491 



The Honorable Peter DeFazio 

 July 16, 1993 

 Page two 



These questions include: What are the least cost energy 

 alternatives for the region?; Should we purchase more expensive 

 resources if they are perceived to have lower "environmental 

 externality" costs?; What additional requirements should be 

 considered beside direct costs (ie. power reliability, rate 

 equity)?; and What will be the effects on the electric power 

 industry of deregulating the transmission system? These questions 

 will impact BPA's future competitiveness and we may comment of 

 these questions on the August hearing in Seattle. 



My first observation on BPA's resource acquisition is that BPA and 

 the NPPC have identified the same mix of energy resources as PGE — 

 natural gas-fired combustion turbines (cogeneration and stand- 

 alone) , renewable energy resources, and demand-side management. 

 That PGE and BPA are pursuing the same resources confirms, I 

 believe, the technological, financial, and operational viability of 

 the options available to our region. 



My second observation is that the costs proposed to BPA for new 

 supply side resources is within the same range PGE has found. I 

 must qualify this by adding that as a federal agency, BPA often is 

 bound to different statutory and public obligations that might add 

 to the program delivery costs. But as a whole, the price of new 

 resources that are bid to BPA by private contractors is consistent 

 with what is being offered to PGE. 



BPA and PGE intend to pursue the same general timetable for 

 acquiring new energy resources, beginning with natural gas-fired 

 combustion turbines in the next one to two years. Renewable 

 resources such as wind and geothermal power will contribute to the 

 region's energy supply in the next three to five years. This roll- 

 out of new supply-side resources reflects the additional challenges 

 of bidding, siting, and constructing alternative resources that are 

 relatively rare in the region. 



If there is a difference in the strategies of PGE and BPA, it would 

 be the question of whether BPA's financial constraints will allow 

 it to pursue all cost-effective demand-side management (DSM) 

 savings within its customer's service territory. I am hopeful that 

 implementing the suggested changes to encourage third-party 

 financing and decentralized DSM programs will allow BPA to be 

 successful in acquiring these important energy savings. 



At PGE, assuming moderate growth within our service territory, we 

 intend to satisfy about 30 percent of our new load growth, or about 

 10 percent of our total requirements, with cost-effective demand- 

 side management resources. PGE is working hard to keep the costs 

 of acquiring DSM low so that they can compete with supply-side 

 resources. 



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