54 



Quality of service, however, has also declined in the eyes of most, and, for many, fares have 

 gone up. 



It is not yet clear how BonnevUle and other utilities will respond to restructuring 

 forces. One model of competition suggests that electricity is fundamentally a commodity, 

 and competition will ultimately be on the basis of price alone. If that is the model that 

 characterizes the Northwest utility response to competitive pressures, it bodes ill for the 

 goals of the Power Act. The fundamental issue is that utility concerns about stranded 

 investment and short-term price competition discourage investment in the long term least- 

 cost future envisioned by the Power Act. The lowest price does not necessarily ensure that 

 the product is the best value for society. 



There are, however, other ways in which Bonneville and the region's utilities can 

 choose to be competitive. If they choose to compete on the basis of delivering the best value 

 for the dollar ~ the lowest energy cost to satisfy an end use as opposed to the lowest 

 electricity price, the goals of the Act stand a much better chance of being achieved. The 

 utilities' growing expertise in demand-side management and the promise of new control 

 technologies that will f)ermit utilities to provide their customers with more choices and 

 greater value gives them a new area of potential competitive advantage. The key is the 

 concept of "value," which does embrace the long-term societal goals of the Power Act. 



The challenge facing Bonneville, the utilities, their customers, state regulators, the 

 Council and Congress is not to stop the changes taking place in this industry. That would be 

 futile. It is. instead, to try to guide or manage that change so the region achieves both the 

 benefits that these changes can bring and the broader goals embodied in the Power Act. The 

 Council's planning pix>cess and its plan can be important tools for managing that change. 



The Council is analyzing the forces of change in this industry and seeking 

 opportunities to guide that change. At our August meeting, we participated in a spirited 

 debate with proponents of different modeb of utility restructuring. Our staff is preparing an 

 issue paper that will critically examine the forces affecting the structure of the industry; the 

 consequences of not being competitive at both the wholesale and retail levels; and the 

 available policy alternatives. We are consulting with knowledgeable persons both inside and 

 outside the region. We are participating in Bonneville's function-by-function review, which 

 is one facet of the agency's competitiveness project, and we are working with Bonneville to 

 help streamline the delivery of conservation services. We will keep this committee informed 

 as our woric progresses. 



Bonneville's Competitiveness Project 



In response to your question regarding Bonneville's competitiveness project, let me 

 first say that the Council believes Bonneville is now, and can continue to be, a competitively 



