165 



included in that priority firm rate, that rate we pay for our whole- 

 sale power. The major service I think we get is load following. 

 Loads at night are much lower than they are in the day time dur- 

 ing peak hours, and as a full-requirements customer, you do not 

 have to worry about that. Bonneville takes care of it for you. There 

 would be serious economic disadvantages that would flow to full- 

 requirements customers if somehow we had to start paying for 

 that. For 50 years it has been in our rate. I think it needs to con- 

 tinue to be in our rate. There needs to be a set of services that 

 have historically been provided for full-requirements customers 

 that remains imbedded in the priority firm rate for full-require- 

 ments customers. 



Chairman DeFazio, I believe those comments address your ques- 

 tion to the first panel on how unbundling would effect smaller utili- 

 ties. Most of our utilities are a smaller size. 



How should environmental externalities be distributed in tiered 

 rates and/or unbundled services? Our view is that the rates for 

 these unbundled services, be they bundled or unbundled, and rates 

 for tiered rates or average system cost rates as they are now, those 

 rates need to be determined based on a cost of service. Our main 

 fear under an unbundled scenario is that Bonneville will price 

 these unbundled services at a level that the market will bear. And 

 Bonneville is not an investor-owned utility. Bonneville is a public 

 agency, and they have some public policy concerns that they have 

 to address. I think the major policy concern in unbundled services 

 and in tiered rates are rates based on cost. 



A cost of service study — I am using that term generically — on 

 these unbundled services and tiered rates needs to capture those 

 costs in the agency and apply them to the resource that generates 

 those costs. Fish and wildlife needs to be applied to the 

 hydrosystem. Transmission costs need to be provided — or applied to 

 transmission system rates. That is what I am referring to. 



Should the variable rate for the direct service industries be elimi- 

 nated? I believe current economic circumstances in the Northwest, 

 including load resource balance, the variable rate for the DSI is no 

 longer appropriate. Up until, I think, the second quarter of Bonne- 

 ville's fiscal year 1993, there were still some positive benefits to all 

 those non-aluminum smelter customers of Bonneville in that the 

 estimate was that a variable rate brought in more revenues than 

 otherwise would have happened. In the last 2 years, that has been 

 declining rapidly, and I would suspect by the end of Bonneville's 

 fiscal year, that we will be worse ofT because of the variable rate. 



On the value of reserves for the direct service industries, we be- 

 lieve there is no value for reserve on the second quartile. The value 

 for reserve on the first quartile, the calculation on that — I am not 

 familiar enough with it on how the calculation is done, but I am 

 aware that it has not been updated in some time. We believe the 

 value of the reserves should be no more than $20 million a year. 



Since my orange light is on, I am going to skip comments on irri- 

 gation discount. We do support the irrigation discount. Don 

 Clayhold will give you a very full analysis of the irrigation discount 

 I am sure in his testimony. 



Our group also supports the low-density discount. The low-den- 

 sity discount is in the Act, It is part of a law. And it is there be- 



