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Mr. DeFazio. Just one other thing. Correspondence that I saw 

 that had gone to you — or I think I saw a report in the press about 

 it. I cannot remember where. I think I saw the actual correspond- 

 ence. At our last hearing in Portland, you had just before that en- 

 tered into the contract with Emerald Public Utility District, who 

 we will hear from a little bit later, for the conservation power 

 plant. Then, I think subsequently, not too long after that, you get 

 a letter from the DSIs urging you not to enter into any more of 

 these agreements. Have you responded to them? 



Mr. Hardy. I responded verbally, and I have told them that I am 

 not going to accept their advice. 



Mr. DeFazio. Thank you. 



Mr. Hardy. I would like to explain that however. 



Mr. DeFazio. Okay. 



Mr. Hardy. The Emerald Public Utility District contract, as well 

 as the signing other agreements we are going to sign — in fact we 

 are one next week with the Washington Conservation and Renew- 

 able Energy System (CARES) utilities, which is made up of the six 

 or seven public utilities in Washington State which has formed its 

 own joint operating agency to do a conservation power plant sort 

 of deal — all have off-ramps. So 2 years from now, if in fact we find 

 it necessary to lower the incentives or change the incentive struc- 

 ture in very fundamental ways because we have put in tiered rates, 

 we will change those contracts. And those utilities then have an 

 off-ramp if they do not think that is a good enough deal. So, I have 

 done my best in protecting against commitments that go on for 7 

 or 8 years when the marketplace changes around us. Each of those 

 contracts has off-ramps. That is what we have negotiated with and 

 we will have to see whether people choose to exercise those or not. 

 I think that protects against the kind of concern that the direct 

 service industries were worried about, but still has us moving for- 

 ward with innovative conservation programs in the meantime at 

 the lowest cost. 



Mr. DeFazio. Right. I do not want to revisit that hearing, but, 

 as you remember, at the time, the opinion that I expressed — and 

 I think it would be a majority opinion in the Northwest delega- 

 tion — ^would be that we are not going to get to the point where we 

 do all of our conservation renewables and implementation of those 

 mandates under the Act just through the market-pricing mecha- 

 nism and message. There will be some residual continuing obliga- 

 tion on the part of BPA to provide some services, more direct serv- 

 ices and incentives in those directions. 



Mr. Hardy. I understand that and that is what we are trjang to 

 sort out in this kind of environment. I think with tiered rates, or 

 some form of that and some change in our program incentives, we 

 can do both. I do not know that for a certainty, but I am dedicated 

 to trying to get to that result. 



Mr. DeFazio. Right. And the other concern was that we do not 

 do nothing in the anticipation of tiered rates. 



Mr. Hardy. We are not doing nothing, Mr. Chairman. We are 

 going ahead. As a result of that previous hearing, you will see sev- 

 eral contracts signed to that effect, both with Energy Service Com- 

 panies and with Conservation and Renewable Energy Systems 

 (CARES) and others in the next 30 days. 



