174 



Mr. DeFazio. Thank you. Mr. Carr. 



STATEMENT OF JOHN D. CARR 



Mr. Carr. Good afternoon, Mr. Chairman. I'm John Carr, execu- 

 tive director of the Direct Service Industries, 11 members of indus- 

 tries who are served directly by the Bonneville Power Administra- 

 tion, consisting of aluminum and titanium, magnesium and chemi- 

 cal producers. 



I'm going to step back from some of this discussion and draw an 

 analogy, because I think the basic model we're using here does 

 need to be questioned. Sometimes the best way to do that is just 

 to take a look at another industry. Instead of picking one of the 

 ones that are usually discussed today, let me pick the watch indus- 

 try. 



If you go back to 1968, the Swiss had about 60 percent of the 

 watch market and they had about 85 percent of the profits or some- 

 where in that range. A fateful event happened to them, though, 

 about 6 months going into 1967. Some of their own engineers — a 

 fact not usually recognized — but a few of their own engineers had 

 come up with a new technology. 



Of course, the technology is probably what everyone has on their 

 wrist in this room today. It's quartz movement, digital watches. 

 The watchmakers turned it down, the Swiss watchmakers did, and 

 they had so much hubris about their position that they didn't even 

 protect their own finding. 



Of course, later that year, they had an international watch show. 

 Texas Instruments and Seiko walked by, saw the technology, and 

 of course, history was made. Ten years from then, the Swiss didn't 

 even have 1 percent of the watch market. 



There are similarities to that and the power industry today. We 

 are going to see massive changes in the power industry, much like 

 telecommunications and others. Right now we can't see what those 

 end results are going to be, but we know some of the forces that 

 are moving it. The transmission deregulation, retail wheeling, open 

 access, construction of new generation resources by non-utilities, 

 the natural gas itself, just that we have relatively cheap natural 

 gas. 



The technology is well known. Notwithstanding Bonneville s 

 charts earlier, I think the pressure for Bonneville to stay competi- 

 tive is going to become larger by the day. We are seeing the same 

 massive restructuring of a market in electricity now and over the 

 next few years, what the watch market has seen or what it experi- 

 enced in 1968 and the early 1970s. 



There is a difference, though, that I'd like to point out today, and 

 that is Bonneville and Randy Hardy and the senior managers are 

 not doing what the Swiss watchmakers did. They are actually rec- 

 ognizing that the fundamental changes are happening and that 

 the/re going to have to make the changes to be competitive and, 

 in simple terms, have gotten past the denial stage. 



Obviously, by the time the Swiss manufacturers got past the de- 

 nial stage, it was way too late. I guess from my standpoint, I can't 

 overstate the sense that I think massive changes are going to occur 

 and we need to help Bonneville stay ahead of that game and get 

 to a place in several years where it can stay competitive. 



