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and basis for making cost-effective resource decisions. 



PGP Recommends Use of Revenue from FBS Power Sales for Tkmsitional Funding of 

 Conservation 



Over die long-term, the PGP believes that setting BPA's rates for its services at the actual cost 

 for each service will help its customers make cost-effective resource decisions while also keeping 

 BPA focused on the services it is best able to provide. However, we recommend making one 

 exception to this general approach. Specifically, the PGP recommends that for some transition 

 period, funding for BPA customer acquisition of conservation should continue to be supported 

 by revenues from die sale of FBS power. 



This recommendation is based on the recognition that conservation is the Region's top-priority 

 resource and that we must not allow the shift to a new BPA rate structure to disrupt the Region's 

 acquisition of all cost-effective conservation. BPA's customers have made extensive 

 commitments to this goal with the understanding that regional funding would be available to 

 support their efforts. Thus, the PGP would not want a sudden end to regionalized funding for 

 conservation to interfere with continued customer acquisition of regionally cost-effective 

 conservation. 



Instead, by continuing to provide regionalized funding for conservation until a new cost-based 

 BPA rate structure is implemented and working effectively, BPA customers will be able to make 

 a smoother transition to other funding mechanisms for conservation. Further, we diink it makes 

 sense to use revenues from FBS power sales to provide this transitional fimding for conservation, 

 in part because the resulting energy savings will serve to 'stretch' the capability of the FBS 

 resources. 



PGP Recommends a More Limited BPA Role in New Generating Resources 



In contrast to conservation, the PGP believes that there is not a great need for transitional 

 regionalized funding of new generating resources. As noted earlier, a vigorous nonutility 

 generating sector already exists and is prepared to meet the Region's need for new generating 

 resources. Because this market is available as an alternative to BPA acquisition of new 

 generating resources, customers already face the price signals needed to make cost-effective 

 resource decisions. Thus, with a cost-based BPA rate structure, we do not see a significant need 

 for BPA to provide funding support for new generating resources either to its customers or to 

 itself in the form of cross-subsidies between FBS resources and new resources. 



Further, PGP recommends that BPA acquire new generating resources only to the extent that 

 specific customers formally request it to do so, and only to the extent that those customers enter 



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