192 



Question 3: The principal advantage of unbundling services is that it allows BPA to 

 more accurately and fairly allocate costs while allowing customers to choose only those 

 energy and non-energy services that integrate well with their own systems. Unbundling is 

 likely to favor the interests of large utilities with sufficient maricet power and expertise to 

 readily take advantage of unbundled services. Smaller utilities may form consortia that can 

 overcome some of these handicaps. 



Question 4: Without strong safeguards and legally binding commitments to the purposes 

 of the Regional Act, tiered rates and unbundling may make it more difficult to hold utilities 

 accountable to those purposes. By and large, we believe that it is appropriate to assign 

 environmental costs to the resources that cause the impact in question, regardless of how 

 these resources are allocated to serve loads. Thus, fish recovery costs and nuclear 

 decommissioning costs should be added to the cost of the FBS. Carbon dioxide and air 

 pollution costs should be included in the costs of new and existing fossil-fueled generation, 

 etc. Whether those costs fall into tier 1 or tier 2 depends on how resources are allocated 

 among the tiers. 



If resource acquisition and transmission become more decentralized, BPA must play a 

 stronger role in negotiating power sales contracts and rate structures to ensure that any 

 customer that develops new resources is held accountable to the goals of the Act. We have 

 a number of suggestions as to how this should be accomplished, some of which are listed 

 below. But, if these provisions are to be adopted, BPA must assert itself in these 

 negotiations as an effective steward of Qjlumbia River Basin resources and a tireless 

 advocate for the goals of the Regional Act 



Some of our concrete proposals include: 



• Pricing unbundled integration services Goad following, transmission, reserves, etc.) 10% 

 lower for integration of customers' conservation and renewable resources, to reflect the 

 first two purposes of the Act. 



• Requiring all BPA-served utilities that wish to develop their own resources to write least- 

 cost plans in open public forums, using consistent values for environmental externalities. 



• Giving authority to the Council to reduce customers' first tier allocation by the amount of 

 any new generating resource that is not consistent with the Plan. 



We are open to other suggestions as to how resource acquisitions should conform to the 

 Act's priorities and the regional least-cost plan. But, having worked so diligentiy to 

 develop a least-cost planning process in which all interests are heard and the pubbc interest 

 comes first, we are not willing to accept resource development that flaunts the provisions of 

 the Plan. We do work very hard, however, to make least-cost resource development 

 consistent with the financial interests of utilities, and will continue to do so. 



Question 5: We believe that the variable rate should be eliminated when it expires in 

 1996, unless DSIs can pay variable rates and still pay the full cost of service and similar 

 deals are offered to other industries. The variable rate shifts some of the market risk of the 

 aluminum industry to the rest of the region's consumers. At current world aluminum 

 prices, the rest of us subsidize the industry to the tune of around $11 million per month 

 through the variable rate. Even if the variable rate were a wash, it transfers enormous value 

 from customers as a whole to the industry by transferring business risk. 



NCAC page 5 



