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WSEO is currently participating in long term sales contract discussions and intends to continue 

 doing so. In our view, the provisions of these contracts should ensure that the goals of the 

 Power Act are met by long term customers of BPA. 



11. It has been suggested that the residential exchange program rewards less efficient utilities. 

 Are revisions to the exchange agreements necessary? If so, what changes would you 

 suggest? 



The residential exchange was a vital compromise in the passage of the Northwest Power Act. 

 The exchange was invented to settle on-going litigation over who BPA's customers were. Public 

 utilities agreed to the exchange to get Congressional support necessary to pass the act However, 

 the publics felt strongly that their rates should not rise as a consequence of the exchange. The 

 theory was that the Direct Service Industries would pay for the cost of this arrangement in 

 exchange for long term power sales contracts. The theory changed in 1985 to make the DSI 

 rates and industrial rates of customers of BPA similar. It is becoming harder and harder to 

 estimate who is bearing the cost of the exchange. It is clearly placing significant pressure on the 

 PF rate paid by public customers of BPA. 



The issue raised is whether the exchange rewards less efficient resource acquisition. In our 

 view, while the exchange could, in theory, reward inefficiency, BPA and utility regulators have 

 adequate tools to ensure efficiency, such as audits and prudency reviews. 



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