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ENCLOSURE VIII ENCLOSURE VIII 



PMA RATES /RE PAYMENT 



BACKGROUND 



The Bonneville Power Administration (EPA) and the Department 

 of Energy's four other power-marketing administrations (PMA)-- 

 Alaska, Southeastern, Southwestern, and Western--sell wholesale 

 power from hydroelectric facilities built and operated by the 

 Department of the Interior's Bureau of Reclamation (Bureau) or by 

 the U.S. Army Corps of Engineers (Corps). These projects are 

 financed largely by the federal government. Project costs properly 

 allocated for irrigation, power generation, and municipal and 

 industrial (M&I) water supplies must be repaid in accordance with 

 repayment policies and contract terms established by the Congress 

 and through Bureau and Corps administrative decisions made over a 

 long period of time. In general, repayment provisions for 

 irrigation users require water users to repay the federal 

 construcrtion costs, without interest, over a period of time 

 (usually 50 years). 



Federal laws and regulations require power-marketing 

 administrations to establish power rates at levels necessary to 

 ensure that revenues from power sales are sufficient to recover all 

 power-related costs. BPA and Western are also required to recover 

 some costs for certain Bureau irrigation projects through power 

 sales revenues (irrigation assistance). Generally, irrigation 

 assistance is not repaid in annual installments; usually, it is 

 deferred until the end of the payment period (usually 50 years). 



GAP WORK 



In March 1981, we reported that the price of Irrigation water 

 is much lower than the federal government's cost of producing the 

 water. To show policymakers the direct economic value of producing 

 more irrigation water, we recommended that, as part of the 

 congressional authorization and appropriations process, the 

 Secretary of the Interior provide estimates of (1) the federal 

 government's full cost of providing irrigation water, including the 

 cost of borrowing at the then-current rate of interest for federal 

 borrowing; (2) the increases in crop yield expected for acres 

 receiving federal water, and (3) the change in net income on the 

 acres to receive federal water at full cost. 



In August 1981, we recommended that the Secretaries of the 

 Interior and of the Army change certain policies to, sunong other 

 things, (1) require that all reservoir users share equitably in 

 cost recovery, (2) include Interest expense in all M&I water sales 

 prices, and (3) accumulate all unrecovered operations and 

 maintenance costs and consider such costs in future price 

 determinations . 



25 GAO/RCED-93-133R, GAO Products on Bonneville Power Administration 



