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(3)(i) The annual cash outlays for operations and maintenance expense (OM) and fuel expense (FL) for a powerplant may be computed by one of the following three methods; however, the one chosen must be consistently applied throughout the analysis.

(A) Assume the energy produced by the powerplant equals seventy (70) percent of design capacity times 8760 hours for each year during the life of the powerplant, and compute cash outlays for operations, maintenance, and fuel expenses for the powerplant.

(B) Economically dispatch the new powerplant. The cash outlays for operations, maintenance, and fuel expenses of all powerplants being dispatched (where oil and natural gas are priced according to the procedures of appendix II) are the corresponding expenses for the purpose of the cost calculation. The dispatch analysis area must be that area with which the firm currently dispatches, anticipates dispatching, and will be interconnected. It must also include all anticipated exchanges of energy with other utilities or powerpools. The outlays for operations, maintenance, and fuel may also be estimated using a methodology that incorporates the benefits of economically dispatching units and provides consistent treatment in the alternate fuel and oil or natural gas cases being compared.

(C) Use a dispatch analysis to project the energy produced by the powerplant for a representative (not atypical) year of operation when consuming an alternate fuel. Compute the cash outlays for operations, maintenance, and fuel expenses for the powerplant based upon the level of energy production estimated for the representative year. The dispatch analysis and fuel expenses for the cost calculation must include oil and natural gas priced according to the procedures of appendix II.1

(ii) When computing the annual cash outlays for operations and maintenance expense (OM) and fuel expense (FL) for an installation, specify the firing rates and the length of time each firing rate will be maintained.

(4) The discount rate (k) for analyses is 2.9 percent or that which is computed as specified in appendix I. The method of computing the inflation

index (IX) is shown in appendix II to part 504. OFE will modify these specified rates from time to time as required by changed conditions after public notice and an opportunity to comment. However, the relevant set of specified rates for a specific petition for exemption will be the set in effect at the time the petition is submitted or the set in effect at the time a decision is rendered, whichever set is more favorable to the petitioner.

(5)(i) The guidelines for the useful life (N) of all powerplants except nuclear will be thirty-five (35) years. The guidelines for the useful life of a nuclear powerplant will be forty (40) years. The guidelines for the useful life of major fuel burning installations will be forty (40) years. Other useful life projections may be used if they are more appropriate than these guidelines; however, the source or derivation of these projections must be contained in the evidential summary. The summary should include a discussion of engineering, economic historical or other evidence.

(ii) If the units being compared have different useful lives, the petitioner will have to modify his calculation so that the two cash flows being compared have the length of the shorter useful life. To do this, (A) use the shorter of the two useful lives in Equations 2 and 5 for both units, and (B) multiply capital investment (I) of the unit with the longer life (computed with Equation 3) by the following adjustment factor (A):

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laws. All investment tax credits al vestments including a description of lowed under Federal tax law must be all major construction and equipment; reflected in the computations. The pe- (2) Annual cash outlays for opertitioner must use the method of depre- ations and maintenance expenses inciation which results in the greatest cluding the formulas used to compute present value of the cash flow due to them; and the tax and depreciation effect. The (3) Annual cash outlays for delivered marginal income tax rate (ti) is the fuel expenses including the formulas firm's anticipated marginal Federal in- used to compute them. come tax rate in year i. The relevant

[46 FR 59903, Dec. 7, 1981; 46 FR 63033, Dec. 30. investment tax credits, depreciation

1981; 47 FR 15314, Apr. 9, 1982; 54 FR 52893, methodology, and marginal Federal in

Dec. 22, 1989) come tax rates for a specific exemption petition will be those prescribed by $503.7 State approval-general reFederal law in effect (or those tax pa- quirement for new powerplants. rameters which are known with cer (a) Where approvals by the approtainty will be in effect) at the time a priate State regulatory authority are decision is rendered. (However, if an in required prior to the construction or vestment tax credit expires in a certain use of a new powerplant, a petition for year under the law which is in effect at an exemption for consideration by OFE the time the petition is submitted, the may be submitted to OFE prior to obpetitioner must assume that it will in taining such approvals from the State fact expire in that year.)

regulatory authority. (7) If powerplants are being com (b) An exemption granted for a powpared, the design capacities or the erplant shall not become effective until maximum sustained energy per unit of an adequate demonstration has been time that could be produced must be made to OFE that all applicable apthe same. If installations are being provals required by the State regucompared, the maximum sustained en latory authorities have been obtained. ergy per unit of time that could be produced must be the same.

