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term fluctuations, principally drought and aluminum price driven. 

 Those are probably the two major variables that cause that prob- 

 ability to vary. 



Those won't change. Buyout or no buyout, those remain what 

 they have always been, to the same degree of certainty. What does 

 change with the buyout is that currently we have an annual pay- 

 ment of $700 million to the Treasury. If you got in absolutely dire 

 straits you could defer a portion of this payment, and we did that 

 in the late 1970s and early 1980s. These deferrals are really a 

 large part of why payment reform got started. So we are motivated 

 not to do that, but in extreme circumstances we have the ability 

 to do that. 



The amount deferred would be more like $300 million to $400 

 million after the debt buyout, because the appropriations would es- 

 sentially be paid off in one lump sum and be refinanced on the pri- 

 vate capital markets. So you would have less of an amount to defer. 

 But we still think the $300 million to $400 million beyond the re- 

 serves provides ample flexibility if we got into that kind of a situa- 

 tion. 



Mr. DeFazio. Okay. I don't have any further questions. 



At this time, I ask unanimous consent to place into the record 

 the statement of Senator Max Baucus from Montana. 



[Prepared statement of Senator Baucus follows:] 



Statement of Senator Max Baucus 



Thank you Chairman DeFazio for offering me a chance to include my statement 

 into the official hearing record. 



As a Senator from Montana, I have been very involved in issues facing western 

 states, including salmon recovery, utility rates, and the drought. Over the past few 

 years, I have worked very closely with the Bonneville Power Administration to in- 

 sure that its practices and policies did not harm the people of my state. Let me say 

 at the outset that my working relationship with BPA has at times been difficult. 

 But I beUeve the current Administrator, Randall Hardy, has provided the leadership 

 necessary to make BPA a more efficient and responsive public agency. 



For instance, last June, at my request, Administrator Hardy held two public lis- 

 tening sessions in western Montana while considering BPA rate increases. Based on 

 these meetings and the comments he heard from the public, rate increases were 

 kept below the level that would have closed down our Columbia Falls Aluminum 

 Plant (CFAC), causing widespread layoffs and economic devastation. Randy Hardy 

 proved willing to listen to the concerns of western rate payers before making policy 

 decisions. 



Although the plant remains open, the effect of this double-digit increase in rates, 

 coupled with low aliuninum prices, has caused CFAC to lay off about one-third of 

 the plant's employees. As a primary employer in the Flathead Valley, these layoffs 

 have had a far-reaching effect in the area. 



Each year, western rate payers are faced with uncertainty in terms of future rate 

 increases. This uncertainty can lead to a slowing of business development when 

 businesses fear that substantial rate increases could cause their operating expenses 

 to skyrocket. Montana needs these companies to insure economic growth. 



Under the current system, the Bonneville Power Administration has to undergo 

 time-consuming, frustrating repajrment battles each year with the government. This 

 hurts BPA, the rate payers, and the government. Instead of engaging in these bat- 

 tles, we would Jill be better served by a restructxiring of the entire debt. A restruc- 

 turing that provides stability, certainty, and fairness to all rate payers. 



I support BPA in their efforts to operate in a more businesslike fashion. I believe 

 a reasonable debt restructuring will prove a significant step in this direction. 



But there Eire certain aspects of a debt restructuring that I will not tolerate. Most 

 importantly, any revised structure must be rate neutral, not creating an increased 

 burden on the rate payers in the west. Drought conditions and salmon recovery pro- 

 grams are already affecting utility rates. Restructuring the debt should help allevi- 

 ate, not exasperate, these increases. 



