93 



Mr. Hardy. The dark blue part below is mostly WPPSS debt, and 

 the operating costs of WPPSS plant No. 2. 



Senator MURRAY. It makes it easy. 



Mr. Hardy. Modest other costs are included. 



Senator MURRAY. And that goes off in what, 2015? 



Mr. Ht^dy. It expires in steps between 2010 and 2020. By 2015 

 or 2016, the bulk of it is repaid, and the outstanding debt will be 

 almost down to zero. 



Senator MURRAY. In another vein, BPA sells power at 27 mills 

 or 28 mills wholesale. Can you describe for us the items that create 

 the difference between actual costs of running the dam and the 

 price you charge customers? 



Mr. Hardy. The actual costs of running a dam, or the basic O&M 

 costs of a dam are less than five or six mills. They are relatively 

 minimal. 



The difference is essentially reflected, to a large extent, in this 

 chart, in terms of the difference between the 5- or 6-mill operating 

 costs of the dams, and Bonneville's 27-mill rate. 



This difference is essentially due to the debt service on the dams, 

 that is repaying the Federal Government for the appropriations 

 that built the dams and the transmission and other expenses slice 

 on the chart lines in the first place. This difference also includes 

 the operating costs of WPPSS plant No. 2, and the debt service on 

 plant No. 2 and plants 1 and 3, the mothball plants. 



Finally, this difference is due to the fish costs, the 10-percent 

 slice from the chart, and conservation, which is the 3-percent slice 

 from the chart. And that essentially makes up all of the other costs 

 that we have that get you from a less than 5 mill or a 6 mill oper- 

 ating cost for the dams, which generate 90 percent of Bonneville's 

 power, up to the 27-mill rate that we have to charge to cover all 

 of our costs. 



Senator Murray. So can we say that all things being equal, hy- 

 dropower is still the most cost-effective competitive source of en- 

 ergy in the Pacific Northwest? 



Mr. Hardy. In raw power production costs, that is absolutely cor- 

 rect. As you add in fish mitigation cost hydropower, I think, it is 

 quite competitive, but that is the challenge we have right now. 

 What we are competing with is not just low-cost natural gas, and 

 combustion turbines, but low-variable-cost coal resources in other 

 regions of the country, companies that are essentially selling into 

 our market at prices in the midtwenties just to cover their operat- 

 ing costs and the transmission charges. Essentially, their goal is to 

 gain market share. 



This has all of a sudden been transformed into an extremely 

 competitive market, and that is what we are seeing. 



Senator Murray. OK. Thank you, Mr. Chairman. 



Senator Hatfield. Thank you. Senator Murray. 



Senator Kempthorne. 



Senator Kempthorne. Mr. Chairman, thank you very much. 



Mr. Hardy, you said that the Federal credits offered by the ad- 

 ministration are a bridge and not a long-term solution. What, in 

 your view, is the long-term solution? 



Mr. Hardy. Essentially, I think that is the purpose of the hear- 

 ing today. There have been a number of solutions and a number 



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