As you noted in your opening statement, Mr. Chairman, for a 

 long time many have presumed that Bonneville could absorb the 

 costs of restoring the salmon population. 



But in 1994, the Government acted on an emergency basis to as- 

 sume part of the cost of additional spills and flows. At the time, 

 that action seemed necessary to protect the salmon, and a $19 mil- 

 lion credit was extended to Bonneville based on section 4(h)(10)(c) 

 of the Northwest Power Planning and Conservation Act. 



With the recent release of the National Marine Fisheries Serv- 

 ice's 1995 biological opinion, Bonneville is facing additional costs. 

 We need to find another way to come back to this next chapter of 

 the problem and look at how to share the costs. 



The administration expects the amount of additional costs to 

 Bonneville and the Treasury in fiscal year 1996 will be about $140 

 million. This figure includes $32 million of direct program ex- 

 penses, $54 million of replacement power purchases, and $54 mil- 

 lion of foregone revenues. 



By fiscal year 2001, we expect the costs of complying with the re- 

 covery plan to rise to about $200 million. 



Last month, the administration agreed to help defray the costs 

 of the 1995 biological opinion. We have talked to all of the con- 

 cerned agencies and worked back and forth on various options. Yes- 

 terday, we were pleased to announce that we had reached a conclu- 

 sion which we believe will substantially assist the region in meet- 

 ing these costs. 



What is involved here? On average, our proposal will, over the 

 next 2 years, provide a $60 million-per-year credit against Bonne- 

 ville's Treasury payments. 



Assuming average levels of water availability, our proposal will 

 yield a total credit of more than $200 million over the next 5 years. 

 Based on these actions, Bonneville believes the incremental costs 

 of the 1995 biological opinion can be covered without a further in- 

 crease in its recently announced 5-percent rate increase. 



Bonneville will cover these incremental costs in a variety of 

 ways. Roughly, $30 to $40 million a year will be derived through 

 administrative and other cost savings which Bonneville believes it 

 can achieve. 



Beginning in the current fiscal year, permanent annual credits 

 under section 4(h)(10)(c) of the Northwest Power Act, will be pro- 

 vided for Bonneville's direct fish and wildlife expenses. These cred- 

 its will amount to $25 to $35 million a year. 



In each of the fiscal years 1995 and 1996, section 4(h)(10)(c) cred- 

 its for Bonneville's power purchase costs related to its fish and 

 wildlife program will also be available. We believe this action is ap- 

 propriate considering the immediacy of the program requirements 

 and the time that it will take Bonneville to implement its cost sav- 

 ings and other programs. We expect this action to result in about 

 $30 million for each pf those 2 years. 



Finally, Bonneville will, to the extent necessary, reduce its build- 

 up of cash reserves. This action will increase the likelihood of Bon- 

 neville having to reschedule a portion of its annual treasury pay- 

 ment in future years. If such an event occurs, Bonneville will re- 

 schedule its debt consistent with existing Treasury policy. 



