81 



Regarding Washington Nuclear Project No.2, (WNP-2) preliminary analysis indicates, that given 

 decommissioning costs of about $450 million, it is significantly more cost-effective to manage 

 WNP-2 costs down to 25-27 mills in the near term In addition, reliability analysis shows the 

 plant is important for fall-winter capacity. However, should the plant fail to manage to cost 

 targets, termination will be re-examined. 



REINVENTION/IMPROVING SERVICE 



Bonneville has completely reorganized its work force to focus on customer service Prior to the 

 re-organization, we had no sales force. Now the agency is mobilized around account executives 

 who have direct contact with individual customers and who are empowered to respond quickly 

 and creatively. The feedback from our customers has been overwhelmingly positive about this 

 new service-oriented focus 



As part of the Administration's FY 1996 proposal to reinvent government, the Department of 

 Energy is preparing legislation to make Bonneville a wholly-owned government corporation 

 under the Government Corporation Control Act This would increase Bonneville's flexibility 

 over personnel, procurement, financial, budget, and litigation functions to allow Bonneville to 

 compete more effectively in electric power markets. Bonneville has already obtained 

 administrative relief from significant barriers in these areas as a National Performance Review 

 reinvention laboratory. This legislation would make permanent the relief obtained 

 administratively as well as relieve the agency from additional administrative burdens which are 

 statutory in nature. 



IMPROVING REVENUES 



Bonneville's Draft Business Plan identifies several means to protect and increase revenues Cost 

 cutting is not the sole means to close the revenue gap. Bonneville is committed to building 

 revenues through enhancing current products and existing markets, as well as seeking new 

 markets. By unbundling products and services, we can offer custom-tailored packages and ensure 

 that customers pay only for goods and services they need, rather than for one bulk product At 

 the same time, Bonneville's marketing department is developing new products and services that 

 will benefit customers and enhance our revenues. 



Initially, Bonneville proposed instituting tiered rates as a competitive tool, however, in light of the 

 rapidly evolving marketplace and customer concerns, has decided to temporarily shelve tiered 

 rates. Three key factors contributed to this initial decision, which we expect will be confirmed in 

 contract negotiations. First, the market itself Prices have collapsed to the point where the 

 difference between tiers is insignificant Second, a major goal of tiering is to send a market signal 

 to invoke energy conservation. It is now clear that, even without tiering, customers are moving 

 to develop conservation programs. We are confident that the Northwest Power Planning 

 Council's Regional Power Plan conservation targets can be achieved. Finally, given current 

 conditions, the complexity associated with implementing tiered rates appeared to be a disincentive 

 for doing business with Bonneville and at odds with our objective to stay customer focused This 

 decision responds directly to our customers and new market realities. 



Steps outlined in the Draft Business Plan, which we now expect to finalize in June, are essentia! to 

 maintaining our competitive position. Failure to act will lead to significant rate increases over the 

 next decade If we lose customers and revenues, we jeopardize our ability to fulfill legislative 

 mandates which include our broader commitments to fish and wildlife, energy conservation, 

 renewable resource development and other Northwest values, and meet our annual obligation to 

 the US. Treasury of about $860 million on average for FY 1996-2000. 



SALMON RESTORATION 



We believe the costs of restoring depleted salmon is one of the major factors in defining whether 

 Bonneville remains competitive Restoration of salmon stocks is possibly the most difficult issue 

 confronting the Northwest. Over the past 1 5 years, Bonneville has incurred costs exceeding $2 

 billion for all of the fish and wildlife mitigation programs. In the last four years, these aggregate 



