertainratio,
forexample,1.8iscommonandaminimumDCRforanysingleyearofasmallerratio,for
example,1.5ispreferred.
DebtPayment:Periodicrepaymentofdebtoraloan.
DebtPayment=Principal+Interest
DebtRate(percent):Theinterestchargedonaloanordebtissued.
Depreciation:Depreciationistheaccountingofthedeteriorationofthephysicaland
functionalutilityofafixedassetduetousageandtime.Depreciationcanbeexplainedin
economicoraccountingterms.Theaccountingdepreciationmethodsareoftwotypes:Book
andTaxdepreciation.
DiscountRate(percent):Usedtocalculatethepresentvalueoffuturecashflowsaswellas
thelevelizedcost.Thediscountratereflectsnotonlythetimevalueofmoney,butalsothe
riskinessassociatedwiththecashflows.TheDiscountRateiscalculatedwithintheCOG
ModelastheWeightedAverageCostofCapital(WACC).
EconomicLife(years)Foraccountinganddepreciation,thistermissynonymouswith
booklife.Moregenerally,thisistheexpectedlifeofanassetoverwhichitwillbe
economicallyproductive.
EffectiveLoadCenterDeliveredCapacity:ThisisthesameasaverageMW.Itisusedto
findtheequivalentconstantMWsthatwouldgeneratetheequivalentenergy.Thisisa
usefulmechanismtocompensateforthevariabilityofgenerationforunitssuchassolarand
wind.ThisistheEffectiveOperatingCapacitydeliveredatthemeterafterbeingadjusted
fortransformerandtransmissionlosses.Thisisthecapacitymeasureappropriatefor
comparisontodistributedgenerationanddemandsidemanagementmeasures.
EffectiveLoadCenterDeliveredCapacity=LoadCenterDelivered
Capacity*AveragePercentOutput
EffectiveOperatingCapacity(MW):AdjustmenttoNetCapacitythataccountsfor
intermittentoperationallimits,forexample,windvariation,hydrodroughtconditions,that
reducetheexpectedplantcapacityinanymoment.
EffectiveOperatingCapacity=NetCapacity*AveragePercentOutput
EmissionReductionCredits(ERCs):Permitoffsetspurchasesfromotherregionalemitters
tocompensateforaddedemissionsfromanewpowerplant.TheERCsdifferbyairquality
regulationdistrict(forexample,SCAQMD)andconstituentpollutant(forexample,NO x,
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SOx,PM10,andsoforth.)TheERCsareforaonetimepurchasesothecostsarespreadover
thebooklifeoftheassetsimilartoothercapitalexpenditures.
EquipmentLife(years):Theestimatedlifeofequipment.IntheCOGModelthisisusedto
determinedepreciationandthefrequencyofoverhauls.
Equity($):Thenetworthofafirmorcorporation.Equitycanbebothcommonstockand
preferredstock.Equitycancomefromsellingofstockorotherassets.Theownershipshares
ofacorporationauthorizedbyitsarticlesofincorporation,includingpreferredandcommon
stock.Thisisalsoknownascapitalstockorequityholdingsandisexpressedasownership
orpercentageofownershipinacompanyoritemsofvalue(thatis,assetsandliabilities).
Thesefundsareacquiredforconstructionandoperationwithrepaymenttermssubjectto
incomeperformancebytheasset.
EquityRate(percent):Theratethatisusedtocalculatethecostofusingacompanysequity
holdingstofinancethepowerplantasopposedtousinglongtermdebt.Thispercentage
insimplesttermsiswhatitcoststopaythestockholdersthenecessarydividendsplus
expectedcapitalappreciation,butitallincludesallassetsthatcanbeusedtoraisemoney.
EquivalentAvailabilityFactor(percent):Ameasureofaunitsreliability.Insimplest
terms,itcanbethoughtofasthepercentoftimethatapowerplantisavailabletogenerate
power.Thatis,thosehourswhenitisnotonscheduledmaintenanceordownduetoa
forcedoutage.IntheCOGModel,itisdefinedas
A=(1FOR)(1SOF)
Where:FOR=ForcedOutageRate
SOF=ScheduledOutageFactor
Theaboveformulaissimplisticasitappliesonlytothecasewhereaunitiseither
completelyonorcompletelyoffneverderatedduetopartialequipmentfailure.Although
thisformulaisusedinthemodel,itreallyimpliesthemoregeneralcasewherederatesexist,
andAvailabilityshouldbecalculatedas:
A=(1EFOR)(1ESOF)
Where:EFOR=EquivalentForcedOutageRate
ESOF=EquivalentScheduledOutageFactor
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EquivalentForcedOutageRate(EFOR):Apowerplantsrateiffailureaccountingfor
partialderates.FORissimplisticinthatitappliesonlytothecaseswherethepowerplantis
eitheravailableatitsfullpowerorhascompletelyfailed.Inactualityapowerplantcanbe
availableatpartialpower;thatis,derated.Forthismorecomplexcase,thetermEFORis
usedtocapturetheeffectofthesederates.
Forced
OutageHours
EFOR=
Forced
OutageHours
EquivalentForced
DeratedHours
Service
EquivalentForcedDerated
Hours
+
HoursduringReserve
Shutdowns(RS)Only

