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in the next 60 days and their competitiveness over the next 6 

 months. 

 Mr. Smith of Oregon. I need just one more, Mr. Chamnan, if I 



may. 



Mr. DeFazio. Sure. 



Mr. Smith of Oregon. As I sit here, I'm concerned about the fact 

 that each time there's a rate increase, it means that Bonneville 

 Power Administration has more competition in the field of develop- 

 ing energy fi*om other sources. 



So we've loaded them up with the social agenda to protect fish 

 and now we're going to load them up for another social agenda, 

 which you may argue with me about, but it's this conservation 

 question. 



We may be loading them up so heavily that they can't compete, 

 and that bothers me a little bit. I want to ask Mr. Hardy in that 

 respect. You had a very ambitious, I thought, program looking at 

 this whole competitiveness issue to reduce your administration's 

 costs by 50 percent. Where are you in that effort? 



Mr. Hardy. We've set ourselves a goal. Congressman, of reducing 

 administrative costs by 50 percent just for fiscal year 1993. I don't 

 think we can sustain cuts of that level in 1994-95. We're probably 

 more in the 15-20 percent level, but it's rolled into the program 

 costs then. 



That aside, the long-term goal of the competitiveness project is 

 to make ourselves much more efficient, efficient in a structural 

 sense as opposed to kind of a budget-cutting, squeeze-the-grape ex- 

 ercise that we've just been through. I would anticipate significant 

 efficiencies not just in our conservation programs, but across the 

 board. How much I can't say at this time. By about September, we 

 should start to have some pretty good numbers in hand, both rel- 

 ative to staff and relative to overall dollar savings. 



One of the things that you have to weigh in conjxinction with 

 that is this question. Right now, we are actively working to convert 

 a significant number of our conservation outlays through a third- 

 party financing mechanism where we can do multi-year contracts 

 of just the type that we did with Eugene Water & Electric Board 

 back in the middle 1980's. 



But there's a limit to that, and the hmit is that 85 percent of our 

 costs are fixed now. In that arena, you take costs from the control- 

 lable category and shift more costs into the fixed category. So 

 you've got to baleince that against the limitations that that then 

 puts on your ability, frankly, to meet your Treasury payment — 

 against the very kinds of long-term benefits that Angus pointed to. 

 The dilemma that you have, particularly with the conservation 

 resource, is how many short-term costs for what kind of long-term 

 benefit. You're constantly trying to balance those two. Right now, 

 we think we've got a solution to that, at least in part, by cutting 

 out a lot of our administrative costs — ^which we've done in the 

 Super Good Cents program and some of these other programs — in 

 the short-term sense and looking at decreasing the delivery costs 

 in the long-term, plus tiered rates. You can get the same megawatt 

 targets for a lower amount of cost, but the longer-term dilemma, 

 what that balance is, is still there. 



