Financial Management

Pursuant to a congressional request, GAO reviewed the: (1) ongoing expenses incurred by the federal government to support the electricity related activities of four Power Marketing Administrations (PMAs), the Department of Agriculture's Rural Utilities Service (RUS), and the Tennessee Valley Authority (TVA); and (2) potential future losses from these activities given the move toward deregulation and increased competition in the electricity industry.

GAO noted that: (1) the federal government incurred net costs of over a billion dollars annually for fiscal years 1992 through 1996 to support the electricity-related activities of RUS and the PMAs; (2) GAO estimated that the net costs to the federal government for fiscal year 1996 totaled about $2.5 billion--$0.4 billion for the Bonneville Power Administration (BPA), $0.2 billion for the other three PMAs (the Southeastern, Southwestern, and Western Area Power Administrations), and about $1.9 billion for RUS, including about $982 million in loan write-offs; (3) cumulatively, for fiscal years 1992 through 1996, GAO estimated that the net costs were about $8.6 billion in constant 1996 dollars, including over $1 billion in RUS loan write-offs; (4) the net costs associated with TVA were minimal; (5) under current policies and law, the federal government will likely continue to incur many of the same types of costs; however, future RUS loan write-offs cannot be accurately predicted; (6) there is risk to the federal government of future losses from each of these entities because of financial difficulties faced by RUS borrowers, TVA, BPA, and one or a few projects at each of the other three PMAs; (7) as of September 30, 1996, the federal government was exposed in varying degrees to the risk of future losses because of its more than $84 billion in direct and indirect financial involvement in the electricity-related activities of RUS, the PMAs, and TVA; and (8) the risk of future losses relates to the possibility that RUS borrowers, the PMAs, or TVA would be unable to repay the full $53 billion in debt owed to the federal government or that the federal government would incur unreimbursed costs as a result of actions it took to prevent default or breach of contract on the $31 billion in nonfederal debt owed by these entities.