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and difficult, we are initiating analytical work on the issue so that we can participate in 

 Bonneville's process. 



Several utilities have tried to develop "conservation power plant" and utility 

 financing proposals with Bonneville. To date, none has been successful. In one 

 instance, negotiations broke down at the last minute. We understand now that 

 Bonneville is close to reaching agreement with Emerald Peoples Utility District in 

 Oregon. We hope the effort is successful. Transaction costs of developing these 

 proposals by Bonneville and the utilities have been much too high. For example, the 

 Emerald Peoples Utility District negotiations have extended over nearly four years at a 

 cost to this small utility of over $150,000. 



One of the primary reasons why Bonneville and the utilities have not been able to 

 consummate "conservation power plant" projects is that the parties cannot agree upon 

 an appropriate allocation of risk. The Council believes that one of the explicit purposes 

 of the Regional Act was to allocate the risk of resource development to the widest 

 possible revenue base, so that no individual or small group of utilities would be placed 

 in economic jeopardy when developing a resource to benefit the region. We believe 

 that Bonneville should adhere to this logic when it negotiates for the acquisition of 

 future "conservation power plants." That is, risks which the utility can control, such 

 as whether the energy efficient equipment is installed and operating properly, should 

 be borne by the utility. Bonneville should accept those risks that are beyond the control 

 of the local utility, such as changes in operating hours or production levels due to 

 economic cycles. 



Bonneville also should pursue utility financing of conservation programs. This 

 could have the effect of lowering the cost of these programs and also could address 

 Bonneville's concerns about approaching the limit of its Treasury borrowing authority. 

 Additionally, utility financing would demonstrate a long-term commitment to energy 

 conservation. 



Efforts to work through energy service companies also were relatively 

 unsuccessful until recently. Bonneville and Tacoma City Light are working together 

 with an energy service company to implement energy efficiency improvements at Fort 

 Lewis, the U.S. Army base near Tacoma. There also are several potential projects with 

 energy service companies being considered in Bonneville's Competitive Acquisition 

 Project. 



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