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In 1991, Senator Hatfield requested a study of the agency's financing alternatives. Regional utility 

 representatives, through the Public Power Council and with the help of Bonneville, developed a 

 response that analyzed a number of alternatives. Among these was one which proposed early 

 satisfaction of Bonneville's entire appropriations obligation through an up fi-ont cash payment to 

 the U.S. Treasury. Bonneville would finance the cash payment through the sale of its own 

 revenue bonds in the public bond markets. This "buy-out" of the appropriated debt received 

 extensive discussion among our customers. 



Appropriated Debt Buy-Out 



In September 1993, the National Performance Review Task Force stated that the Energy 

 Department may attempt to restructure the financing of Bonneville's debt by allowing the agency 

 to issue bonds at market rates and repay its low interest appropriations. This approach would 

 replace low-interest debt with current-market-interest debt, removing fi-om Treasury's books low 

 interest appropriations associated with the low rates on the older projects. This transaction would 

 be analogous to selling a low-interest mortgage in a higher-interest secondary market. The buyer 

 offers the current value ("present value") of the stream of payments associated with the low- 

 interest instrument. The seller accepts this discounted cash value of the instrument in today's 

 market. The Secretary has indicated that a buy-out proposal should not harm Bonneville's 

 customers. The discounted present value of Bonneville's $7 billion of low-interest appropriated 

 debt is about $4 billion. So the federal taxpayers - the original lenders of the fiinds that built the 

 federal hydropower dams in the Northwest ~ would be fairly cashed out by accepting an up fi^ont 

 payment of $4 billion in lieu of the principal and interest payments Bonneville would otherwise 

 make over the next 50 years. 



