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ApPENDIX 1 ISSUES INVOLVING HYDROPOWER PRICES/MARKETING/REVENUES DAVID LUTTRELL LINCOLN COUNTY POWER prOCHE, NV No specific comment. DANIEL MCARTHUR CITY OF ST. GEORGE SI. GEORGE, UT The hydropower from the dams constructed on the Colorado is our low cost imbedded resource that makes it possible to compete with the private sector who have their low cost imbedded resources. In addition, the resource is clean, renewable and environmentally safe. We feel that most of the recent decisions made as a result of studies completed on the river system are inappropriate and not well founded. TOM MORRIS WATER QUALITY/WETLANDS, NAVAJO NATION WINDOW ROCK, AZ Sotlrces state that currently available and oncoming tech- nologies in energy efficiency and production i.e., solar conld, if implemented, drastically reduce the need for elec- tricity from hydro, coal, nukes, oil/gas. DAVID ONSTAD LIICHFIELD PARK, AZ Many of the currently proposed alternatives for environ- mental mitigation place severe restrictions on the way hydro facilities are operated. Glen Canyon Powerplant has had its operational flexibility greatly reduced. It also has had maximum flow rates imposed which reduce the maxi- mum amount of power which can be produced. Operating costs have remained constant, which means that the cost of the reduced amount of electric power generated must increase to maintain the current revenue stream. PHIL MUTZ NEW MEXICO INTERSTATE STREAM COMMISSION SANTA FE, NM No specific comment. DAVID ONSTAD LITCHFIELD PARK, AZ In the past, wholesale and retail electric power rates have generally been cost based without much regard for market forces. State and federal regulators had established elabo- rate review procedures with the intent of controlling the prices utilities charged for the electric power and energy sold under their jurisdictions. The Electric Power Act of 1992 is changing the way electric power is priced by moving it from a regulated environment to a free market environment. The traditional vertically integrated electric utility is already competing with inde- pendent power producers and non utility generators in the supply of generation area of the business. The transmission and distribution areas of the business are also getting closer to true competition. However, before this is possible, the Federal Energy Regulatory Commission (FERC) will have to establish rules for the transmission sys- tem which will open it up to all suppliers and users on an equal basis, so an electric utility cannot use its transmis- sion system to compete unfairly with other power produc- ers and distribution companies. FERC is currently work- ing on rules to remove the market lever transmission companies currently have in the transmission area. We have already seen wholesale electric rates fall as the independent power producers bring on newer, more effi- cient generation to compete with those power plants which have higher costs. Just because a company has a power plant doesn1t mean that they can always recover the costs associated with the more expensive methods of producing electricity. Power producers must compete with other producers and those with a reliable product at an attractive price will sell the most electric power. DAVID ONSTAD LITCH FI ELO PARK, AZ Federal power rates are still cost based rates. Beca.use of large investments in transmission, visitor centers, replace- ments and environmental studies, these rates have increased dr<1matically in the p<1st few years, particularly in the Southeast. The following table shows the rates for the last 10 years. Year SLClP BCP APA 1983 9.92 1986 3.15 1987 6.75 14.17 1991 16.20 10.21 20.70 1993 16.72 14.56 24.20 1995 1221 25.11 The CSRP and Boulder Canyon rates have had the largest increases. These rates are starting to exceed current rates for spot market power. While spot market power is not suitable for most smaller utilities without some generating capacity they can use for reserves, the price doesn(t have to go much higher before it cannot compete in todayts emerging free market system. The ability to greatly increase the price of electricity to pay for environmental mitigation cannot be accomplished without paying atten- tion to the ma.rket price of electricity. FRED PARADY RHONE-POULENC GREEN RIVER, WY Operation of the hydroelectric system and the western area power grid-interacts specifically with the Jim Bridger power plant, affecting local taxes and jobs. In the larger picture, the move to restrict hydro operation's traditional role as a supplier of peak power demand is going to mag- nify other power generation (coal especially) demands and attendant environmental trade offs.