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DeFazio Hearing 

 Emerald PUD, page 14 

 September 25, 1 993 



curtailment effectively eliminates the value of the DSIs' second quartile to the region. 

 Prior to exercising restrictions on the second quartile, Bonneville must call for 

 voluntary curtailments in the region. If Bonneville must pay lost margins for this saved 

 power there is significantly less value for the restriction rights on the second quartile. 



10. How should the long-term power contracts that BPA is currently 

 negotiating differ from the current contracts? What, If any, environmental 

 issues should be addressed in these contracts? 



The existing power sales contracts need to be substantially revised to incorporate the 

 changes in the industry and to allow Bonneville to become more competitive. For 

 example, new contracts will be required to deal with: tiered rates, changes to 

 Bonneville's role as a regional energy supplier, a shift to unbundled products and 

 services, new transmission access requirements, changes to the Residential 

 Exchange, changes to how we meet reserve requirements, and how we would modify 

 the contracts once signed. 



The new power sale contracts should address as many environmental issues as 

 possible that are not dealt with in present or future forums by other appropriate 

 agencies. Such issues should be substantially and functionally related to some 

 provision of the new contracts, or be a solution or corrective action to an existing 

 problem, and be able to be reasonably implemented by the parties to the contract. 

 Specifically, this would include the Council's Fish & Wildlife Plan, a least-cost planning 

 requirement, and the inclusion of externalities for both Bonneville and utilities. 



11. It has been suggested that the residential exchange program rewards less 

 efficient utilities. Are revisions to the exchange agreements necessary? 



If so, what changes would you suggest? 



The residential exchange is a complex arrangement that may well reward inefficiency. 

 For example, the residential exchange is about to become a conduit for further 

 regionalization of the cost of Trojan. Clearly, if tiered rates are adopted, changes to 

 how the exchange is calculated will be necessary. Emerald has been considering 

 several alternatives. Bonneville could eliminate this subsidy altogether, or could 

 arrange for an up-front buy-out. Bonneville could create a vintaged or bifurcated 

 system that would treat existing and new resources separately. Also, Bonneville could 

 create a formula that locks in the exchange amount at current dollars with adjustments 

 based on the differential of average lOU and public utility retail rates. 