x 100%

EquivalentScheduledOutageFactor(ESOF):Ameasureofapowerplantsfailurerate
accountingforderates.SimilartoEFOR,itaccountsforscheduledmaintenancethatis
performedwhiletheplantisderated.Althoughannualmaintenance,plannedoutagehours
(POH)istypicallyperformedwiththepowerplantturnedoff,maintenanceoutagescanbe
doneduringpartialderates.
ESOF=(SOH+ESDH)/PH;
Where:SOH=POH+MOH
ESDH=EPDH+EMDH
EscalationInCapitalCosts(percent):Thecostofthepowerplantgenerallychangesover
time.Thispercentagevalueistheannualchangeinthesecosts.Thisescalationisusedinthe
COGModeltotranslateknownbaseyearcoststotheactualstartyearcosts.
FederalTaxDepreciation:Thedepreciationallowanceoncapitalassetsprovidedinthe
InternalRevenueCode.TheallowanceiscomputedusingtheMACRStaxschedule.
FederalTaxLife(Years):Thebooklifeoftheassetforpurposesofcomputingfederaltax
depreciationandrelatedtaxitems.
FederalTaxes:Taxesthattheownermustpaytothefederalgovernment.Theseare
calculatedasfollow:
IfOwnerType=Muni,FederalTaxes=REPI
IfOwnerType=IOU,Merchant,FederalTaxes=FederalTax
Rate*(AfterTaxReturnOnDebt&Equity(DebtInterest+FederalTax
Depreciation+TDMA+GDA(BETC+REPTC)/(1FederalTaxRate))
FinalPlannedOperatingHours/Year:ExpectedHoursinayeartheunitisplannedtobe
operating.TheexpectedhoursofoperationperyearminustheScheduledOutageHours.
FinalPlannedOperatingHours/Year=Minimum(PlannedPercentof
YearOperational*8760,8760ScheduledOutageHours.)
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FinancialTransactionCosts:Feescollectedbyfinancialinstitutionsrelatedtoissuingdebt
andraisingequitytofinanceconstructionandoperationofapowerplant.
FixedCosts($/KWYror$/MWh):Thesearethecostsforpowerplantsthatoccurregardless
ofwhetheritoperatesornot.Fixedcostsincludecapitalcost(includingthefinancingcosts),
insurance,advaloremandcorporatetaxes(federalandstatetaxes).Inotherwords,allcosts
exceptvariableO&Mandfuelcosts.
FixedCosts=Capital&Financing(Construction)Costs+Insurance+
AdValoremCosts+FixedO&MCosts+CorporateTaxes(W/Credits)
FixedO&MCosts($/KWYr):Thesearethecostsofoperatingandmaintainingthepower
plantthatoccurregardlessofhowmuchthepowerplantoperates.Whatisincludedinthis
categoryisnotalwaysconsistentfromoneassessmenttotheotherbutalwaysincludeslabor
costsandtheassociatedoverhead.Themostcommoncharacterization,andtheoneusedin
theEnergyCommissionsCOGModel,includesbothstaffingcostsandnonstaffingcosts.
Nonstaffingcostsarecomprisedofequipment,regulatoryfilings,andothermiscellaneous
directcosts.TheCommissionssurveyofcostsfoundthatforsimplecycleandCCunits,
thesecosts($/kWYr)varywiththesizeoftheplant.TheformulausedintheCOGModelto
calculatethefirstyearvaluesoffixedO&Mis:
FixedO&M/kWYr(BaseYear)=AnnualSalaryw/Overhead+NonLabor
FixedO&M/GrossCapacity(MW)*1000
TheannualcostiscalculatedintheCOGModelas:
FixedO&MCosts(YearCalculationIsDone)=(FixedO&M/kWYr
(BaseYear)*((1+HistoricalInflationRate)*(1+LaborEscalation))(StartYrBaseYr)*
((1+ForwardInflationRate)*(1+LaborEscalation))(YearCalculationIsDoneStartYr)
FixedOperatingExpense:ThesumofFixedO&MCosts,AdValoremandInsurance.
FixedOperatingExpense=FixedO&MCosts+AdValorem+Insurance
ForcedOutageHours:Forcedoutages(FO)arethoseoutageswhereaplantmustbetaken
outofserviceforunplannedrepairs.Thehourswhereaunitspendsinthisconditionis
calledforcedoutagehours.
ForcedOutageRate(FOR):Thepowerplantsrateoffailure.Thiscalculationignoresthe
periodduringreserveshutdown(economicshutdown)asthisperiodtellsusnothingabout
howtheplantperformsbecauseitwasnotaskedtoperformwecannotknowhowit
wouldhavedone.Itisbasedsolelyonwhenitiscalledupon.TheGADSformulaforthisis:
FOR=FOH/(FOH+SH)
Where:FOH=ForcedOutageHours(HoursOfFailedOperation)
SH=ServiceHours(HoursOfSuccessfulOperation)
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ForwardInflationRate:Itistheaverageannualinflationratefromthestartyeartotheyear
calculationisdone.
FuelConsumption/Hour(MMBtu/Hr):Theamountoffuelusedbyapowerplantin
MillionsofBtuperhour.
FuelConsumption/Hour={GrossCapacity(MW)*AveragePercentage
Output*AnnualAverageOperatingHeatRate(NetofStartUp)}/1000
FuelCost($/kWYr):FuelCostisthecostofelectricity.ItiscalculatedastheFuelPrice
($/MMBtu)timestheFuelUse(MMBtu).FuelUseiscalculatedasGrossMWtimesthe
OperatingHourstimestheHeatRate(Btu/kWh).ThisisthemajorcomponentofVariable
Costforfuelintensivesourcesforwhichfuelispurchased,forexample,fossilfuels.
FuelCosts($/kWYr)=FuelPrice($/MMBtu)*AnnualFuelUse(MMBtu)
GrossCapacity(MW)*1000
FullTimeEquivalent(FTE):Equivalentnumberofemployeesworkingfulltime.
GeothermalDepletionAllowance:Afederaltaxdeductionprovidedforexhaustingor
depleting(depreciating)ageothermalreserve.Thisallowanceissimilartotheoil
depletionallowanceinthefederaltaxcode.
GDA=Minimum(GeothermalDepletionLimit*TaxOnReturnOnEquity,
GeothermalDepletionPercent*EquityRecovery)
GeothermalResourceRoyaltyPayment:Whenacompanyorindividualentersintoa
geothermalleasewiththeUnitedStatesGovernment,thatcompanyorindividualagreesto
payashare(royalty)ofthevalueofproductiontotheUnitedStates.
GeothermalResourceRoyaltyPayment=0.1*ReturnOnEquity*Gross
Capacity(MW)*1000
GrossCapacity(MW):Thecapacityofthepowerplantwithoutparasiticload.Thatis,the
capacityofthepowerplantbeforeithastoprovidepowertoservetheloadassociatedwith
thepowerplant.SeeNetCapacity.
HistoricalInflationRate:Itistheaverageannualinflationratefromthebaseyeartothe
startyear.
Inflation:Therateofchangeinapriceindex(forexample,theConsumerPriceIndex)over
acertainperiodthatreflectsageneralincreaseinallpricessothattherelativecostsof
differentgoodsandservicesremainessentiallythesame.Alternatively,inflationreflectsthe
percentagereductioninthepurchasingpowerofadollaroveraspecifiedperiodfor
example,ayear.
InstalledCosts(InServiceCosts)($/kW):Thetotalcostofbuildingapowerplant.It
includesnotonlytheInstantCosts,butalsothecostsassociatedwiththefactthatittakes
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timetobuildapowerplant.Thus,itincludesabuildingloan,insurance,salestaxand
propertytaxesaswellasthecostsassociatedwithescalationofcostsduringconstruction.
InstalledCost(BaseYear)=TotalConstructionCost*(1+CASalesTax)
GrossCapacity*1000
InstalledCost(StartYear)=TotalConstructionCost*(1+CASalesTax)
(GrossCapacity*1000)*(1+HistoricalInflationRate)StartYrBaseYr
