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servation. We want to promote the direct use of natural gas, where 

 it conserves gas, electricity and capital. That's the wise use of our 

 natural resources. 



In conclusion, the most effective thing BPA could do to promote 

 conservation is to confine its conservation endeavors to improving 

 its transmission and distribution system and adopt tiered rates. 

 Tiered rates would separate the cost of the Federal Base System 

 fi*om the cost of new resources. 



When a utility's consumption rises above its FBS allocation, it 

 would either solve the problem on its own or pay BPA to do it 

 through a second tiered rate which would cover the full cost of 

 building and operating the new resource. 



Tiered rates will keep the decisions and the responsibilities for 

 requiring new resources right where they belong — on the utiUties. 

 Tiered rates provide a strong incentive for conservation. They send 

 the right market signal. 



Adam Smith is not a myth. Thank you. 



[Prepared statement of Mr. Dillon follows:] 



