J B P J PO Box 49130 J...The CBC submits that this is particularly important given that recent energy and capacity acquisitions have, of necessity, had to rely on comparison of cost-effectiveness

D Barry Kirkham, QC+ Robin C Macfarlane' Duncan J Manson' Alan A Prydenlund, QC'' Daniel W Burnell, QC' Harvey S Delaney• Ronald C Paton• Paul J Brown• Karm S Thompson• Guy M Yaffe' Laur• A \Yrighl Harley) Harris' James H McBealh' Karl F Richardson* F.dilh A Ry•n' James W Zallsoff' Daniel H Coles* Jocelyn M Bcllcrud' Patrick J O'Neill Brian Y K Cheng .. •

Carl J Pines. As«<late Coun5"1' Rose-Mary L 8uh1m. QC. Associate Counsel' Jennifer M WIW..ms, Associate Co11M4'1' I Ion Walti,r S Owen, QC, QC, LLD (1981) John I Bird, QC (2005) Oar

August 14, 2018

VIA ELECTRONIC MAIL

Josephine M Nadel, QC' Allison R Kuchta' James L Cerplck' Patrick) llaberl' Heather E Maronachie Jonath"" L Wtlllams' Paul A Bra<kstone•· Pamela E Sheppard' Katharina R Spotzl Sarah M P~loqu111"

British Columbia Utilities Commission 6th Floor, 900 Howe Street Vancouver, B.C. V6Z2N3

James D Bums• Jeffrey B Llghtfool' Christopher P Weafl•r• Gregory ) Tucker, QC' T~renre W Yu· Mlc:hael F Robson' Scott H Stephens' C'A.Orge J Roper' Sameer Kamboj S1eJfi T Boyce

• Law Corporation ' Al,o of the Yukon Bar •• Also ol theOnlarlo Bar •

0 Also of the Washlncton

OWEN•B IRD i, AW CORPORATION

PO Box 49130 Three Bentall Centre 2900-595 Burrard Street Vancouver, BC Canada V7X lJS

Telephone 604 688-0401 Fax 604 688-2827 Website www.owenbird.com

DirectLine: 604691-7557

Direct Fax: 604 632-4482

E-mail: [email protected]

Our File: 23841/0 186

Attention: Patrick Wruck, Commission Secretary and Manager, Regulatory Support

Dear Sirs/Mesdames:

Re: British Columbia Hydro and Power Authority Electricity Purchase Agreement Extension Applications for Armstrong Wood Waste Co-Generation and NWE Williams Lake Wood Waste Facilities - Project No. 1598954

We are counsel to the Commercial Energy Consumers Association of British Columbia (the "CEC"). Attached please find the CEC's Final Submission with respect to the above-noted matter.

If you have any questions regarding the foregoing, please do not hesitate to contact the undersigned.

Yours truly,

m<s{~r P. Weafo

CPW/ij cc: CEC

CORPORATION

cc: BC Hydro cc: Registered Intervcners

(01076392;1} A lNTERLAW M€11<BER OP INTERLAW, AN INTERNATIONAL ASSOCI ATIOI<

'8,1 OF 1NDEP£H0DfT LAW Flit.MS IN MAJOlt WORLD Ct:NTlt&S

COMMERCIAL ENERGY CONSUMERS ASSOCIATION OF BRITISH COLUMBIA

FINAL SUBMISSIONS

British Columbia Hydro and Power Authority Electricity Purchase Agreement Extension Applications for Armstrong Wood Waste Co

Generation and NWE Williams Lake Wood Waste Facilities Application Project No. 1598954

August 14, 2018

{01076081;1}

Commercial Energy Consumers Association of British Columbia

British Columbia Hydro and Power Authority Electricity Purchase Agreement Extension Applications for Armstrong Wood Waste Co-Generation and NWE Williams Lake Wood

Waste Facilities Application Project No. 1598954

Table of Contents

I. Summary of Recommendations ......................... ................. ..... ........................ .................. ........... .... .. ........ ...... 2

II. Sub1nissions ...... ......... .......... ................................. ............... ......... ................. ... .... ... ................ ..... .................. .. 2

A. Background .............. ..... ............................ ..... .......... ... ..... ................ ...... .............. , ..... ...... ................... ... 2

B. Commission Assessment ....................... ............. ..... ... .......................... ............... .. ... ........................ ..... . 4

