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1. Lack of an Adequate Resource Development Funding Mechanism 



Small and medium size PUDs and cities do not have the financial resources or the 

 access to bond markets necessary to develop energy resources. Though each PUD has 

 the power to issue tax-exempt bonds, this approach is difficult and costly for small 

 utilities. Bond issuance activities tend to be proportionally more expensive, the 

 bonds are viewed as higher risk, and there is a smaller population of potential 

 purchasers for bonds issued by small utilities. 



2. Utility Staffing/Technical Resource Limitations 



Small and medium size utilities can not respond effectively to BPA resource 

 development incentives, such as billing credits, because they have neither the staff 

 nor the particular technical expertise needed to develop the resources or manage 

 their development by third parties. Fifty percent of the Washington PUDs have fifty 

 or fewer employees. Five utilities have fewer than twenty. Employees in the smaller 

 PUDs often perform several different functions. Four of the eight CARES members 

 have only one conservation staff person. 



3. Size of Project Risks 



Small and medium size utilities can not undertake the risks, both financial and 

 political, inherent in resource development. For example, the cost of developing a 

 several-million-dollar cogeneration plant may seem reasonable when compared to 

 the revenues of a large utility. However, the cost may seem overwhelming when 

 compared to the revenues of a small PUD or dty. 



Unfortunately, this proportionally greater risk has discouraged small utilities from 

 developing potentially cost-effective conservation and renewable generating 

 resources in their service territories. 



4. Lost Revenue Issue 



For those PUDs and cities facing no load growth, or the possibility of major load loss 

 (e.g., closing of a lumber mill), conservation may be viewed as merely a revenue 

 loser that potentially could result in the need for a near-t' m rate increase to cover 



