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Question 5; The credit to the smelters for the ability to interrupt service is based on two 

 things; 1) the 1985 costs of building new capacity, discounted at an interest 

 rate of 14%, and 2) the 1288 megawatt credit of forced outage reserves. 



Today, interest rates for new power sources are nearly half that. Further, BPA 

 stated in the "1992 Pacific Northwest Loads and Resources Study" (the White 

 Book) that the smelters actually provide approximately 600 megawatts of 

 forced outage reserves. 



Has BPA taken steps to adjust the forced outage reserve credit to reflect 

 current conditions? When does BPA plan to adjust the forced outage reserve 

 credit to reflect current conditions? 



Answer: BPA has not recently taken steps to adjust the Value of Reserve (VOR) 



credit In our rate design, the VOR is incorporated in the IP-PF link The 

 IP-PF link is the Premium or Standard margin, less the VOR credit, both 

 determined in the 1985 rate filing The 1985 values are escalated by the 

 rate of inflation for use in subsequent rate proceedings Following a formal 

 rate proceeding in 1990 the link has been extended and would not expire 

 before June 30, 1996 BPA is planning to examine the general reserve 

 issue with its customers in the Resource Program and Contract 

 Renegotiation Process Because of the complexity and contentiousness of 

 reestimating the various types of reserves provided by the Direct Service 

 Industries, the cost basis for developing a credit, and the linkage to these 

 other processes, BPA has not determined when the reserve credit will be 

 examined in a Rate Case 7(i) process. 



