79 



Most of these offers have a similar pattern; they start at or below Bonneville's current 

 wholesale rate of 27 mills and escalate by a fixed percentage for five to ten years. They 

 thus start as extremely competitive prices and offer predictability for several years. 



As more customers leave, the amount of revenue produced declines. It's clear we need to 

 consider our competitive position when we set our prices. 



PROSPECT OF THE CALIFORNIA MARKET 



Some critics have suggested that Bonneville is overstating the competitiveness issue If 

 Bonneville cannot compete in the Northwest, they have said, there is always the California 

 market. The assumption that the California market is our salvation is well-intentioned, but does 

 not reflect current reality. 



California today has less expensive or the same alternatives to Northwest power, and it no longer 

 enjoys the economic boom that once supported large extra-regional power imports The reality is 

 that the same low-cost independent providers that are competing for Bonneville's customers in 

 the Northwest also are competing in the California markets. 



As a result of slow load growth, several California utilities also have substantial power surpluses 

 well past the year 2000. These surpluses are depressing prices to historic lows, as utilities opt to 

 sell power at prices below fully allocated cost rather than letting such resources sit idle 



It's not a case of Bonneville's 3-cent power versus a California utility's 8-cent power Bonneville 

 is competing against other generating utilities and independent suppliers in that market who also 

 offej 2.5 to 3-cent power and against prices forced down by the current surplus, a condition likely 

 to persist for several years. 



That does not mean there are not effective and positive arrangements to be forged with California 

 We are moving to maximize the working arrangements between the Northwest and California to 

 provide more seasonal energy exchanges and sales. The competitive market has reduced but 

 certainly not eliminated the economic value of these arrangements. The statutory limit on 

 marketing further reduces the value of these arrangements. 



BONNEVILLE COMPETITIVENESSES CRITICAL 



Bonneville's competitiveness is critical to the Pacific Northwest economy The agency provides 

 nearly half of the electric power and three-fourths of the high-voltage transmission in a very 

 electricity-dependent region. 



Bormeville's competitiveness is critical to its customers because the competitiveness and survival 

 of many of the 1 50 utilities and large industrial customers the agency serves in the region are 

 closely linked to Bonneville's rate levels. Likewise, business and industries serviced by these 

 utilities depend on an economic power supply. 



Bonneville's competitiveness is critical to the envirorunent because Bonneville funds conservation 

 activities, and we presently invest roughly $300 million per year on fish and wildlife (not including 

 additional fish mitigation measures recently proposed by the Northwest Power Planning Council, 



U.S. Fish and Wildlife Service, or National Marine Fisheries Service), in addition to tens of 

 millions for clear air, clean water, and hazardous waste cleanup. 



Further, Bonneville's competitiveness is important to the nation's taxpayers because of the annual 

 payments Bonneville plans to make to the U.S. Treasury. For FY 1996-2000, Bonneville's 

 projected annual Treasury obligation is on average about $860 million. 



