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you see Clark and Snohomish, EWEB and others proceeding to de- 

 crease their dependance on us, or at least taking the initial steps 

 to do that. I think the calculation that they are making is, even 

 though the crossover point is not out there, they think our rates 

 are going to go up by substantially more than we think they are 

 going to, and they see a lot of uncertainties. They see fish-and-wild- 

 life-related ESA uncertainties out there. They see repayment re- 

 form. They see potential nuclear plant decommissioning costs — 

 none of which have been factored into our rates yet — and they say, 

 I will take a risk on gas prices and supply in exchange for those 

 kinds of risks. So, I will start to diversify my sources of supply. If 

 those initial kind of forays into the turbine marketplace become a 

 wholesale rush, we have got a major problem. That is one of the 

 things we are trying to address in the Competitiveness Project — to 

 ensure our customers we have got control of our rates. We are 

 going to remain a reliable low-cost power supplier so that does not 

 happen. It is kind of Angus' scenario number two, if you will. 



Bonneville continues to be the resource provider of choice for at 

 least a number of the utilities in the region, and you have the sta- 

 bility of rates and of fish and other benefits that we have essen- 

 tially projected. 



Mr. LaRocco. It seems to me that there is a rate question if 

 somebody takes the risk and leaves for cheaper rates and that risk 

 does not payoff, does not work out, and you are sitting there and 

 you always are — BPA is always there. How do you handle that in 

 terms of rate structure down the road? I mean, if you lose part of 

 your customer base and that does not work out and they come back 

 3 years later and say, here we are, we are your best friend. Re- 

 member us? What is our rate? I mean, that uncertainty is not good 

 for the region as well, is it? 



Mr. Hardy. That is right. It sounds like an unbundled product 

 to me. 



Mr. LaRocco. It sounds like market forces at work, and you 

 have to be able to 



Mr. Hardy. I think you have made a point. The backup reliabil- 

 ity that our transmission system provides is worth a considerable 

 amount and in some way that has to be reflected in the mix of 

 unbundled products and services that we have. But it has also got 

 to be able to compete with other market forces out there, and that 

 is the challenge that we have. 



Mr. LaRocco. One last question, Mr. Chairman, and Adminis- 

 trator Hardy. When many agencies modernize, they say they have 

 to get lean and mean and more efficient. Say it is going to cost a 

 hell of a lot more money. Do you anticipate this in the Competitive- 

 ness Project. Is this built into the rate increase or do you anticipate 

 needing more money to bring in more technology, or is this going 

 to be able to be accomplished without an influx or surge of money? 



Mr. Hardy. I am anticipating that this can be accomplished 

 within the constraints of what we project our existing rates to be. 

 The whole purpose of this exercise is to decrease costs, not to in- 

 crease them. We are not seeking a strategy of major investments 

 up front that will give us benefits 10 years down the line. 



Mr. LaRocco. That is what I am talking about. 



