Question: Please provide a detailed break down of the $31,260,000 request for program development. Why is a $5 million increase necessary in FY 1985?

Answer: I have a table which shows a detailed breakdown of the program development segment of our conservation budget:

The $4.5 million increase from the FY 1984 budget is reflected mainly in the Assessment and Evaluation area and is primarily due to the need to step-up capability building efforts. All of our current pilot projects are slated to become regional acquisition programs by FY 1987. The completion of assessment and evaluation analyses related to these projects becomes, therefore, essential in FY 1985 and FY 1986. More important than merely being timely, of course, is meeting that schedule with programs that we know how to administer and that we are confident will work. In addition to our own desire that our current pilot efforts assure us the capability to reap future energy savings, the Planning Council has been deeply concerned and involved in these efforts, particularly with regard to Model Conservation Standards adoption, and the advancement of industrial and appliance efficiency programs.

Other areas in which assessment efforts in FY 1985 are crucial are Irrigated Agriculture, long-term Residential Weatherization, and Mobile Homes.

In FY 1985 we will be conducting our first regional commercial survey in order to establish a baseline for commercial stock and to assess conservation opportunities of that stock. Evaluation work on our Hood River Project will require a higher funding level in FY 1985 than originally projected due to the fact that start-up has taken longer than originally anticipated and much of the activity has been rescheduled from FY 1984 to FY 1985. Lastly, we will be continuing our End-Use Load and Conservation Assessment Program. This project involves the metering of over 1,000 commercial and residential structures. From analysis of the data that will be compiled through this metering, BPA will improve the accuracy with which it forecasts hourly and peak loads and predicts the effect of conservation measures on such loads.

Question: How will the $4.3 million increase in assistance for States and local governments be utilized in FY 1985? What will be accomplished?

Answer: The $4.3 million increase in assistance for States and local governments, which is reflected in the FY 1985 budget, is to

support State and local government activities in the adoption, implementation and enforcement of the Council's Model Conservation Standards.

Question: Describe the need for the expanded industrial energy audit program.

Answer: The industrial energy audit program is being expanded to become a pilot acquisition program for the industrial sector in order to develop capability to quickly accelerate acquisition programs should unexpectedly high load growth occur in the region. This is consistant with the Planning Council's Two-Year Action Plan and BPA's resource planning which recognizes the number of uncertainties that could affect the load/resource balance in the region.

As a result of BPA's ongoing assessment activity to identify significant conservation potentials in the non-direct service industrial, non-agricultural sector, BPA has undertaken development of energy estimating engineering methodologies for use in several industries in the region. These will be tested and evaluated in FY 1985. In addition, the expansion of BPA's industrial program will involve the design and testing of various financial incentive mechanisms to overcome economic barriers that might otherwise inhibit adoption of new measures for increasing the electrical efficiency of industrial plants.

Question: There seems to be a large potential for cost-effective conservation measures in the irrigated agriculture program. Do you have the capability to more aggressively implement this program with additional funds?

Answer: We do not believe that additional funds would achieve significantly more energy savings in the agriculture program. We are currently funding the full amount of budget requests from every program operator, and plan to do that in FY 1985 as well. Our current budget is not a constraint to achievement of the long-range savings potential in the agriculture sector. We believe that our pilot program will build capability for a regional program that will acquire the cost-effective savings available from this sector in a timely manner.

Question:

Has BPA determined whether the following programs are cost-effective given the current regionwide electric power surplus?

Answer: Of the five programs listed, only the Sponsor Designed Program is a BPA conservation resource acquisition subject to cost-effectiveness evaluation under the Pacific Northwest Power Planning and Conservation Act. Proposals accepted under this program are consistent with the Planning Council's Two-Year Action Plan, focusing on commercial/industrial applications under 40 mills/killowatt hour in 1980 dollars. In addition, acquisitions

The

under this program assist in meeting conservation acquisition targets in the proper time frame as part of a least cost mix of resources needed to meet BPA's load serving obligations mix. remaining four programs are pilot programs and demonstration projects designed to build program capability for future acquisitions when their cost-effectiveness can be demonstrated.

Question: What determination was made as to cost-effectiveness of the above-mentioned programs in the last rate case?

Answer: At the time of last year's rate case, only the Solar and Heat Pump Water Heating Program was proposed as a BPA acquisition program. At that time the Planning Council's Two-Year Action Plan was not final. As a result, BPA applied the principles of its draft near-term resource policy which indicated that any near-term acquisition having a 20-year measurable life should not exceed 35 mills/killowatthour in cost to the power system. The Solar and Heat Pump Water Heating Program as proposed at the time involved an incentive structure which met this cost criterion.

Since that time, however, this program has been scaled down and redesigned as a market test of several delivery mechanisms. Additional performance data on solar and heat pump systems will also be gathered in this test.

Question: What measurement standard is being used to determine if these programs are cost-effective?

Answer: Only one of the listed programs, the Sponsor Designed Program, is currently a BPA conservation acquisition. BPA uses the Least Cost Mix Model to measure the cost effectiveness of various conservation measures and generating resources. The Least Cost Mix Model is a linear program that selects from similarly available and verifiable resources using supply curves and levelized costs developed from assessment and evaluation activities. Additionally, BPA's conservation acquisition programs are checked for consistency with the Planning Council's Two-Year Action Plan.

