232 



DeFazio Hearing 

 Emerald PUD, page 5 

 September 25, 1993 



Basin. We have decreased tlie ability of the basin to sustain fish, wildlife, timber, etc. 

 We have done so without dedicating adequate funds to restore these resources. This 

 trend must be reversed and Bonneville must take its role of caretaker of the 

 Northwest's assets more seriously. Bonneville needs to ensure that it is capable of 

 fulfilling the responsibility it has for the resources currently under its jurisdiction. None 

 of the costs associated with Bonneville's past actions eind choices should be placed at 

 the feet of the nation's taxpayers. 



In conclusion, it is vital that Bonneville become more competitive by focusing on a 

 long-term perspective, by getting a handle on its expenses and employee levels 

 (becoming a government corporation sounds like an excellent first step), by dealing 

 forthrightly with its hidden costs, by coming to grips with the realities of 

 decentralization in the industry, by restoring the public trust and accountability, by 

 becoming more open in its decision-making, and by taking head-on the responsibility 

 of caretaker of the Northwest's assets. 



2. Should BPA adopt tiered rates? If not, why not? If so, how should these 

 rates be structured? If there is a specific model or framework for BPA 

 tiered rates that you support, please describe it in detail. What principles 

 should be used in the development of these rates? Can tiered rates be 

 designed so that they do not discourage development of new industry In 

 areas served by customers of BPA? Should federal base system 

 resources be allocated through a tiered rate system? 



Yes, Bonneville should adopt tiered rates. The recent commitment by the 

 Administrator to implement a tiered rate structure was made in the spirit of 

 compromise and settlement of the rate case. Failure to follow through on the 

 comm'rtment will further erode the credibility of the agency. 



The Administrator's commitment was based on a principle that tiered rates would 

 serve to promote conservation. Others would prefer to see a tiered rate structure that 

 reflects the price-specific resources. It is possible that both of these objectives could 

 be achieved through a properly designed rate structure. The presumption that the 

 existing Federal Base System (FBS) resources will be in a first tier and all new 

 resources in a second tier assumes that new resources cost more than the existing 

 FBS. In fact, as the costs of fish, wildlife and decommissioning are accounted for in 

 the FBS, there is a potential that these resources will be more expensive than new 

 resources. This begs the question: under any allocation scheme of the FBS, should 

 the first tier be based on a take-or-pay basis? 



