115 



Explanation of PPC's Principles for Tiered Rates 



(Draft of September 6, 1993) 



These notes arc provided as a discussion of PPC's "Principles for Tiered Rates". The 

 principles were developed to provide a simple framework for the evaluation of tiered rates 

 alternatives, with this explanation providing more information. We expect that this list will be 

 modified as we move through the tiered rates process. Therefore, this should be seen as a working 

 document. 



1. Implementation of tiered rates must be accomplished within the structure of 

 existing statutes. 



PPC does not wish to open a legislative "can of worms" in order to implement tiered rates. 

 If tiered rates are to be implemented, it must be within the existing legislative authority. 



2. Tiered rates require new BPA Power Sales and Residential Exchange 

 Contracts. 



Tiered rates should not be adopted under the current contracts. The anticipated change in 

 the relationship between BPA and its customers that will come as a result of tiered rates will be so 

 sweeping as to require new contracts. BPA's customers cannot respond effectively to tiered rates 

 with the existing contracts, nor can the existing contracts be simply amended. Residential and 

 |small farm customers of investor-owned utilities must not be any better off than they are currently 

 WB oivo any additional r e oidcntial a n a hang e b a n e fito as a result of a move to tiered rates. 



3 . Ail a xisting FBS and contracted resources are subject to public preference, 

 including those that yield unbundled products and services, those used to 

 malce sales to the DSIs, and nonfirm energy. 



A public utility's right to preference power exists with or without a tiered rates structure. 

 This has regional and nadcmal iiiq)lications. One of the key tests we will use in judging the 

 acceptability of tiered rates is that public power's fust right to federal resources is preserved. 

 Thus, when we discuss allocations of the federal resources to customers other than publicly-owned 

 utilities, we must analyze whether this constitutes a transfer of preference rights. Such a transfer 

 cannot be allowed to occur. Initially, public preference applies to existing f^ral base system 

 resources as defmed in the Northwest Power Act. We are also assuming that the word existing 

 implies that federal base system resources, identified in the Act but not in operation, will not be 

 "replaced" with other resources. A (question remains regarding future resources that BPA mi^t 

 acquire upon the specific request of mdividual customers or customer groups: how would public 

 preference ^ly to these resources? Would the implication of public preference differ from the 

 case of existing FBS and contracted resources? Inese questions mean that the introduction of 

 tiered rates will require a careful re-examination of both the concept and the specific apfdicaticms of 

 "public preference . (The PPC legal committee is addressing this issue.) 



ATTACHMENT 1 

 PPC Testimony before the 

 Committee on Natural Resources 

 BPA Task Ftwoe (Page 2 of 5) 



