Federal Electric Power

Pursuant to a congressional request, GAO identified alternatives to the Department of Energy's (DOE) power marketing administrations' (PMA) power-pricing practices.

The alternatives discussed are those based on a cost-of-service objective and those based on criteria other than cost. GAO noted that the: (1) cost-of-service objective requires that the government or utility recover costs through electric rates; and (2) alternatives based on criteria other than cost-of-service include methods for recovering some irrigation project costs through power sale revenues and marginal-cost pricing. GAO found that: (1) changes to current PMA power-pricing practices could identify and recover the government's costs or result in revenues in excess of costs; (2) the cost-of-service alternative would result in pricing methods that are more consistent with nonfederal electric utilities; (3) the government could recover an additional $449 million of its future interest costs and increase the reported value of the total federal investment if PMA implemented changes in the computation of interest; and (4) PMA must consider the effects of price increases on power customers, regional economics, and U.S. Treasury revenues when determining power-pricing practices.