8503.8 No alternate power supply(8) All estimated cash outlays must general requirement for certain ex. be computed in accordance with gen

emptions for new powerplants. erally accepted accounting principles (a) Application. To qualify for an exconsistently applied.

emption, except in the case of an ex(9) The scope of the estimates of rel- emption for cogeneration units, section evant costs (as discussed above) of 213(c) of the Act requires a demonstraunits being compared must be the tion that, despite reasonable good faith same.

efforts, there is no alternative supply (10) All allowances for uncertainty of electric power available within a and risk in the cost estimates must be reasonable distance at a reasonable explicit.

cost without impairing short-run or (11) All cash outlays must be net of long-run reliability of service. If a petiany government subsidies or grants. tioner is unable to demonstrate that

(e) Evidence in support of the cost cal- there is no alternate supply during the culation. Petitioners for an exemption first year of operation, OFE will conwhich requires the use of the cost cal clude that the absence of the proposed culation shall certify that the cost of powerplant will not impair short-term using alternate fuel substantially ex- reliability of service, and as a result ceeds the cost of using oil as primary will not grant the exemption. Such acenergy source as calculated in this sec- tion would not impair long-term relition. A brief summary of the peti ability of service, since a petition may tioner's supporting calculations and es be submitted for a powerplant that timates shall be submitted with the would begin operation in a subsequent certification. The summary should in- year. clude the following:

(b) Criteria. To meet the demonstra(1) Cash outlays, Investment tax tion required under paragraph (a) of credits, depreciation methodologies, this section, a petitioner must certify and anticipated salvage for capital in- that:

(1) A diligent effort has been made to purchase firm power for the first year of operation to cover all or part of the projected shortfall at a cost that is less than ten (10) percent above the annualized cost of generating power from the proposed plant (including the capital, operation and maintenance expenses, and fuel prices); and

(2)(i) Despite these efforts, the reserve margin in the petitioner's electric region, normal dispatch area, or service area, in the absence of the proposed plant, would fall below twenty (20) percent during the first year of proposed operation; or

(ii) Despite these efforts, the reserve margin will be greater than twenty (20) percent but reliability of service would be impaired. In such case, the certification must be related to factors not included in the calculation of reserve margin, such as transmission constraints.

(C) Evidence. The petition must include the following evidence in order to make the demonstration required by this section:

(1) Duly executed certification required under paragraph (b) of this section; and

(2) Exhibits containing the basis for the certification submitted under this section (including those factual and analytical materials deemed by the petitioner to be sufficient to support its certification to this general requirement).

(d) FERC consultation. OFE will forward a copy of any petition for which a showing is required under this section to FERC promptly after it is filed with OFE, and OFE will consult with FERC before making the no alternate supply of power finding. (46 FR 59903, Dec. 7, 1981, as amended at 47 FR 15314, Apr. 9, 1982; 54 FR 52894, Dec. 22,

under 10 CFR 503.38 (Fuel mixtures) would be available, would not be economically or technically feasible.

(b) Evidence. The petition must include the following evidence in order to make the demonstration required by this section:

(1) Duly executed certifications to the criteria set forth in paragraph (a) of this section; and

(2) Exhibits containing the basis for the certifications submitted under this section (including those factual and analytical materials deemed by the petitioner to be sufficient to support its certifications to this general requirement.)

