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The remainder of my written testimony is directed toward the issues you raise in your 

 invitation to testify: 



Question 1: As discussed above, if we define "competitiveness" as the ability to market 

 wholesale power at a competitive price, BPA is in no imminent danger. Nevertheless, we 

 believe strongly that BPA should more effectively and efficiently focus its programs to 

 achieve the goals set forth in the Regional Act. Most importantly, BPA must be reminded 

 that it ultimately serves the long-term public interest, not the short-term interests of its 

 wholesale customers. 



Question 2: NCAC proposed tiered rates in the 1993 rate case, and reached a settlement 

 with BPA that led to tfie current negotiations. We believe strongly that marginal cost price 

 signals promote economic efficiency. We do not, however, believe that tiered rates are 

 equivalent to or can substitute for strong utility- sponsored conservation programs. On the 

 contrary, they will increase demand for those programs. In parts of the country with 

 substantially higher rates and weak conservation programs, cost-effective conservation 

 opportunities are foregone more often than they are seized due to a formidable array of 

 market barriers. Tiered rates will only marginally diminish those barriers. Conservation 

 programs will be more successful because of tiered rates, but they will also be more 

 necessary. 



We propose the following principals for tiered rates: 



• All customers should face BPA's regional marginal cost including the external costs of 

 the marginal resource. 



• All customers who share the benefits of the publicly-owned Columbia River system share 

 the responsibility for its stewardship. Tiered rates must be structured so as to strongly 

 support the goals of the Regional Act 



• All customers should pay their cost of service. 



• Public preference should be maintained and not extended to the Direct Service Industries. 



We believe that tiered rates will encourage economic development by promoting economic 

 efficiency and least-cost resource resource acquisition. The tiered rate proposals under 

 discussion relate only to wholesale rates; how these costs are passed on to retail consumers 

 is largely within the discretion of the retail utilities. We have proposed for discussion that 

 tier 1 allocations could grow with population growth in preference customers' service 

 areas, accompanied by a commensurate shrinking in the DSIs' share of raS and exchange 

 resources. But with or without this sort of adjustment, retail utilities are free to set retail 

 rates autonomously. 



Tiered rates may in some respects "allocate" federal base system resources. This is one of 

 the most compelling reasons that they must be accompanied by contractual obligations to 

 the implementation of the Regional Act (See answer to question 4.) We do believe that 

 customers should enjoy certain property rights that current contracts deny or dilute. For 

 instance, under existing contracts, independently conserved energy amounts to a theft of 

 federal property, while customers may do whatever they wish with the output of their 

 generating resources. Tiered rates and contracts should encourage the development of a 

 market in conserved power by allowing customers to reap some or all of the maricet value 

 of their conservation efforts. 



NCAC page 4 



