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ENCLOSURE VIII ENCLOSURE VIII 



In our October 1981 report, we concluded that interest-free 

 financing for irrigation projects and future M&I water supply costs 

 had become a costly burden on the U.S. Treasury. We calculated 

 that the interest subsidy for only four reviewed projects would 

 cost the Treasury more than $667 million. We recommended that the 

 Congress (1) amend the appropriate federal laws to ensure that M&I 

 water users would fully repay their share of interest costs and (2) 

 require the Secretaries of the Interior and of the Army to (a) use 

 interest rates, developed by the Treasury, that would more 

 appropriately reflect the Treasury's costs of borrowing funds and 

 (b) revise the method of computing interest on construction. The 

 Treasury concurred with our recommendations . 



In 1985, we reported that revenues to the U.S. Treasury could 

 be increased if irrigation assistance were to be repaid in annual 

 installments over the life of the repayment period instead of being 

 repaid in a lump sum at or near the end of the repayment period. 

 For exeunple, we calculated that this change would result in a net 

 benefit to the Treasury of about $8.7 million for one project for 

 which BPA provides irrigation assistance. We noted that the 

 benefits might not be realized if BPA deferred power cost 

 repayments to compensate for accelerated irrigation assistance 

 payments . 



In our September 1986 report, we analyzed several alternatives 

 for determining federal power prices and concluded that certain 

 changes could more fully identify and recover the government's 

 costs or, in some cases, produce revenues in excess of costs. 

 Alternatives based on the existing cost-of-service objective (which 

 generally requires that the costs of providing electric service be 

 recovered through rates) included options for (1) computing a power 

 project's interest costs and (2) scheduling payments to the 

 Treasury to repay the federal investment in constructing the power 

 projects and financing their costs. We concluded that these 

 alternatives would generally reduce or eliminate the under-recovery 

 of costs and result in pricing methods that were more consistent 

 with those of nonfederal electric utilities. In addition, we 

 analyzed alternatives based on criteria other than the cost of 

 service, including alternative methods for recovering some 

 irrigation project costs through power sales revenues, marginal 

 cost pricing, market pricing, and user fees. We concluded that the 

 use of these methods could produce revenues in excess of costs. 



26 GA0/RCED-93-133R, GAO Ptodncts on Bonneville Power Adalnistration 



