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cooperation among BPA and the region's utilities is accented by the 

 fact that BPA owns most of the major transmission facihties in the 

 region and the utiHties in the region rely heavily on that trans- 

 mission to integrate their loads and resources. 



In order to be most efficient and cost effective, BPA must have 

 a clearly defined appropriate role. In other words, BPA should do 

 what it does at least-cost and not do what others can do as well 

 or better perhaps at a lower cost than Bonneville could. For exam- 

 ple, the risks of investing in conservation and the small generating 

 projects envisioned for the region can be assumed by individued 

 utilities or groups of utilities. As BPA recognized in its written 

 statement to this task force, greater benefits will accrue to the re- 

 gion where BPA's customers can expand the supply of valuable 

 services or provide the services at lower cost or more efficiently 

 than BPA. 



In any event, they should continue to assist regional utilities in 

 transmission and other activities for which BPA and its resources 

 are uniquely suited. This includes exploring a wide range of options 

 for increasing opportunities for regional utilities to participate in 

 things like transmission projects. A good example of this approach 

 is BPA's offering of non-federal participation in the Third AC line 

 of the Pacific Northwest-Pacific Southwest Intertie. 



We believe that tiered BPA power rates represent a promising 

 and challenging prospect. Properly designed tiered rates for BPA 

 firm wholesale power sales that reflect the cost of developing new 

 resources can encourage conservation and help ensure that BPA 

 and BPA's customers receive appropriate price signals. If BPA's 

 rates for additional power sales are based on the cost of providing 

 that power, BPA will not be faced with meeting demand for its 

 power stimulated by rates that mask the cost associated with new 

 resources. 



However, there are many issues that remain and you have heard 

 a number of those expressed already that have to be resolved with 

 respect to the design and implementation of tiered BPA rates. The 

 promise is there, and we are confident that BPA working with its 

 customers and other interest groups exploring these issues will 

 come up with a reasonable solution. 



BPA's services should be made available on an unbundled basis 

 at cost-based rates, and I emphasis cost-based rates. BPA has ap- 

 propriately recognized that it should provide unbundled services 

 tailored to its customers' needs. Unbundled services should pro- 

 mote efficient BPA operations and help ensure that BPA's cus- 

 tomers pay for only those BPA services that they need and use. 



Unbundling of BPA's services should emphasize separately pric- 

 ing those services for which BPA has incurred or incurs material 

 and direct operating or capital cost to provide. This does not re- 

 quire subdividing BPA's services into every identifiable element 

 which would be difficult and costly to administer and unnecessarily 

 complex. 



The rates for BPA's firm power and other services must be cost- 

 based in order to avoid cross-subsidization of one customer class by 

 another. Such cross-subsidies are unfair. They also send erroneous 

 price signals that promote inefficient outcomes. Unbundling should 

 not be seen or used by BPA as a vehicle for charging what the mar- 



