35 



Public Power Council Testimony 



before the 



Conunittee on Natural Resources 



Bonneville Power Administration Task Force 



Washington, D.C. 



October 28, 1993 



1. What alternatives can you suggest to Bonneville's current repayment formula for 

 its appropriated Treasury debt that would provide a long-term solution to the 

 perennial attempts to accelerate BPA's debt repayment schedule, have a neutral 

 or beneficial effect on Bonneville's rates, and provide the maximum deficit 

 reduction? Please discuss the principles that should govern any restructuring of 

 Bonneville's debt. 



Repayment acceleration initiatives have led to considerable power pricing uncertainty 

 in the Northwest. Some of these initiatives could have raised BPA's rates by 25 percent or 

 more. PPC has spent much time and effort over the past years fighting repayment 

 acceleration and looking for ways to remove the uncertainty of repayment acceleration. We 

 have sought a solution that will provide a long term resolution of this issue and will not lead 

 to rate increases in the near or long term. We also need to make sure that the current rights 

 of BPA's preference customers are not harmed in any way and timl the viability of 

 preference customers is preserved. The current level of customer involvement in BPA 

 decision-making must not be diminished. If legislation is needed to accomplish this, it must 

 be limited to this single issue. The proposal developed by the Administration and the 

 Northwest Delegation appears to meet these requirements, and therefore has our support. 



The alternative that we have spent the most time exploring is the present-value 

 refmancing approach. Under this alternative, the debt service stream of BPA's appropriated 

 debt would be restated in present- value terms. BPA would then borrow sufficient funds from 

 the U.S. Treasury, or the private capital market, to refinance this debt. BPA would repay 

 the refinancing bond, or bonds, over time. This refinancing could be done in such a way 

 that it would not increase BPA's power rates and, if the legislation is written properly, would 

 provide for federal deficit reduction. Deficit reduction could occur since the federal 

 government is receiving an influx of cash over a short period of time (one year or less) 

 instead of receiving these funds through repayment over many years. The choice between a 

 Treasury or private capital market refinancing would be based upon that refinancing vehicle 

 that best meets our needs and has the best prospects for "scoring" against the federal deficit. 

 This is very similar to the proposal developed by the Administration and the Northwest 

 Delegation. 



PUBLIC POWER COUNCIL 

 500 N E Mullnomah, Suite 729 Porllana, OR 97232 

 (503) 2322427 



