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effect will be to encourage independent development of less environmentally sound 

 resources. Care must be taken to maintain a level playing field. 



For the Council, the objective of a tiered wholesale rate structure would be to provide 

 a rate signal that would encourage utilities to undertake conservation and other resource 

 development on their own where they can do so more cost-effectively than Bonneville. The 

 Council has supported the concept of tiered wholesale rates for some time. The 1991 Power 

 Plan specifically asks Bonneville to implement tiered rates if billing credits and Bonneville 

 programs are not sufficient to achieve the plan's conservation targets. While Bonneville 

 appears to be on track with the conservation targets, billing credits have not figured 

 significantly in achieving those targets. 



The logic of providing a marginal price signal to encourage utility development of 

 new resources, particularly conservation, remains attractive. A reliable tiered rate would 

 minimize most utility concerns about lost revenues from conservation. Individual utilities or 

 utility consortia, such as Washington's CARES, can borrow money at a lower cost than 

 Bonneville. And, there is reason to believe that at least some efficiency improvements can 

 be secured more efficiently by utUiries than through Bonneville programs. Some believe that 

 a tiered rate structure would be an incentive to Bonneville to be more efficient in its resource 

 development. 



However, depending on how they are designed, tiered rates could result in a very 

 different allocation of the costs and risks of new resource development than is currently the 

 case. In today's Bonneville system, for example, resource development costs and risks are 

 spread throughout the region, even to those who are not growing. If , however, tiered rates 

 are designed based solely on an allocation of the federal base system that is not adjusted to 

 reflect load growth, utilities that require new resources will be faced with the full cost of 

 those resources, whether they acquire them on their own or from Bonneville at the upper tier 

 rate, while those who are not growing wiU see no rate impact. If utilities develop the 

 resource themselves, they bear the risks but also stand to get the rewards of good 

 management. The growing utilities are not limited to one type or area. They are both big 

 and small. Many are located in the 1-5 corridor, but many are also located in other parts of 

 the region. 



There are, however, other ways to design a tiered rate that would lead to a somewhat 

 different allocation of costs and benefits. If, for example, the size of the first tier is allowed 

 to grow in some proportion to a utility's growth, the effect will be to put the costs of some 

 new resources in the first tier, causing the fust tier rate to rise. This will result in some 

 degree of sharing of the costs of new resource development around the region at the expense 

 of diluting the economic signal for resource development. 



