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QUESTIONS SUBMITTED BY SENATOR MARK HATFIELD 



Bonneville Power Administration 



Question: Speculation abounds regarding what elTect the Administration's 

 so-called "cost reduction" efforts will have on Bonneville and its customers Most 

 of this speculation revolves around whether or not BPA can survive in a 

 competitive marketplace if the costs of salmon recovery become too large. 



Could you please describe for the Committee your view of the competitive 

 market place'' 



Answer Yes I will describe the situation in the marketplace for electric 

 energy in the Pacific Northwest, changes taking place in sales to Bonneville's 

 customers, current market prices, and the marketing activities of independent 

 power producer operating in the region 



The marketplace in the Pacific Northwest is extremely competitive The 

 causes for this competitiveness are many, including the steep decline in gas prices 

 over the last couple of years, increases in gas supply, a large surplus of energy on 

 the West Coast, the entrance of marketers, brokers, and independent power 

 producers into the marketplace, and deregulation of the electricity industry Prices 

 both for sales from utility systems and new generation from combustion turbines 

 are quite competitive with current Bonneville rates, and are likely to stay that way. 



Current projections of the cost of power from new gas-fired generation 

 over around 25 mills per kilowatt-hour at the bus bar Bonneville's current 

 average priority firm rate is 27 1 mills, based on projected fiscal year 1994 and 

 fiscal year 1995 costs, loads, and revenues Bonneville's customers report regular 

 and frequent visits from competitors of all kinds Several independent power 

 producers are actively pursuing projects and customers in the Pacific Northwest 

 As much as an additional 1000 average megawatts of new generation sponsored by 

 independent power producers are in the early stages of development The ability 

 to price its products at market prices will be crucially important to Bonneville's 

 success in this competitive marketplace Therefore, costs of all kinds will need to 

 be controlled and predictable. 



Overall, nearly 450 average megawatts of Bonneville sales have been lost 

 already. In addition. Requests For Proposals in process could lead to an additional 

 decline in sales from Bonneville of up to 1,200 average megawatts. Also, two 

 direct-ser\'ice industrial customers recently gave notice to Bonneville of their 

 decision to take about 250 average megawatts of their business to competitors at 

 verv' attractive prices 