InstantCosts($/kW):Thecostofapurchasingandbuildingapowerplantassumingthatit
couldbebuiltinaninstant.Infact,thebuildingmaytakeseveralyearsandincuradditional
costs.SeeInstalledCost
InstantCost(BaseYear)=TotalInstantCapitalCost
(GrossCapacity*1000)
InstantCost(StartYear)=
TotalInstantCapitalCost
[(GrossCapacity*1000)*(1+HistoricalInflationRate)StartYrBaseYr]
Insurance:Thecostofinsuringtheprojectwhichispaidasanannualpremium.
IfOwnerType=IOU,Insurance=Insurance%*BookValueOrRateBase
IfOwnerType=Merchant,Municipal,Insurance=Insurance%*InstalledCost
(YearCalculationIsDone)*(1+ForwardInflationRate)(YearCalculationIsDoneStartYr)
LaborEscalation:Theescalationinplantoperationlaborcostsabovetheescalationin
generaleconomywidepricelevelsorinflation.
LandPreparingCosts/Acre:Thecostsofpreparinglandbeforeconstructionthrough
clearingandinfrastructureinstallationonaperacrebasis.
LandfillTippingFees:ThefeespaidtodisposetheSolidWaste.
LevelizedCost(LC):LevelizedCostisthesingularmostimportantobjectiveofthismodel.
Itistheannualpayment(samevalueallyears)thatisequivalenttoallthecostsincurredin
theconstructionandoperationofthepowerplant.IftheNetPresentValueofallthese
paymentsiscalculatedasNPV,then
LC=[NPV*I*(1+i)n]
[(1+i)n1].
ThecorrespondingExcelformulaisPMT(DiscountRate,BookLife,PV).
Foraseriesofunequalpayments,theExcelformulaisPMT(DiscountRate,BookLife,NPV
(DiscountRate,yearlyvalue1,yearlyvalue2,...,yearlyvaluen).
Thisisthesameprincipleusedindeterminingthemortgagepaymentonahouse.A
mortgagepaymentisalevelizedpaymenttorepaythelumpsumloanamount,whichisthe
equivalentofthenetpresentvalueoftheloan.Forexample,ifthehousecost$100,000,the
A12
expectedtermofthepaymentis20yearsandtheinterestrateof5percent,theannualhouse
paymentis$8,024.26.
LoadCenter:LoadCenteristhephysicallocationwherethepowerisbeingreceivedunder
contract.Themodelmustaccountforthelossesbetweenthewherethepowerisgenerated,
atthegeneratorbusbar(lowsideofuplifttransformer),andwhereitisdeliveredatthe
LoadCenter.
LoadCenterDeliveredCapacity:Theavailablegeneratingcapacitydeliveredtothetypical
retailmeterorloadcenter.Itisthecapacitynetofthepowerplantuplifttransformer
lossesandthetransmissionlosses.
LoadCenterDeliveredCapacity=NetCapacity*(1TransmissionLosses)*
(1AncillaryServices&Reserves)
Loan/DebtTerm(Years):Lengthofloanforthatportionofthefinancingofthepowerplant
thatisfinancedthroughlongtermdebt.SeeCostofCapitalandCapitalStructure.
MACRSTaxTables:FederaltaxdepreciationtablesreflectingtheModifiedAccelerated
CostRecoverySystem(MACRS).Thesedepreciationmethodsapplytoassetsplacedin
serviceafter1986;lessfavorablethantheearlierAcceleratedCostRecoverySystem(ACRS)
system.
MajorOverhaul:Thesearerepairsthatareextensiveandaredonelessthanannually,such
asevery2.5years.Thecalculationofthesecostsonanannualbasisisquitecomplicatedand
isnotshownhere,butcanbefoundintheOverhaulsectionofthisUsersGuide.
MinorOverhaul:Thesearetypicallyannualrepairsthataremuchlessextensivethatmajor
overhauls.
MajorOverhaulReplacementCosts:Itisthecostofreplacingequipmentassociatedwith
MajorOverhauls.
MakeupWater:Waterwhichissupplied(astoasteamboilerorcoolingtower)to
compensateforlossesbyevaporationandleakage.
Net(AfterTax)Income:Incomeaftertaxesaretakenintoaccount.
Net(AfterTax)Income=BeforeTaxIncomeTaxes
NetCapacity(MW):Thecapacityasitleavesthepowerplantstructure,netoflossesand
providingstationservice.Thisistheusablepowerthatleavesthepowerplantatthebusbar
andissentoverthetransmissionlines.
NetCapacity=GrossCapacity(1PlantSiteUses&Losses%)
NetCapacityFactor(NCF):ThistermisequivalenttoCapacityFactor.CapacityFactoris
calculatedastheenergygeneratedbytheplantdividedbytheenergythatcouldhavebeen
generatedhaditoperatedatfulloutputfortheentireyear(8,760hours).Thisdenominator
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isanunlikelyvalueasitassumesthatthereisnomaintenance,noforcedoutagesandno
reserveshutdownduringtheentireyear.IntheCOGModelitbecomeequivalentto
AvailabilityforabaseloadunitbecausetheCOGModelassumesthattherearenoreserve
shutdownhours.ButforaCT,solarorwindunit,itwillbeless.
Forasimplecycleunit(combustionturbine),itwillbelessastheOperationalHoursare
constrainedtoreflectitsintendedlowcapacityfactorthisisdoneusingPlantPercentof
YearOperational.Forasolarorwindunit,NCFwillbelessduetoitsOperatingCapacity
beingderatedtoreflectthevariabilityofitsfuelsource(sunlightforsolarandadequate
windforwindunits)
NetCapacityFactor(NCF)=OperationalHrs/Yr*EffectiveOperating
Capacity(MW)/(8760*NetCapacity(MW))
NetRevenues($/Lb):Therevenuethatisleftafterallcostsarededucted.
NetRevenues=Revenues(ProcessingCosts+ShippingCosts)
NumberofAnnualStarts:Thenumberoftimesapowerplantisstartedduringtheyear.
O&MEscalation:TherealportionofO&Minflation.Thatis,theescalationinplant
operationandmaintenancenonlaborcostsaboveorbelowtheescalationingeneral
economywidepricelevels.
Operational(Service)Hours/Year:Numberofhoursinayearthepowerplantoperates.
OperationalHours/Year=PlannedOperatingHours/YearForcedOutageHours
OverhaulLabor(Hrs):Thelaborcostsincurredinscheduledmaintenanceoverhauls
Overhauls:Costsincurredforlargescalescheduledmaintenance.SeeMajorOverhaulsand
Minoroverhauls.
OverheadMultiplier:Thismultiplierisappliedtothetotallaborsalariesincurredto
accountfortheaddednonsalarycostssuchasbenefitsandemploymenttaxes.
PeriodHours(PH):GADSTerminologyforthenumberofhoursinayear.
PlannedPercentofYearOperational:Thisfactorisderivedfromeitherhistoricaldataor
modelingresults,bothexternaltothismodel.Expectedpercentofyearthatunitisplanned
tobeoperating.ThispercentagetimestheAverageOutputDuringOperationwillbethe
primaryfactorsdeterminingannualgeneration.Forexample:asolarplantmaybe
operational100percentoftheyearwitha25percentaverageoutput,apeakingunitwill
havea100percentaverageoutputwitha10percentplannedpercentofyearoperational.
PlantSchedulingCosts:Costsincurredtosellandschedulepowerplantoutputtothegrid,
forexample,fordayaheadandrealtimesalestotheCaliforniaISO.Thiscostcanvaryby
technologyandloadfollowingtype(forexample,peakingvs.baseload).Thiscostmeasure
A14
isappropriateforcomparisontodistributedgenerationanddemandsidemanagement
measureswhencomputingcostsattheLoadCenter.
