331 



perhaps even beyond that and more important is that they rep- 

 resent a number of small communities throughout the rural area 

 that depend on irrigated agriculture, and it is doubtful that they 

 could survive either. 



Throughout Bonneville's 50-year history, there has been an irri- 

 gation discount rate, based on the fact that it costs less to serve 

 this non-growing — ^by the way, it is a non-growing — load. In fact, it 

 has declined a little over the years due to conservation. It is an off- 

 peak in terms of seasonal peak, summer load, and it costs less to 

 serve it than it costs to serve BPA's year-around winter peaking 

 loads. By the way, we are talking about a $12 million issue here, 

 so it is not large in terms of Bonneville's financi£d picture, but it 

 is very large in terms of the utilities that receive this rate. 



The basic reason why Bonneville's costs are increasing are the 

 cost of new resources and transmission facilities required to serve 

 growing winter peak loads. Irrigation does not contribute to BPA's 

 winter peak demand. There is no irrigation usage in winter; in fact, 

 it is the summer months of June, July and August. Irrigation is not 

 causing BPA to incur resource acquisition costs to meet winter 

 load. In fact, irrigation is not causing Bonneville to incur resource 

 acquisition costs at all, because it is a non-growing load. 



The irrigation load provides benefits to BPA and its customers 

 and complements BPA's winter-peaking system by providing load 

 and revenue in the summer when BPA demand is otherwise at its 

 low point. It is increasingly important as the operation of the fed- 

 eral system is modified to increase summer flows to meet fish and 

 wildlife requirements during the summer months. 



The irrigation discount goes back to 1942. From 1942 to roughly 

 1974, it was based on low-cost and availability of surplus power 

 when Bonneville was in surplus back in those days, during the 

 summer. During this period, Bonneville had enough low-cost hydro 

 to meet year-round needs. There was no need to acquire high-cost 

 thermal until later on and finally during that time the hydro sys- 

 tem was expanded to meet load growth. The ability of BPA to meet 

 load growth ended about the 1970s, and at that point, Bonneville 

 introduced a concept in its rate called seasonality. Seasonal rates 

 took account of the fact that the cost of acquiring resources to meet 

 growing winter demand was the principal reason for increasing 

 BPA costs. BPA seasonalized rates by increasing the winter period 

 rates to reflect the higher cost of new resources required to meet 

 winter loads. The idea was that BPA should send a price signal to 

 the customers who were causing BPA to need additiongd resources. 

 The hope was that this price signal would cause BPA's customers 

 to be more efficient. 



The tiered-rates proposal which BPA is now considering or will 

 consider, from what we understand, is based on a similar concept. 

 The idea is that utilities should face higher-cost power for their 

 load growth. Again, it is hoped the price signal will cause growing 

 utilities and their consumers to be more efficient. 



The irrigation discount was phased out between 1974 and 1979, 

 as seasonality of rates came into being. In the 1979 rate case, Bon- 

 neville said that because of seasonal rates there was no need for 

 an irrigation discount, and in 1979, that was roughly true. And the 



