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INFORMATiaa PROVIDED BY MR. WHITE 



The $100 million represents the contribution customers may be willing to make to 

 permanently resolve the threat of repayment reform and the continuing uncertainty it 

 casts over the future competitiveness of Bonneville's rates. The $100 million 

 rqjresents the present value benefits of Bonneville's planned debt service payments to 

 Treasury over the 50-year repayment period. It reflects a balanced solution to the 

 Administration's desire that the subsidy criticisms on low interest appropriations be 

 addressed and Bonneville's need to maintain competitive rates and avoid financial and 

 rate instability. 



The $100 million is proposed to be provided in addition to the present value of the 

 currently anticipated repayment stream for unpaid Bonneville Federal debt. The buyout 

 legislative proposal would authorize Bonneville to borrow money in the private debt 

 market to buy out this present value while not causing a rate increase. The buyout 

 analyses assumed that the buyout occurs on the first day of FY 1996 and that a seven 

 percent discount rate and a one percent issuance cost. It was also assumed that long- 

 term private market debt would cost one-half of one percent more than the long-term 

 cost of Treasury bonds. Bonneville's existing computer based repayment model, which 

 utilizes separate generation and transmission studies, was run to yield a present value of 

 $4,020 million for the currently anticipated unpaid Bonneville Federal debt, (as of the 

 end of FY 1995) 



The next step in Bonneville's calculations was to determine how the present value of 

 the projected Federal debt service payments to the Treasury under the buyout proposal 

 would compare with the present value of the projected Federal debt service payments to 

 the Treasury under the status quo. 



The legislative proposal authorizes Bonneville to conduct a single, combined repayment 

 study rather than the separate generation and transmission studies currently required by 

 the Federal Energy Regulatory Commission. The concept of a combined repayment is 

 to put all the generation and transmission obligations into one power repayment study. 

 The combined study reduces the FY 1996 level debt service requirement by $50 million 

 because the combined study allows the generation study's surplus revenues beyond 

 FY 2006 to be used to help pay debt service in these later years on the projected 

 transmission replacements. As a result of the lower overall debt service level, the 

 combined repayment study does not enter a surplus revenue condition until FY 2044. 

 Despite this lower debt service level, the present value of Bonneville's total Federal 

 debt service payment to Treasury in the combined study, actually increases by about 

 $1 10 million, relative to the separate studies. This is because interest rates on the 

 projected Federal obligations which are being repaid at a slower rate, in the combined 

 study 7.87% and 7.25%, are higher than the assumed discount rate of 7.0%. 



The attached table provides summary information regarding the comparison of the 

 present value of Bonneville's planned Federal debt service payments to Treasury under 

 the debt buyout proposal and the Status quo. As shown by the table, the actual change 

 between the present values of planned Federal debt service payments to Treasury is 



