Exchange. While I think they have a ways to go in understanding 

 some of the institutional constraints relative to the Northwest 

 Transmission System, they clearly see market potential for setting 

 up a commodities exchange or a commodities future market 3 to 5 

 years down the line. These are players that are the equivalent in 

 our industry of the MCIs and the Sprints and other competitors in 

 the telephone industry. I think that will give you some idea of the 

 degree of structural change that is occurring. 



The fourth element of this is last year's Energy Policy Act which 

 you alluded to, Mr. Chairman. That basically has opened up trans- 

 mission access at the wholesale level in electrical generation. While 

 there are some protections in there for the Northwest, they are lim- 

 ited. They are limited to existing firm-load customers and com- 

 pensation for transactions that would cause us to spill. That leaves 

 a whole volume of transactions that are still at risk. 



Finally, there is the logical extension of open transmission access 

 and retail wheeling. Whether or not that comes to pass is a hotly 

 debated topic, but it certainly is a logical extension of the kind of 

 deregulation that we see occurring. 



The two basic competitive risks that we see are the traditional 

 risks we have always had, that if our rates get too high, our cus- 

 tomers go out of business, whether it is the DSIs or a pulp and 

 paper mill of a public utility customer of ours, or a small business, 

 or an agricultural concern. That has not changed much; except as 

 I explained earUer, the price margins are shrinking. 



We have got two other fundamental risks that are new however. 

 One is the threat that customers will see turbines and other kinds 

 of new resource alternatives as being more attractive and less risky 

 than buying power from Bonne\'ille. In fact, we see that today. 

 Even though, we have not reached the crossover point with Bonne- 

 ville priority firm rate and the cost of resources, Clark County 

 PUD, Snohomish County PUD are out with request for proposals 

 for their own resources. Eugene has its own resource plan that con- 

 templates substantially greater independence from Bonneville. Co- 

 lumbia Falls Aluminum Compsiny has gone out with a request for 

 proposal to provide up to 40 percent of its power potentially from 

 other sources than BPA. 



The second type of risk, beyond customers going off our system 

 and our losing revenue associated with that, are the consequences 

 of open transmission access. As I mentioned before, we can protect 

 our existing firm-load customers and we can get compensated for 

 spill that is caused by transmission access. But that leaves a whole 

 volume of transactions, non-firm transactions, and possible-firm 

 transactions, including seasonal exchsinges for fish or other kinds 

 of revenue enhancing possibilities, that have to compete in that 

 marketplace with the Louis Dreyfuses of the world or those other 

 kinds of transactions. That category of additional transactions, both 

 firm and non-firm, is Uterally the margin that will determine 

 whether we are successful and competitive or not. And those are 

 the transactions that are at risk in a fundamentally different way 

 in an open-access transmission market than has been the case be- 

 fore. That is the nature of the competitive circumstance and the 

 competitive threat we see. What are we going to do? 



