16 



rate of inflation may be a more appropriate goal in an industry where many costs have 

 been falling. More fundamentally, any success measurement keyed to the rate of inflation 

 may be suspect. If we are really in a declining cost industry, relative price comparisons to 

 other service providers— our competition— may be the only relevant yardstick. 



An examination of tiered rates that would send more appropriate price signals about the 

 cost of providing incremental services are an integral part of the Marketing Plan 

 development. We expect the proper role for tiered rates to emerge as the Marketing Plan 

 is developed, and in subsequent discussions with our customers and other interested 

 parties, as we test and implement the Marketing Plan through such actions as estabhshing 

 future rates and developing new power sales contracts. 



Progress on the Function-by-Function Review 



The Function-by-Function Review is our vehicle for seeking out opportunities for 

 accomplishing Bonneville's work more efficiently. Each function is being examined to 

 determine whether it can be performed with fewer staff and at lower cost. We have 

 completed the first phase of the review, and the results are being reviewed by teams which 

 include BPA customers and other external parties as advisors. 



Progress on Internal Culture 



A key part of Bonneville's competitiveness effort is to create an internal culture that 

 supports the agency's Jiew direction. Organizations going through fundamental change 

 have learned that the change effort is not successful without careflil attention to cultural 

 issues. A cultural audit completed in May concluded that BPA has several strengths that 

 will help us succeed and some weaknesses that need to be addressed. A survey of our 

 customers confirmed many of the findings of the internal cultural audit. 



7 



