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requirements customers to compete as "integrated systems" in partnership 

 with Bonneville. 



4. How should the costs of environmental externalities, including the 



costs of restoring endangered fish and other species, be distributed in 

 tiered rates and/or unbundled services? What must Bonneville do to 

 ensure th^t competitiveness efforts such as tiered rates and unbundling 

 do not diminish its commitment to statutory requirements such as the 

 protection of fish and wildlife? 



How can the region maintain the benefits of regional coordination and 

 planning if resource acquisition and transmission become more 

 decentralized as a result of tiered rates and unbundling? 



Cost based rates, bundled or unbundled, tiered or not tiered, is the 

 principle that must apply to BPA and preference agency ratemaking. External 

 costs actually accrued should be applied to the source of the external 

 payment. That is fish and wildlife costs attributable to a hydro resource 

 should be recovered from the rate pool that the resource supports. 



We doubt that unbundling will diminish Bonneville's commitment to 

 meet its statutory obligation to protect fish and wildlife. While we support 

 Bonneville meeting its statutory obligation regarding fish and wildlife 

 protection, it is important to note that since the passage of the Regional Act 

 Bonneville has been the "deep pocket" for cash starved fish and wildlife 

 agencies who have not contributed their share. The Regional Act 

 contemplated BPA only doing its share and only after those with direct and 

 already existing responsibilities had provided their own funds as required 

 under existing law. If competitiveness means better accountability in the 

 spending of revenues provided by Bonneville customers, that is a net benefit 

 to the region. 



Both Bonneville and the Power Planning Council should continue to 

 provide the "vision" of the benefits of coordinated planning to the region's 

 utilities. The utility industry, however, is rapidly changing to a less 

 regulated, more competitive model. As we all have experienced, centralized 

 planning does not guarantee the most efficient result. Regional planners will 

 have to be more realistic about the changes that are coming in the power 

 industry and provide planning assistance that the utilities can use in the real 

 world of competition. 



Page 5 - TESTIMONY OF FERGUS A. PILON 



