Power Marketing Administrations: Cost Recovery, Financing, and Comparison to Nonfederal Utilities

GAO discussed the Southeastern, Southwestern, and Western Power Administrations, focusing on: (1) the three power marketing administrations' (PMA) recovery of their power-related costs; (2) federal subsidies for financing power-related capital projects; and (3) differences between PMA and nonfederal utilities on power production costs. GAO noted that: (1) the three PMA do not fully recover all power-related costs in the areas of employee health and retirement benefits, project construction or operation, capital costs for incomplete facilities, environmental mitigation costs, and deferred operations and maintenance and interest expense payments; (2) the annual unrecovered cost for these activities in fiscal year 1995 was about $83 million; (3) a federal financing subsidy of about $228 million exists because interest expense on the Treasury debt is higher than the interest income Treasury receives from PMA; (4) in 1994, the average PMA revenue for wholesale electricity sales was more than 40 percent lower than nonfederal utilities; (5) PMA production costs were generally well below the costs for nonfederal utilities, primarily because PMA rely on low-cost means of electricity generation and generally do not pay taxes; and (6) increased competition and access to transmission lines and the increasing influence of low-cost independent producers could affect PMA costs and revenues in the future.