Question: Several utilities, including most investor-owned utilities in the region, did not sign BPA's long-term conservation contracts in 1983. Is BPA proposing to move conservation dollars that would have been spent by those utilities into programs that are two to seven times more expensive per average megawatt saved?

Answer: BPA is not proposing to move the conservation dollars that would have been spent by nonsigning utilities into other programs. BPA reduced its proposed budget for FY 1985 by an amount which represented the financing of weatherization and street lighting acquisitions in nonsigning utility service areas.

Question: Given the current and projected surplus of power in the region, why should 3PA begin new conservation acquisition programs while at the same time reducing existing programs that are less expensive per average megawatt saved?

Answer: BPA is not proposing to begin new acquisition programs in FY 1985, nor do we see a need to begin new acquisiton programs until FY 1986. In the meantime, BPA proposes to continue building the capability to develop the conservation potential of

the residential, commercial, industrial, and agricultural sectors by designing and operating pilot programs and demonstration projects. The regionwide acquisition programs have been funded at levels consistent with meeting forecasted needs in the mid to late 1990's.

While it is true that the region presently enjoys a surplus of power, the region's load and resource balance is very dynamic. The current BPA Long-Term Load Forecast suggests that by 1990 the region will be somewhat deficit. This condition continues into 1992 when load resource balance is again temporarily attained. After 1992, however, the region's loads exceed its resources. If we have to meet these forecasted deficit situations with expensive conventional resources, we would have to begin construction immediately.

If we are to meet those future deficits with resources like conservation, which is less expensive than conventional resources, we need to begin to build the capability now. This involves developing and testing markets, developing and testing conservation measures, developing and refining operational and contractual mechanisms and infrastructures, and evaluating processes and results. This involves using BPA's borrowing authority in the near future.

The deficits will have to be met. The only question is what new resources we use to meet them. BPA is committed to a reliable, least-cost approach. That is the basis of the economic benefit. Conservation is cheaper than similarly reliable and available new

resources.

Question: Has BPA studied the competitive impact which these conservation programs may have on the choice consumers face between alternate fuels?

Answer: BPA has not completed any specific studies which fully address this question. However, we have conducted, or are currently sponsoring, studies to collect data or estimate simulation model parameters which will help to analyze this issue. In the residential sector, BPA sponsored a project by the Oak Ridge National Laboratory and the MIT Energy Laboratory. An econometric study entitled Heating System and Appliance Choice was completed in 1983 which used data collected in our 1979 residential end-use survey to estimate an econometric model of heating system and appliance choice for new residences constructed in the Pacific Northwest. The equations and parameter estimates from this study are currently being placed in BPA's residential end-use forecasting model. The end-use model will be used to simulate some of the competitive impacts of conservation programs for new housing.

BPA is also collecting detailed cost and energy conservation data for new houses being constructed to meet the Planning Council's energy conservation standards in the Residential Standards Demonstration Project. Studies of conservation program impacts in existing houses are currently being conducted in our conservation program evaluation effort. These evaluations concern electricity savings only. However, we plan to use this and other data in a future residential end-use model development effort to incorporate the effect of conservation programs targeted at existing houses.

Less information is available in the commercial sector. BPA is currently placing a new commercial end-use forecasting model on its computer system which will have a limited capability to simulate competitive impacts of conservation programs. A major limitation in the development of this simulation model was the poor quality of data available in the commercial sector. BPA is currently planning to conduct a regional commercial end-use survey in FY 1985.

Question: Instead of reducing electric usage, will programs such as encouraging all electric home construction likely promote uneconomic fuel switching and increase electric consumption?

Answer: The impact of electricity conservation programs on fuel switching or aggregate electricity consumption can vary dramatically, depending upon the program design. At one extreme, a mandatory program for electricity use only, which places the increased costs of the program on the building owner or purchaser, might result in switching out of electricity into other fuels and a decrease in aggregate electricity consumption. At the other extreme, a program which pays the complete cost of program requirements might result in switching into electricity from other fuels. The change in aggregate electricity consumption would depend on whether the increase in electricity consumption from fuel switching is greater or less than the reduction in electricity consumption from the efficiency increases caused by the conservation program. With the exception of demonstration or information programs, most of BPA's conservation programs require a sharing of the costs of the program between BPA and the program participant. A variety of different mechanisms to share costs are used in the program design. A major purpose of our conservation program assessment and evaluation effort is to obtain data so we can better evaluate the energy impacts and cost effectiveness of alternative designs. Theoretically, there is a "breakeven point" in the design of a program where there would be no fuel switching impact. In practical terms, we are just beginning to develop the data and analytical tools which will provide a rough estimate of the competitive impacts of conservation programs.

IRRIGATED AGRICULTURE

Question: BPA has embarked on a pilot program that offers irrigaton utilities nonfirm power at reduced rates during the early irrigation season. Do you have any estimate as to how many utilities and irrigators will take advantage of this offer?

Answer: So far fifteen utilities have signed BPA'S offer to provide nonfirm power during the March and April early irrigation season. At this time BPA has no estimate of the number of utilities or irrigators that will take advantage of this offer.

Question: Is it your intention to offer other pilot programs that serve to assist both irrigators as well as BPA?

Answer: Yes. BPA has circulated for comment a proposal for a second pilot program to serve nonfirm energy to irrigation loads in May, for those utilities that cannot use the March-April program. BPA has also been discussing other possible pilot programs with utilities. If BPA determines that any of the proposals under