Federal Investment in the Columbia River Power System

GAO reviewed the status of the Bonneville Power Administration's repayment of the Federal investment in the Columbia River Power System to the Federal Treasury. Federal law requires Bonneville to repay this investment, which exceeds $7 billion, over a period of years. GAO stated that, during the past 10 years, Bonneville has repaid little of the Federal investment. Through 1965, Bonneville repaid about $364 million. In 1965, Bonneville adopted a repayment study method for determining revenue requirements because of pressure to raise power rates to meet fixed annual payments. However, under this method, repayment of the Federal investment was not scheduled and Bonneville was experiencing a net operating loss. In an earlier report, GAO recommended a cost-based approach with scheduled annual repayments. Department of Energy studies suggested other methods. GAO also reviewed another change Bonneville made in its repayment policy which was to repay its highest interest bearing debt first. While GAO found that Bonneville's highest-interest-first policy is justified under sound business principles, the policy results in a higher cost to the Federal Treasury. GAO concluded that a more systematic approach is needed to ensure timely and equitable repayment of the Federal investment.