58 



These trade-offs need to be thoroughly explored as the region examines the tiered rate 

 concept. Depending on the circumstances of a utility, a tiered rate design or, for that matter, 

 the current flat rate design, may be considered equitable by one and inequitable by another. 

 The Council is participating in Bonneville's process to develop a tiered rate. Our objective in 

 that process is a tiered rate structure or some other mechanism that is as equitable as possible 

 to all and that provides a clear signal for the development of efficient resources consistent 

 with the Act and the Council's plan. 



Ahhough tiered rates will provide an incentive for utility resource development, the 

 Council believes there will still be a need for Bonneville to be an effective resource provider. 

 There will still be many utilities that will have to rely on Bonneville programs for 

 conservation and new generating resources. Moreover, there are some activities that really 

 need to take place at a regional level. These include facilitating utility consortia to develop 

 conservation in chains and franchises; market transformation activities such as manufacturer 

 incentives for efficient equipment and products; and provision of support activities and 

 research, development and demonstration that will be essential if Bonneville's customers are 

 going to continue to be competitive. 



The Value of Reserves Provided by the Direct Service Industries 



The regional power system needs reserve power so that it can meet loads under 

 adverse conditions. TypicaUy, reserves have been thought of in terms of energy to meet 

 needs under low water conditions or in the event of outage of generating plants. More 

 recently, as the hydroelectric system has become more constrained, concerns have also arisen 

 about the capacity of the system to meet peak loads and the need for peak reserves. The 

 direct service industries have provided reserves through the ability to restrict portions of their 

 load under certain conditions. 



The questions the region must now confront are how much and what kind of reserves 

 does the region need, what is the value of those reserves, and what is the most efficient way 

 to provide them? It has been some time since these questions have been examined. They 

 should be answered in the context of the power sales contracts renegotiations. A technical 

 group has been formed to analyze these questions. Council staff is participating in that 

 group. When the woric group has completed its work, there will be important policy 

 decisions to be made. 



Obviously, discussion of the value of reserves and how they are best provided cannot 

 be divorced from the question of the future of the aluminum industry in the region. Choices 

 could be made that some contend would result in the immediate shut-down of the industry. 

 This would have adverse impacts for industry and the power system. At the other extreme, 

 however, trying to perpetuate the status quo may be both expensive and fiitUe in the long run. 

 The aluminum industiy will undoubtedly be affected by forces outside the control of this 



