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5. Should the variable rate for the Direct Service Industries (DSIs) be eliminated or 



modified? Please provide an estimate of the cost and/or benefit to regional rate payers of 

 continuing to provide this variable rate. 



The Pacific Northwest hydro system has comparatively little storage; it is dominated by lun-of- 

 the-river projects that must provide flows to meet a variety of water quality, fish and wildlife, 

 irrigation, flood control, recreation, and river transportation requirements. During the last 

 decade surplus, variable rates for direct service industries provided clear value to the region's 

 ratepayers, to BPA, and to flsh and wildlife programs because we were able to sell power that 

 would otherwise have no maricet. As we move toward deficit, this value is in question and DSI 

 rates, in our view, are appropriately being revisited. The fundamental river conditions, however, 

 have not changed. It is quite possible to imagine relatively low rates for DSIs, based on the 

 reserves they provide the system and the constant load and revenues they provide BPA during 

 periods of time when water must be released for fish, recreation, water quality, flood control, 

 and other non-power reasons. 



As a point of departure, new long term sales contracts with the DSIs ought to be based today on 

 their value to the power system. Because these loads have very unusual characteristics, it is our 

 expectation that DSI contracts will reflect a fully-unbundled cost-based approach. It may be 

 possible to have contracts that incorporate these power system values and are sensitive to the 

 price of aluminum in the world market. Such an approach is possible regardless of the steps 

 BPA might take with other customers. 



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