31 



interactions that I have had with him, his observation has been, at 

 least on first blush, he thinks there are some significant staff sav- 

 ings available in the Supply System, and he intends to pursue that. 



Mr. DeFazio. So he is going to earn his quarter of a million a 

 year? 



Mr. Hardy. I would hope he would and then some. 



Mr. DeFazio. That is good. 



Mr. Hardy. I guess his observation was, he ran a very similar 

 utility in Texas where the staffing was considerably less than is at 

 the Supply System, and I suspect he will pursue that aggressively. 

 I expect him to, and the Supply System board expects him to. 



Mr. DeFazio. Perhaps a good first step would be to say that you, 

 in fact, given your extraordinary circumstances, find their request 

 too high and ask them, since you — and I will get into this a little 

 later — but since you are considering across-the-board cuts, that you 

 recommend that they consider across-the-board cuts. I think it is 

 $240-some-odd million, their operating expense. 



Mr. Hardy. $242 milhon a year. 



Mr. DeFazio. Right, and we have the figure that — what was 

 it? — $25 million rates increase by 1 percent? 



Mr. Hardy. Right. 



Mr. DeFazio. So if we could get a 10 percent reduction there, we 

 could pick up a percent. A percent here and a percent there, and 

 pretty soon you have got real percents. 



My time has expired, but I will get back to this. I want to recog- 

 nize other people so that I don't carry on at too great a length. 



Mr. Smith. 



Mr. Smith. Thank you, Mr. Chairman. 



Mr. Hardy, I am interested in the irrigation discount as well as 

 the heavy industry discount like you give to aluminum production 

 folks. First, how much impact does the irrigation discount have on 

 your budget? 



Mr. Hardy. It is about a $13 million impact. That was the 

 amount of the discount in 1992, I believe. That is about a half a 

 percent. 



Mr. Smith. A half of 1 percent. 



Mr. KLardy. Half of 1 percent; yes, sir. 



Mr. Smith. And the heavy industry discount? 



Mr. Hardy. It is not a discount, it is what we call a variable rate. 



Mr. Smith. It is on the price of aluminum. 



Mr. Hardy. Right. It varies not only with the cost of power but 

 also with the price of aluminum. So it has a slope to it. The base 

 rate floats up and down with the cost of power, but where you are 

 on the slope depends on what the world price of aluminum is. 

 Right now, because the world price of aluminum is so depressed, 

 the industry's rate is 18 mills, which is the lowest it can get under 

 the current rate structure. 



Mr. Smith. And what was it at its peak? 



Mr. Hardy. At its peak, I believe it was in the range of 26-27 

 mills. Our priority firm rate is 23.5 mills. So it was considerably 

 above that. 



I guess the point I would make, Congressman Smith, is that in 

 the five or six years since the variable rate was initiated we have 

 about broken even. When aluminum prices were over a dollar a 



