Bonneville Power Administration's Repayment of the Federal Investment

GAO testified on its recently completed work on the Bonneville Power Administration's (BPA) repayment of the Federal investment in its power system. The Federal investment in the Columbia River Power System exceeds $7 billion, of which BPA has repaid about $638 million. BPA collects revenues to pay for the costs of operation and maintenance, purchased and exchange power, and transmission service before paying the amortization of the Federal investment. Since the Federal investment is the lowest category of expense, it is deferred if revenues are insufficient to cover all expenses. In the past 10 years, BPA has had problems repaying the Federal investment and has experienced a net operating loss in 8 of those 10 years. In June 1981, GAO recommended that BPA adopt a cost-based approach to repayment as an alternative to its repayment study method. Under the former approach, repayment would be made annually and would form the basis for determining revenue requirements. However, BPA objected to the GAO recommendation. In March 1982, the BPA administrator stated that actions had been taken to catch up on repayments by fiscal year (FY) 1985. Despite a projected net operating loss for FY 1983, the administrator still plans to catch up on repayments by FY 1985 because rates to be effective in November 1983 have been designed to recover: (1) the cumulative deferral of interest through FY 1982; (2) the FY 1983 projected deferral; and (3) the regularly scheduled amortization payment for FY's 1984 and 1985. On the basis of BPA repayment performance over the past 10 years, GAO continues to believe that a cost-based repayment approach is needed to facilitate timely and equitable repayment of the Federal investment.