PlantLosses(percent):Thepercentageofonsiteloadrequiredtooperateapowerplant.
Thisloadtypicallyincludespumps,lightingandotherlocalservices.
PredevelopmentExpenses:Expensesincurredbytheprojectdeveloperinpreparationfor
design,financingandconstruction.
PresentValue(PV):Thevalueofperiodicpaymentsdiscountedtothebaseyear.
Mathematically,eachyearsvalueismultipliedbyPV=1/(1+i)n,whereiisinterest(the
valueofmoney)andnisthenumberofyearsofdiscount.Iftheseriesofvaluesare
identical,theformulabecomesPV=[(1(1+i)n)]/i.Excelhasapresentvaluefunctioncalled
PV.Iftheseriesofpaymentsaredifferent,PV=1/(1+i)nmustbemultipliedagainsteach
yearlyvaluethecorrespondingExcelFormulaisNPV.
RateBase:Thevalueofaregulatedpublicutilityanditsoperationsasdefinedbyits
regulatorsandonwhichthecompanyisallowedtoearnaparticularrateofreturn.
BookValueOrRateBase=InstalledCost(StartYear)AccumulatedDepreciation.
RealDiscountRate:Therealdiscountratereflectsthenominalorapparentdiscountnetof
inflation.Therealdiscountrateisappliedtopresentvaluecalculationsineconomics,
financeandengineeringthatuseconstantorrealdollars.Theproperdiscountratetouse
dependsonwhetherthebenefitsandcostsaremeasuredinrealornominalterms.Thisterm
isusedinthemodeltofacilitatethecalculationofOverhaulCosts,AirEmissions,Water
Treatment&CoolingEquipmentReplacementCosts.
Arealdiscountratethathasbeenadjustedtoeliminatetheeffectofexpectedinflation
shouldbeusedtodiscountconstantdollarorrealbenefitsandcosts.Arealdiscountrate
canbeapproximatedbysubtractingexpectedinflationfromanominalinterestrate.
Anominaldiscountratethatreflectsexpectedinflationshouldbeusedtodiscount
nominalbenefitsandcosts.Marketinterestratesarenominalinterestratesinthissense.
TherealdiscountrateiscalculatedintheCOGModelasfollows:
RealDiscountRate=(1+NominalDiscountRate)/(1+InflationRate)1
RenewableEnergyProductionIncentive(REPI):AtaxcreditthatisavailabletoMunicipal
facilitiesonly.SeeAppendixD
RenewableEnergyProductionTaxCredit(REPTC):Ataxcreditthatisavailableto
Merchant&IOUfacilities.SeeAppendixD
A15
ReservoirManagement:Costsincurredinroyaltiesandotherfeesformanaginga
geothermalsteamorhotwaterreservoirorwaterrightsassociatedwithareservoirorlake
usedtoprovidewatertoahydropowerplant.
ReturnOfEquity:AtermusedonlybyInvestorOwnedUtilities(IOUs),tobreakthemore
commonlyusedtermReturnonEquityintotwopartsReturnonEquityandReturnof
Equity.ReturnofEquityisthatportionthatwillexactlyrepaythesumoftheinitial
investmentwithoutanyprofit.
IfOwnerType=IOU,ReturnOfEquity=EquityRate%*BookDepreciation
ReturnonEquity:Ingeneral,thistermrepresentstheportionoffinancingthatisdone
throughissuingstockasopposedtodebtfinancing.ForIOUs,ithasasubtlermeaning:Itis
theannualtimevalueofmoneylentaboveandbeyondtheReturnOfEquity.Inother
words,thisistheprofitthatshareholdersaccruefromhavingmadetheinitialinvestment.It
iscalculateddifferentlybasedonownership.
IfOwnerType=IOU,ReturnOnEquity=EquityRate%*BookValueOr
RateBase*EquityPercent
IfOwnerType=Merchant,ReturnOnEquity=PMT((EquityRate,BookLife,
EquityPercent*InstalledCostPerkW)
ReturnonRatebase:Measuredasnetincomeasapercentageofnetbookvalue(totalassets
minusintangibleassetsandliabilities).Thisisperformancemeasureforaregulatedutility.
ReturnonRatebase=
ReturnOnEquity
(Equity%*BookValueOrRateBase)
RevenueRequirement:Therevenuesrequiredtocoverthetotalcostofconstructingand
operatingapowerplant:OperatingExpenses,TaxesandDebtandEquityPayments.These
typesofutilitiestypicallyhavepostedpricesprescribedbyaregulatorycommissionor
governmentcouncilthatdonotdirectlyreflectmarketforces.
RevenueRequirement=AfterTaxReturnOnDebt&Equity+Total
OperatingExpense+TotalTaxes
ReclaimTradingCredits&MitigationFees:SouthCoastAirQualityManagementDistrict
(SCAQMD)RECLAIMTradingCredits(RTCs)andperpoundofemissionorperhourof
operationmitigationfeespaidtolocalairqualityregulationdistricts.RTCsareboughtand
soldamongseveralhundredindustrialfacilitiestoallowvariationsinNOxandSOx
emissionsfrominitialpermittedlevels.Mitigationfeesaretypicallychargedwhenafacility
orpowerplantexceedsitspermittedlevelofoperationoremissionsinasetperiodoftime
(forexample,12monthsoracalendaryear).
ScheduledOutageFactor(SOF):TheratioofSOHtothehoursinayear(8,760).Thatis,the
percentageoftheyearthataplantisonscheduledmaintenance.Ifaplanthas876hoursof
A16
maintenance,thenitsSOFis10percent.Thisismoreorlesssynonymouswiththemore
commonlyusedmodelingtermMaintenanceOutageRate(MOR).
SOF=SOH/PH
Where:SOH=POH+MOH
ScheduledOutageHours:GADSdefineScheduledOutages(SO)asthecombinationof
PlannedOutages(PO)andMaintenanceOutages(MO).Forthosepurposeswhen
MaintenanceOutageHours(MOH)arestillincludedwiththeForcedOutages(FO),the
termUnplannedOutages(UO)isapplicable.
ScheduledOutage(SO)=PO+MaintenanceOutage(MO)
UnplannedOutage(UO)=FO+MaintenanceOutage(MO)
PlannedOutage(PO)=YearlyPlannedMaintenance
ThecorrespondinghoursforScheduledOutages(SO)andUnplannedOutages(UO)are
ScheduledOutageHours(SOH)andUnplannedOutageHours(UOH).Theseareillustrated
below,relativetoPlannedOutageHours(POH),MaintenanceOutageHours(MOH)and
ForcedOutageHours(FOH).
SOH=POH+MOH
UOH=FOH+MOH
IntheCOGModel,onlyScheduledOutageHoursareused.
SchedulerCosts:Costsforbiddingandschedulingapowerplantintheelectricitymarket,
forexample,deliveryofpowertotheCaliforniaISO).
ServiceHours(SH):ThisisGADSterminology.InourmodelweuseOperational(Service)
Hours/Year.
SparkSpread:Thisisameasureofthefinancialviabilityofapowerplant.Initscommon
form,itcomparestheenergypaymentsavailabletoapowerplantagainstitscostof
operation(fuelcosttimesheatrate)andissometimesexpressedasaheatratedifference.
IntheCOGModel,itischaracterizedinalesscommonmannerwheretheRevenueis
comparedagainstthecostofoperationintheformofaheatratedifference.Itiscalculated
ofheatratedifferences:
SparkSpread=[Revenue(FuelCost)*(HeatRate)]*GrossMW/AnnualEnergy
StartYear:Theyearthatthepowerplantisinserviceandavailabletogeneratepowerfor
thegrid.ThisisalsothefirstyearinthePresentValueandLevelizedCostcalculations.In
themodelStartYearissynonymouswithInServiceYear.
StartUpFuelUse(MMBtu/Start):Priortoathermalpowerplantbeingconnectedtothe
powersystem,itconsumesfuelmostofwhichisassociatedwithwarmingthepowerplant
components,e.g.boilers.Thiswarmupperiodcantakeanywherefromafewminutesto
