17 



so you get some feel for the order of magnitude of what is possible 

 in terms of cutting the budget and its effect on the rate increase. 



Next slide please, John. 



I'm sorry, before we get to the pie charts, this graph simply illus- 

 trates in a graphic sense the sum of the previous two graphics. 



A year and a half ago when I took over as Administrator, we had 

 $900 miUion in reserves and were projecting that we would end fis- 

 cal year 1993 with over $1 bilUon worth of reserves. Today, given 

 the circumstances that I have just described, we are projecting that 

 we will end fiscal year 1993 with $90 milhon worth of reserves 

 after we make our annual pa5mient to the Treasury. 



The significance of the $90 miUion figure is that that is working 

 capital for us. Between the time that we make our annual Treasury 

 payment on September 30 and the time utility power bills, which 

 are our revenue source, start coming in the third week in October, 

 the cash flow in those three to four weeks is $80 to $100 million 

 in a typical October. So we are already in the cash flow range rel- 

 ative to m^ng our annual Treasury payment. 



I still remain confident that we can make that payment, but we 

 do have exposures. If we have other unanticipated cost increases as 

 a result of further worsening in weather conditions, farther Endan- 

 gered Species Act requirements, or other sorts of circumstances, 

 that could impair our ability to do that. The graphic simply illus- 

 trates the causes of that deterioration in a graphic sense as op- 

 posed to a numbers sense in the $90 million reserve level. 



Next slide, please. 



This is the overall Bonneville budget. The point of this graph is, 

 about 25 percent of our budget is our current expense budget. Th^s 

 is the controllable portion of our expense budget. I suspect our 

 budget does not look unlike those that you have seen in the Fed- 

 eral Government. 



We have a lot of fixed costs. The blue, which is 15 percent, rep- 

 resents Federal interest; that is the interest on the Federal debt 

 ft-om the dams and fi-om the transmission system. The non-Federal 

 debt service, which is 23 percent, is primarily WPPSS debt. Depre- 

 ciation is 11 percent. The net cost of residential exchange is 8 per- 

 cent. Finally, other entities, or basically Army Corps of Engineers 

 and Bureau of Reclamation expenditures, over which we can re- 

 quest reductions but over which we have no realistic direct control, 

 is 18 percent of our annual expense budget. 



That leaves about 25 percent of our budget, that is what we call 

 our current operations budget. That is the principal discretionary 

 portion of our budget. 



Let's go to the next slide, please. 



This shows the current operations portion of our budget, some 

 $560 million worth of expenses. Of this portion of the budget, 39 

 or 40 percent, the one labeled the green or orange segment — it is 

 orange on the chart; I think it is green on your graphic; unfortu- 

 nately, we have switched our colors here — is basically power pur- 

 chases. This is weather driven. These are expenses, at least that 

 I would argue, that are not discretionary. To the degree you start 

 taking risks with these, you literally are taking risks with whether 

 you are going to keep the lights on or not. 



