238 



DeFazio Hearing 

 Emerald PUD, page 1 1 

 September 25, 1993 



However, what is less clear is how one would include indirect environmental costs. 

 For this reason the treatment of the price for second tier resources it is not as 

 apparent. 



Unless the entire region is playing by the same rules with regard to externalities, some 

 market distortions can occur. There exists a dilemma between what is appropriate for 

 planning as opposed to what is appropriate for pricing. It is necessary to include 

 environmental externalities in the planning and selection of resources so that we 

 account for all costs and choose the resources with the least long-term cost to society. 

 (It is not likely that the people of the Northwest, let alone the citizens of the United 

 States, will accept decimation of Columbia River fishery or other natural resources of 

 the drainage, in order to preserve Bonneville's competitive position. This is particuleuly 

 true given the rate differential between the region and the rest of the country.) But if 

 Bonneville were to add several mills to the price of second tier power to account for 

 environmental externalities and competitors did not do the same, Bonneville's product 

 might be uncompetitive before it even hit the streets. If all competitors are required to 

 play by the same least-cost planning rules that include environmental externalities in 

 the planning and selection of resources, then no market distortions occur. The 

 question is whether including environmental externalities in the planning and selection 

 process alone is sufficient to send the correct market signal to acquire the least-cost 

 resources in the long term for society. 



When applying environmental externalities to unbundled services, it is extremely 

 difficult to assign certain externalities to certain services. Parts of the existing federal 

 generation and transmission system do not exist independent of each other. Applying 

 the environmental cost of first-tier resources across-the-board to all unbundled 

 products and services might be the most expeditious and equitable method of 

 distribution. 



To ensure that Bonneville's statutory requirements, such as those to protect fish and 

 wildlife are not diminished, it should be a requirement of those who wish to purchcise 

 tiered rate power or unbundled products or services that they adhere to all existing 

 laws and regulations, adhere to the Council's Fish & Wildlife program, and adhere to 

 the least-cost planning "guidelines" mentioned in question number 2 about tiered rates. 



To ensure that we maintain the benefits of regional coordination and planning, we 

 should require those wishing to acquire resources other than conservation (and maybe 

 renewables) to do least cost plans consistent with established "guidelines" which 

 should include environmental externalities (see question 2 about tiered rates), and to 

 encourage cooperation among utilities. 



