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and, therefore, the value of reserves. 



The contract for VOR Ceiimot be modified automatically to 

 reflect the reduction in the values of the quartiles used for 

 planning purposes. 



The reason is that BPA "locked in" the essential components of 

 the VOR in 1987. This "lock" was approved as part of the IP-PF 

 Rate Link, a BPA rate proceeding; it expires in mid-1996. 



The idea of an administrative "lock" in which key elements are 

 frozen in time and cannot change to reflect changing conditions is 

 a legal and policy issue that ought to be closely examined. It is 

 certainly not what I would call prudent. It is reminiscent of the 

 WPPSS "take or pay" contracts. 



The effect of the "lock" has been to preclude testimony during 

 the 1993 rate proceedings on the value of reserves. Absent some 

 effective way to deal with this issue at this time, the region will 

 have to wait and hope that it can be dealt with in the next rate 

 case or upon expiration in 1996. However, BPA' s long term 

 financial plans clearly assume the current arrangement will 

 continue to the end of the 10 year planning horizon. 



The process for restriction of second ( and third ) quartile 

 DSI load is contained in Section 7(f) (3) and (d) and (e) (1) . It 

 appears to require notice be given by June 1. Failure to provide 

 this notice precludes action until next year under most 

 circumstances . 



Other requirements include the administrator requesting 

 voluntary curtailments ( which has not been done ) and recalling 

 conditional or provisional sales that can be recalled. This 

 condition has already been met. A letter to Bob Olsen dated April 

 22, 1993 (reference PSC) signed by Sandra K. Smith for Mark W. 

 Maher BPA, director of power supply, states "There no existing 

 power sales contracts with BPA customers that include conditional 

 or provisional sales for power that can be recalled". Therefore, it 

 appears that the only requirement prior to notice of curtailment of 

 the second quartile is the administrator's call for regional 

 voluntary curtailment of non-essential loads. 



The short and midterm effect is to limit BPA's financial 

 flexibility and reduce the reliability of Treasury payment while 

 requiring a regional subsidy to the DSIs which is not provided to 

 equally stressed industrial customers, such as Boeing and Globe 

 Metallurgical . 



SPRINGFIELD UTILITY BOARD PAGE 2 SEPT. 25, 1993 



