half of other project purposes (e.g., navigation and flood control) to the Treasury. 

 BPA was allowed to take a $19 million credit against its payment to Treasury for 

 fiscal 1994 Corps of Engineers and Bureau of Reclamation operations and mainte- 

 nance costs. 



Today, the Federal government pays over $100 million a year to study, maintain, 

 and restore salmon in the Columbia and Snake Rivers. Through its customers, BPA 

 is paying about $200 million a year — not counting purchase power and foregone rev- 

 enues resulting from reduced water availability. When these latter costs are in- 

 cluded, the total cost to BPA and its ratepayers is over $300 million. This represents 

 about 11 percent of Bonneville's estimated 1996 operating outlays. 



Additional costs are expected over the next several years. As many of you know, 

 pursuant to the Endangered Species Act, the NMFS recently issued its 1995 Biologi- 

 cal Opinion. The opinion outlines the effort required to avoid jeopardy to the three 

 listed salmon stocks and prevent further harm to declining but unlisted stocks. The 

 opinion requires even more changes in the way the river activities are conducted, 

 including new flow levels, increased water spills, some reservoir drawdowns, 

 changes to hydrogeneration, flood control and other activities. These changes all will 

 be carried out to protect salmon survival, and they will have a cost on top of govern- 

 ment program costs already being spent each year. 



In tne future, there will be other changes as well. NMFS is expected to issue a 

 Recovery Plan later this month that will address the other factors affecting salmon, 

 such as habitat, harvest, and hatcheries. The Plan is intended to improve the condi- 

 tion of listed and unlisted salmon resources. 



ADMINISTRATION PROPOSED COST SHARING 



Now, I want to address the 1995 Biological Opinion, which primarily affects 

 hydrogeneration and the BPA, in more detail. We expect the amount of additional 

 costs to BPA to be about $140 million in fiscal 1996. This figure includes $42 million 

 of direct program expenses, $54 million of replacement power purchases, and $54 

 million of foregone revenues. We expect these costs to rise to $200 million by fiscal 

 2001. 



Last month, the Administration agreed to help defray the costs of the 1995 Bio- 

 logical Opinion. We have completed our analysis of program costs and options that 

 were being discussed by all the Federal agencies involved in developing the opinion. 

 I am pleased to announce that we have reached a conclusion, which we believe will 

 substantially assist the region in meeting these costs. 



On average, our decisions will provide Federal credits to the region of about $60 

 million per year for each of the next two years. Assuming average levels of water 

 availability, it will yield a total credit of more than $200 million over the next five 

 years. Based on these actions, BPA believes the incremental costs of the 1995 Bio- 

 logical Opinion can be covered without a further increase in its recently-announced 

 five per cent rate increase. 



The specifics of how incremental salmon recovery costs will be covered are as fol- 

 lows: 

 — About $30-$40 million a year will be derived through administrative and other 



cost savings which BPA can achieve. 

 — Beginning in fiscal 1995, annual credits on a permanent basis under section 

 4(h)(10)(c) of the Northwest Power Act will be provided for BPA's direct fish and 

 Wildlife expenses. These credits will amount to about $25-$35 million a year. 

 — In each of fiscal 1995 and 1996, section (4Mhi(10)'c) credits for BPA's power-pur- 

 chase costs related to its fish and wildlife programs will also be available. We 

 believe this is appropriate due to the immediacy of the program requirements 

 and the time it will take BPA to implement its cost savings and other programs. 

 We expect this action to result in about $30 million for each of these two years. 

 — Finally, to the extent necessary, BPA will reduce its build-up of cash reserves. 

 This may make it more likely that BPA will have to reschedule a portion of its 

 annual Treasury payment in future years. If such an event occurs, BPA will re- 

 schedule its debt consistent with existing Treasury policy. 

 The Administration believes these actions will make a major contribution toward 

 our shared goal of achieving healthy salmon stocks in the Columbia basin and main- 

 taining a stable power system in the region. 



Mr. Chairman, this concludes my remarks on the Administration's efforts to de- 

 velop a solution that reverses declining salmon runs in the Columbia and Snake 

 River system. I would be pleased to answer any questions that you may have. 



Senator HATFIELD. I will now call on our colleagues. For those of 

 you who have just arrived, I have asked the colleagues to withhold 



