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priced wholesale power provider. Council staff compared the cost of power from new 

 resources with forecasts of Bonneville's wholesale rates under the current flat rate structure. 

 Using our mid-range growth projections, purchasing power from Bonneville will cost utilities 

 less than building and operating their own resources. Only under "worst case' assumptions 

 of unexpected costs to Bonneville, including fish and wildlife costs and continued low gas 

 prices, is BonneviUe in danger of losing its price advantage. 



It is also important to remember that Bonneville's rates cover a great deal more than 

 just the cost of energy at the busbar. With that single rate, Bonneville's customers receive 

 reserves, transmission, load shaping and, importantly, risk sharing. These are services that 

 would cost them extra were these customers to buy them from an independent power 

 producer. 



It may. however, take more than low power prices for Bonneville to be competitive in 

 the future. As we indicated earlier, adding value on the customer's side of the meter should 

 be a significant part of a competitive utility's repertoire. The experience of Bonneville and 

 its customers in developing conservation should give them a competitive edge. And 

 Bonneville has a clear competitive advantage as a broker of transmission services. However, 

 conditions under which Bonneville would not be competitive are possible. Bonneville's 

 competitiveness project is an entirely appropriate effort to identify how the agency should 

 restructure itself to respond to the forces affecting the industry as a whole. 



We think Bonneville is looking at the right things. Through the fimction-by-function 

 review, it is examining how it can better manage costs. In its marketing plan, Bonneville is 

 frying to better understand its customers and their needs. It is trying to define a mix of 

 products and services to meet those customer needs. If that is what Bonneville means by 

 being more like a business, the Council is supportive. 



Bonneville must remember, however, that it is not Just a business. As we noted 

 above, utilities can choose to respond to the competitive challenge in ways that facilitate 

 achieving the goals of the Power Act or in ways that do not. The goals of the Power Act 

 address more than short-term pnices. The choices Bonneville makes in its competitiveness 

 project must support not only its need to be competitive but also its broader responsibilities. 

 Up to this point, we would have to say that Bonneville's marketing analysis has not been 

 open to review and input from the Council and others. We understand that will change in the 

 near future. We look forward to working with Bonneville on the important policy issues 

 embedded in their market analysis. 



Unbundling Services 



Bonneville's current service to its public utility customers bundles a lot of "products" 

 together and charges one rate for them. 'These products include not only energy, but also 



