50 



Mr. Williams. I remember Lowry from his days around here. I 

 expect that practice will be ending soon. 



Mr. Hardy. One might have that expectation; yes, sir. 



Mr. Williams. Thauok you, Mr. Hardy. I appreciate your being 

 with us. 



Mr. Hardy. Thank you, Congressman. 



Mr. DeFazio. That was most illuminating. I was unaware that 

 he had that unilateral authority, and I think I may correspond 

 with him and urge that he use that unilateral authority. 



Mr. Kreidler. 



Mr. Kreidler. Mr. Hardy, I would go back to some of the issues 

 relating to BPA's short-term situation and get your thoughts on the 

 viability of various options to limit any additional rate increase re- 

 quests while retaining Bonneville's ability to meet obligations to 

 the Federal Government and others. One option would be to charge 

 a one-time drought surcharge on BPA customers as a means of 

 more or less looking at this as a short-term crisis and not some- 

 thing that is ongoing, hopefully. 



Mr. Hardy. I think the drought surcharge is kind of appealing. 

 It has a clear conceptual linkage. The chart I showed you clearly 

 shows that a significant portion of the costs are weather related, 

 and that if we get average water next year it will go away. So hav- 

 ing a higher level of rate for the first year and a base level of rate 

 that you recede to may make some sense. 



I must say, in the discussions we have had both in the rate case 

 and in the settlement discussions with our customers, they have 

 not favored that approach. Our public utility customers, in particu- 

 lar, for a variety of reasons that are still a bit of a mystery to me, 

 are reluctant to proceed. I think they have to do with how many 

 times you go back to your commission to get your rate changed and 

 wanting to have some stability of some 2-year rate period rather 

 than changing it every year or every 6 to 9 months. 



I think they are also concerned somehow that the Direct Service 

 Industries are going to be advantaged because they would be recov- 

 ering in the second year just to take advantage of this while the 

 public utilities would be penalized in the first year. 



I must say, I don't find those arguments to be terribly persua- 

 sive, but that is one of the issues that will be considered in the rate 

 case. We have left ourselves the flexibility to do that, and I simply 

 need to look at the rate case record and make a decision, but I 

 think there is a certain logic to that. 



Mr. Kreidler, What do you think of the more long-term option 

 of turning more of the conservation responsibilities over to the 

 BPA's customers. 



Mr. Hardy. We are actively working with our customers to do 

 just that. It is called third-party financing. They put up their bond- 

 ing capability to finance conservation activities, and we pay the 

 debt service. 



We have a group of customers, about 7 or 8, with whom we are 

 actively pursuing negotiating such arrangements with right now, 

 the advantage being both at the federal borrowing that is shifted 

 to them because they can borrow in the tax-exempt market and we 

 have to borrow at Treasury rates; they can actually do it more 

 cheaply. I am hopeful that we will be able to conclude some con- 



