is the changing electric utility industry. This industry is changing 

 in a way structurally that the airlines, the phone companies, and 

 the gas companies changed in the 1980s. 



That portends some very significant impacts, not just on Bonne- 

 ville, but on virtually every other electric utility in the United 

 States. We have initiated a competitiveness project to deal with 

 those kinds of uncertainties, both in terms of unbundling our serv- 

 ices and in terms of becoming more efficient. That has a definite 

 impact on our resource acquisition program. We need to keep that 

 in mind, and we'll speak to some of those changes as we move for- 

 ward today. 



Probably the first issue that is of some significance is the cost of 

 new generating resource acquisitions and our priority firm rate as 

 it affects and impacts our competitiveness. There's been a lot of 

 speculation about Bonneville pricing itself out of the market. We're 

 concerned about that, but I'd like to put that in perspective. The 

 graph on your right, which you have a copy of and is an attach- 

 ment to my testimony, is an effort to do that. 



It essentially displays a range of costs for a baseload Combustion 

 Turbine (CT). The bounds of the gray area are a high and a low 

 kind of gas price forecast and the two dotted lines in the middle 

 represent — the upper one represents a median base load and the 

 other represents median prices, but with displacement. 



The significance of this graph is that there is no crossover point 

 even with low gas prices on the Priority Firm (PF) rate until well 

 after the turn of the century. There are conversions, and that is 

 cause for some concern. In fact, we don't think conversions will 

 occur until sometime in the next several years, if at all. 



Now, there may be a golden resource opportunity out there that 

 we haven't heard about, but in fact, most of the resources that have 

 been discussed in the region and are potentially being acquired by 

 others have already been proposed to us. We've either moved to ac- 

 quire them, as in the case of the Tenaska project, or they haven't 

 been as competitive, and therefore, we have rejected them. 



The other thing I probably should point out about this graph is 

 the value of displacement, which is a imique advantage that Bon- 

 neville can take advantage of. The difference between the two dot- 

 ted lines represents 50 percent displacement of an existing turbine 

 resource. 



That's about 5 to 7 mills over the lifetime of the resource. We 

 have the hydro capability to displace a resource, be it the Tenaska 

 turbine or other turbine, with surplus hydro when that's available, 

 and that results in a significant cost savings. By and large, other 

 utilities do not have that advantage or they only have it when they 

 can get surplus hydro from us. 



So that's a significant price advantage and operating advantage 

 that we have in acquiring these resources that does not necessarily 

 accrue to others. 



All that being said, there are legitimate reasons why other utili- 

 ties can, and probably should, develop some of their own resources. 

 We have uncertainties associated with our rate structure in the 

 form of Endangered Species Act obligations, nuclear plant decom- 

 missioning costs, repayment reform, and other kinds of imcertain- 

 ties that do not exist for other retail utilities. 