NOTE: In meeting this general requirement, OFE will require a petitioner to examine only mixtures of oil and coal and natural gas and coal, or, where petitioner wishes to examine an additional or substitute mixture, such other alternate fuels as OFE and the petitioner agree are reasonable to petitioner's circumstances. (46 FR 59903, Dec. 7, 1981, as amended at 54 FR 52894, Dec. 22, 1989)

8503.10 Use of fluidized bed combus

tion not feasible-general requirement for permanent exemptions. (a) OFE finding. Except in the case of an exemption for fuel mixtures, OFE may deny permanent exemptions authorized under section 212 of the Act if OFE finds on a site-specific or generic basis that use of a method of fluidized bed combustion of an alternate fuel is economically and technically feasible.

(b) Demonstration. If OFE has made such a finding, OFE will deny a petitioner's request for exemption unless the petitioner demonstrated that the use of a method of fluidized bed combustion is not economically or technically feasible. The petition or any supplement thereto required by OFE must include the following evidence:

(1) If use of a method of fluidized bed combustion were to be required, evidence that the petitioner would be eligible for a permanent exemption for lack of alternate fuel supply, site limitations, environmental requirements, lack of adequate capital, or State or local requirements; or

1989)

$503.9 Use of mixtures-general re

quirement for certain permanent exemptions. (a) Criteria. To qualify for a permanent exemption, except in the case of an exemption for fuel mixtures, section 213(a)(1) of the Act requires a demonstration that the use of a mixture of natural gas and petroleum and an alternate fuel for which an exemption

(2) Use of a method of fluidized bed combustion is not technically or eco nomically feasible due to design or special circumstances. 146 FR 59903. Dec. 7. 1981. as amended at 54 FR 52894, Dec. 22, 1989)

$ 503.11 Alternative sites general re

quirement for permanent exemp

tions for new powerplants. (a) Criteria. To qualify for permanent exemption due to lack of alternate fuel supply, site limitations, environmental requirements, or inadequate capital, section 212(a) of the Act requires a demonstration that one of these exemptions would be available for any reasonable alternative site for the facility.

(b) Evidence. The petition must include the following evidence in order to make the demonstration required by this section:

(1) Duly executed certifications to the criteria set forth in paragraph (a) of this section; and

(2) Exhibits containing the basis for the certifications submitted under this section (including those factual and analytical materials deemed by the petitioner to be sufficient to support its certifications to this general requirement). (46 FR 59903, Dec. 7, 1981, as amended at 54 FR 52894, Dec. 22, 1989)

ance with the applicable prohibitions of the Act;

(iii) A schedule indicating how any necessary permits and approvals required to burn an alternate fuel will be obtained; and

(iv) Any other documentary evidence which indicates an ability to comply with the applicable prohibitions of the Act.

(2) Any exemption for which a compliance plan is required shall not be effective until the compliance plan is approved by DOE.

(3) If the petition is granted, an updated, duly executed plan must be submitted to OFE within one (1) month of an alteration of any milestone in the compliance plan, together with the reasons for the alteration and its impact upon the scheduling of all other milestones in the plan.

8503.12 Terms and conditions; compli.

ance plans. (a) Terms and conditions generally. A petitioner must comply with any terms and conditions imposed upon the grant of an exemption petition. OFE will limit any such terms and conditions to the unit(s) which is the subject of the petition.

(b) Compliance plans for temporary exemptions. (1) Any compliance plan required to accompany a petition for a temporary exemption shall include the following:

(i) A detailed schedule of progressive events and the dates upon which the events are to take place, indicating how compliance with the applicable prohibitions of the Act will occur;

(ii) Evidence of binding contracts for fuel, or for facilities for the production of fuel, which are required for compli

$503.13 Environmental impact anal

ysis. In order to enable OFE to comply with NEPA, a petitioner must include the information indicated in this section if a permanent exemption is requested. Material which has been prepared pursuant to any Federal, State or local requirement for environmental information for this unit or site may be incorporated by reference and appended to the petition. Guidelines issued by OFE for environmental reports should be used in preparing this analysis (44 FR 63740, November 5, 1979). These guidelines, which are also available in the OFE public document room, have been designed to insure that environmental reports follow the format prescribed by Council on Environmental Quality final regulations implementing NEPA. The guidelines are subject to discussion at a prepetition conference and to modification according to the facts of a particular case.