C. Ratepayer Impacts ........... ...... ..................... ....... ................. ..................... ................ :·········· ···· ········· ·······5

D. Longer Te1m Impacts ... .............. .. ....... ............ ......... ..................... ... ............. ..... ... ......................... .... .... 6

E. Other Public Interest Considerations ........ ...... .................. ........ ............. .......................... ..... .................. 9

F. Recommendation ... .... ...... ....................... ................... .................... ...... .............. ...... ........... ........ ..... .. .. 11

(0107608 1;1}

COMMERCIAL ENERGY CONSUMERS ASSOCIATION OF BRITISH COLUMBIA

FINAL SUBMISSIONS

British Columbia Hydro and Power Authority Electricity Purchase Agreement Extension Applications for Armstrong Wood Waste Co-Generation and NWE Williams Lake Wood

Waste Facilities Application Project No. 1598954

The Commercial Energy Consumers Association of BC ("CEC") represents the interests of ratepayers consuming energy under commercial tariffs in applications before the British Columbia Utilities Commission ("BCUC" or "Commission").

BC Hydro and Power Authority ("BC Hydro" or "Authority") requests temporary renewal for the following two supply contracts:

• An agreement dated November 17, 2017, between BC Hydro and Tolko Industries Ltd. ("Tolko") that amends and extends a 2009 electricity purchase agreement ("Tolko Armstrong Extension Agreement") for its wood wasteco-generating facility near Armstrong, B.C. ("Armstrong Co-Gen Facility") until June 30, 2019 (or September 30, 2019 if BC Hydro exercises its option to extend the end date); and

• An agreement dated December 29, 2017, between BC Hydro and Atlantic Power Preferred Equity Ltd. ("Atlantic Power") that amends and extends a 1990 electricity purchase agreement ("EP As") (''NWE Extension Agreement") for its wood waste generating facility near Williams Lake, B.C. ("NWE Williams Lake Facility") until June 30, 2019 (or September 30, 2019 if BC Hydro exercises its option to extend the end date). 1

These extensions are intended as a bridging mechanism until a biomass energy strategy is developed and adopted to enable longer term decisions with respect to biomass EPAs.2 The purpose of the extensions is to preserve BC Hydro's option to enter into a longer term cost-effective EPA to serve future needs and to avoid less cost-effective alternatives.3

The CEC supports the objective of avoiding less cost-effective alternatives, particularly because BC Hydro has significant surplus energy now and in its future. BC Hydro is and will be selling this surplus energy for substantially less than it is paying and will be paying for the energy and consequentially doing significant harm to ratepayer interests.

The CEC has participated in the proceeding and provides the following submissions for the Commission's consideration.

1 BC Hydro Final Argument page 1

2 Exhibit B-1, Page 2, Lines 20-22

3 ExhibitB-1, Page 4, Lines 9-12

{01076081;1}

- 2 -

I. SUMMARY OF RECOMMENDATIONS

1. The CEC recommends that the Commission approve temporary renewals for both projects until June 30, 2019, or until September 30, 2019 if BC Hydro exercises its option to extend the end date as requested in BC Hydro's application.

2. The CEC recommends that the Commission request BC Hydro develop and complete an analysis of the Independent Power Producer ("IPP") and Standing Offer Programs ("SOP") renewals and acquisitions as an important context for biol!lass policy decisions.

3. The CEC recommends that the Commission request that this analysis be complete with assessments as to the need and appropriate pricing for IPP energy and capacity over the next

20 to 40 years.

4. The CEC submits that this analysis will be useful for the Commission to help inform future Commission decisions with respect to EPA applications and to help properly inform provincial government policy discussions.

5. The CBC recommends that the Commission establish market prices as one of the key values that should be considered in developing a comprehensive and complete analysis for acquisition and/or renewal of BP As. The CBC submits that this is particularly important given that recent energy and capacity acquisitions have, of necessity, had to rely on comparison of cost-effectiveness to market prices because of significant energy surpluses held by or anticipated to be held by BC Hydro in the long-term future.

II. SUBMISSIONS

A. Background

6. The Armstrong Co-Gen Facility has been in operation since 2003 and has the capability to

produce approximately 163 GWh per year.4

7. The NWE Williams Lake Facility is a 68 MW generating facility, which commenced operations in 1993. NWE Williams Lake Facility continues to use wood waste residue from local sawmills and has the capability to produce approximately 545 GWh per year.5

8. Both previous agreements would have te1minated in the absence of the Extension

Agreements6 requested by BC Hydro.