overaday,dependingonthepowerplant.ThefuelconsumedistheStartUpFuel.
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StateTaxDepreciation:ThedepreciationallowanceoncapitalassetsprovidedinStatelaw,
inparticularforCaliforniaintheCOGModel.Theallowanceiscomputedusingthe
CaliforniataxschedulesfromtheFranchiseTaxBoard.
StateTaxLife(Years):ThebooklifeoftheassetforpurposesofcomputingStatetax
depreciationandrelatedtaxitems.
StateTaxes:CorporateincometaxesthattheownermustpaytotheStateGovernment,
CaliforniainparticularintheCOGModel.Thesearecalculatedasbelow.
IfOwnerType=Muni,StateTaxes=CSISGIP
IfOwnerType=IOU,Merchant,StateTaxes=StateTaxRate*(After
TaxReturnOnDebt&Equity+FederalTaxes(DebtInterest+State
TaxDepreciation)(CSI+SGIP)/(1StateTaxRate))
WeincludedCaliforniaSolarInitiative(CSI)andSelfGenerationIncentiveProgram(SGIP)
intheformulafortheUseralthoughtheCOGModeldoesnotusetheminthecalculations.
TimeToMajorOverhaul:Theperiodbetweenmajoroverhauls.
TimeToMajorOverhaul= HoursToMajorOverhaul
Operational(Service)Hours/Year
TotalAcres:Thetotalacreageofthepowerplant.
TotalAcres=If(Isnumber(AcrePerMW),AcrePerMW*GrossMW,
AcrePerPlant)+AdditionalAcreage
TotalAirEmissionCostConversion:TotalAirEmissionCostscanbecalculatedasbelow.
AirEmissionsfromLbs/MWhtoTons/Yr=
LbsAirEmissions*AnnualNetEnergy(GWh)*1000/2000
TotalAnnualAirEmissionCosts(ExcludingCapital):Thetotalannualcostsofoperating
theAirEmissionequipment.
TotalAnnualAirEmissionCosts(ExcludingCapital)=CalculatedAirEmissions
ReplacementCost+AirControlAnnualConsumablesCatalyst*AnnualNet
Energy(GWh)*1000+LaborerWage*OverheadMultiplier*AirControlAnnual
Labor(Hours/Year)
TotalAnnualEnvironmentalO&MCosts:ThesumoftheannualAirEmissionsCosts,
WaterCoolingCostsandSolidWasteDisposalCosts.
TotalAnnualEnvironmentalCosts=TotalAnnualAirEmissionsCosts
(ExcludingCapital)+TotalAnnualWaterTreatment&CoolingCosts
(ExcludingCapital)+TotalAnnualSolidWasteDisposalCosts
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TotalAnnualMaintenanceCosts:ItisthesumoftheConsumableMaintenanceCosts,
PeriodicRoutineMaintenanceCosts,OtherRoutineMaintenanceCosts,WellFieldCosts,
ScheduledMaintenanceCosts&OtherUnscheduledMaintenanceCosts.
TotalAnnualMaintenanceCosts=TotalConsumableMaintenanceCosts+
PeriodicRoutineMaintenanceCosts+TotalOtherRoutineMaintenanceCosts+
TotalWellFieldCosts+TotalScheduledMaintenanceCosts+TotalUnscheduled
MaintenanceCosts.
TotalAnnualSolidWasteDisposalCosts:ThetotalannualcoststodisposeSolidWaste.
TotalAnnualSolidWasteDisposalCosts=TotalNonHazardousMaterial
DisposalCosts+HazardousMaterialDisposalCosts
TotalAnnualWaterTreatmentCosts(ExcludingCapital):Thetotalannualcostsofcooling
thepowerplantnetofwaterpurchases.WaterpurchasesareincludedinFixedO&M,Other
OperatingCosts.
TotalAnnualWaterCoolingCosts(ExcludingCapital)=CalculatedWater
Treatment&coolingReplacementCost+WaterControlAnnualConsumables
Catalyst*AnnualNetEnergy(GWh)*1000+LaborerWage*OverheadMultiplier*
WaterControlAnnualLabor(Hours/Year)
TotalComponentCosts($):Thecostforindividualpowerplantcomponents,forexample,
turbinesets,boilers,generators,controlroom.Reportedcostsmayonlyshowasumtotalof
allofthesecomponents.
TotalConstructionCosts($):ThetotalcostofapowerplantthatincludesboththeInstant
CapitalCost($)andthefinancingoftheconstructionloan.
TotalConsumableMaintenanceCosts:Maintenancecostsassociatedwithconsumptionof
materials,suchaslubricatingoils.Thesecoststypicallyareincurredonarecurring,almost
daily,basis.EitherformulabelowcanbeusedforcalculatingtheTotalConsumable
MaintenanceCost.
TotalConsumableMaintenanceCosts=ConsumableMaintenancePeriod*
TotalConsumableCostPerPeriod,
TotalConsumableMaintenanceCosts=OilCost+ConsumablesCost+
ConsumableMaintenanceLabor
TotalCostPerOverhaul:Thetotalcostoftheoverhaul.
TotalCostPerOverhaul=MajorOverhaulLabor(Hrs)*
MechanicsWage/Hour*OverheadMultiplier+MajorOverhaulReplacement.
TotalDevelopmentCosts:Preconstructioncostsincurredbyprojectdevelopersforland
acquisitionandpreparationandprojectfinancing.Thesecostsarerecoveredwithinthe
CapitalCostexpenditures.
A19
TotalDevelopmentCosts=PredevelopmentExpenses+Construction
Insurance&Installation+CommitmentFee.
TotalEnvironmentalCosts($/MWh):Theannualcostsenvironmentaldischargecontrol
devices,suchasselectivecatalyticreduction(SCR)devicestoreduceairemissionsand
coolingwaterdischargecontrolmeasures.
TotalEnvironmentalCosts=(TotalAnnualEnvironmentalO&MCosts+
VariableRTCs&MitigationFees)/LoadCenterEnergy(GWh)*1000
TotalEnvironmentalControlInstallationCosts:Thecostsofinstallingnecessary
environmentaldischargecontroldevices,suchasselectivecatalyticreduction(SCR)devices
toreduceairemissionsandcoolingwaterdischargecontrolmeasures.Thesecostsarein
additiontothePermittingCostsincurredtoacquirethenecessaryenvironmental
compliancefees.
TotalEnvironmentalControlCosts=TotalAirEmissionsControlCosts+
TotalWaterTreatment&CoolingControlCosts
TotalHazardousMaterialDisposalCosts:Thetotalcostsassociatedwiththedisposalof
Hazardousmaterials.
TotalHazardousMaterialDisposalCosts=HazardousMaterialTons/Year
*(HazardousCollection&HaulingCost+HazardousLandfillTippingCost)
TotalInstantCapitalCost($):Thecostofpurchasingandbuildingapowerplantassuming
thatitcouldbebuiltinstantaneously:ComponentCosts,LandCosts,DevelopmentCosts,
PermittingCosts,InterconnectionCosts,TotalEnvironmentalControlsCosts.
TotalInstantCapitalCost=(TotalComponentCost+TotalLandCosts+Total
DevelopmentCosts+TotalPermittingCosts+TotalInterconnectionCosts+Total
EnvironmentalControls)*(1+FinancialTransactionCosts*DebtFinanced(%))
TotalInterconnectionCosts:Costsincurredtoconnectthepowerplanttothepowergrid
beyondthebusbar.Thesecostsarehighlyprojectspecific,butgeneralvaluesmaybe
reportedthatrepresenttypicalcasesforeachtechnology.
TotalInterconnectionCosts=TransmissionInterconnection+
Fuel/Water/SewerCosts
TotalLandCosts:Thecoststoacquireanddevelopthelandnecessarytoconstructapower
plantofaparticulartechnology.Thecostsshownaretypicalforthesettinginwhicha
technologyismostlikelytobedeveloped(forexample,urbanforfuelcells,ranchlandfor
wind,industrialzonedforgasfired.)ItisthesumoftheAcquisitionCostsandTotalLand
PreparationCosts.
TotalLandCosts=AcquisitionCosts+TotalLandPreparingCosts
