64 



Mr. DeFazio. And how much was that one? 



Mr. Hardy. About 2.5 percent. 



Mr. DeFazio. Okay. 



Do you have any model for measurable economic impacts? I 

 noted one of my local utilities usually uses a period of rate increase 

 by BPA to piggy-back. Is that common? 



Mr. Hardy. That is not an uncommon phenomenon, Mr. Chair- 

 man. 



Mr. DeFazio. Is this measurable long-term — if you go 2.5 percent 

 or you go 5 percent, the inflationary impact in terms of cost of elec- 

 tricity throughout the region is x, is there any model out there? 

 When we are talking about rate increases of the magnitude you are 

 talking, I am just curious about what the total economic impact is. 



Mr. Hardy. It is very difficult and dangerous, frankly, to specu- 

 late about what the ripple effect of our wholesale rate impact is at 

 the retail level because utility circumstances are so different. A 

 rule of thumb that some use is, if you are a total requirements cus- 

 tomer you buy all your power from Bonneville. A 10 percent Bonne- 

 ville rate increase would equal about a 5 percent retail rate in- 

 crease absent any other factors. Now you crank in inflation, and 

 you crank in the cost of a utility's distribution system. Typically I 

 think a number of our customers do use the occasion of our rate 

 increase to increase rates not just to accommodate our increased 

 wholesale power bill but for their own needs it is convenient to do 

 that. The costs can vary significantly anywhere from 90 percent to 

 10 percent of our wholesale rate increase passed through to retail, 

 just depending upon the individual circumstances of an individual 

 customer. 



Mr. DeFazio. When we were talking earlier about your power 

 purchases and the concerns about consumption, it seems to me 

 there must be some elasticity with consumption which will be driv- 

 en by the rate increase, particularly for marginal businesses or 

 other large consumers of power, et cetera. So at some point, after 

 you raise the rates to a certain amount, you must be assuming that 

 your consumption falls off a certain amount. Is that factored in? 



Mr. Hardy. It is factored in, in terms of how we evaluate the 

 load impacts of any rate proposal. I don't have those numbers right 

 at my fmgertips, but I would be happy to give you some illustrative 

 examples for the record. 



Mr. DeFazio. Okay. 



[The information follows:] 



BPA accounts for the effects of electricity rate increases on electricity load. In gen- 

 eral, as the electricity rate increases, load decreases. In addition, with any given 

 rate increase, marginal businesses or large electric energy-intensive industrial con- 

 sumers will be affected the most, relative to residential or commercial consumers. 



We reflect the effects of rate increases in our load forecasts used for rate projec- 

 tions and for long-term resource planning. The electricity rate is a significant factor 

 influencing electricity consumption, along with other factors, such as employment 

 and variations in weather. We describe the responsiveness of electricity loads to 

 electricity rates by the term elasticity. Our near-term forecasting models, used t» 

 forecast one to five years out, have relatively low elasticities of less than -0.1, indi- 

 cating that a 10 percent increase in average retail electricity price would result in 

 a public utility load decrease of less than 1 percent. This is a short-term elasticity, 

 intended to reflect only near-term changes in retail electricity usage. 



In our near-term forecasting, we have also included a small amount of additional 

 load losses from marginally viable industrial firms that we believe will be especially 

 had hit by rare increases. This is because the general models used for near-term 



