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Show ; k h Utah Power & Light Company i l 1407 WEST NORTH TEMPLE STREET f SALT LAKE CITY, UTAH 84116 801 535-4211 f HARRY BLDNDELL PRESIDENT v AND C CHIEF EXECUTIVE OFFICER - , .() . ; .1 January 11, 19uQ ? z t H To: CP. National Customers - i i ' As you may have heard, Utah Power & Light Co. has offered to Vs buy, and C. P. National has agreed to sell, their electric service facilities in southern Utah and northern Arizona. f; i Utah Power personnel have been visiting with elected vl officials and members of the community in the area to get ; ! acquainted and to tell them how pleased we are to have an H opportunity to provide your electric service. This is one of the beautiful areas of Utah we have not previously had the opportunity i to serve, although we have had many discussions with your previous !'4 supplier seeking a way to bring our reliable service to you. M Our service will save you money because we have lower rates; -: and, as we upgrade facilities, we will give you better service. jp: For years we have been generating much of the power you use, but - up until now, our service has not been direct. k, UP&L strives to be a good and considerate corporate citizen ) wherever it serves. We are especially happy to be able to extend pi this effort into southern Utah and appreciate very much the jvl courtesies extended to us on" our visits. ' l- At meetings we have held, we encouraged questions from your l?l city and county officials and others... "no holds barred." Eelow ; are our replies to the more frequently asked questions. If you I have additional questions, please serai than to the address shown below. t' x Cordially yours, : Harry Blundell, President t- ' P.O. Box 899 - Dept. SU A Salt Lake City, Utah 81110 ' i i customers will continue to get substantially sub-stantially what it does now. Various "preference customers" will be quarreling among themselves to hold their share. New power sources from ICPA members and IPP are largely committed, but some power might become available from steam electric plants to be constructed. If municipalities municipali-ties build their own plants, it is probable their costs will be higher than UP&L. At the end of 1978, UP&L's embedded cost (or average cost) of all existing steam generation was $300 per kilowatt. Today, the cost of new steam generation is more than twice that amount, and plants coming on line in the 1983-1986 period will be near three times that amount. UP&L's rates are based on lower embedded, or average costs. Do you honestly feel that your recommendation recom-mendation that we go on your service as retail customers is best for us as homeowners? Without question. Our nation faces an energy crisis and, in many areas of the nation, a shortage of generating capacity. There is also a money supply problem, and a shortage of low-cost capital to build plants. UP&L's power supply is relatively secure as compared to any other source in the country, and the company com-pany presently has the capability and expertise to construct the facilities needed to supply and improve service in the area. We have had damaged equipment which servicemen have indicated is the electric supplier's fault. If your equipment fails to properly function and our equipment is damaged, do we have to seek legal counsel or do you have a policy to reimburse customers cus-tomers for losses sustained when you are at fault? If it's our fault, we pay. What is your intent as far as the employees of C. P. National are concerned? Experienced utility personnel are an asset to a utility company. C. P. National employees are being offered jobs with UP&L. Will you support economic progress of the local area, and if so, how? UP&L has a keen awareness of its responsibilities, as a corporate citizen. The company supports the efforts of local Chambers of Commerce and other organizations to provide better economic and living conditions. Note: A reliable, experienced investor-owned investor-owned electric utility often is the added advantage needed to attract new employers to an area. How do we know we can depend upon UP&L for reliable service? UP&L has been in the electric utility business for 67 years. Our employees and management team are experienced experi-enced and loyal. Our reputation for good service is unsurpassed. As we understand it, UP&L is prepared pre-pared to serve all of C. P. National's customers, not just those in cities and towns. Correct. C. P. National customers are promised prom-ised access to sources of "cheap" power by those advocating a municipally-owned electric system. Is this realistic? Most "cheap" power is "cheap" for three reasons: (1) The system or generating station was built at low prices years ago; (2) The generation is a hydroelectric installation; and, (3) the generating station is subsidized by federal tax dollars. Low construction construc-tion prices are just a memory; practically prac-tically all large feasible hydroelectric