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service industry's load, including amounts paid to a third party for transfer service 

 to that load Bonneville is required by the contract to try to mitigate these costs 



Instead of triggering this termination provision, a utility customer could 

 request an incremental reduction of load on Bonneville by use of the many 

 contractual provisions available to it to submit changes in their Firm Resource 

 Exhibits Depending on whether Bonneville is surplus or deficit, some contractual 

 provisions enable the customer to reduce load on Bonneville in 7 years or 6 

 months, respectively Other provisions are triggered regardless of Bonneville's 

 supply situation. For example, the contract enables a customer to take load off 

 with only 30 months' notice if it intends to serve regional load with a renewable or 

 co-generation resource 



Question How enforceable are those rights'^ 



Answer Bonneville's power sales contracts were basically not designed to 

 prevent its customers from reducing or eliminating the amount of power which 

 they take from Bonneville Were Bonneville to impose monetary consequences 

 upon a customer seeking to terminate its contract, the customer may choose 

 instead to reduce its load in steps under the contract to mitigate or avoid 

 termination consequences to the extent it has a contract right to do so 



Question Is Bonneville addressing these issues in its new power sales 

 contracts'^ 



Answer In the recently completed first phase of power sale contract 

 negotiations, Bonneville and the customers reached a tentative agreement that 

 matched Bonneville's need for load certainty with the customers' need for rate 

 certainty Bonneville is developing 2 and 5-year requirements products which 

 would carrv' 2 and 5-year rate certainty, respectively. In some cases, the load 

 commitment period becomes a take-or-pay obligation of the customer For those 

 customers reducing their requirements purchases from Bonneville, we have 

 reached tentative agreement requiring 7 years' notice to return to requirements 

 service This provision enables Bonneville to remarket any unpurchased 

 requirements power into higher-margin long-term markets, although Bonneville's 

 ability to market such power outside the Northwest is still significantly constrained 

 by the Regional Preference Act of 1964 



Question If BPA's customers do leave the system, what are the agency's 

 alternatives for selling the surplus power'' 



Answer. As I indicated earlier, market prices for spot and block purchases 

 of power by Bonneville have been under 16 mills since January The loss of a 27- 

 mill preference-firm sale, then by creating surplus power, and resort to the 1 5- to 

 20-mill spot market to sell that surplus does create a revenue loss Given current 



