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period. They are real regional loads which generally operate 

 around the clock during the June, July and August period. The 

 revenues from irrigation loads are dependable, not speculative. 

 Because irrigation is an exclusively off-peak load, it costs less 

 to serve and which provides valuable revenues and system benefits 

 to BPA and its customers. 



A. Irrigation Discount Has Existed Since 1942. BPA 



established a discounted rate for irrigation usage in 1942. The 

 irrigation discount rate was initially based on BPA's need to 

 market surplus power in the summer period. At the time, BPA had 

 not included in its rate structure the now widely accepted 

 principle that electric rates should reflect seasonal differences 

 in the marginal cost of providing service. BPA had a uniform rate 

 for all power sales year-around. The original irrigation discount 

 did, however, reflect the fact that it cost BPA virtually nothing 

 to generate surplus power during the summer period. This was true 

 because overall demand on BPA was low during the summer, there was 

 surplus hydro generating capacity in the Federal Columbia River 

 Power System and river flows were highest during the summer. 



During the period from 1942 to 1974, BPA's sximmertime 

 irrigation rate was about 65% of the rate for year around 

 preference customer loads. 



B. Introduction of Seasonality to BPA Rates. Between 1974 

 and 1979, BPA phased out the irrigation discount. At the same 

 time, in 1974, BPA introduced "seasonality" to its rates. Prior to 

 that, BPA had "energy" and "demand" rates which were uniform year- 

 around. Seasonality of rates was introduced primarily to reflect 

 BPA's cost incurrence. BPA's system, like any utility system, must 

 be built to serve "peak" demand during the year. This necessarily 

 means that resources which are acquired by BPA to serve in peak 

 periods are not needed during off-peak periods. In other words, 

 the incremental costs which are incurred to serve peak loads are 

 not necessary to serve off-peak loads. 



The Northwest is a "winter peaking" utility system. 

 BPA's costs are driven by the need to acquire additional electric 

 resources at incremental cost to meet the growth of winter demand. 

 It costs BPA more to serve demand during the winter peak period 

 than during the off-peak summer period. Seasonality of rates is 

 intended to reflect this seasonal differential in cost causation 

 and give BPA's customers a correct "price signal" which will, 

 hopefully, encourage the efficient use of power. 



C. Irrigation Discount Phased Out When Seasonality Phased 

 In. As the irrigation discount was phased out between 1974 and 

 1979, the seasonality of BPA rates were at their peak. BPA's 

 rationale for not reinstituting an irrigation discount in the 1979 



