121 



we would obviously take those into account as to whether we went 

 forward. 



We think that is probably more a matter of the timing and the 

 sizing of the issues as opposed to whether you actually go forward 

 or not, period. Although, as I said initially, the basic legislation is 

 permissive, and if there were some extraordinarily unanticipated 

 circumstance, we have the flexibility to stop or not to go forward 

 based on what that is. 



Mr. DeFazio. The way I understand the construct, the way it has 

 been presented to me by your staff, is that we could anticipate that 

 total obligation we are incurring, the net present value of the $100 

 million in transaction costs, would be financed in such a way that 

 there would be no rate impact over a 25-year period, and at the end 

 of that period, because our obligations would be adjusted or other 

 fixed obligations would have been satisfied or declining, that we 

 could anticipate that rather than a bump-up in rates at that point 

 in time, what we are looking at essentially is, we would have a 

 time period where we are continuing some underl3ring obligations, 

 but they are not going to increase your total burden. 



Mr. Hardy. I think that is correct. Essentially what we have 

 tried to do in modeling the $100 million figure is to move that debt 

 out into the post-2025 period, and that puts it in a period where 

 all the Supply System debt has been retired. That all occurs by 

 about 2020. 



So you have an ability to shape other debt and just keep your 

 rate level constant, not have rates, perhaps, that go down as quick- 

 ly as they otherwise would have, and t£ike care of both the $100 

 million and any issuance costs associated with it, so you effectively 

 have no increase in rates for a 25-year period. We are very con- 

 fident that we can do that. 



Mr. DeFazio. So in having this discretion, if we were confronted 

 with a situation where we could no longer provide that guarantee 

 to the ratepayers of the Northwest, 25 years of no increased obliga- 

 tion or rate increases because of this reissuance. Is that a point at 

 which you would use your discretion to either suspend or 



Mr. Hardy. That is clearly a point where we could do that, and 

 we would seriously look at that option depending on the nature of 

 the circumstance, its size, the timing, and the effect of any near- 

 term rate increase that might result from those unexpected cir- 

 cumstances. 



Mr. DeFazio. I have always approached this with the idea of rate 

 neutrality. The way it is currently explained to me is that we have 

 achieved that objective, and if we were to no longer be able to pro- 

 vide that assurance, I would really have some second thoughts 

 about going forward with refinancing. I would then go back and do 

 a calculation of what are the risks, you know, what are the costs 

 here, and maybe even revisit the whole idea of a reissuance by 

 Treasury which could lower transaction costs. 



Mr. Hardy. I understand that and I think that is the spirit with- 

 in which the discussions were held between ourselves and 0MB 

 when we sized this, that rate neutrality was a certainty, near-term 

 rate neutrality. If we had that type of a circumstance, I would 

 agree essentially with your assessment as to what is on the table. 