A20
TotalLandPreparingCosts:Thetotalcostsassociatedwithpreparingthelandinadvance
oftheerectionofthepowerplant.
TotalLandPreparingCosts=TotalAcres*LandPreparingCosts/Acre
TotalNetRevenues=TotalNetRevenuesarecalculatedasfollows
TotalNetRevenues=NetRevenues*NetCapacity*AnnualProduction
ofByproducts(Lbs/kW)
TotalNonHazardousMaterialDisposalCosts:Thetotalcostsassociatedwiththedisposal
ofNonHazardousmaterials.
TotalNonHazardousMaterialDisposalCosts=NonHazardousMaterial
Tons/Year*(NonHazardousCollection&HaulingCost+NonHazardous
LandfillTippingCost)
TotalOperatingExpense:ThetotalofFixedOperatingExpenseandVariableOperating
Expense.
TotalOperatingExpense=FixedOperatingExpense+VariableOperatingExpense
TotalOperatingHoursOverTheLifeOfThePlant:Theprojectedtotalhoursofplant
operationsovertheeconomiclifeofthepowerplant.Thisvalueisusedtocomputethe
numberofmaintenancecyclesrequired.
TotalOperatingHoursOverTheLifeOfThePlant=EquipmentLife
(Years)*OperationalHours/Year
TotalPeriodicRoutineMaintenanceCosts:Thesumofperiodicroutinemaintenancecosts
incurredonaregular,expectedbasis.ThesecostsmaybecapturedintheTotalRoutine
MaintenanceCosts(seebelow),butthiscategoryisincludedinthemodelforflexibility
purposes,andforsituationsthatmayapplytospecifictechnologies,forexample,
replacementofthefuelcoreinfuelcells.
TotalPermittingCosts:Costsincurredinapplyingfornecessarylocaluseand
environmentalcompliancepermits,includingdirectpermitfees.Thesecostsdonotinclude
thecostsofinstallingandoperatingEnvironmentalControls.
TotalPermittingCosts=LocalBuildingPermits+EnvironmentalPermits
+EmissionReductionCreditsCosts
TotalReturnonDebt&Equity:Thetotalnetincomeovertheentireamount,bothdebtand
equity,investedinthepowerplant.
TotalReturnonDebt&Equity=DebtPayment+EquityRecovery+TotalTaxes
TotalRoutineMaintenanceCosts:Thesearecostsforsignificantpartsandlaborincurred
duringtheyear.TheyaremorefrequentbutlesscostlythanMajorandMinorOverhauls.In
A21
theCOGModel,thesecostsareapplicabletoalltechnologiesexceptGeothermalandWind,
whichhavetheircostsdelineatedunderTotalOtherRoutineMaintenanceCosts.
TotalRoutineMaintenanceCosts=TotalConsumableMaintenanceCosts+
TotalPeriodicRoutineMaintenanceCosts+TotalOtherRoutineMaintenance
Costs+TotalWellFieldCosts
TotalOtherRoutineMaintenanceCosts:Thesecostssimilarinnaturetotheabovedefined
TotalRoutineMaintenanceCost,withaddedcategoriesforcertaintechnologiessuchas
GeothermalandWind.Thelisteditemsarespecifictothetechnologiesasprovidedby
technologyspecialists.Definitionsofthoseitemsshouldbecollectedfromsuchspecialists,
andarebeyondthescopeofthisGuide.
TotalScheduledMaintenanceCosts:ThesumoftheMajorOverhaulCostsandtheMinor
OverhaulCosts.SeeMajorOverhaulsandMinorOverhauls.
TotalScheduledMaintenanceCosts=MajorOverhaulCost+MinorOverhaulCost.
TotalTaxRate:ThisisthetotaloftheStateandFederalTaxes.
TotalTaxRate=FederalTaxRate*(1StateTaxRate)+StateTaxRate
TotalUnscheduledMaintenanceCosts:Expectedaverageannualcostsforrepairinga
powerplantafteraforcedoutageorotherunforeseenoutage.
TotalUnscheduledMaintenanceCosts=MechanicsWage/Hour*
OverheadMultiplier*HoursofLabor+PartsCosts
TotalWellFieldsCosts:Costsincurredatgeothermalplantsformaintenanceandoperation
ofsteamandhotwaterreservoirwellfields.
TransformerLosses(percent):Intheprocessofatransformerupliftingordownliftingthe
voltage,someofthepowerislost.TheselossesarecalledTransformerLosses.
TransmissionLosses(percent):Lossesincurredinthetransmissionlinesduringthe
transmissionofelectricity,betweenthebusbaranddeliverytothedistributiongridusually
intheformofheatoravoltagedrop.
TransmissionServices($/MW):Costofconnectingtothetransmissiongridanddelivering
poweroverthatgrid,typicallypaidtoatransmissionsystemownerunderFederalEnergy
RegulatoryCommission(FERC)approvedtariffs.
VariableCosts($/KWYrOr$/MWh):Coststhatchangeasafunctionofpowerplantsuse;
thatis,fuelcostsandVariableO&M(Hourlylabor,supplypurchases).Asthetimehorizon
oftheanalysisexpands,morecostsbecomevariable.Morespecificallyforapowerplant,
theseareallcostswhichareafunctionoftheoperationoftheplantiftheplanthasazero
capacityfactor,thentheoreticallythesecostsarezero.
VariableCosts=FuelCosts+VariableO&M
A22
VariableO&MCosts($/MWh):Operation&Maintenancecoststhatareafunctionofthe
operationofthepowerplant(yearlymaintenanceandoverhauls).IntheEnergy
CommissionsCOGModel,theannualcostsarecalculatedbythefollowingformula:
VariableO&MCosts($/MWh)(YearCalculationIsDone)
=(VariableO&M/MWh(BaseYear)*((1+HistoricalInflationRate)*(1+O&M
Escalation)(StartYrBaseYr))*((1+O&MEscalation)*(1+ForwardInflation
Rate)(YearCalculationIsDoneStartYr))
Toconvertfrom$/MWhto($/KWYr):
VariableO&MCosts($/MWh)*AnnualLoadCenterEnergy(GWh)
GrossCapacity(MW)
VariableOperatingExpense:ThesameasVariableCoststhesumofFuelCostand
VariableO&M.
WaterSupplyCosts($/AcreFoot):Thecostsofacquiringwatersuppliesinthelisted
region.CostsreportedrepresenttypicalindustrialwaterdeliveryratesfoundintheRegional
CostDifferencesreportfortheCaliforniaISOin2002.
ToconverttheWaterSupplyCostsinto($/MWh):
WaterSupplyCosts=(WaterSupplyCosts/AcreFoot)*WaterConsumption
(AcreFoot)
WaterTreatment&CoolingControlTechnologyCapitalCosts:ItistheCapitalCostof
purchasingandinstallingtheWaterTreatment&CoolingControlTechnologyEquipment.
WaterTreatment&CoolingControlTechnologyCapitalCosts=WaterCooling
ControlInstallationCost*GrossCapacity*1000
WaterTreatment&CoolingControlTechnologyThemethodusedtocoolapowerplant.
DifferenttechnologiesusedifferentintensitiesofwaterconsumedperMWhofoutput,with
installationandoperatingcostsincreasingaslesswaterisused.
WeightedAverageCostOfCapital(WACC):Theaveragecostoffinancingtheconstruction
ofapowerplant.Theweightedaverageiscalculatedbymultiplyingthepercentageofthe
incrementalcapitalusedforfinancingthatcomesfromdebtinstrumentsandequitysources
bytheirrespectiveinterestrates.
WACC=PercentEquity*CostofEquity(%)+PercentDebt*CostofDebt(%)*
(1TotalTaxRate)
TheWACCisalsousedastheAFUDCrateandthediscountrateusedtocalculatethe
PresentValueoffuturecashflowsaswellastheLevelizedCost.
WheelingCharges($/KWh):Costofdeliveringpoweroverthetransmissiongrid,typically
paidtoatransmissionsystemownerunderFERCapprovedtariffs.
A23
A24
APPENDIX B: Federal Tax Incentives

