On the contrary, it could simply bid in all of its demand as completely price inelastic, and therefore willing to accept any price, no matter how high. Yes, there certainly is. With the incentives in place today, the utilities have no reason to behave in this manner, but if their profitability depends upon meeting or beating a PX day-ahead price PBR benchmark, that is precisely the incentive that they will have. Clearly it would be a grave mistake for this Commission to adopt such an incentive structure for the UDCs that it regulates. But caution should clearly be the guiding principle.
Incentives do work, and they can be very powerful.
As a result, the Commission must assure itself that any new incentives that it chooses to create are well-understood and point in the right direction. The consequences of error could be very great, not just for the customers of the utility that has the incentive, but for consumers statewide. I believe that the potential for losing customers to other commodity providers will exert some discipline on the utilities' procurement costs, even in the absence of a direct financial incentive. I tend to agree with ORA witness Price that the RAP proceeding that begins in the year 2000 would probably be a good time and place to revisit some of these difficult questions. Yes, thank you.