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follow several guidelines. Bonneville must focus on the things 

 that it is good at and leave the rest for others to do. That means 

 helping the overall competitiveness of the system — even if it 

 means that Bonneville may not always be the monopoly player they 

 now are. Those areas where BPA clearly has a role include running 

 the transmission system and maintaining and optimizing the use of 

 the existing Federal Base System (FBS) . However, competition 

 should guide decisions on who is best suited to acquire new 

 resources to meet load growth. 



Unfortunately, BPA has not shown itself to be a low-cost supplier 

 of resources. Its higher resource acquisition costs are driving up 

 BPA's average (melded) cost. This in turn is undermining the very 

 underpinning of the Northwest's economy, low-cost Federal power 

 resources. We believe that the way for BPA and the region to get 

 the most for its resource acquisition dollar is to create a truly 

 competitive market for new resources. There is no reason BPA 

 should not have to compete with non-Federal power suppliers in the 

 overall effort to meet new regional power demands. Competition 

 will ensure that the lowest cost options prevail. 



PNGC is very interested in seeing a leaner, more customer-oriented 

 BPA. Currently, all of our members are net-requirements customers 

 of BPA. Accordingly, we have a direct interest in promoting a more 

 cost-efficient agency. That, in turn, results in lower costs 

 passed on to the ratepayer. A leaner, more competitive Bonneville 

 will protect jobs, consumers, the environment, and the ability to 

 provide for repayment of BPA's Federal debt obligations. 



PNGC is also, however, well situated to react quickly to a less- 

 efficient BPA and/or a more competitive environment. PNGC has 

 experience in resource acquisition, and has a membership interested 

 in providing more diversity to its resource mix. Accordingly, we 

 are actively seeking alternative resources to provide for the 

 growth of PNGC member-system loads. 



Tiered Rates 



Currently, Northwest public utilities face an average or melded 

 cost for all of the power they purchase from BPA. This average 

 rate, the Priority Firm (PF) rate, melds the cost of more 

 expensive new resources with the enormous, low-cost FBS hydro 

 resource. Faced with this average cost for incremental load. 

 Northwest utilities are hard-pressed to economically justify buying 

 new resources themselves, thereby losing the melding effect of the 

 BPA rate. Accordingly, the market for new power resources has not 

 fully developed. Without a tiered rate structure in which 

 incremental load is served at the actual cost of incremental 

 resources, a truly competitive market cannot develop and the system 

 is left bearing higher acquisition costs. 



A tiered rate system would put all resource acquirers on an even 

 footing — providing a new competitive atmosphere while preserving 

 BPA's ability to repay the Federal investment in existing 