{01076081;1}

- 3 -

9. The Extension Agreements are short-term and intended to act as bridging mechanisms until the completion of the biomass fibre study7 and biomass energy strategy8 that BC Hydro is undertaking.

10. Both studies are described in BCUC 1.4.1. The Extension Agreements preserve the option for BC Hydro and the biomass facility owners to enter into long-term EP As.

11. The additional time will allow BC Hydro to develop a biomass energy strategy that takes into consideration biomass fuel supply availability and cost-effectiveness. Biomass facility owners also need the information about cost-effective biomass fuel supply availability to inform their decisions about long-term viability. In the absence of the Extension Agreements, BC Hydro might not have these options available to it when it is in a position to decide on long-term EPA renewals with biomass facilities. 9

12. BC Hydro anticipates that the energy strategy for biomass facilities will be complete by June 201910 and will include a set of guiding principles for energy procurement from all biomass facilities with expiring EPAs. This includes the Tolko Armstrong and NWE Williams Lake biomass facilities along with other biomass facilities with expiring EP As. 11

13. The biomass fibre study will be completed in 2018 and will assess the supply and demand for forest-based biomass by type. 12 They are looking at the delivered cost of biomass, which reflects the value of biomass for power supply and other purposes ( e.g. pellet production). 13

14. BC Hydro states that the results of the biomass fibre study and biomass energy strategy will enable BC Hydro to make decisions on longer-term biomass EPA renewals. 14

15. The CEC recommends that the Commission request that BC Hydro's study of biomass fibre supply also include a comprehensive analysis of the risks involved in anticipating long-term availability of biomass fibre availability.



9 Exhjbit B-4, CEC 1.6.1

10 Exhibit B-1, page 2

11 Exhibit B-4, BCSEA 1.1.1


13 Exhibit B-4, CEC 1.4.1


(01076081 ; 1}

-4-

B. Commission Assessment

16. The Extension Agreements are "energy supply contracts" under Part 5 of the Utilities Commission Act ("UCN') and have been filed with the BCUC in accordance with the requirements of section 71 of the UCA.

17. BC Hydro provides the following view of the Commission's public interest assessment.

18. They state:

Section 71 (2.21) of the UCA describes the factors and criteria that the BCUC is to consider when assessing whether or not an energy supply contract filed by BC Hydro is in the public interest, as follows:

• first, the BCUC is to consider the interests of both current and future BC Hydro customers; and

• second, the BCUC is to consider;

o British Columbia's energy objectives as set out in section 2 of the Clean Energy Act ("CEA");

o an applicable Government-approved Integrated Resource Plan (IRP);

o the quantity, availability and price of the energy to be supplied under the contract; and

o the quantity, availability and price of any other form of energy that could be used instead of the energy to be supplied under the contract.

The criteria the BCUC is to consider are specified in section 72 (2.21) of the UCA Section 7 of the Application provides BC Hydro's views on the alignment of the Extension Agreements to those criteria.

Section 71 (2.21) does not specify the weight to be given to each particular prescribed factor and criteria. In assessing public interest, section 71 (2.21) requires consideration of benefits the contract might provide that are potentially at odds with the interests of current or future ratepayers. 15

19. The CEC agrees with this assessment.

20. The CEC submits that ratepayer impacts are key criteria and should be given significant weight by the Commission in any assessment it undertakes.

21. The CEC submits that financial impacts are highly important in al] these analyses and are appropriately considered by the Commission in assessing the interests of cun-ent and future


{0107608 1; 1}

- 5 -

BC Hydro customers; in the approved IRP; in the quantity, availability and price of energy; and in the quantity, availability, and price of other forms of energy.

C. Ratepayer Impacts

22. The CEC submits that present and future ratepayer interests are primarily defined by the short and long-term cost-effectiveness of the energy and capacity supplied by those projects, relative to ratepayer needs and available supply options.

23. BC Hydro acknowledges that the energy purchased under the Extension Agreements is not in and of itself cost-effective with respect to the short-term extension periods, in particular because BC Hydro does not require the energy during the short-term extensions.16

24. BC Hydro provides total ratepayer impacts17 in BCUC Confidential IR 1.2.2.l and responses to Panel IR 1, and several CEC !Rs which are redacted. They do not expect any additional costs.

