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5. Should the variable rate for the Direct Service Industries (DSIs) be 

 eliminated or modified? Please provide an estimate of the cost and/or 

 benefit of to regional ratepayers of continuing to provide this variable 

 rate. 



What is the current value of reserve (VOR) of the first quartile of the 

 DSI allocation? What is the current VOR of the second quartile? 



Under the current circumstances, there is no justification for continuing 

 the Variable Rate for the DSIs. BPA is no longer surplus In firm power 

 resources and is acquiring short-term and long-term resources to cover Its 

 power deficits. The Variable Rate, when It was adopted, provided revenue 

 benefits to Bonneville and its other customers. That benefit to Bonneville 

 revenues (an additional $23.5 million from 1986 through the first quarter of 

 1993) Is no longer relevant. The changes In the world aluminum market 

 have most economists pessimistic over the potential for higher aluminum 

 prices. Therefore, we conclude that the prospect for any net benefit to BPA 

 revenues from the Variable Rate Is highly doubtful and its continuation is 

 unwarranted. 



The current value of reserves provided by the DSIs and reflected In DSI 

 rates is valued by BPA to be about $60 million per year. With the changes In 

 BPA's resource programs, the value of the second quartile versus Its current 

 cost ($30 million) Is not justified across the board. We favor a hard look at 

 what reserves are economic to the system and some major revisions In their 

 application. Based on current expectations the value we estimate for 

 reserves Is more in the order of $20 million. 



6. Should the irrigation discount be eliminated or modified? Please 

 provide an estimate of the cost and/or benefit to regional ratepayers of 

 continuing to provide this discount. 



We favor continuation of the Irrigation discount or a special rate 

 reflecting the cost of service to these loads. Irrigation loads are unique In 

 that the loads coincide with the periods when Bonneville has surplus 

 capacity and energy available on the system. They place no planning burden 

 on BPA during the winter peak and provide a "round the clock" load when 

 the flow requirements for fish put the hydro system In a "spill" condition. 

 Bonneville in Its rate process can evaluate the cost of service to this 

 Important segment of the Northwest economy and set the rate appropriately. 



Page 6 - TESTIMONY OF FERGUS A. PILON 