Source:www.dsireusa.org
FigureB1summarizesthepresentlyavailableFederaltaxcredits.However,itshouldbe
keptinmindthatthesetaxcreditsaresubjecttochange,andmaynotberealizablebyall
powerplants.
Figure B-1: Summary of Tax Credits2009 IEPR
Notes:
1. GCC Production Credit separate from REPTC. Based on "refined coal" =
$4.375/(13900 Btu/ton for anthracite / HR*(1+ParasiticLoad) for IGCC). Expiration date for ARRA ITC unclear
2. Geothermal ITC does not expire. Unclear as to whether the ARRA increased the ITC for geothermal to 30% until 2014, and
whether self-sales are eligible
3. Solar ITC reverts to 10 percent in 2016
4. REPI payments scaled based on 2007 shares of paid to applications
Source: Aspen
B1
B2
ATTACHMENT A: Reference for Degradation

Factors
PacificGroupElectricPowerLLC
Memorandum
FromJamesL.Schoonmaker
DATE:
Wednesday,December07,2005
TO:
WillWalters
AspenE.G.
SUBJECT:
GasTurbinePerformanceDegradationwithTime
Below is a brief summary of the situation with regard to gas turbine and CC power plant
degradation due to simple aging. The General Electric Technical Bulletin is typical of the
current understanding, and is similar to views expressed by Siemens/Westinghouse, ABB
andMitsubshi.
Somegeneralstatements:
Degradation usually happens gradually over time. The root causes include deposit of
airborne material particularly silica on turbine blades at high temperature,
erosion/corrosionofbladingduetootherairbornesaltsparticularlysodium,maintenance
practicessuchasregularbladewashingonlineoroffline,numberofstartsandoperating
hours.Occasionaluseofoilfuelalsohasmajornegativeimpact,asdoespoorairfiltration
andunusualairbornecontaminantload.
11
Theusualdegradationpatternissawtoothshaped;frominitialoperationtothefirsthot
gasinspectionsamodernframeturbinemaylose3percentofitscapacityandheatrate.The
cleaningatthehotgasinspectionwillrecover1to2percentoforiginal(leaving1to1
percent loss from initial operation). There will be a further 3 percent loss over the next
24,000hourstothesecondgaspathinspection,andcleaningwillrecovermost,soattheend
of the second inspection the machine will lose approximately 2 to 3 percent of its original
capacity.Thissawtoothshapeddegradationcontinuesuntilgaspathpartsarereplacedto
bring the machine to original performance typically this never occurs in practice as
machines have reached their useful life cycle by the time economics would become
attractive.
ThedescriptionaboveistypicalofframeturbinesinCaliforniaatmanylocations.Aturbine
located near the ocean may experience 5 to 6 percent loss between hot gas inspections. A
turbinenearasteelmillinCaliforniasufferedveryseriouslossesinthefirstyear.Adesert
environmentmachineproperlyfilteredtoprotectagainstsilicaintrusionmayexperience2
percent loss. Machines subject to frequent starting cycles may degrade more quickly than
typicaldue tothemoisturegeneratedbycoldtemperaturesinstartingaswellasdiffering
chemistryonbladesurfaces.
Typically aeroderivative turbines degrade on the high end of that of frame turbines,
althoughrepairbyreplacementallowseasiercorrectionofthedegradation.
InaCCplantthegasturbinesusuallyaccountforabout2/3ofthetotalplantoutput,sototal
plantperformancedegradationmaybe2/3orevenlessthangasturbinesalone.
BelowistherelevantportionoftheTechnicalBulletinreference:
GeneralElectricTechnicalBulletinGER-3567H
Lastupdate2000
GeneralElectricproprietarymaterial.
Allturbomachineryexperienceslossesinperformancewithtime.Gasturbine
performancedegradationcanbeclassifiedasrecoverableornonrecoverableloss.
Recoverablelossisusuallyassociatedwithcompressorfoulingandcanbepartially
rectifiedbywaterwashingor,morethoroughly,bymechanicallycleaningthe
12
compressorbladesandvanesafteropeningtheunit.Nonrecoverablelossisdue
primarilytoincreasedturbineandcompressorclearancesandchangesinsurface
finishandairfoilcontour.Becausethislossiscausedbyreductionincomponent
efficiencies,itcannotberecoveredbyoperationalprocedures,external
maintenanceorcompressorcleaning,butonlythroughreplacementofaffected
partsatrecommendedinspectionintervals.Quantifyingperformancedegradation
isdifficultbecauseconsistent,validfielddataishardtoobtain.Correlation
betweenvarioussitesisimpactedbyvariablessuchasmodeofoperation,
contaminantsintheair,humidity,fuelanddiluentinjectionlevelsforNOx.
Anotherproblemisthattestinstrumentsandproceduresvarywidely,oftenwith
largetolerances.Typically,performancedegradationduringthefirst24,000hours
ofoperation(thenormallyrecommendedintervalforahotgaspathinspection)is
2percentto6percentfromtheperformancetestmeasurementswhencorrectedto
guaranteedconditions.Thisassumesdegradedpartsarenotreplaced.Ifreplaced,
theexpectedperformancedegradationis1percentto1.5percent.Recentfield
experienceindicatesthatfrequentofflinewaterwashingisnotonlyeffectivein
reducingrecoverableloss,butalsoreducestherateofnonrecoverableloss.One
generalizationthatcanbemadefromthedataisthatmachineslocatedindry,hot
climatestypicallydegradelessthanthoseinhumidclimate.
13
14
ATTACHMENT B: Asset Rental Prices
21
TURNINGANASSETPRICEINTOARENTALRATE
22
23
24