sites are in use, and the federal government is no longer building large hydroelectric generating stations for preference customers. Our experience tells us that "cheap power" is a thing of the past. IMS. poDoooeip II A LIGHT COMPANY Questions Received by UP&L Regarding Its Purchase of C. P. National Do you feel the commission will continue to limit your service to existing exist-ing municipalities and to new municipal muni-cipal systems if we were to organize such? The commission has ordered, us to limit our sales to wholesale customers cus-tomers to those presently taking service, and terminate sales to those for whom an alternate supply can be accomplished. Can't municipalities issue bonds to finance an electric system at a rate below that available to UP&L? The interest rate may be lower on tax-free bonds but the cost-of-interest on utility bonds, after the utility takes the tax deduction of interest, will be very close to the same if not lower for the taxpaying utility. It should also be noted that a town's bonding capacity for other needs (sewers, etc.) may be reduced if municipal muni-cipal bonds are issued. I What rate reduction can we expect when Utah Power & Light Co. begins supplying us service? As of January 7th, Utah rate reductions range from 5 to 15.9 depending upon the rate schedule and amount of electricity being used. Most customers will be in the 10 to 15 reduction range. Senior citizen reductions will be 10 to 20. C. P. National now has a request filed for a 10 increase. 'Arizona reductions not yet calculated. This percentage ranged from 10 to over 20 prior to a recent UP&L rate order. Is there a provision in the purchase agreement between UP&L and CPN for CPN stockholders to exchange their stock for UP&L stock? We looked at the possibility, but it isn't feasible. UP&L stock can, of course, be purchased through any registered securities broker. Isn't there more cheap Federal power that may be allocated to this area? It is questionable. It is highly unlikely that those now receiving such subsidies sub-sidies will give them up willingly although new sources planned may have some capacity available (but arei'mostly "peaking units" which do not increase the amount of energy available). Do you intend to improve the existing transmission capacity into the St. George area? Yes. wi Why can you charge us less than C. P. National? Since we already supply C. P. National, we not only, "cut out the middle man," we also will be able to avoid CPN's higher "cost of service" and give our new customers the advantage of UP&L's lower average system costs. Will our rates be higher than Salt Lake City customers of UP&L? No. Rates will be proposed to be identical to those throughout UP&L's Utah service area. What are your plans to improve service? We calculate we will have to spend some $7,000,000 in the next few years to upgrade the C. P. National system to the same standards as that supplied to all UP&L customers, which will result in more reliable service for you. Southern Utah is growing rapidly. What do you expect to pay in local taxes to help pay for schools, water supplies, sewers and other public services? C. P. National was paying approximately approxi-mately $100,000 per year in local taxes on their investment in the area. Since UP&L will be upgrading the C. P. National system, it is expected that taxes paid to local governments will go up. Note: No taxes are paid by municipally-owned electric utilities. UP&L says it uses coal for over 90 of its power generation. Where does it get the coal? UP&L owns three mines in Emery County with reserves adequate to supply its plants there for the life of the plants (about 35 years). These mines also ship coal to UP&L plants in Carbon and Salt Lake counties. The company has a long-term contract for coal supplies for the life of its Wyoming plants. UP&L's fuel supply is one of the most favorable in the West. Can't a municipality build a power plant just as cheaply as UP&L? Power plants are usually built by large construction firms specializing in such plant construction. The disadvantage dis-advantage of the municipal organization organiza-tion is that when much or all of their energy comes from one new plant, built at today's high costs and financed finan-ced at today's high rates, their rates tend to be higher. UP&L customers have the advantage of plant costs and financing over many years in the past at much lower cost, and UP&L's service rate is based on the average of these lower costs over th? years. Do you have capacity to serve us as ultimate customers of UP&L? ( Yes. As mentioned above, we already supply most of the power you use... C. P. National bought from usand , sold to you. If you are unable to serve future municipalites, where can we get such service if we decide to go municipal? This would be a problem. If reliable power from federally-owned plants is reallocated in a few years (which we are advised is doubtful), we estimate esti-mate that present Utah preference |