management recordkeeping and financial information into a single data system. As this budget shows, BPA has become a

$2.9-billion/year operation.

revenue just 6 years ago.

That's nearly six times our gross Efficient, up-to-date information

management is a necessity.

SUPPLY SYSTEM

I see signs of renewal even in one of the most intractable situations I personally have encountered in 30 years as a businessman. A few weeks ago, Washington Public Power Supply System Project No. 2 entered its pre-operational testing period. No. 2 was the plant most beset with all the problems: strikes, regulatory halts, contractor difficulties. When I arrived at BPA in the spring of 1981, Project 2, the flagship of the Supply System's enterprise, was adrift.

It was obvious to me that No. 2 was not getting the attention it needed, and equally clear that the fates of Projects 1 and 3 hung on successful completion of No. 2.

The preservation of Projects 1 and 3 has had the effect of channeling the Supply System's best talent and maximum effort on completion of No. 2. Today, Project No. 2 faces no apparent obstacles to licensing and operation later this year. Meanwhile, something very important is happening regarding the preserved plants; efforts are under way to find ways to reduce the costs of completion. While Project No. 1 is in a state of suspended animation, engineers and contractors are carrying out PEP, the Preservation Enhancement Program.

Under PEP, engineers are completing designs of the project before the first worker picks up a wrench to resume work at the site. In doing so, they are finding ways to reduce costs.

And, they are elminating many of the inefficiencies of the old "fast-track," design-as-you-build method.

At Project 3, another very encouraging development has occurred. Several weeks ago, the three major contractors at Satsop tendered a contractual arrangement for completion of the plant at a fixed price considerably lower than previously estimated.

The PEP program and the contractors' offer, we

believe, constitute breakthroughs in the nuclear industry's battle against high risks and rising costs.

NORTHWEST POWER PLANNING COUNCIL

Recent activities under the Regional Act also show great promise. Last year, the Northwest Power Planning Council produced its first Two-Year Action Plan. We reviewed the Plan thoroughly and found no obstacles to implementing 101 of the 115 specific action items recommended by the Council.

We

However, we

embraced the objectives of the remaining 14.
believed those objectives could be achieved at lower costs.

We labored cooperatively with the Council and its staff to find better ways to address the 14 items in question. We have reached substantial agreement on adjustments that achieve the same results at a fraction of the original cost. There now remain only five items where the Council is concerned that BPA's commitment of resources might not be consistent with the Plan. The Council believes more funds are needed in appliances and in the commercial, industrial, and agricultural sectors. If our analysis suggests the need for additional funding in these areas, we have agreed to consider a shift of funds from other conservation areas. In any event, our implementation of

the Council's action items will require a limited redistribution of funds within our 1984 and 1985 totals for conservation. We will inform you of any significant changes which result from our mid-year review of 1984 and 1985 spending plans.

A healthy working relationship has been established between BPA and the Council. Nearly 3 years ago, we pledged that we wanted

to help the Council become strong, effective and respected. Today, with its Plan completed, the panel has achieved those

attributes.

INTERTIE

In several other areas, we will be making some tough calls in months ahead. We are now in the process of formulating a new Pacific Northwest-Pacific Southwest Intertie Access Policy. This policy will set the terms for future secondary power sales over the intertie.

The intertie is a great asset for both the Northwest and the Southwest. The Federal System has a surplus of power, which we expect will last through the 1980s. Other utilities in both Canada and the Pacific Northwest also have surpluses. If the intertie is managed well, sales can be made to the Pacific Southwest--sales that will benefit all parties, North and South. The Intertie Access Policy is key to a successful marketing program. After receiving extensive comments from the public, we will move ahead and adopt a new policy.

At the request of a number of Northwest utilities, BPA has

taken a lead role in the effort to secure firm surplus power

sales with the Southwest. We are undertaking an aggressive and coordinated effort to secure sales which can contribute

importantly to the economic health of the region.

AVERAGE SYSTEM COST

Finally, we are reviewing the average system cost methodology of the power exchange program. The methodology adopted in 1981 in the wake of the Northwest Power Act simply is not working. It has turned into an administrative nightmare, with over 60 submittals being appealed to the FERC and still others to the courts. The average system costs for exchanging utilities have been far higher than anticipated. We are proposing improvements to the methodology, and are receiving public comments. We are encouraging the parties to give Bonneville their thoughts on this important subject so the best, balanced result can be achieved.

We will make changes only after a

thorough review of the various positions of the parties involved.

In summary, BPA and its customers are entering a period of recovery and stability. That's the message behind the numbers you see in our 1985 budget. Tight cost controls and improving conditions enable us to project an increase in obligations of only 4.1 percent. I am optimistic that electricity rates will level off in the remainder of the 1980s. This is the best news Because of the very difficult actions we have taken over the past 3 years, BPA is lean and fit. With the help of this Committee, we are ready to meet the challenges ahead.

of all.

Addendum to Statement of

Peter Johnson, Administrator
Bonneville Power Administration

BPA, THE AGENCY, ITS MISSION AND PROGRAM

BPA is the Federal electric power marketing agency in the Pacific Northwest, a 300,000-square-mile service area that encompasses Oregon, Washington, Idaho, western Montana, and small portions of adjacent western states in the Columbia River drainage basin. Originally established by the Bonneville Project Act of 1937, Public Law 75-329, to transmit and market electric power generated at Bonneville Dam on the Columbia River, BPA now markets hydroelectric power from 30 Corps of Engineers and Bureau of Reclamation projects, as well as thermal energy from non-Federal generating facilities in the the region. BPA also markets and exchanges surplus electric power inter-regionally over the Pacific Northwest-Pacific Southwest (PNW-PSW) Intertie with California, and in Canada over interconnections with utilities in British Columbia.

BPA constructs, operates and maintains the Nation's largest high-voltage transmission system (13,755 circuit-miles of transmission line and 374 substations at the end of FY 1983). This permits the coordination of the Federal electric power program with the region's public and investor-owned utilities to obtain the operating economies and investment benefits of a single regionwide utility.

Public Law 93-454, the Federal Columbia River Transmission System Act of 1974 (Transmission Act), placed BPA on a selffinanced basis and brought it under provisions of the Government Corporation Control Act. BPA has ongoing "revolving fund" authority to finance its operations with revenues from its power sales and to borrow funds from the Treasury to finance its capital investments.