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Question 6: In its 1988 "Resource Program" document, BPA stated that they had departed 

 from the "least-cost path" in obtaining conservation resources. To quote the 

 document, "Bonneville recognizes there is an economic risk in not being on the 

 least-cost path, and that getting back to the least-cost path may result in higher 

 costs to ratepayer However, these risks are judged to be acceptable, in view 

 of the importance of the financial targets." 



In light of its departure from the "least-cost path" causing BPA to lose 

 opportunities to acquire low-cost conservation resources ([i e.] home^^ 

 weatherization during construction), and the current need fofrW^icr$^ak6.J" 

 expensive out of region power purchases, was this action fiscally prudent? If 

 BPA had followed the "least-cost path" how much out of region power 

 purchases could have been avoided in fiscal 1992 and the first two quarters of = 

 fiscal 1993? What impact would this action have on the current rate increase? 



Answer: In the 1988 Resource Program, BPA decided to deviate fi'om the Least Cost 



Path in response to budget constraints At that time, this decision was 

 expected to result in a savings loss of 55 aMW through the end of 1992. A 

 return to the least-cost path was, at that time, projected to occur in 1995. 



However, BPA ramped-up its conservation efforts in 1990 and again in 1992. 

 It is not clear exactly how much more conservation would have been obtained 

 had BPA ramped up from its 1988 least cost path, but for analytical purposes, 

 55 aNfW will be used to re^sent additional savings that might have been 

 obtained (and, therefore, the power purchases that could have been avoided). 



To assess the financial impact of deviating fi-om the least cost path, it is 

 necessary to compare the revenue reqairetpents fpr the conservation which 

 was not acquired with the cost of purchases required to cover the 55 aMW 

 of need for FY 1992 and the first two quarters of FY 1993. For all but two 

 months of this period, purchase power was relatively inexpensive. The 

 purchases to meet the extra need resulting from not following the least cost 

 path totaled S19 4 million By contrast, S25.4 million would have been 



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