Data on DOE Uranium Enrichment Power Contracts and the Cost of Power

In response to a congressional request, GAO answered questions concerning the Department of Energy's (DOE) uranium enrichment program and its effect on the Tennessee Valley Authority (TVA) and its customers. Specifically, GAO discussed: (1) the amount and cost of TVA power for which DOE contracted but does not intend to use; (2) differences in DOE power contract terms; (3) the cost of TVA power in comparison with other DOE power suppliers; (4) the impact of lower power costs on the DOE enrichment price; and (5) the action taken by DOE to minimize the cost of TVA power not taken.

GAO determined that, for fiscal years 1983 through 1992, DOE plans to take about 34 percent less power from TVA than it has contracted to take. Although DOE has take-or-pay provisions with other suppliers, the specific contract provisions with TVA differ in how the amount of power under contract may be adjusted, the notice required for such adjustment, the required demand charges, and the right to automatically extend the contracts. Further, the cost of electricity purchased from TVA is considerably higher than that of two other major suppliers. GAO also determined that, if all the power used for enrichment was to cost 25 mills per kilowatt hour, the price of enrichment services between 1984 and 1992 would be reduced by about 12 percent. As to whether DOE has acted to minimize the cost of TVA power not taken, GAO found that, although DOE has sought to renegotiate its contract, TVA has not been willing to do so. TVA stated that it would have to increase the price of electricity to other customers to recover its capital costs if costs to DOE were lowered.