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through the billing credits. They have given their customers an av- 

 enue to develop resources, enabling them to offset BPA purchases. 

 Administratively, the process has become more refined. For in- 

 stance, Bonneville has waived detailed scrutinizing of costs for very 

 small projects. Alternative costs have been revised and a public 

 process has been taken into consideration. 



As a result, EWEB has been successful in securing billing credits 

 contracts for a backpressure turbine at our steam plant, for the 

 Smith Creek hydroelectric facility, and for the Newberry geo- 

 thermal project. BPA could further simplify its billing credits proc- 

 ess by accepting a standard offer format for small resources and by 

 assuring its customers of their billing credit eligibihty at the front 

 end of the process so the utility has confidence there is a market 

 for its resource. 



Negative bilUng credits remains an issue. When the wholesale 

 power rate exceeds the alternative cost of the resource, the utility 

 must pay Bonneville the difference until the end of the contract pe- 

 riod. The utility can find itself in the position of paying for a nega- 

 tive billing credit so far into the future that the benefits to develop- 

 ing the resource are negated. 



BPA shoxild take additional steps to eliminate this disincentive 

 for resource development. I think it's important to recognize on the 

 issue of fuel switching that the electric-to-gas natural fuel switch- 

 ing question is only a part of a broader issue of fuel substitution. 

 Fuel substitution includes three elements: Residential fuel switch- 

 ing from existing electric water and space heating to using natural 

 gas; residential fuel choice decisions about what kinds of equip- 

 ment to install; and the substitution of natural gas for electricity 

 for natural gas in commercial and industrial apphcations. 



For fuel switching, the market conditions play less of a role be- 

 cause the cost-effectiveness of a conservation decision is dominated 

 more by the actual cost of conversion. In markets where there is 

 a fuel price disparity, gas availability and relative ease of conver- 

 sion to fiiel switching seems to be proceeding. 



We need to ask. Is fuel switching a resource or only an interim 

 solution that will come back to haunt utilities in 20 to 25 years 

 when natural gas supplies are exhausted and the cost of fuel is no 

 longer competitive with electricity and are we addressing the po- 

 tentially gray picture of a gas system whrch is subscribed to the 

 point of some intemiptible contracts with scheduled periods of 

 backup oil? 



Without the imposition of barriers to switching back to electricity 

 as a heating fuel sometime in the future, we believe fuel switching 

 is of questionable value as a long-term resource. Fuel substitution 

 in the short-term, however, could be considered a resource, but the 

 priority, regardless of fiiel type, is always efficiency of the end use. 



We believe that the issue of fuel switching shoiild be fuel blind. 

 Bonneville should not prohibit the expenditure, in our opinion, of 

 Super Good Cents incentives in areas where natural gas is cur- 

 rently available. 



We beheve that Bonneville has been effective in carrying out the 

 research necessary to evaluate environmental costs. We think Bon- 

 neville has taken a deliberate approach to explicitly including only 

 those external costs and benefits that are quantifiable and they 