25. In particular, BC Hydro points out the following in its Final Argument:

Tolko has confirmed that absent the Tolko Armstrong Extension Agreement, current market pricing for electricity does not support Tolko selling electricity generated at the Armstrong Co-Gen Facility into the Alberta or Mid-C electricity markets. As such, without the Tolko Armstrong Extension Agreement, it is BC Hydro's understanding that Tolko would operate the Armstrong Co-Gen Facility differently and will likely have to deal with a wood waste disposal problem from its mill operations. BC Hydro's response to BCUC IR 1.10.2 outlines the effects of a temporary or indefinite shut down of the Tolko Armstrong Co-Gen Facility based on information provided by Tolko. 18

26. The CEC submits that the evidence shows that at the present time there is a negative short term financial impact for ratepayers for the duration of the contracts.

27. The CEC submits that this information is primarily relevant to an assessment of the current ratepayer impacts and has less relevance to the long-term consideration of the EP As which will be conducted in the future.

28. The CEC recommends that the Commission consider the short-term supply situation only in the light of a comprehensive understanding of the long-term supply situation, which at this point is not adequately in evidence before the Commission.


17 Exhibit B-7, Panel TR 1.1.1


{01076081 ;1}

-6-

D. Longer Term Impacts

29. BC Hydro believes that preserving the option to enter into longer-term EPAs with the Biomass Facilities will enable BC Hydro to mitigate the risk of exposure to higher-cost resource options in the future. 19 The Authority notes that:

Biomass facilities are desirable generation resources for BC Hydro's IPP portfolio as they offer both capacity and energy, and contribute to the reliability of the system. That is, biomass facilities are available to generate anytime they are called upon while intermittent resources cannot provide such assurance.20

30. Further discussion of the benefits of the Agreements are outlined in Exhibit B-1, at pages 7-8 of the Application.

31. BC Hydro also provides its view of the longer-term ratepayer risk impacts that could occur from not renewing the agreements:

a) Financial Impact - Risk that these resources would not be available to BC Hydro, which could limit BC Hydro to less cost-effective resource options for serving future needs; and

b) Physical Impact - Risk that new greenfield projects need to be constructed in the future, which could impact the public and cause associated environmental impacts.21

32. The CEC submits that it is necessary for a full financial, long-term analysis to be undertaken in order to determine the long-term impact of the EP As.

33. BC Hydro states that it has been renewing contracts with Hydro IPPs at prices lower than the prices under the original contracts, recognizing that those producers with existing projects would have likely recovered their initial capital costs over their original contract terms, and are being achieved at cost-effective energy prices. BC Hydro expects that a similar situation may exist for biomass projects, but is awaiting information from the studies noted above.22

34. With regard to the Armstrong Co-Gen Facility, BC Hydro states that:

(It) has demonstrated the ability to provide consistent, highly reliable generation output. The facility is about 15 years old and BC Hydro assumes that most of the initial capital investment should have been recovered. Thus, based on current assumptions and subject to the results of the biomass fibre study and biomass energy strategy, BC Hydro expects it is possible to negotiate a cost effective longer-term agreement for this facility. 23




22 Exhibit B-1, pages 6 and 7


{01076081;1}

- 7 -

35. With regard to the Tolko Agreement, BC Hydro states:

The NWE Williams Lake Facility has demonstrated the ability to provide consistent, highly reliable generation output. The facility is about 25 years old and BC Hydrn assumes that most of the initial capital investment should have been recovered. Thus, based on current assumptions and subject to the results of the biomass fibre study and biomass energy strategy, BC Hydro expects it is possible to negotiate a cost effective longer-term agreement for this project.24

36. The CEC submits that the EP As may or may not be cost-effective in the long run. A comprehensive evidentiary record is not available at this time, given that BC Hydro has only evaluated the cost-effectiveness of the sho1t-term Extension Agreements over the term of each extension25, and BC Hydro's commitment to the Biomass studies and strategy, which will be available in approximately I year. BC Hydro states that until the biomass energy strategy is completed, and the costs of any future agreements are known, BC Hydro considers it would be speculative to include an analysis of having these two facilities as potential long-term EP As as prut of the evaluation of the short-term Extension Agreements.26

37. The CEC notes that biomass projects have ongoing fuel costs that hydro projects do not. and, as such, the recovery of capital expenses may not result in sufficient substantial cost reductions over time.

