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DeFazio Hearing 

 Emerald PUD, page 12 

 September 25, 1993 



Finally, it is important to distinguish regional planning from regional acquisition of 

 projects. We are increasingly questioning the benefits of regional acquisition of 

 resources as it presently functions. Regional acquisition has served to prevent 

 Emerald PUD's billpayers from understanding the consequences of the resource 

 choices being made for them by Bonneville. We have asked for a copy of the 

 Tenaska Contract. We have asked for a copy of the WPPSS/GE settlement 

 agreement, and we have asked for a copy of the EWEB/BPA Trojan Agreement. 

 None of these agreements have been provided, yet we are obligated to pay for all of 

 these regional acquisitions. 



There are certain economies that come from regional coordination, but those 

 economies are not likely to be lost in decentralized resource acquisition and 

 development if we encourage cooperation among utilities in the context of least-cost 

 planning. 



5. Should the variable rate for the Direct Service Industries (DSI) be 



eliminated or modified? Please provide an estimate of the cost and/or 

 benefit to the regional ratepayers of continuing to provide this variable 

 rate. What Is the current value of reserves (VOR) of the first quartlle of 

 the DSI allocation? What Is the current VOR of the second quartile? 



The region can no longer afford to offer artificially priced power to select industrial 

 loads. There has been significant debate in the region as to the true cost and benefit 

 of maintaining the variable rate. Regardless of the costs and benefits, and regardless 

 of the rationale for the original decision to offer variable rates, the reality is that in an 

 era of energy deficit and economic hard times, the region cannot afford the 

 subsidization of power for selected loads. 



Specifically to the Value of Reserves (VOR), the original analysis (prepared by 

 Bonneville in 1985) is based on the cost of a proxy gas turbine (the alternative source 

 of reserves if Bonneville could not restrict the DSIs' firm power loads). Put another 

 way, the VOR attempts to estimate the cost to Bonneville of acquiring sufficient gas 

 turbine reserves if the DSIs had firm power contracts without restriction rights. 



The analysis showed that the value of DSI reserves in 1985 was approximately $90 

 million. To this amount was added to the projected cost to the DSIs of a Bonneville 

 power outage. The two items totalled about $92 million. Half of this amount -- $46 

 million -- was then allocated to the DSIs as a credit (discount) on their annual power 

 bills. This value escalates with inflation, and is now about $60 million. 



