82 



whatever else here — actually, the value of that outside of their 

 package would be priced marginally higher in case someone is just 

 choosing that service? 



Mr, Hardy. Right. If you had a product that involved substantial 

 shaping or load factoring component, it is going to be a generating 

 utility or a potential generator that is going to be interested in that 

 product, as opposed to right now where storage shaping and load 

 factoring are all kind of rolled into the priority firm rate. It is all 

 melded in and without much regard to who gets what. We can 

 price that more differentially. My hope is that, for a significant 

 number of those products, we can price them differentially and col- 

 lect more revenue overall for those products. They will also provide 

 higher value. Some utilities will want heavy load hour energy in 

 particular times of the day. Seattle and Tacoma have big sustained 

 peak problems in the middle of the day. That is what they are in- 

 terested in. Other utilities are more interested in needle peaks and 

 the capacity to cover those kinds of swings. Irrigation utilities are 

 interested in energy that might meet the irrigation load shape. We 

 will try to provide a different mix of products that both collects 

 more revenue and actually is of higher value to that customer, par- 

 ticularly in the case of the generating utilities. It allows them to 

 combine that with their own generation to make a third-party sale 

 even though they are in California or somewhere else. So even 

 though they are paying more for the product they are getting from 

 us, they are able to mark it up and make up from a third-party 

 sale. Those are some of the kinds of examples. 



Mr. DeFazio. Sure. But this is all new ground. 



Mr. Hardy. Absolutely. 



Mr. DeFazio. If I could, Randy, maybe just to shape your re- 

 marks a little bit more. We have two-year rates and it is a very 

 ponderous process. I am concerned that if we go to unbundling and 

 we unbundle a whole sector of services, that we have to build in 

 some capability of constant or more short-term adjustments be- 

 cause we are not going to fully understand the implications of these 

 things when we first put them out. 



Mr. Hardy. It is probably true that one of the major challenges 

 we will have is meshing this kind of a process which requires near- 

 term response to market signals with the Regional Act, 7-1 rate 

 process, which is around a year and a half exercise this is going 

 to present us with some unique challenges. Frankly am not sure 

 how we resolve those. That is one of many issues. Believe me, we 

 are essentially in the realm of speculation here because those are 

 the very kinds of issues we are grappling with. The point I would 

 like to m£ike is, our objective here is in the aggregate really two- 

 fold. One, I think we will end up providing more value to individual 

 utilities rather than the one-size-fits-all kind of product that we 

 have now. Secondly, we will get the revenue recovery — a high reve- 

 nue recovery — ^because we £ire providing that to more niche mar- 

 kets than a broad market. It will help do two things. It will keep 

 rates overgdl lower, or the revenue requirement overall lower, and 

 it will help support fish and wildlife obligations and the other re- 

 gional obligations that we have. The alternative is to keep loading 

 everything in the priority firm rate, look at a succession of double- 

 digit rate increases, £ind we are in even worse shape relative to our 