(a) All petitions for permanent exemptions must contain the following information:

(1) A description of the facility, including site location, and roundings, alternative site(s), the facility's current proposed operations, its

fuel capability, and its pollution abate

Yes No NA ment systems and equipment (includ

(1) is your facility located in, or ing those systems and equipment nec

will it affect a wetland (Protecessary for all fuel scenarios consid tion of Wetlands Executive ered);

Order No. 11990)? .........

(2) Is your facility located in, or (2) A description of the existing envi

will it affect, a 100-year floodronment, including air, water, and land plain (Floodplain Manageresources;

ment Executive Order No.

11988)? (3) Direct and indirect environmental

(3) Will your facility affect a desimpacts of the proposed action includ ignated wild, scenic, or recreing impacts of alternative fuel sce ation river (Wild and Scenic

Rivers Act)? ....... narios, and no build alternatives.

(4)(A) Is your facility located (4) Regulatory requirements gov within a county in which criterning the facility, including a descrip ical habitat for threatened or tion of Federal, State and local re

endangered species are

known to exist (Endangered quirements for air, water, noise and

Species Act)? .... solid waste disposal which must be met (4)(B) Has a qualified biologist for each fuel considered.

determined that your facility

will not affect any species on (b) For exemptions for cogeneration,

the Threatened and Endanthe information enumerated below is gered Species list? ... to be submitted in lieu of the informa- (5) Is your facility located on, or

will it affect land that has tion required by paragraph (a) of this

been classified as prime or section. However, submission of the unique farmland or rangeland following information merely estab

by the U.S. Department of

Agriculture? ........ lishes a rebuttable presumption that

(6) Is your facility located on, or the grant or denial of the exemption will it affect, historical archaewould have no significant environ ological, or cultural resources mental impact. OFE may, in individual

that have been designated

pursuant to the National His cases, during the course of the adminis toric Preservation Act? ........ trative proceeding, determine that additional environmental information is

[46 FR 59903, Dec. 7, 1981, as amended at 47 required. In such cases, the petitioner

FR 15315, Apr. 9, 1982; 51 FR 18866, May 22, will be required to submit the informa- 1986: 52 FR 658. Jan. 7, 1987; 54 FR 52894, Dec. tion described in paragraph (a) of this 22, 1989) section.

(1) A certification that the petitioner 8503.14 Fuels search. will, prior to operating the unit under

Prior to submitting a petition for a the exemption, secure all applicable

permanent exemption for lack of alterenvironmental permits and approvals nate fuel supply, site limitations, inadpursuant to, but not limited to, the fol

equate capital, or state or local relowing: Clean Air Act, Rivers and Har

quirements, a petitioner must examine bors Act, Coastal Zone Management

the use of conventional solid coal as a Act, Safe Drinking Water Act, Re

primary energy source at the site source Conservation and Recovery Act;

under consideration, and at reasonable

alternative sites. Where a petitioner (2) Information required by the fol

believes that its use of such coal would lowing environmental checklist must

be infeasible, however, and where OFE be provided and certified as accurate:

and the petitioner can reach accord, it Environmental Checklist for FUA Certifi- may evaluate use of a different altercation Exemptions Instructions

nate fuel in lieu of solid coal. A petiAll questions are to be answered by placing tioner of these exemptions must demà check in the appropriate box. N/A rep onstrate for any fuel examined that he resents (not applicable). Although it is not would qualify for an exemption. required, the petitioner may elaborate on any question in writing on a separate sheet (54 FR 52894, Dec. 22, 1989) of paper.

and

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