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Over the past three years, I have spent more time on this than any other single external issue and I am, in fact, getting burned out on it. It is important, however, that I keep my enthusiasm up in this area. I remind myself that over 40 cents of every dollar you pay us goes to pay for the power that we purchase. This month, over 50 cents of every dollar will go to pay for power. We are sitting here with a bill for $641,000 for the amount of electricity we bought from Bonneville during January. The issue that OPALCO needs to address during 1996 centers primarily around our need to enter into a long-term agreement for power at a price that is competitive today and will be competitive in the future. Our current contract with BPA expires in 2001. Today, BPA is not the lowest cost provider of power. PacifiCorp, BC Hydro and Washington Water Power are currently selling power at a lower cost than BPA. As I have said many times before, BPA's power is based on the Columbia River hydroelectric system plus WPPSS Nuclear Plant 2. The cost of this power is basically fixed. The other utilities and potential suppliers are playing in a resource market dominated by exceptionally low natural gas prices and a current surplus of generation in the western part of the United States that has been tied together electrically by massive transmission lines. Even if BPA is not the lowest cost provider today (by a couple of percent), there is a tremendous value in the generation facilities on the Columbia River. I believe this value will become apparent when gas prices increase and the current generation glut is exhausted. I believe that BPA will again become the lowest cost provider and our collective interests are best served by sticking with BPA over the long term. Our need/desire to continue with BPA is reinforced by our need for BPA to maintain two full capacity submarine cables between Anacortes and Lopez. A year and a half ago, there were three cables supplying power in this crossing. In November, 1994, one of the three cables failed at the end of its life and has not been repaired. The second cable in this crossing will be 30 years old in 2003 and is at or near the end of its life. BPA needs to spend $12-$15 million dollars on a new cable to serve us. I think they will be more inclined to install that cable if we are purchasing power from them than if we are purchasing power from someone else. During 1996, we need to continue to press these issues with BPA to obtain a long-term (5-10 year) contract for power at a known price and get a contractual commitment from BPA to install the needed submarine cable. Next time, we will talk about the fourth and final of our strategic objectives which I have saved for last because it is the most important: Member Services - our commitment to you as a member/owner of OPALCO.
Doug Bechtel
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