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4. How should the costs of environmental externalities, induing the costs of restoring 

 endangered fish and other species, be distributed in tiered rates and/or unbundled 

 services? What must BPA do to ensure that competitiveness efforts such as tiered rates 

 and unbundling do not diminish its commitment to statutory requirements such as the 

 protection offish and wildlife? 



The costs of protecting endangered fish and other species should primarily be included in the 

 price of first tier resources. These costs are clearly related to the availability of inexpensive 

 federal base resources. It is also true that changes in river operations can increase the 

 availability of non-firm resources and decrease BPA's ability to shape power or meet capacity 

 requirements. Both of these costs would tend to be reflected in higher costs for unbundled 

 services. 



Other non-market environmental costs are associated with resource acquisition. BPA made 

 some provision for offsetting future carbon emissions from the Tenaska II plant. Private utilities 

 in the Pacific Northwest typically consider such externalities in their integrated resource plans. 

 They have a choice of assuming surrogate values for future regulations or market measiu'es or 

 assuming the risk of disallowance of expenditiu^s or non-operation of a facility. BPA could 

 condition access to first tier resources on completion of integrated resource plans that consider 

 long term costs including externalities. 



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