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ENERGY AND WATER DEVELOPMENT
APPROPRIATIONS FOR FISCAL YEAR 1988

THURSDAY, MARCH 12, 1987

U.S. SENATE,
SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.
The subcommittee met at 2:33 p.m. in room SD-192, Dirksen Senate
Office Building, Hon. Mark O. Hatfield presiding.
Present: Senator Hatfield.

DEPARTMENT OF ENERGY
POWER MARKETING ADMINISTRATIONS

BONNEVILLE POWER ADMINISTRATION
STATEMENT OF JAMES J. JURA, ADMINISTRATOR

OPENING REMARKS Senator HATFIELD. The hearing will please come to order. This afternoon, we are to receive the testimony for the fiscal year 1988 budget request for the Bonneville Power Administration.

On behalf of the subcommittee and Chairman Johnston we extend a warm welcome to Mr. James Jura, the Administrator of Bonneville.

Mr. Jura, I believe this is your first appearance before this committee as the new Administrator of the Bonneville Power Administration, and we welcome you for this historic moment. We look forward to many more years of your appearing here.

We will place your entire statement in the record and you may proceed with your testimony at this time in any fashion you choose.

Mr. JURA. Thank you, Mr. Chairman. First, I would like to say it is my pleasure to be here. This is my first congressional hearing, and it is a pleasure to appear before you, sir.

I am here to answer any questions as best I can about our fiscal year 1988 budget. Before I do that, I do have a few remarks I would like to make about the Booneville Power Administration.

INTRODUCTION OF ASSOCIATES Senator HATFIELD. Fine. Mr. Jura, you may wish to identify your very distinguished associates who have accompanied you here today. I must

observe that over the years, those faces change a bit, and some of them look a little older and others disappear. I am looking for the old legal eagle that you used to bring with you, Bob Radcliffe.

Mr. JURA. Bob Radcliffe, our Deputy Administrator, is in Portland today taking care of the agency.

Senator HATFIELD. Would you like to make a part of the record the names of your associates here?

Mr. JURA. Yes, sir.

I would like to introduce Lee Johnson, the manager of our Washington, DC, office; Roger Seifert, the deputy of our Washington, DC, office; Steve Ailshie, our Financial Manager; Jack Robertson, head of external affairs for the agency.

Senator HATFIELD. Who? (Laughter.] Mr. JURA. Jack Robertson; James Jones, Deputy Power Manager; John Cameron from our Office of General Counsel; Craig Mortensen and Steve Wright from our Washington, DC, office; and Joan MacNamara. I believe that is all, sir. Senator HATFIELD. Thank you. Welcome to all of you.

REPAYMENT STATUS Mr. JURA. Mr. Chairman, we are continuing to operate in a very interesting time, and I am here today to report that Bonneville is addressing many things, but the one issue I would like to highlight first is that we are making our scheduled Treasury payments. At this time, we are fully current in our payments to the Treasury, and I am pleased to report that we will make a full fiscal year 1987 payment of $588 million to the Treasury this September.

We also plan in fiscal year 1988 to make a full Treasury payment of $612 million. This will result in a fully up-to-date payment schedule for Bonneville. We have paid $2.2 billion to the Treasury in the last 5 years on principal and interest on the federal investment in the hydroelectric projects and transmission facilities in the Pacific Northwest. This resulted in payments of over $4.8 billion being paid on principal and interest since Bonneville was established in 1937.

REVENUE DIFFICULTIES We are making these payments in somewhat difficult circumstances. We have experienced revenue difficulties in 1986 and are experiencing such difficulties in fiscal year 1987. We are experiencing these difficulties in all of our revenue sources, but in 1986, the problem was primarily in two of our three major revenue sources.

The first was our sales to California, which are our export sales; that is, sales of surplus power. In fiscal year 1986, those revenues were $164 million short of what we projected when we established the rates 14 years ago.

Sales to our aluminum customers have also been off substantially. In 1986, we were $120 million short of projected sales from our direct servo ice customers. In 1986, our sales to our other customers within the region were right on target.

However, as we go into 1987, we find that the sales to California, the sales to the aluminum industry, and now, the sales in the region are lagging somewhat.

The primary reason for the lag in sales in the region deals with the weather conditions we have experienced this year. I should also mention that these market conditions are improving somewhat in 1987, but that we expect, in 1987, to underrun our earlier revenue projections by about $300 million.

REVISED BUDGET LEVELS Now, at the same time, we are taking actions to address this, and I will get to those actions in a moment. I would like to also mention that we continue to project a sizeable surplus of firm power. Our surplus now is estimated to be in the neighborhood of 1,800 average megawatts. We expect that will extend out in lesser amounts to the end of this century.

The key effort we are making in addressing these issues is to cut our costs. Since May of last year, we have cut over $1 billion of projected programs for fiscal years 1987, 1988, and 1989. Just before my predecessor, Peter Johnson, left, we saw the need to take this action and started to reduce the costs that were projected for those years.

Last week, as part of our ongoing rates process, I announced another round of cuts which totaled $220 million for years 1988 and 1989. This action is a result of the discussions we have had with our customers and other parties in the region as to where Bonneville should be spending money. These revised spending levels will allow us to continue to meet all of our obligations, including repayment to the Treasury, and to overcome lower revenue projections, with a 9.5 average rate increase to our preference customers at the start of fiscal year 1988.

We believe this proposed rate increase is prudent and necessary given these obligations and these circumstances. I would also like to emphasize that we are trying to do a better job of marketing our surplus power, and I hope when I am here next year to testify before you that I can tell you about ways we have found to make better use of that surplus in the region.

NEW CHALLENGES BPA faces new challenges as it begins its 50th year of service to the region and to the nation. We are responding to these challenges by taking strong action so that we can improve our financial condition, satisfy our commitments to the Treasury, assist the Pacific Northwest in its economic recovery, and carry out all of our statutory responsibilities.

Mr. Chairman, this concludes my statement. I would be happy to answer any questions you have.

(The statement follows:)

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