73 



kilowatt-hours into useful services. By unbundling these services, BPA would provide 

 customers with a range of services from which to choose. Customers who prefer to remain 

 entirely dependent on BPA could buy all these services individually or as a package. Customers 

 who choose to develop some of their own resoiu'ces could buy fewer services. 



The interactions between tiered rates and unbundling are likely to be complex. For example, 

 since many BPA costs involve fixed capital performing many functions, any cost allocation for 

 unbundling could be seen as arbitrary. Moreover, the fixed assets would need to be allocated 

 under tiered rate principles - which largely associate the assets of the system with preference 

 customers - and unbundling - which is primarily based on cost. In other industries such as 

 telecommunications, where there is a high level of fixed costs, the debate over unbundling has 

 proven lengthy and contentious. Nevertheless, we believe that BPA will face difficulties if it 

 elects tiered rates without comprehensive unbundling. 



BPA might consider unbundling certain fixed, statutory obligations - such as fish and wildlife 

 programs and the low density discount - and charge a proportionate share on an annual basis to 

 all customers who buy any service from BPA. This could help ensure that regional costs are 

 borne regionwide. 



Finally, we believe that stability in this environment is important but very difficult to achieve. 

 BPA needs to ensure that it recovers its costs and customers need to be able to make decisions on 

 relatively stable prices. These may be competing objectives in a continually changing market 

 environment. However, successful implementation of long term regional plans cannot occur in 

 an environment of rapidly changing prices and services. 



aR2-02W 



