105 



STATEMENT OF WILLIAM K. DRUMMOND 



Mr. Drummond. Good morning, Mr. Chairman and members of 

 the task force. My name is Bill Drummond. I am the manager of 

 the Public Power Council. The Public Power Council is as associa- 

 tion of Bonneville's publicly and cooperatively owned electric utili- 

 ties. PPC members all purchase power from Bonneville and account 

 for approximately 50 percent of the agency's revenues 



This morning, I would like to address four areas from my written 

 testimony: First, Bonneville competitiveness; second, tiered rates 

 and unbundling; third, resource acquisition; and finally, the na- 

 tional performance review. 



There are several aspects to Bonneville competitiveness that I 

 would like to address. First, the Bonneville Project Act, which was 

 the first statute addressing Bonneville as an agency, set the origi- 

 nal mission for the agency as encouraging the widest possible use 

 of all electric energy that can be generated and marketed and to 

 provide reasonable outlets therefor and to prevent the monopoliza- 

 tion thereof by limited groups. Without a competitive Bonneville, 

 the original mission of the agency, even as enlarged and enhanced 

 by the Northwest Power Act, will go unfulfilled. 



If Bonneville continues on its current path, customers will simply 

 leave the system. They would probably continue to use the trans- 

 mission system to move power around but Bonneville's days as a 

 resource agency would simply be over. Most utilities are currently 

 examining alternatives to Bonneville's resources and many of the 

 utilities are pursuing alternatives. 



A recent public utility bidding process appears to have found sev- 

 eral resources that are competitive with Bonneville's current rate. 

 Mr. Hardy talked about the Bonneville rate being about 27 mills. 

 One utility was able to find several generating resources whose 

 first-year cost was less than 30 mills. Those are resources without 

 the attendant risk of fish and wildlife expenditures, repayment ac- 

 celeration or nuclear decommissioning. Thus, Bonneville as we cur- 

 rently know it could simply disappear, picked over like some car- 

 cass for the salvageable parts that utilities can use and that are 

 competitively priced. 



The notion of Bonneville going out of business should not be dis- 

 missed. It is entirely conceivable that the agency could fade into 

 oblivion — a really great idea whose time came and went. 



Second, tiered rates and unbundling — the book on tiered rates is 

 still open with significant potential benefits but also many ques- 

 tions left unanswered. The goals for tiered rates are laudable. 

 First, to send the proper price signal. That would encourage re- 

 source development; provide a wider array of choices; show people 

 the true cost of resource acquisition; and reduce pressure on Bon- 

 neville's debt cap. It would divorce the cost of Bonneville resource 

 acquisition from the operation and maintenance of the federal base 

 system. There are questions now regarding the cost effectiveness of 

 Bonneville's resource acquisition because they face, of course, their 

 own bureaucracy as well as constraints placed on them by federal 

 law. It would force those who face load growth to pay for the cost 

 of that load growth. 



There is a lot of pressure to implement tiered rates, but we must 

 make sure that it works for public power; for example, small sys- 



