170 



year. Although we feel that this proposal represents a dramatically-reduced and inadequate 

 level of regional investment (given the Act and the Plan's directives to acquire all cost- 

 effective conservation), we believe that a rapid compromise is necessary in order to avert 

 long-lasting damage to the region's conservation infrastructure next year. Their proposal 

 will be forwarded to the Committe within the week. 



The first priority must be to ensure that the region's conservation and renewable resource 

 efforts do not fall apart in FY 96. At a bare minimum, BPA should adopt the utilities' 

 proposal for FY 96 and follow through on its commitment to implement the four renewable 

 resource pilot projects. 



In the next several years, BPA should work to implement a system for funding investments 

 that produce important, system-wide benefits through an equitable charge on the 

 distribution system. This would ensure that these investments, which benefit all end-users, 

 are paid for equitably by all end- users. BPA should encourage this development not by 

 mandating it, but by matching its customers' investment so that retail utilities can leverage 

 regional investment through their own participation. Finally, BPA should play a very 

 active role in funding regional programs with regional scope - so-called "market 

 transformation" programs that are either more costly or impossible for iridividual utilities to 

 run. 



We will submit more detailed recommendations on how BPA can maximize the 

 effectiveness of its conservation and renewable resource investments in a more competitive 

 environment within the next two months. In the mean time, it is imperative that we sustain 

 regional momentum in FY 96. BPA can afford to do so, and the region can't afford not to. 



6. Your testimony supports WPPSS costs beirg paid directly by BPA customers. In what 

 WO)' would these costs be allocated? On the basis of the original net billing agreements? If 

 on some other basis, please describe. 



To clarify, our testimony supports the proposition that BPA's customers should not be able 

 to elude WPPSS costs by choosing an alternative power supplier, since these costs are not 

 avoidable. 



BPA customers pay for WPPSS costs now, through their wholesale rate. While we are 

 still examining the recent FERC NOPR to assess the most promising ways to continue to 

 recover those costs, the basic principle is to make that proportion of BPA's rates that 

 represents unproductive nuclear investments (and possibly others, if appropriate) non- 

 bypassable. We believe that the most equitable way to determine the allocation would be, 

 at least roughly, as we do now. That is, allocation would be based on customers' load on 

 BPA, as of some recent historical period but no later than September 30, 1995. In 

 principle, we believe an explicit allocation should be as close as possible to the implicit 

 allocation that exists now, to minimize the friction associated with dramatic shifts. Using 

 the Tier 1 allocations that were calculated for tiered rates would seem an appropriate place 

 to start. 



7. Your testimony supports the use of transmission charges to recover stranded investment 

 from customers departing BPA. Mr. Hardy's testimony indicates that approximately half 

 of BPA 's customers are not seized by BPA transmission. How do you propose to deal 

 with this problem? 



Our testimony does not rule out the use of transmission charges to recover stranded 

 investment, but neither does it single out transmission charges as the most appropriate 

 vehicle. Again, we are evaluating alternative mechanisms in hght of the recent F^RC 

 NOPR. We are inclined to think that contract charges may be the best vehicle, but they will 

 require skillful negotiation on BPA's part, much as private utilities are negotiating to ensure 

 recovery of their stranded costs. The unilateral waivers that BPA granted recently are a 

 bold step in the opposite direction. 



With respect to transmission, few if any BPA customers "are not served by BPA 

 transmission." Some take their deliveries through an intermediary system, but in virtually 



