254 



Several components of the link are now out of date, yet Bonne- 

 ville has shown no interest in revising them to reflect current mar- 

 ket conditions. In other words, Bonneville has locked into place a 

 lucrative set of discounts for the DSIs. The more discounts the 

 DSIs receive, the more the rate burden shifts to other customers, 

 particularly the public utilities. 



Bonneville's reluctance to do anything about the way the DSI re- 

 serves are priced is all the more troubling because Section 7(c)(3) 

 of the Northwest Power Act requires the Administrator to adjust 

 DSI rates to "take into account the value of power system reserves 

 made available! to the Administrator through his rights to interrupt 

 or curtail service" to the DSIs. 



(2) The Power Sales Contract Renegotiations. The power sales 

 contracts must address the fact that DSIs are not preference cus- 

 tomers of Bonneville and they are not entitled to as much firm 

 power as they wish. Bonneville's primary legal obligation is to the 

 preference customers, for whom the federal system was built. 



That basic fact is often overlooked in the posturing and negotiat- 

 ing over new power sales contracts. The simple truth is that there 

 is no mandate in the Northwest Power Act for Bonneville to sign 

 new, firm power agreements with DSIs after initial contracts ex- 

 pire in 2001. 



We are not suggesting that Bonneville cut off the DSIs when the 

 existing agreements end. We do, however, believe that Bonneville 

 has considerable discretion about setting the terms and conditions 

 of new agreements: 



1. MaMng one or more additional quartiles interruptible. 



2. Providing firm power to DSIs in the summer only. 



3. Offering a menu of options to the DSIs, including shorter term 

 contracts for those companies that intend to close part or all of 

 their operations within the next 5-10 years. 



4. And linking rates to more energy-efiRcient production prac- 

 tices. 



In sum, the new contracts should take into consideration the na- 

 ture of the aluminum industry. The new agreements should dis- 

 courage the DSIs from signing up for new 20-year contracts, unless 

 they agree to remain in the region for the entire period (and pay 

 a penalty if they leave early); and if they agree to pay rates com- 

 parable to the industrial customers of existing public utilities, as 

 contemplated by the Northwest Power Act. 



We would call your attention to the correspondence between 

 Canby Utility Board and Bonneville regarding this issue. Attach- 

 ment B contains the letters in question. In particular, we ask that 

 you and your staff review Bonneville's assertion that Section 12 of 

 the existing contracts obligates Bonneville to offer new firm power 

 contracts to the DSIs. 



(3) The need for a GAO audit to review the Bonneville-DSI rela- 

 tionship. The Bonneville-DSI relationship has not been subjected to 

 an independent audit or evaluation since the passage of the North- 

 west Power Act in 1980. We believe it is time to conduct an inde- 

 pendent evaluation of the relationship and to help answer a num- 

 ber of pressing questions about the Act and how it is being imple- 

 mented in respect to DSI. 



