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B. Tiered Rates. The concept of tiered rates has been much 

 talked about cimong BPA and its customers. To date, however, the 

 concept of tiered rates remains ill defined. NIU is not convinced 

 that a tiered rates system would be beneficial; however, we do 

 believe that the concept illustrates an important point. Under a 

 tiered rate system, power would be priced in blocs which reflect 

 the higher costs of resources required to serve incremental loads. 

 In other words, growing loads should receive a "price signal" which 

 reflects the fact that load growth generally causes increasing 

 cost. 



Conversely, the concept of tiered rates suggests that 

 non-growing loads should not bear the high costs of acquiring new 

 resources to serve incremental load. I have already noted that 

 BPA's irrigation load has essentially been non-growing for the past 

 fifteen years, and that it is projected to remain flat or even to 

 decline slightly for the foreseeable future. If BPA moves to a 

 tiered rate system, it should reflect the fact that irrigation is 

 a non-growing, off-peak load which has imposed no additional 

 resource cost on BPA and will impose no additional cost for the 

 foreseeable future. 



C. Cost of Fish Flows. An important new cost which 

 Bonneville faces is the approximately $300 million per year it 

 expends related to the release of water for fish flows and other 

 investments in fish and wildlife enhancement activities. The water 

 budget imposed by the Regional Power Council's Fish and Wildlife 

 Plan and by the Endangered Species Act requires that water be run 

 through the system generating excess amounts of low cost hydropower 

 in the summer. 



Essentially, water which was previously stored and used 

 to generate power to serve winter loads is now used for fish flows. 

 The cost of replacing that low cost resource with other higher cost 

 resources for use in the winter should be reflected in increased 

 seasonality of BPA rates in the winter period. Likewise, the 

 increased availability of low cost hydropower during the summer 

 should reduce the cost of power during the summer. 



D. Cost of BPA Conservation Programs. A serious inequity 

 presently exists in the distribution of conservation program 

 dollars by BPA and in the allocation of energy conservation costs 

 to rates. A recent BPA study (Office of Power Resources, 

 "Conservation Expenditures by Area Office," spreadsheet data, July 

 1991) indicates that between 1980 and 1989, winter peaking 

 utilities in Western Washington received conservation funding from 

 BPA of $170 million or 8.7 cents for every dollar of revenue paid 

 to Bonneville. At the same time, NIU members received $42 million 

 or 3.7 cents for every dollar of revenue paid to Bonneville. 

 Proportionally, these winter peaking utilities received financial 

 support 2.4 times greater than that received by NIU members. Under 

 the current methodology, when these conservation expenditures are 



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