38. The CEC submits that one of the key valuations of EPAs, and in particular the biomass projects considered in this application, should be determined based on mru·ket prices.

39. BC Hydro values EPAs over their contract terms based on BC Hydro's opportunity cost and other metrics, including the IPP cost of service. 27

40. The CEC notes that the Extension Agreements are beneficial to the respective owners of the Armstrong Co-Gen facility and the NWE Williams Lake facility. The Extension Agreements provide the owners with sufficient compensation to continue operating the facilities during the extension period with manageable changes to operations, such as reducing staffing levels, changing biomass supply ru-rangements, etc.28

41. The CEC does not support the IPP's cost of service as a relevant consideration for ratepayer impacts. The CEC submits that the IPP's cost of service should be considered an issue for the vendor and should not be considered as an issue for BC Hydro as an energy purchaser. The

24 Exhibit B-1, pages 6 and 7


25 Exhibit B-4 CEC l. 7 .2




{0 1076081; 1}

- 8 -

CEC submits that BC Hydro should purchase energy and capacity at the most cost-effective price available regardless of the IPP suppliers' cost structures.

42. The CEC submits that one caveat to this position is where the BC Hydro ratepayers have paid for energy and/or capacity at costs over shorter-term contracts, and the extended life of the projects beyond initial contracts makes the renewal of a contract reasonable at lower prices than market alternatives. Then BC Hydro should explore the appropriate costs for providing the lower-priced cost of service, because of the ratepayers' contribution to the economics of the plant coming due for renewal.

43. BC Hydro assesses its opportunity costs based on the levelized value of additional energy at market value (ie. BC Border Sell price), during periods of surplus, or BC Hydro's reference price during periods in years of BC Hydro Load Resource Balance ("LRB") shortfall.29 BC Hydro's response to BCUC CONF IR 1.2.2.2 provides illustrative examples of BC Hydro' s opportunity cost for 10-year and 20-year EPA renewals for the two projects.

44. The CEC notes that from a planning perspective, the LRB from the Fiscal 2017 to Fiscal 2019 Revenue Requirements Application shows:

• With no new resources (i.e., Site C, DSM, EPA renewals, Standing Offer Program), there is an energy surplus until fiscal 2022; and

• With inclusion of Site C and other planned activities, the need for new resources is deferred until fiscal 2034.30

45. The CEC submits that the inclusion of Site C is necessary for proper analysis as there has been a final determination that the Site C project is proceeding.

46. With regard to other planned activities, the CEC is of the view that activities such as Demand Side Management ("DSM") and IPPs should be assessed and included in the resource stack based on the lowest price available.

47. The CEC is of the view that it is approp1iate for a comp~ehensive review of all IPP renewals to be conducted and assessed on a portfolio basis, prior to making individual determinations on EPAs.

48. The CEC is concerned that piecemeal analysis of individual EP As, in the absence of a cohesive and comprehensive strategy, can result in non-financial criteria effectively overwhelming a full financial assessment of the overaJ I cost of IPPs.

49. The CEC notes that the biomass energy strategy will inform the possible renewal of the Tolko Armstrong and NWE Williams Lake EPAs and the next IRP. However, it is uncertain

29 Exhibit 8-4, CEC 1.5.1

30 Exhibit 8-4, CEC 1.2.2

{0 1076081 ;I}

- 9 -

whether the next IRP will be completed in time to be applied to all the biomass EP As that will be expiring.31

50. The CEC recommends that the Commission request BC Hydro to develop and complete a comprehensive analysis of the IPP and SOP renewals and acquisitions as an important context for biomass policy decisions.

51. The CEC recommends that the Commission request that this analysis be complete with assessments as to the need and appropriate pricing for IPP energy and capacity over the next 20 to 40 years.

52. The CEC submits that the need for IPP and SOP energy and capacity should be assessed in context of the likely load that BC Hydro is expected to experience over the relevant time frames. The CEC notes that BC Hydro uses its mid-level forecast for resource planning. The Site C Inquiry Final Report highlighted concerns raised by many participants with the BC Hydro load forecasting. The CEC submits that overly optimistic load forecasting on the part of BC Hydro, combined with a lack of IPP and EPA strategy to manage cost effectiveness of EP As or a pre-planned means to adapt purchases to changing circumstances raises a significant risk to ratepayers of non-cost effective purchases of IPP energy during extended

surplus conditions.

