Policies Governing BPA's Repayment of Federal Investment Still Need Revision

Federal law requires the Bonneville Power Administration (BPA) to repay the federal investment in its power generation facilities. In a follow-up to a previous report, GAO examined BPA policies regarding repayment.

Through 1964, BPA used a fixed annual payment approach to repayment. In 1964, BPA adopted the repayment study method to determine revenue requirements. Under this method, estimated revenues are projected to cover estimated expenses over the repayment period of a facility. If actual revenues are insufficient to cover all expenses, the federal repayment is deferred. BPA has also adopted a policy of making repayments on its highest interest-bearing debt rather than repaying its oldest debts. In its earlier report, GAO recommended that BPA use a fixed annual payment approach to amortizing the federal investment. In response, BPA prepared a plan to catch up on deferred payments by 1985; however, BPA recently estimated that it will fall behind by an additional $119.4 million because of a $350 million shortfall in revenues. GAO found that the practice of paying higher interest debts first reduces the BPA payment to the Treasury and costs money because of the difference between the borrowing cost paid by BPA and that paid by the Treasury. While this has had little effect because of the small amount repaid since the policy was adopted, under a fixed-payment approach the effect would be more significant.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Daniel C. White Team: General Accounting Office: Resources, Community, and Economic Development Division Phone: (202) 353-3711