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CALIFORNIA

COST OF GENERATION MODEL

Arnold Schwarzenegger, Governor

Overview of the Cost of Generation Model

Figure 1: Illustration of Levelized Costs

Source: Energy Commission

Improvements to the Model

Organization of Users Guide

CHAPTER 2: Cost of Generation Model Overview

Figure 2: Flow Chart for Cost of Generation Model

Plant Side Losses

Levelized Fixed Costs

Levelized Variable Costs

Plant Cost Data

Instant Cost ($/kW)

Total Levelized Costs

(Merchant, Muni & IOU)

Fuel Cost ($/MMBtu)

(Merchant & IOU)

Source: Energy Commission

Summary of Annual Costs

($/kW-Yr & $/MWh)

Figure 3: Cost of Generation Model Worksheets

Tracks COG Model modifications using version numbers.

General Instructions & COG Model Description.

Estimates Wholesale Electric Price Forecast

User selects Assumptions Levelized Costs are reported along with

Plant Type Assumptions

Summary of Data Assumptions summary for each plant type.

Average Plant Type Assumptions

High Plant Type Assumptions

Low Plant Type Assumptions

Data Assumptions summary of all Financial Data.

Summarizes tax incentives for central station technologies

General Assumptions summary such as Inflation Rates & Tax Rates.

Plant Site Air & Water Data

Regional Air Emissions & Water Costs Used by Data 2 Worksheet.

Calculates Historical & Forward Inflation Rates based on GDP Price

Fuel Price Forecasts

Fuel Price Forecast Used by the Income Statement Worksheet.

Heat Rate Table

Shows the regression and provides the Heat Rate factors.

Calculates the Labor Cost components.

Calculates Overhaul & Equipment Replacement Costs Used by

Source: Energy Commission

Figure 4: Block Diagram for Cost of Generation Model

Fuel Price Forecasts

- Select Plant Type &

- Read Levelized Cost

Source: Energy Commission

Figure 5: Color Coding for Assumptions Worksheets

Plant Type Assumptions

Plant Site Air and Water Data

Fuel Price Forecasts

Income Statement Worksheet

CHAPTER 3: Using the Cost of Generation Model

Admonishment to All Cost of Generation Model Users

Opening the Cost of Generation Model

Using the Cost of Generation Model With Its Preset Data

Figure 6: Input Selection Table

Source: Energy Commission

Entering User-Specified Data

Figure 7: Color Coding for Assumptions Modification

Saving and Recalling New Scenarios