56 



That being said, had we had one or two more events in mid-Jan- 

 uary, we would have been to the governors requesting regional cur- 

 tailment. Had two more things happened, we probably would have 

 been at that point. Had the cold snap lasted another week or two 

 and had WPPSS II continued off line for more than it did, we 

 might very well in early or mid-February been to the governors 

 asMng for that, because we simply would not have been able to 

 purchase enough power to serve load. That is what the regionwide 

 curtailment plan is set up to address, that kind of power supply 

 emergency as opposed to the severe revenue problem which we cur- 

 rently have. 



Mr. DeFazio. What was yoxir average price for your purchase 

 power versus your average wholesale rate, or maybe even looking 

 at your blended rate with the lower rate to the 



Mr. Hardy. If I recall correctly, our average purchase power 

 price for January, February, March, is about 28 mills. Our whole- 

 sale rates for public utilities is 24, and the rate for the aluminum 

 companies is 18. 



Mr. DeFazio. I can't quite imderstand that then. Okay, let's say 

 we sold one kilowatt hour less through conservation, we have lost 

 24 mills of revenue; but if we had to purchase that kilowatt hour 

 it would have cost 28 mills; so we lost 4 mills. I don't quite imder- 

 stand. If you are buying it for a higher price and selling it for a 

 lower price, if you didn't have to sell it, do you get it? I'm puzzled. 



Mr. Hardy. Our calculations were that we had a significant risk 

 of being worse off as a result of that in a financial sense, and we 

 are, by virtue of the obUgations under the regionwide curtailment 

 agreement, responsible for those lost revenue costs of the utilities. 

 That is the only way we could get them to agree to sign up. 



Mr. DeFazio. Oh, so you are sajdng it isn't your wholesale rate 

 that is relevant to me, it is the retail rate, and so we have a rate 

 system in effect where, even if expensive, costs you more to pur- 

 chase than to generate. When you are in a deficit situation you will 

 go out and purchase because your avoided cost is actually higher 

 because it is the difference between your wholesale rate to those 

 utilities and their retail rate that you have to make up. So we are 

 subsidizing consumption at the retail rate level even in periods of 

 economic crisis. Is that in the rate case that you have to reimburse 

 them for those costs? 



Mr. Hardy. No. It is part of the Share the Shortage agreement 

 that we have negotiated with the utilities. 



Mr. DeFazio. And that is the long-term power sales agreement 

 with the utilities? 



Mr. Hardy, No. It is a separate curtailment agreement that basi- 

 cally regulates a series of progressive steps associated with calling 

 for curtailments to address a power supply emergency. 



Mr. DeFazio. It doesn't sound to me like they are sharing much. 

 They are saying, "We want to be made whole for the power that 

 we might have sold," and I mean I would say that is something to 

 be looked at very carefully, particularly if we beginning to look at 

 tiered rates. I mean we have got a problem with that kind of an 

 agreement because you are going to go out and purchase at higher 

 cost, which is a 4 mill loss to you, in order to avoid the higher mill 

 cost to reimburse these utilities for foregone revenues. 