53. The CEC recommends that the Commission direct BC Hydro to examine the role of IPP and SOP purchases at its mid-level and low-level forecast as recommended for consideration in the BCUC Site C Inquiry.

54. The CEC submits that this analysis will be useful for the Commission to help inform future Commission decisions with respect to EPA applications and to help properly inform provincial government policy discussions.

55. The CEC recommends that the Commission establish market prices as one of the key values that should be considered in developing a comprehensive and complete analysis for acquisition and/or renewal of EP As. The CEC submits that this is particularly important given that recent energy and capacity acquisitions have, of necessity, had to rely on comparison of cost-effectiveness to market prices because of significant energy surpluses held by or anticipated to be held by BC Hydro in the long-term future.

E. Other Public Interest Considerations

56. In addition to ratepayer impacts, BC Hydro also points to other public considerations such as the impacts to the local economies and industries from not renewing the agreements.

57. BC Hydro outlines several consequences as follows:

31 Exhibit B-4, BCSEA l.1.3

{01076081 ;1}

- 10 -

In the absence of the Tolko Armstrong Extension Agreement, the key specific impacts to Tolko and the local community would be as follows:

a) Risk that the likely change in operation of the Armstrong Co-Gen Facility would reduce the biomass fuel consumption of the facility resulting in wood waste disposal issues and potentially increased fire safety risk;

b) Possibility that external suppliers of biomass would lose business, as the Armstrong Co-Gen Facility, which historically consumed biomass from seven wood products facilities (three Tolko mills and four external mills), would preferentially curtail the external suppliers of biomass; and

c) Risk that the local economy would be impacted by direct and indirect job losses, loss of local economic benefits and loss of tax revenues for the communities as Tolko employs about 28 people directly related to its cogeneration facility.

In the absence of the NWE Extension Agreement, the key specific impacts to Atlantic Power and the local community would be as follows:

a) The NWE Williams Lake Facility would likely shut down and fuel supply contracts would have to be cancelled, which would leave the majority of the local mills with an immediate wood waste disposal issue, loss of revenue and potentially increased fire safety risk;

b) Risk that the local economy would be impacted by direct and indirect job losses, loss of local economic benefits and loss of tax revenues for the communities as Atlantic Power employs 30 people at its facility and supports 20 contracted trucking employees, all of whom would be terminated;

c) Risk that the region would lose about $8 million of annual revenue ( e.g., supplies, parts and contractor services);

d) Risk that the City of Williams Lake would likely lose its largest taxpayer revenue (approximately $2 million annually from taxes and water supply); and

e) The loss of the benefits outlined in the letters of support submitted by the Williams Lake & District Chamber of Commerce (Exhibit E-1) and the Mayor of the City of Williams Lake (Exhibit E-2).

58. The CEC submits that the issues of tax loss, local economy concerns, and wood disposal are not the primary drivers for cost-effective supply to the electric authority.

59. The CEC submits that local economy and tax issues are appropriately addressed by those affected when the supply of power to the utility is not needed or is not cost-effective.

60. The local government level must address tax revenues when industries are not economic and forestry industry parties must deal with wood waste disposal where certain industry options

are not economic.

{01076081;1}

- 11 -

61. While public interest issues may be evaluated broadly, their weighting should not make BC Hydro ratepayers responsible to the point of cost-ineffective and uneconomic supply.

62. The CEC submits that such public interest considerations and their corresponding solutions may be best addressed by the provincial government.

F. Recommendation

63. The CEC recommends that the Commission approve the proposed temporary extensions as filed by BC Hydro.

ALL OF WHICH IS RESPECTFULLY SUBMITTED

David Craig

David Craig, Consultant for the Commercial Energy Consumers Association of British Columbia

Christopher P. We~er; Counsel for the Commercial Energy Consumers Association of British Columbia

{01076081;1}

Documents

J B P J PO Box 49130 J...The CBC submits that this is particularly important given that recent energy and capacity acquisitions have, of necessity, had to rely on comparison of cost-effectiveness