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Act (PURPA), deregulation of the natural gas industry, repeal of the Power Plant and Industrial 

 Fuel Use Act, passage of the National Energy Policy Act (1992), and inexpensive and abundant 

 natural gas, utilities and large industries have begun to look beyond BPA to other sources 

 including independent power generation projects to meet their growing power demands. With 

 the need for salmon protection, the potential for accelerated federal debt repayment, and 

 requirements for increased transmission access, some industries and utilities doubt that BPA can 

 remain a low cost provider of basic power services. 



Competition is keener in today's electric power industry. Because of extremely low natural gas 

 prices, technological improvements in gas turbine design, and federal regulatory changes dating 

 from the late 1970s, the market for new generation is increasingly dominated by independent, 

 non-utility power producers. This is likely to continue so long as natural gas power plants have 

 low capital cost, are perceived to be low risk, and are easy to site. As a result, utilities with high 

 retail rates driven by excess capacity in transmission, distribution, and expensive coal and 

 nuclear plants are put in the most severe competitive disadvantage. It puts systems with 

 relatively low retail rates and fully utilized transmission and generation in strong positions. 



Moreover, this increased competition can lead to a fundamental disconnect between our planning 

 process and our ability to implement those plans. The unique nature of our hydro system has led 

 us to develop the most elaborate planning models in the world to ensure that the benefits of the 

 system are maximized and that new resources have the lowest long term costs and environmental 

 consequences. But if decentralization in the market presents an obstacle to implementing those 

 plans, how do we retain the advantages of long range planning and a fast acting marketplace? 



O-R2-02W 



