37 



We have adopted a competitive statement and a strategy of about 

 10 or 15 pages that lays out a concept of where we want to go, but 

 it basically involves two things. First, we have to become much 

 more efficient. Not efficient in the sense we are describing here 

 today of just squeezing the grape and cutting the budgets; we have 

 to go through a fundamental structural change to look at making 

 ourselves more efficient. That probably implies staffing reductions. 

 It implies a lot more fundamental changes in how we deliver pro- 

 grams and our services. Secondly, to use the utility jargon, we have 

 to unbundle our services. 



Basically, we have one product right now. It is plain vanilla PF 

 bulk power. We deliver it to everybody, and we load all of our costs 

 under that one product. That is a little oversimplified, but not 

 much. That may work for a small co-op in eastern Oregon or east- 

 em Washington. It is not a particulsirly attractive product to a gen- 

 erating utility privately or publicly owned. We need to break apart 

 our products and services; we need to market our storage, our load 

 factoring, our other transmission integration services, shaping all 

 of these different services that we are uniquely equipped to pro- 

 vide. We provide them now. Sometimes we charge for them, some- 

 times we don't, but we don't market them as separate products. 



From my perspective, we don't collect nearly the value we should 

 fi*om those products, and we don't serve our customers very well 

 because we are not marketing in a discrete sense to try to meet the 

 individual needs of individual customers. We have to do that. 



Probably the final thing that is implied in this is, we have to look 

 at subsidies in our existing rate structure or things that are argu- 

 ably subsidies — ^variable rate, irrigation discoimt, low-density dis- 

 count. I am not saying we are necessarily going to do away with 

 them, but we clearly have to examine whether those are still ap- 

 propriate given this kind of competitive environment that we face. 



Finally, we have to look at other rate structure changes. The 

 chairman has expressed an interest in two-tiered rates at the 

 wholesale level. We are going to actively investigate that concept. 

 If we were to adopt a two-tiered rate, I beheve we would be the 

 first utility probably in the country to adopt a two-tiered rate at 

 the wholesale level. There are significant equity and revenue sta- 

 bility questions involved in that, but I have concluded that we need 

 to start moving in that direction so we have a combination of pro- 

 gram incentives and price signals. 



We need to do all of that, and that is what our competitiveness 

 project is designed to do. Those are the challenges that I see in the 

 strategy that we have tried to scope out to meet those challenges. 



Mr. Sharp. My time is about up, but I appreciate that very con- 

 cise overview and at some point will want to get a little better un- 

 derstanding of the interplay between the new transmission access 

 requirements and BPA, which I think is actually treated somewhat 

 differently than most of the rest of the country on that, as one who 

 is very much involved in advocating that. 



But I think what you are sa3dng is very important for lots of peo- 

 ple to hear, because that kind of change is oftentimes very upset- 

 ting, especially when you use the analogy — which I understand 

 doesn't quite accurately fit — of the punch bowl, that what has, I as- 

 sume, been brought more to the table, is who really benefits, who 



