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do, or they won't get the money, that another BPA staff collects from us, to send 

 back to us — after deducting its expenses. 



And finally, centralization has created conservation programs that waste 

 energy, that hold on to electric load . In the Northwest, where gas is available, it's 

 thermodynamically and economically superior to electricity for a number of uses. 



But, instead of encouraging people to fuel fiimaces and hot water tanks with 

 natural gas, BPA wants: to buy natural gas to fuel turbine generators, to generate 

 electricity, to be sent over already loaded transmission lines, substations, and 

 distribution lines to heat homes and water; and will even pay a homeowner $65 to 

 buy a new electric hot water heater, even if they have gas heat In fact, BPA intends 

 to spend hundreds of millions of dollars to acquire Tanaska, a power plant that will 

 consume vast quantities of natural gas to generate electricity. That's not our idea of 

 conservation. We want to promote the direct use of natural gas: where it conserves 

 gas, electricity, and capital. That's a 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 from 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 it, through a second tier rate which would cover the full cost of 

 building and operating the new resource. 



Tiered rates will keep the decisions and the responsibilities for acquiring new 

 resources right where they belong — on the utilities. Tiered rates provide a strong 

 incentive for conservation. They send the right maricet signal. Adam Smith is not a 

 myth. 



Thank you very much. 



