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associated with the federal system or other explicit requirements 

 provided for in the Act. 



Second, if we use higher marginal prices to send a price signal, 

 we should ensure that all users see the signals, otherwise the in- 

 centive for efficiency will be diluted. This means a very careful 

 structure of what is included in each tier the second tier needs to 

 be broad enough to send clear signals. 



Third, we should be sure that, in using tiered rates to send this 

 stronger marginal price signal, that we do no set it so high that 

 it triggers excessive construction of new gas generation or abandon- 

 ment of regional conservation programs. 



We must also remember that market pricing itself is not a sub- 

 stitute for conservation programs. The conservation market is very 

 complex and there are many reasons for market failures. Higher 

 prices by themselves do not solve these marketplace problems. To 

 meet our conservation goals, customers must see both a price in- 

 centive to conserve, but also have access to effective conservation 

 programs. 



The notion of unbundling Bonneville's service can add consider- 

 able complexity to tiered-rate issues, but unbundling, we feel, is es- 

 sential to make tiered rates successful as a competitive tool. Bonne- 

 ville could unbundle a significant number of services, including 

 transmission shaping, capacity, interconnection, fish and wildlife 

 programs and conservation programs by sector. The more Bonne- 

 ville unbundles these programs and charges for these services, the 

 less it needs to charge for raw electricity. This clearly could mag- 

 nify Bonneville's competitive advantage as a commodity supplier. 

 But it also creates potential problems in ensuring compliance with 

 regional priorities, especially for conservation and instability and 

 revenues to support Bonneville programs. 



Our third and final point is that uncertainty costs us all. We be- 

 lieve that market forces have not fundamentally changed either the 

 benefits of regional coordination and planning or the regional value 

 or the resource priorities of the power plans. Whether tiered rates 

 and unbundling help us achieve these regional goals will depend on 

 large measure on how they are structured and implemented. It is 

 very possible to envision tiered-rate proposals that strongly support 

 regional priorities while allowing the benefits of competition to 

 emerge. It is also possible to envision proposals that destabilize 

 Bonneville much in the same way that Angus Duncan has de- 

 scribed and erode our ability to meet Power Act goals. We need a 

 specific proposal from Bonneville to allow all parties to begin to 

 analyze the true probable effect of tiered rates and unbundling. We 

 encourage them to provide this information as soon as possible. We 

 are concerned that speculation over the future of Bonneville prod- 

 ucts and services could lead to uncoordinated investments in new 

 gas-fired generation or in the failure to acquire conservation re- 

 sources. Either result would lead us away from the least-cost en- 

 ergy path envisioned by the Power Act. 



In summary, we would like to reiterate our support for Bonne- 

 ville's continuing efforts to improve efficiency and to streamline de- 

 livery of products and services. We have much to gain as a State 

 and a region in those efforts. We believe that Bonneville is and will 

 remain a competitive provider, and we will work with your commit- 



