103 



Mr. Hardy. Roughly $7 billion, or more precisely $6.7 billion, is 

 the appropriated debt, both before 1974 and projected to 1995. The 

 remainder of that debt on the chart is the bonds that we have is- 

 sued since 1974 for the transmission system. We became self-fi- 

 nanced in 1974. 



If we refinance that $7 billion of appropriated debt, which is at 

 an average interest rate of 3.5 percent, on the private capital mar- 

 kets at today's interest rates, we estimate that will yield some $4 

 billion worth of up-front payments to settle our overall payment ob- 

 ligations by giving the Federal Gk)vernment a $4 billion near-term 

 cash infusion. It is our proposal to do that, plus provide the Treas- 

 ury with an additional $100 million worth of net present value in 

 the way of scoring rules per Gramm-Rudman-Hollingsworth. It is 

 that additional $100 million over and above what we would have 

 paid that constitutes a contribution, if you will, towards deficit re- 

 duction. 



We think there are issuance costs and other costs in addition to 

 the $100 million associated with this proposal. We believe and I 

 think the administration believes that this is an appropriate way 

 to resolve what has been an extremely contentious issue in the 

 Northwest and in Washington, DC. It will essentially refinance all 

 of the low-interest debt on Wall Street. It will be, by definition, re- 

 financed at market interest rates, and it will be by definition re- 

 paid on a fixed repayment schedule to the private investors. This 

 would address the two main sources of contention relative to the 

 so-called subsidy. That is, you had artificially low interest rates 

 this debt was being held at, and that Bonneville had a flexible re- 

 payment methodology that allowed it to hold on to this low-interest 

 appropriated debt and pay off" the high-interest debt first. Those 

 two issues would be removed as a result of this refinancing, in ad- 

 dition to making a significant contribution towards deficit reduc- 

 tion. 



We think that is appropriate for both for Northwest ratepayers 

 and for U.S. taxpayers, and we hope that the proposal will proceed 

 in more or less its current form as the part of the deficit reduction 

 package. 



In addition to this proposal, Bonneville, as part of the agency 

 Competitiveness Project and our status as a reinvention laboratory 

 under the National Performance Review, under Vice President 

 Gore's leadership, is also exploring the concept of a government 

 corporation. We have distributed a three-page outline of the kind 

 of structure that we would see associated with that kind of a cor- 

 poration. 



As I said before, the legislation we have drafted is under review. 

 The Department of Energy hasn't even reached full executive 

 branch review, and I anticipate it will still be some time before a 

 proposal is introduced to Congress. 



The objectives of such a corporate status would be to improve our 

 efficiency to execute our existing missions. This has naturally 

 raised some concerns in the region associated with, how does this 

 change Bonneville's status relative to the Northwest Power Plan- 

 ning Council, our customers, public interest groups, the Northwest 

 delegation, and congressional appropriations committees. 



