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into bilateral contracts with BPA for service at cost-based rates. For example, a customer could 

 enter into a separate contract with BPA to buy power from a new resource or from a pool of new 

 resources that BPA would then acquire on its behalf The rate for power sold under such 

 contracts should reflect BPA's actual costs for the new resource or pool of new resources 

 involved. This will ensure that no cross-subsidization occurs between BPA sales of FBS power 

 and BPA sales of power from new resources. In turn, it will allow BPA's customers to compare 

 the true cost of new BPA-acquired resources with the cost of other resources that the customers 

 could acquire directly, thereby promoting least-cost resource decisions by both BPA and its 

 customers. Finally, this approach reinforces the BPA-customer partnership approach to acquiring 

 new resources, rather than giving BPA excessive control over new resource acquisition. 



PGP Recommendations are Consistent with Open Access Transmission and Increased 

 Competition in Bulk Power Markets 



At this point, I would like to look at the PGP's recommendations in the broader context of 

 changes that are taking place in the electric utility industry as a w^ole. As you know, the 

 National Energy Policy Act of 1992 contains a number of provisions designed to increase 

 competition and efficiency in bulk power supply markets. The PGP supports this nationwide 

 restructuring effort, including the move toward open access transmission and the entry of new 

 suppliers in bulk power markets. However, we have equal interest in maintaining and 

 maximizing the benefits already provided by the Pacific Northwest's existing base of federally- 

 owned hydroelectric resources. Further, we believe that it is extremely important to keep both 

 of these objectives in mind when considering the fundamental question about the responsibilities 

 of BPA and of other industry participants. 



The PGP supports the unbimdling of power supply and transmission services in the Pacific 

 Northwest. We believe that it is not only possible, but essential, that BPA continue to market 

 FBS power on a cost-of-service basis, w^ile it allows an open, competitive market for new 

 resources to develop in the Region. To the greatest extent possible, diis should involve a "hands- 

 ofF approach by BPA towards its customers' resource decisions. BPA will be needed to provide 

 both intra-regional and inter-regional transmission service, and BPA should be allowed to provide 

 other services at the request of customers willing to pay the actual cost of those services. In 

 short, we see the unbundling of BPA's services into FBS power marketing, transmission of 

 federal and nonfederal power, and supporting customer acquisition of new resources as being 

 fully consistent with the federal government's restructuring program for the U.S. electric industry. 



PGP Recommendations will Make BPA More Efficient and Qarifv BPA-Customer Relationships 



The PGP's recommendations also provide a simple, straightforward basis for making BPA more 

 efficient as well as more responsive to the needs of its customers and the Region as a \^ole. 



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