the capital cost of the SPS (D^); however, it will take some time before this money can be repaid. During the first year of operation, the corporation will incur expenses equal to $513 million (1974) for system maintenance, taxes and insurance plus the amount icc^0> the cost of using the capital during that year. On the other hand, it will receive revenues * equal to ICxE__c. If there is no inflation between now and 1994, the revenues received when the alternative base load generators are nuclear or coal-fired are insufficient to cover the $513 million operating expenses. The revenue received when the alternative is oil-fired generation is sufficient to cover operating expenses and service the debt (principal and interest in equal payment) if the discount rate is only .03%. 3.4.2 Calculated Maximum Discount Rates Three different types of base load generators that might provide the base load during the years from 1994 to 2024 are: • Nuclear (light water reactors) generators • Coal-fired generators; and • Oil-fired generators. The incremental costs associated with operating these generators and the revenues that could be realized by the corporation if the SPS energy were priced the same as these incremental costs are given in Table 3.1. If the SPS revenues are to be fixed by a consideration of the conventional alternatives, the revenues (and costs) must inflate with time or it will never be possible to provide a reasonable return to the investors. However, it takes some time to perceive the effects of inflation, i.e. during the first years, the corporation's debt will increase substantially and begin to decrease only after the Inflationary sprial has had time to affect a significant increase in fuel prices.
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