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making a conscientious effort to implement the Council's Plan. 



The consumers in the Pacific Northwest who obtain tiieir electricity from a BPA-served utility are 

 dependent upon three organizations. To bring about an adequate and efficient result, the three 

 organizations must coordinate, plan, implement, and operate as if they were one efficient entity. The 

 three organizations are the distribution utility, BPA, and the Power Planning Council. (Included with 

 BPA, of course, are the Federal organizations which generate the Federal Power.) There is little 

 hope that this three-legged stool will remain standing! The Council and BPA appear to be unreliable 

 and unstable legs. 



Because of uncertainty about the adequacy of future supply and because of the expected rapidly 

 increasing costs, the distribution utilities must plan and develop resources to supplement or replace 

 the legs of the stool represented by BPA and the Council. The fact that BPA customers are seeking 

 alternatives to BPA and that no investor-owned utility is placing its load on BPA is evidence the Act 

 is not operating as intended. The Act envisioned BPA would be the principal supplier for the entire 

 Region, and that the Governors, through their appointed Council members, would be responsible for 

 determining the amount of power supply developed to fuel the Pacific Northwest economy. 

 Shortages and unnecessarily high power rates will hurt rather than help the Northwest economy. 



Reasons the Act Has Failed to Provide Expected Results 



There are, in my judgment, five factors which contribute to the Act failing to provide the results 

 intended. 



1 . Interpretation of the Act. The Act established carefully designed criteria intended to 



obtain the lowest cost power supply for the Pacific Northwest with due regard for the 

 environment and for wise use of energy through conservation and renewable resources. 

 The Act has been interpreted such that most of the resources acquired are high cost. 

 Not only are the costs high, but the rate impacts are disproportionally high as I will 

 discuss later. 



The Act specifically deals with conservation "measures" which are supposed to be 

 individually evaluated to determine whether they meet the cost-effectiveness criteria. 

 If this had been followed, in the aggregate the average cost of conservation resources 

 would be somewhat lower than the level which would just meet the cost-effectiveness 

 criteria. In practice, what the Council and BPA have done is to package many 

 measures together which in the aggregate form a conservation "program" with such 

 program being given the cost-effectiveness test. Some measures in the program are 

 costing well in excess of seven cents per kilowatthour. By themselves those high-cost 

 measures would never meet the cost-effectiveness test. 



Additionally, the Act provides for giving conservation a ten percent advantage over 

 conventional generation. The Council and BPA have extended that advantage to be 

 twenty percent by considering that an additional ten percent advantage is achieved by 

 having lower distribution and transmission system losses. This also allows higher cost 



