191 



process that Randy has ongoing can refute that perception and that 

 Bonneville can remain a competitive power supplier. 



Mr. DeFazio. Thank you. Mr. Cavanagh, you perhaps heard the 

 earlier discussion regarding the curtailment provisions and making 

 customers whole and kinds of curtailment £ind I'd be interested in 

 any reflection you have on that £uid its compatibility with the man- 

 dates of the Act and the requirement that we encourage conserva- 

 tion and renewables and/or taking into account the Eu-guments BPA 

 makes that this has nothing to do with conservation, that this is 

 curtailment. 



Secondly, there's a statement in your testimony where you say 

 the Regional Act was never intended as a guarantor of the utility's 

 balance sheets, particularly when the revenues at stake are based 

 on wasted energy. 



Does that get at this question I've raised about curtailment? 



Mr. Cavanagh. Yes. There were, as I iinderstood, two issues you 

 were getting at. One was the question of whether Bonneville ought 

 to be responsible for lost revenues when it invests in conservation 

 in customer service territories. 



Mr. DeFazio. Right. 



Mr. Cavanagh. And the other was whether Bonneville should be 

 responsible for lost revenues when it asks for a curtailment at a 

 time of regional need. I, I think, like you, Mr. Chairman, would re- 

 solve those issues consistently. That is, I do not believe that Bonne- 

 ville should be responsible for what is effectively the lost markup 

 on wasted energy, which is what the argument over lost revenues 

 in the conservation context is about. 



Similarly, when there's an urgent regional need for a curtail- 

 ment, because you're having to pay substantially more for outside 

 power purchases than you can get from wholesale transactions, I 

 also would reach the result that Bonneville ought to be able to do 

 that. 



Randy is right, by the way, when he says that doing that will 

 drive up some customers' rates. It's true that in a time of curtail- 

 ment, the purchases Randy is curtailing are at a lower rate than 

 many of his customers' retail rates. So the customers' retail rate is 

 higher than the purchase, even though Randy is losing money on 

 the purchase. 



It stiQ seems to me that the curtailment is in the best interest 

 of the customers collectively because it reduces their bills more rap- 

 idly than it increases their rates. In my view, lower bills ought to 

 tnink higher rates every time, and that is one context where I 

 would apply that rule. 



Mr. DeFazio. How about any thoughts you have on negative bill- 

 ing credits? 



Mr. Cavanagh. Actually, I'm remembering, Mr. Chairman, that 

 billing credits became an unwelcome fixture in many of our lives 

 as an alternative to tiered rates back when the Regional Act was 

 passed. It's pretty clear to me, and this hearing has reenforced the 

 view, that we're heading for tiered rates in the reasonably near fu- 

 ture. 



And I would expect that when we get there, and I don't expect 

 us to get there instantly, that particular issue, which I join you in 

 shrinking from, will be happily moot. 



