Alternative Plan No. 3

Document: Alternative Plan No. 3, 1-26-67, page 11-26-67 Alternative Plan No. 3 No Project Power Generation Federal Writeoff of a Portion of the Reimbursable Costs Proposal This alternative would provide for the construction of the Central Arizona Unit without any project power generation. Commercial power would be purchased for pumping. Without the provisions for project generation of low-cost pumping power, and with an M&I water rate of $51 per acre-foot to accomplish M&I repayment, the project would be unable to repay $322 million of its total estimated construction cost and $165 million of its operation and maintenance cost. In this alternative, a Federal writeoff of this $487 million balance would be proposed. Construction cost would be $627,000,000. Advantages (1) The project water rates of the previous Administration proposals would be maintained. (2) This proposal gives visibility to a portion of the program subsidy. The irrigation subsidy involved might be interpreted as a national payment to Arizona for preservation of the Colorado River in its present state. (Bureau of the Budget staff item not concurred in by Interior staff because of Interior's conclusion that Hualapai Dam would be in the best national interest.) (3) It would have the support of preservationist groups. (4) It would minimize Federal capital investment. (Hualapai - $1,156,000,000; Alternative #1 - $719,000,000; this plan - $627,000,000) Disadvantages (1) The project would deviate radically from conventional Reclamation repayment policy. The precedent of Federal writeoff of irrigation capital, operation, and maintenance costs could have widespread, and possibly adverse, consequences in the future of the Reclamation program. It is doubtful if the precedent could be sufficiently qualified to avoid its attempted application elsewhere, e.g., in the case of Reclamation projects, which although economically justified, would not be considered financially feasible without some form of financial assistance. (2) Interior staff notes that the benefits associated with the multiple-purpose development of the Hualapai Dam site would be foregone or deferred.Epson Perfection 4870 Photo, 400 dpi, 8 bit, 1,650,503 byte