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Show IDeseireft IB ? Seiw SyiriD T Created in May 1978, Deseret Generation & Transmission Cooperative is a taxable, nonprofit cooperative charged with the responsibility of providing a firm wholesale power supply for its six member systems, each a rural electric cooperative. The six member cooperatives comprising Deseret include Bridger Valley Electric, Mountain View, Wyoming; Rural Electric Association, Beryl, Utah; Flowell Electric Association, Fillmore, Dixie-Escalan- Utah; Garkane Power Asso- ciation, Richfield, Utah; Moon Lake Electric Association, Roosevelt, Utah, and Mt. Wheeler Power Inc., Ely, Nevada. Prior to the 1970s rural cooperatives were able to provide an adequate power supply to serve their consumer needs by utilization of limited self generation, and through power allocations from federal generating units at Flaming Gorge and Glen Canyon. Each cooperative was a member of Intermountain Consumer Power Agency, which was organized to schedule utilization of federal power. HARRY FIELDSTED, President of Deseret's Board of Trustees During the early 1970s however, it was evident that additional wholesale power would be needed by the cooperatives. Various power source studies were conducted during this period, and contracts were negotiated with Utah Power & Light Company (UP&L) for the purchase of power. In 1978 UP&L was ordered by the Utah Public Service Commission to divest itself of wholesale power contracts. A date of march 1985, was set as a termination date for such contracts. Faced with a deadline, and without the existence of an agency that could contract for the construction or purchase of power source, the cooperatives joined to form Deseret as a wholesale power supplier. MERRILL General MILLETT, Manager of Deseret G&T Negotiations were started immediately to attempt the purchase of a portion of a generating unit under construction, and planning for the Bonanza Plant also progressed rapidly. In 1980 Deseret was able to purchase a 100 MW ownership in UP&Ls Hunter Unit and during the same year orders were placed for the first equipment for the Bonanza Plant. The early orders for the generator and boiler were placed before final approval was received, in order to meet the impending deadline for power purchases. Final project approval was received DON CULLEM, Manager of the Bonanza Power Plant from the Rural Electrification Administration (REA) in July, 1981, and construction began immediately. During much of the permitting process, involving a total project that would cost more than one billion dollars, Mssofly Deseret was operating with a staff of less than 20 people. Deseret now employs about 200 people, with approximately 150 involved directly with the operation or maintenance of the project, while about 50 are employed in administrative functions within the cooperative. As a generation and trans- mission cooperative, Deseret has a contract with its member systems to provide all of their p,!ws power requirements. Studies and projections are conducted on an basis by member g and Deseret to determine future needs. Plans systems are then implimented to provide generation to fill that need. Deserets member systems serve a total of more than 30,000 users in Utah and surrounding states. Of the six systems, five serve in Utah and one additional state. Only Flowell serves in Utah alone. Although all of Deserets member systems are in rural settings, serving an average of about four consumers per mile of line, users cover a wide scope in use of electric power. Meters serve small recreation home needs, residential, small commercial, farm irrigation and even large industrial loads such as oil fields and mines. The Bonanza Power Project assures a firm power supply to customers for future years. Innovative Financing Used The principle sources financing Deserets capital vestment consisting of purchase of Hunter II interim construction for Bonanza Power Plant of in- the and the and Deserado Mine have been loans from the Federal Financing Bank (FFB) guaranteed by Rural Electrification Administration (REA). In order to finance the purchase of the Hunter II interest, Deseret used a 35 year REA guaranteed loan commitment from the FFB in the amount of $65,640,000 and issued $17,300,000 of pollution control bonds through Emery County. Since the pollution Control Bonds are tax exempt, the interest rate is considerably lower than regular long term financing. ' In order to finance Bonanza I and the Deserado Mine, Deseret obtained a 35 year loan commitment from the FFB in the amount of $900,000,000. Deseret again issued bonds amounting to $158,100,000 for pollution control facilities at the plant through Uintah County. A portion of the pollution control bonds is priced weekly with an effective interest rate of less than 5 'A percent. Deseret issued these bonds early in the construction phase and invested the net proceeds from the sale of the bonds at a higher interest rate than the interest rate of each bond. This procedure allowed Deseret to mitigate the costs of interest for the Bonanza Project. In addition, Deseret has completed a tax benefit transfer whereby a company purchased the tax benefits; namely, the investment tax credit and accelerated depreciation on $26,000,000 worth of equipment. The benefit of this sale for these tax benefits was $8,000,000 which will be used to offset interest costs of the Bonanza Project. Western Fuels-Utaoperator of the Deserado Mine, has entered into leveraged lease transactions in the amount of $82,000,000. Effective interest rates on this type of financing averaged 7.5 percent. All of these innovative financings used by Deseret and Western Fuels-Utawere completed for the sole purpose of lowering the financing costs of the Bonanza Project. The cost savings of such financing will be passed on to the consumer of electrical power. In order to further reduce financing costs, h Deseret is in the process of marketing a sale lease back transaction in the amount of $650,000,000 of plant costs which would lower the financing costs from percent to 7 percent resulting in an annual savings of 11 approximately $28,000,000. Deseret hopes to successfully market such a transaction and have it completed by yearend. |