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"renewable edge" by maximizing the productivity of existing supplies and introducing new 

 renewables into our resource mix; operate the high-voltage transmission grid in ways that 

 encourage the achievement of the Regional Act's objectives; and meet its financial 

 obligations reliably. These, we believe, are BPA's core functions. 



BPA's most troubling financial problem, and the function that bears qq relationship to 

 either BPA's mission or the capabilities of the Columbia River System, is nuclear costs. 

 We speak to this issue extensively in our original testimony. As we indicated there, we do 

 not believe that BPA can (or should) survive if it abandons its core functions in order to 

 assume its customers' bad debts, debts that were incurred on their behalf and at their 

 behest. Neither can BPA survive if it allows itself to be used as the vehicle for transferring 

 customers' nuclear debts to federal taxpayers. We reiterate that customers' attempts to 

 elude these financial obligations are 1121 "competition;" they are quite simply an effort to eat 

 the meal without paying the bill. If customers wanted to exercise competitive choices to 

 avoid nuclear costs, they should have done so before the costs were incurred. FERC's 

 recently issued NOPR on stranded costs sets forth a national policy that supports a 

 determined BPA effort to ensure fair allocation of these costs. 



BPA can and should thrive financially if it fairly allocates these obligations and uses its 

 unique abilities to implement the mission that Congress outhned in the Regional Act. 



2. What is your reaction to limiting BPA's fish and wildlife costs based on the success of 

 BPA as a power supplier? 



As noted above, we do not believe that fish and wildlife costs are the most significant 

 source of financial pressure on BPA. Furthermore, unlike nuclear debt, fish and wildlife 

 recovery is a fundamental part of BPA's mission. So, our first reaction is that fish and 

 wildlife costs are being given a priority beyond their significance with respect to BPA's 

 entire financial picture. 



Having said that, we believe that it may be appropriate to provide some certainty with 

 respect 10 the fish and wildlife costs that BPA bears. Limiting direct, out-of-pocket 

 expenses on salmon recovery measures may be acceptable cuid desirable, particularly if 

 control of the associated program measures is transferred outside of BPA. However, we 

 would not include either power purchases or foregone revenues as direct expenses. We 

 believe that the Columbia River System's hydro-producing capability must be defined as 

 consistent with river operations that support successful salmon migration. When asked 

 about the costs to the power system associated with irrigation withdrawals, BPA said, 

 "We've grown accustomed to those withdrawals." They are part of the baseline, so that it 

 does not occur to BPA to calculate and publicize the cost of power purchases or lost 

 revenues attributable to irrigation. The same should be true of river operations that allow 

 for salmon survival. 



Furthermore, limiting costs associated with power purchases and foregone revenues would 

 send an inappropriate economic signal to BPA. The first priority should be to reduce these 

 costs. Limiting these costs blunts BPA's incentive to reduce them. As NfRDC's 

 "Changing the Currents" study indicates, the opportunities to use western power markets, 

 maintenance scheduling, voluntary water transactions, and interruptible contracts to reduce 

 the costs of changing river operations are enormous, and largely untapped. These 

 initiatives, which more closely align the river's power-producing capability with western 

 energy needs, should be at the heart of the salmon recovery strategy. BPA controls the 

 operational decisions that make these cost-reducing initiatives possible. Only if it bears the 

 costs of these decisions is it likely to make them in a cost-minimizing manner. 



A cap on fish costs would create enormous incentives for all parties to "spin" the costs to 

 their advantage. Instead, we should be creating incentives that direct BPA's ingenuity 

 toward minimizing the costs by using its marketing function to economically align power 

 needs and river operations. In addition to more effective marketing, we might be able to 

 lower these costs significantiy by relieving BPA of much of the operational responsibility 

 for salmon recovery. We would be sympathetic to proposals in which BPA gets greater 

 cost certainty in exchange for less control of salmon recovery efforts. Recovery measures 

 associated with out-of-pocket expenses, such as habitat restoration and dam modification. 



