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Those rates will go up October 1, when the general rate increase 

 takes effect, but even then the VI rates for the aluminum 

 smelters will be significantly below preference rates. 



As far as we can tell, the DSI rates will still be lower than 

 smelter rates anywhere in the United States. In fact, they will 

 still be on par with average electric rates for aluminum smelters 

 in the world (excluding Russia and China).* 



At the time the variable industrial rate was adopted in 1986, 

 Bonneville had a substantial surplus and the rate had some 

 justification: to encourage the DSIs to stay in production and 

 to provide some sort of rate stability to the companies. 

 Bonneville feared that low aluminum prices would drive the DSIs 

 out of business, thus creating even more of a surplus and 

 exacerbating Bonneville's revenue problems. 



But when the VI rate was renewed in 1991 for another three years, 

 Bonneville was facing a pending power deficit — ■ the entire 

 dynamics of the regional power supply picture had changed. 

 Bonneville extended the rate anyway.** 



* See brief discussion of comparative prices in cross 

 examination of DSI witness Donald Schoenbeck in Bonneville rate 

 case. May 20, 1993, at page 1427. Mr. Schoenbeck noted that the 

 1992 worldwide price of electricity for smelters was about 21.8 

 mills, excluding China and Russia. He was relying on a study 

 performed by CRU, a London firm. 



** The rate had originally been adopted for seven years and was 

 scheduled to expire on June 30, 1993. The 1991 decision to 

 extend the VI rate for three years went into effect on July 1 , 

 1993. The rate now expires June 30, 1996. 



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