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EVALUATION OF THE BPA CONSERVATION ACQUISITION SYSTEM 



Introduction 



Bonneville Power is a utility. A utility with a difference. It has no non-DSI retail 

 customers, has no oversight from a local regulatory commission, and has no need to 

 offer itself for regular judgement by the electorate it professes to serve. The 

 differences are also positive - Bonneville is a utility with access to borrowing capacity 

 from the federal government and of such size relative to anything else in the Region 

 as to seem almost immovable. But make no mistake about it, Bonneville is, first and 

 foremost, an electric utility. 



Electric utility resource acquisition in the United States is a bastion of Soviet- 

 style central planning fighting to forestall the introduction of a competitive free market 

 economy to their fiefdom. Utility "apparatchiks" point their weapons at anyone who 

 may seek to bring free market efficiency to a field dominated by utility monopoly 



There may be an argument for the use of a utility's "natural monopoly" for the 

 distribution system. But there is no "natural monopoly" in the conservation or 

 generation of power Nevertheless, utilities throughout the U.S. maintain protected 

 monopolies in conservation as the only entitles that can charge the cost to ratepayers 

 other than those receiving treatment. The utility is the only party that can charge the 

 cost of conservation at House A or Office B to the ratepayers in House X, Office Y or 

 Industry Z. Any private company must charge the cost of conservation to the building 

 receiving it. And the utilities control that option ruthlessly to the detriment of the 

 ratepayers - and often to the detriment of the owners of the utility system, whether 

 stockholders or the federal government. 



It was the utility monopoly in power geneiation that caused the power plant 

 fiascos of the 1970s, including the billions of dollars spent on the WPPSS, Pebble 

 Springs, and Skagit/Hanford nuclear projects in the Pacific Northwest. The Public 

 Utilities Regulatory Policies Act of 1978 (PURPA) helped curt) some of the 

 inefficiency in generation acquisition. It has provided an effective free market 

 •yardstick" to the utility central planners. But PURPA does not apply to independent 

 conservation developers (usually known as energy service companies, or ESCOs). 

 and conservation remains retarded by continued utility monopoly 



Bonneville "Tests," Thus Far Rejects Free Market Competition 



Since the mid-1980s, utilities, often prodded by their regulatory commissions, 

 turned to open competitive bidding to acquire new conservation and generation 

 resources. So far, dozens utilities have issued competitive bids and have contracted 

 with ESCOs and independent generators on a performance basis. Now, many state 



TESTIMONY OF RICHARD ESTEVES Page 5 



