Administrative Feasibility of Two-Tiered Pricing by the Bonneville Power Administration

A member of Congress requested an assessment of the administrative feasibility of a two-tier rate structure for electric power marketed by the Bonneville Power Administration. Legislation has been proposed which would authorize such a rate structure in order to motivate electric utilities and power consumers to conserve electricity and develop renewable resources.

GAO found that there was general support, including support from Bonneville, for motivating electric utilities and retail customers to conserve power and to develop renewable energy sources. The two-tiered pricing system would provide utility customers with more accurate price signals than they presently receive. The tiered system could be made administratively workable at the wholesale level, but there are questions of application about what specific form such rates should take at the retail level in order to assure equity and effectiveness. GAO felt that tiered pricing would serve as a more accurate reminder to utilities of the cost of new power generation than the current rating system. Therefore, GAO believed that Congress should legislatively remove any doubt regarding Bonneville's statutory authority to use the system. Also, Bonneville should be directed to identify and make recommendations for testing alternative retail rate structures and actions which would encourage conservation.