204 



Mr. DeFazio, Thank you. I want to thank all the members of the 

 panel for good testimony. 



Just in general response to a point raised by a number of mem- 

 bers of this panel and previous panels, this Committee will hold a 

 hearing in Washington, DC on the government corporation propos- 

 als. We expect to see some degree of detail beyond the seven-page 

 outline, which is all I have seen thus far, from the Administration 

 in the near future, and also on the issue of repayment reform. We 

 will be holding a hearing on both those issues perhaps in October. 

 So we will air that and invite people to give their views. We have 

 basically got to wait for more details from the Administration. 



There are some interesting points to get into here. Mr. Lorenzini, 

 you have raised some questions about the residential exchange and 

 they were rebutted by two of our subsequent witnesses. I would 

 just like to have a little more dialogue. I am not trying to foster 

 disagreements here, but I think you have both got a point and I 

 would just like to explore that a little bit more, because it was also 

 raised in earlier testimony about the idea of perhaps changing — 

 and I think you raised it in yours — the character of the exchange 

 agreements by a buyout or setting a price certain or some kind of 

 lock. So is there ground for some agreement here? Could that ad- 

 dress the inefficiency concerns that you have raised? Is there some 

 ground for agreement on a way to restructure this? I would like all 

 three of you who raised that point to address it. 



Mr. Lorenzini. I would hope so. I do not see that there is any- 

 thing in the contractual suggestion that we have made that ought 

 to cause a problem. 



Mr. DeFazio. You have made a very specific proposal to BPA for 

 a longer term contractual 



Mr. Lorenzini. We have not done gmything more than make the 

 proposal in our testimony here today. 



Mr. DeFazio. Oh, okay. 



Mr. Lorenzini. But we would be willing to pursue that concept. 



Clearly Mr. Myers is correct, none of us have an incentive to be 

 inefficient. We are all facing a competitive environment. No matter 

 what we say about the way we would like the world out there to 

 be, it is competitive and competition is measured by the fact that 

 customers have choices to make. Customers on the BPA system are 

 looking at those kinds of choices and BPA is going to face the con- 

 sequence of that if they are not competitive. And so we all have an 

 incentive to be efficient. 



It just seems to me that if we take a step to become efficient and 

 it saves us a certain amount, saves our customers a certain 

 amount, and then that is offset by the effect of the residential ex- 

 change, that takes away some of the value of the efforts that we 

 have made to become more efficient. The same is true for BPA. To 

 the extent they become more efficient, if the consequence to the 

 BPA is to remove some of the value of that efficiency gain from 

 them, then that is a disincentive. I do not know how else you would 

 define a disincentive. And that is the way the residential exchange 

 works today. 



And so our propossJ is to try to capture and lock in the current 

 value of the residential exchange, and then create a context in 

 which, to the extent we can become more efficient, we are able to 



