Question-and-Answer Session
Operator
[Operator Instructions]
Your first question comes from the line of Rajeev Lalwani from JP Morgan.
Rajeev Lalwani - JP Morgan
Hi, just two quick questions. One: Can you talk about what’s going out with the generation asset and whether or not there’s going to be change in the accounting, if you’re going to be shortening lives and writing up assets again? And then two: Can you tell us what you’re expecting your average fuel rate to be in 2008 that’s comparable to the $0.029?
James S. Pignatelli
In answer to the second question, I don’t have that number, Rajeev. In answer to the first question, could you repeat it? It had to do with the accounting on the generation?
Rajeev Lalwani - JP Morgan
Yes, because I remember years ago, I think you extended the lives of the generation assets, that you brought down the, I guess, in depreciation. And then now that’s in contemplated and like reversing it.
James S. Pignatelli
Correct. The depreciation lives, they’re going to be established in the actual settlement, or approved in the settlement, are approximately the lives we have now. However, the depreciation lives on a go-forward basis will reflect cost of removal in them and there will be some depreciation in the expense in the current settlement coming up to that 6% which reflect some of that cost of removal, bringing reserves up to a current basis.
I don’t have the actual depreciation lives and adjustments which will be made on the going-forward basis but as soon as the settlement agreement is made, that’s one element that will come out in the 8-K.
Rajeev Lalwani - JP Morgan
Okay. Do you have a general order of magnitude if it’s a couple million dollars?
James S. Pignatelli
I don’t have it at this time.
Rajeev Lalwani - JP Morgan
Okay, thank you.
Operator
Your next question comes from the line of Brian J. Russo from Ladenburg Thalmann.
Brian J. Russo - Ladenburg Thalmann
Hi, guys.
James S. Pignatelli
Hi, Brian. How’re you doing?
Brian J. Russo - Ladenburg Thalmann
Good. How are you?
James S. Pignatelli
Fine. Thank you.
Brian J. Russo - Ladenburg Thalmann
Just real quickly, the $18 million of higher coal cost that you expected in 2008, how much of that was incurred in the first quarter?
James S. Pignatelli
My recollection was about $5-6 million of it. Our coal costs were about $5-6 million. Our quarter to quarter comparison, but it had to do with the mix of the coal plants we were running. Springerville, as I indicated, we had an outage there and that is one of the more efficient coal plants. We ran [sun 4] at almost 98% during the first quarter of availability factor and that is one of the more expensive coal plants. And then also, some of the San Juan expenses. So, we still believe that the $18 million in year over year coal costs, if we operate at 87% availability factor for the coal fleet, that it’s still in the $18 million range and $5-6 of it was incurred in the first quarter.
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