108 



As I see it, it's contractual, but I don't see that it was mandated 

 by the Act. 



Mr. Smith? 



Mr. Smith of Oregon. Mr. Hardy, we discussed earUer in the year 

 your concerns about the drought in Canada and the problems that 

 that would incur in fixing rates with respect to flow, fish and wild- 

 life and other of your responsibilities. 



I'd like for you to bring me up to date about the flow that you 

 anticipate, if there's been any changes, and, beyond that, I want to 

 ask you about the percentage risk that you assumed in the repay- 

 ment, at least the payment of the interest on the debt of Bonneville 

 to the Federal Government, which we discussed, as well. 



Mr. Hardy. Yes, sir. I'll answer the second question first. To get 

 the size of the rate increase down to the 15.7 percent level, we took 

 a somewhat greater risk on Treasury payment. Our initial rate 

 case proposal was for a 90 percent probability of repaying Treas- 

 ury. We reduced that to 85 percent. That made the rate increase 

 2 percentage points lower, roughly, than it otherwise would have 

 been. 



Relative to the water situation, we are continuing to meet the 

 flow targets the National Marine Fisheries Service laid out in a 

 "no-jeopardy" opinion we received at the end of May. Flows are 

 dropping off this month. So we are having to draft more heavily 

 than we had previously anticipated because natural flows aren't as 

 high. 



That is imposing some additionad costs on us, some of which were 

 anticipated in the rate case decisions that I announced 10 days ago, 

 and some of which weren't. We'll simply have to see how those play 

 out. Right now, it's a day-to-day kind of situation. I anticipate 

 meeting those flow targets, but it will probably be somewhat more 

 expensive than it was even as little as 2 weeks ago. 



Mr. Smith of Oregon. That brings to mind, Mr. Grace, at least 

 the press has reported that Mr. Hallick believes that 15 percent is 

 much too low. I'd Kke to ask you your opinion of the 15 percent in- 

 crease and will that, in your mind, take care of at least the imme- 

 diate needs of Bonneville Power? 



Mr. Grace. Congressman, I think I'm quoted as sajdng that no- 

 body liked the rate increase. I'm not clairvoyant enough to know 

 whether 15 percent is adequate at this time or not. I'm comfortable 

 with it. I'm comfortable with it because Mr. Hardy is trying to 

 streamline the Bonneville Power. I think if we all work together 

 and do the best we can, I think it is sufficient. 



I think it makes it a little tougher for us to set priorities and 

 maybe we'll have to take a Uttle more business-like approach to 

 some of the things we'd like to see done, but I feel pretty com- 

 fortable with it. 



Mr. Smith of Oregon. Gee, that would be a tragedy, Mr. Grace, 

 to take a business-like attitude, wouldn't it? I'm interested in the 

 chart and will someone tell me the relative costs, very quickly, of 

 the various energy development programs, cogeneration, wind, geo- 

 thermal and hydro? 



Ms. HiCKEY. The generation costs range fi-om about 25 mills per 

 kilowatt hour, and I'm giving you evei^hing, 1993 dollars, real 

 levelized, up to about 50 mills per kilowatt hour. 



