170 



cause the idea of tiered rates to fail, no matter how much merit there is in 

 the idea. 



3. Bonneville is considering unbundling the services it provides such as 

 transmission, storage, load-shaping and integration services. What are 

 the potential benefits and drawbacks of unbundling? If Bonneville 

 pursues unbundling, what services should be unbundled and how 

 should the price for these services be calculated? Are there some 

 Bonneville services that cannot be unbundled? 



Are you aware of any examples in either the public or private sectors 

 of unbundled wholesale power services? 



Unbundling at present is an undefined term. The degree of unbundling 

 and its effect on requirements customers' competitiveness is of great 

 concern. Obviously, if unbundling provides Bonneville additional revenue 

 without seriously impacting the overall costs for power used by Bonneville's 

 "core" customers, we will support the concept. On the other hand, if 

 unbundling leads Bonneville away from cost based rates and the "postage 

 stamp" rate concept, we will be harmed and the region will suffer. 



The small and medium sized requirements customers are Bonneville's 

 core business. Their ability to compete is the ultimate test of the current 

 efforts to make Bonneville competitive. Increasing the rate disparity between 

 these utilities and their larger more integrated neighbors is not in Bonneville's 

 or the region's interest. 



One of the problems for all small and medium sized requirements 

 customers is their isolated service areas. Bonneville, through its extensive 

 transmission grid and interconnections with the region's larger integrated 

 systems, is a key partner in making these customers a complete "integrated" 

 utility competitive with the larger integrated systems in serving the needs of 

 their customers. When a new customer of Pacific Power in Eastern Oregon 

 asks for service. Pacific Power does not penalize that customer because it is 

 remote from Pacific Power's generating resources. If Bonneville adopts 

 unbundled transmission rates that increase transmission costs to remote 

 service areas, the ability of small communities to have competitive rates will 

 be even more difficult. Further, if an intervening utility's transmission 

 system is involved, BPA is a necessary partner in assuring fair transmission 

 costs across those systems. Unbundling must not dissolve the ability of 



Page 4 - TESTIMONY OF FERGUS A. PILON 



