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D. Tiered BPA Power Rates Is a Promising and 

 Challenging Prospect 



Properly designed tiered rates for BPA firm wholesale 

 power sales that reflect the costs of developing new resources 

 can play a significant role in encouraging conservation and 

 ensuring 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's customers 

 will have an economic choice among conservation, purchasing 

 BPA power or acquiring power elsewhere — and BPA will not be 

 faced with meeting demand for its power stimulated by rates 

 that mask the costs associated with new resources. Tiered BPA 

 firm wholesale power rates can and should provide an incentive 

 for conservation. 



However, there are many issues that remain to be resolved 

 with respect to the design and implementation of tiered BPA 

 rates.* The promise is there, and we are confident that BPA 



'*It should be noted that tiered rates for BPA's firm power sales to 

 its customers need not be particularly complicated. (It is for example not 

 necessary to allocate particular resources to particular rate tiers.) 

 Amounts of power sold at the "first tier" rate to any public utility could 

 be established based on its historical period usage, and that utility could 

 be permitted to purchase that amount of power at the tier 1 rate to the 

 extent such power is needed to meet its previously existing firm retail 

 load. The first-tier amount and rate design would have to be established 

 and fixed by contract to provide sufficient assurance that a BPA customer's 

 investments in response to tiered rate signals or incentives would not be 

 wasted. In any tiered rate proposal, the cost of the federal hydroelectric 

 generating resources would include the cost of fish and wildlife measures 

 associated with those resources; accordingly, tiered rates should not 

 diminish BPA's ability to protect fish and wildlife. 



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