233 



DeFazio Hearing 

 Emerald PUD, page 6 

 September 25, 1993 



Design of an appropriate tiered structure is being debated in the region. While 

 Emerald's position is evolving, along with everyone's else in the region, as we \earr\ 

 more about the nuances of tiered rates. We present the following structure as a 

 representation of our current thinking. 



The goal of tiered rates is to send the correct market signal, i.e., the marginal cost of 

 new resources, for acquisition of resources, especially conservation. 



The Basic Structure 



I. Two tiers based on resource pools: the first tier should be comprised of the 

 FBS resources and possibly a limited number of others. The second tier should 

 be comprised of new resources, including the Tenaska project. 



II. The rate of the first tier should be the cost of FBS with fish and wildlife and 

 conservation expenditures. The second tier should be based on the marginal 

 cost of new resources 



III. Allocations of the FBS should be carried out under the following guidelines: 



1. Regional Preference should be retained. This means that public utilities 

 and agencies get an allocation ahead of all others. 



2. Allocations should be based on historical loads on Bonneville, giving the 

 customer a choice of either a three year average or most recent year's 

 load. The allocations should be weather adjusted, and based on monthly 

 allocations (not hourly). The initial allocation formula should follow one of 

 two alternatives: either 100 percent of a utility's priority firm load, or 75- 

 to-80 percent of a utility's priority firm load. The latter alternative would 

 ensure that all utilities would face the second, higher-priced tier and thus 

 would create an immediate incentive to do conservation and other 

 appropriate resource acquisition. 



3. Ttiere are several alternatives under consideration for the initial firm 

 energy services for the Direct Service Industries (the DSIs), but it should 

 be clear that their firm power is provided by a contract for firm service 

 and not an allocation. 



IV. Allocations would automatically be adjusted with the addition of new Preference 

 Customers (with reasonably short notice period) or the degradation of an FBS 

 resource. 



V. The alternatives for dealing with the residential exchange should include an up- 

 front buy-out, a bifurcated or vintaged tiered rate for resources in each tier, and 



