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resources. While instituting such a system would be a complex 

 undertaking, the keys to making it work are fairly simple. The 

 prices in each tier have to be based strictly on the costs of the 

 resources in that tier. In order for Bonneville to compete fairly 

 to meet load growth, it must bear all of the costs of new resource 

 acquisition in that tier. It is essential that the existing 

 Federal Base System should not be loaded up with unassociated 

 costs. 



The first priority of Bonneville must be to keep the Federal Base 

 System competitive. We are nearing a point at which customers may 

 choose to reduce their reliance on BPA, leaving fewer ratepayers to 

 cover a greater share of the costs. A tiered rate system, if 

 constructed correctly and coupled with some rational limitation on 

 ever-increasing fish and wildlife mitigation costs, would allow 

 BPA's customers to continue to benefit from the FBS — ensuring its 

 financial stability. 



Unbundled Services 



Unbundling services is another measure that, structured correctly, 

 would help give customers the flexibility to make their own 

 resource decisions. Why is unbundling so vital for the success of 

 BPA and the region? When BPA delivers power at a utility's point 

 of delivery, it is delivering more than just energy and demand 

 (power) . It is also delivering transmission services, load 

 shaping, and generation control (including prpscheduling, dispatch, 

 reserves, and control area operation) . In order for other 

 utilities to deliver power to their systems, they must have access 

 to these other services. Some of these services can, in the short 

 and medium term, be delivered only by BPA. 



In a future where BPA has adopted tiered rates and unbundled its 

 services, the most economic resource decisions can be made. For 

 example, if BPA is a low-cost supplier of new power resources, 

 utilities will continue to buy incremental power from BPA. If 

 other power suppliers are competitive with BPA, then they can use 

 specific BPA services to support independent resource development 

 and deliver a product comparable to BPA's. Unbundling of 

 generation control and transmission services will allow the cost of 

 those services to be separated from the resource costs. These 

 services must be priced at the actual cost of providing them. This 

 will allow BPA to provide those services at which it excels, while 

 allowing for the creation of a competitive market for power 

 resource development. 



Low Density Discount 



Because PNGC's member cooperatives are primarily rural, PNGC is 

 especially concerned about how BPA operations affect the rural 

 areas of the Northwest. The Low Density Discount (LDD) plays a key 

 role in allowing agency-provided power to be competitive in remote 

 and sparsely-populated areas. The LDD has its origins in the 

 Regional Act, Section 7(d)(1) which reads: 



