288 



This methodology was known as the IP-PF Rate Link and it was 

 adopted in accordance with Bonneville's traditional ratemaking 

 procedures. The Link, first adopted in 1987 for a four-year 

 period, was extended in 1991. It now expires June 30, 1996, at 

 the same time as the VI rate.* 



There are, however, two components of the IP-PF Rate Link which 

 are now out of date. They affect how the discounts for forced 

 outage reserve are calculated. 



The first, out-of-date component is the amount of forced outage 

 reserves needed by Bonneville. The VOR assumed 1,288 megawatts. 

 The current Pacific Northwest Loads and Resources Study (The 

 White Book), published in January 1993, suggested a lower amount, 

 between 600 and 700 megawatts. Bonneville's own witnesses in the 

 1993 rate case suggested that a 600-800 megawatt range was 

 realistic for what Bonneville needed from capacity (forced 

 outage) reserves. 



The second, out-of-date component is the interest rate attributed 

 to the "proxy" gas turbine. In the VOR, Bonneville estimated the 

 value of the forced outage reserves by computing how much it 

 would cost to acquire the output from a standby plant — in this 

 case, a combined cycle gas plant. 



Because Bonneville cannot build and own its own resources, it 

 assumed that a utility or private developer would build and 

 finance the plants needed for the forced outage reserve. 



* See Administrators' Record of Decision, 1986 IP-PF Rate Link 

 Proposal, adopted March 20, 1987 (IP-PF-86-A-02) , and 

 Administrator's Record of Decision, 1990 IP-PF Rate Link 

 Extension, adopted November 19, 1990 (IP-PF-90-A-03) . 



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