106 



But when someone offers you a long-term manageable resource 

 conservation, you say no, no, we can't pay you for that. 



Doesn't it seem contradictory? 



Mr. Hardy. I would make two observations, Mr. Chairman. The 

 first is that, in the curtailment situation, we're dealing with an 

 emergency kind of situation where we're literally deaUng with a 

 lights-out situation. That I consider fundamentally different fi^om a 

 long-term resource acquisition program. 



Mr. DeFazio. No. We weren't dealing with lights-out. We were 

 dealing with asking people to ask their customers to curtail. Again, 

 you said to me at the time when I had mentioned the 1970s experi- 

 ence, although in here it was put down to be a minimal impact. I 

 said I think the people in the Northwest are rather unique across 

 the country and woiUd be willing to curtail if told of the problems. 



And you said, in fact, that's the problem, they would probably do 

 too much and it would cost too much for us to do that. So we're 

 not talking about lights-out. We're talking about getting Customers 

 to conserve, whether they turn down their thermostats another 

 notch, whether they shut off their advertising lights, like I remem- 

 ber Governor McCaQ asking people to do, and other things. 



Again, I would like to get at the heart of this. Long term, some- 

 one offers you conservation, it's going to impact their revenues and 

 we can't offer them any reimbursement, or at least that's what 

 Snohomish alleges. But in a short-term situation, we can't even ask 

 them to voluntarily do that because it would cost us too much, be- 

 cause we are going to pay them. 



Mr. Hardy. In the short-term situation, as we discussed briefly 

 at the last hearing, the problem is whether we reimburse them or 

 not, their rates will likely go up more having curtailed than they 

 would as a result of the power purchases we incurred this last win- 

 ter to literally keep the lights on. That's why we didn't do it. 



All you have to do is look at the 1977 experience and what most 

 of the region's utilities went through where precisely that kind of 

 thing happened. Set that aside for a minute. The lost revenue issue 

 for conservation acquisition is a massive cross-subsidy program 

 that we would be getting into. Frankly, I don't think it's justified, 

 and fi'ankly, Snohomish is the principal customer in the region 

 that's asked us to do this. 



We're moving forward with acquisitions with most of the rest of 

 our customers without requests for lost revenues, and one of the 

 biggest problems that you have in successfully acquiring conserva- 

 tion is your ability to incur short-term costs for long-term gains. 



We'll probably get into a lot of that later today. And paying for 

 lost revenues simply exacerbates that short-term cost problem and 

 makes it less cost-effective. Instead of 660 megawatts, maybe 

 you're looking at 600 or 500 or 400 or some lesser amount of 

 money, because you're pricing yourself out of the market because 

 you're compensating for lost revenues. 



That's the dilemma, Congressman, we're trying to avoid. 



Mr. DeFazio. Okay. 



Ms. HiCKEY. Randy has answered the big picture. Can I just give 

 a 30-second footnote? 



Mr. DeFazio. Sure. 



