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Mr. DeFazio. Thank you. 



We will proceed now to a round of questions. Let's start first with 

 Mr. Drummond, and anyone else who wants to comment on the 

 question could. 



As I understand the financial wizards at BPA, they have looked 

 at the net present value and the $100 million, and they have prog- 

 nosticated that they can structure the debt in such a way that we 

 would achieve rate neutrality for 25 years, and at the end of the 

 25-year period, they only anticipate a rate increase, but more likely 

 a continuing obligation for debt repayment that wouldn't have oth- 

 erwise existed but does not exceed the current obligation. So there- 

 fore instead of seeing a decrease in fixed costs, what you see is a 

 carrying forward of some percentage of fixed costs, which would ob- 

 viously decrease flexibility or the possibility of a rate decrease, or 

 whatever other obligations BPA might have at the time. 



Given that understanding, do you support the proposal? 



Mr. Drummond. While it has come out just in the last few days, 

 I have not had an opportunity to check directly with my member- 

 ship. I really would have to say at this point I don't think it does. 

 I think that that would fit within the definition of rate neutrality, 

 a continuing obligation, not an increasing one, at some point 25 or 

 perhaps 30 years out into the future — and again, I don't know how 

 long that obligation would last. I don't think it is all that long. I 

 would have to say 



Mr. DeFazio. Five years is what they say. 



Mr. Drummond. In my opinion, no, it would not violate our pro- 

 vision of rate neutrality. 



Mr. DeFazio. So, if I direct a question to Mr. Johnson, in his tes- 

 timony, he said. We are, however, unclear as to the nature of the 

 $100 million payment for the settlement of, "all claims against the 

 Federal Government against the hydroelectric power system." 



You heard Mr. White, the Deputy Secretary, tell us what the jus- 

 tification was, which is, they want to be able to score some savings 

 and we have a very bizarre way of keeping the books around here, 

 and we can't count the prepayment of the principal or interest, the 

 $4 billion just disappears into something somewhere. 



How would you like to comment, given your, now, in-depth un- 

 derstanding of the nature of the $100 million? The question is. Is 

 there a value to the Northwest to avoid current and/or future puni- 

 tive rate repayment reform proposals? 



As you are well aware, starting with David Stockman, who now 

 enjoys a comfortable existence on Wall Street, we had punitive pro- 

 posals, things that would have caused dramatic increase in fixed 

 repayment burden to BPA, straight lining the debt, increasing the 

 interest rates, whatever. There have been a whole bunch of theni. 

 And this administration hasn't seen fit to really rein itself in ei- 

 ther. 



The Speaker, I will tell you, has had to intervene personally with 

 this administration to stave off some of these things. 



The question is. Is there a value in the stability that would come, 

 and could that value be priced at, you know, some prepayment of 

 points, or however else you want to look at it, at this price? 



Mr. Johnson. We think this is an opportunity, and we under- 

 stand a lot of hard work has gone into trying to work this out, and 



