229 



DeFazio Hearing 

 Emerald PUD, page 2 

 September 25. 1993 



1. Why is It important for BPA to become more 'competitive"? How lilteiy is 

 it that BPA will become a higher cost supplier of energy to the region than 

 other providers? Are there other reasons for BPA to undertake its 

 competitiveness initiative? What principles should guide BPA in this 

 effort? 



It is critical for the Pacific Northwest that Bonneville remain "competitive." It is 

 important because unless Bonneville remains price competitive they will become 

 irrelevant as a energy service provider, because they must react to the enormous 

 changes in the electric utility industry, because they need to maintain their political 

 viability and effectiveness, because they must become a partner utilities choose to do 

 business rather than have to do business with, and because they need to maintain 

 their key role as the caretaker of the region's incredibly valuable natural assets. 



Price Competitiveness 



There are enormous pressures on the cost of Bonneville's energy services. There is 

 repayment reform/debt buy-out, endangered salmon, new resource acquisition, a poor 

 aluminum price forecast, bureaucratic inefficiency, as well as other pressures. It is 

 important that Bonneville preserve the financial integrity of the agency, and remain the 

 "yardstick" of competition for investor-owned utilities. Emerald believes that this 

 means Bonneville must provide energy services at the lowest long-term cost to 

 society. Unfortunately, this often conflicts with short-term goals and rate impacts. 

 However, it was the long-term interest of the people of the Northwest for which 

 Bonneville was originally created and for which it should remain today. In order for 

 Bonneville to fulfill this goal it must improve its operational efficiencies, its financial 

 position and the business culture of the agency. 



As well, Bonneville must get a handle on its hidden costs. By this we mean the cost 

 of its nuclear portfolio. In 1992 Bonneville devoted more than 86 percent of its total 

 generating budget to nuclear, yet nuclear provided less that 5 percent of Bonneville's 

 generating output. In a recent study the WNP-2 plant was rated the worst nuclear 

 power plant in the country, in Public Citizen's "Nuclear Lemons" 1 993 study. While 

 efforts are underway to improve the operational efficiency of WNP-2 (a dismal 54.7 

 percent on average from 1990-1992, 15 percent below the industry average), the 

 facility is aging and even normal deterioration will inevitably result in increased 

 production costs. In addition, it also appears to us that there is a disturbing lack of 

 recognition within Bonneville and the nuclear industry of the enormity of 

 decommissioning costs. Senior Bonneville employees readily acknowledge that 

 existing funding levels for decommissioning both WNP-2 and Trojan are seriously 

 deficient, and this will significantly impact Bonneville's ability to remain competitive 

 unless this issue is dealt with directly. 



