Power Marketing Administrations

In recent years, Congress has weighed the pros and cons of privatizing the federal power marketing administrations (PMA), which transmit and sell electric power generated at federal hydropower facilities. This report provides information on three of these PMAs--the Southeastern Power Administration, the Southwestern Power Administration, and the Western Area Power Administration. GAO answers the following three questions: Have all power-related costs incurred through September 1995 been recovered through the PMA's electricity rates? Is the financing for power-related capital projects subsidized by the federal government and, if so, to what extent? How do PMAs differ from nonfederal utilities and what is the impact of these differences on power production costs? GAO summarized this report in testimony before Congress; see: Power Marketing Administrations: Cost Recovery, Financing, and Comparison to Nonfederal Utilities, by Linda M. Calbom, Director of Civil Audits, before the Subcommittee on Water and Power Resources, House Committee on Resources. GAO/T-AIMD-96-169, Sept. 19 (15 pages).

GAO found that: (1) the three PMA are not recovering through power rates some costs related to producing and marketing federal hydropower; (2) PMA are not recovering the full costs of providing postretirement health benefits and Civil Service Retirement System pensions to agency employees; (3) the Western Area Power Administration will probably not be able to recover the construction costs of its Washoe Project because it is not generating sufficient revenue to cover its operating and maintenance expenses and repay the federal investment; (4) Western is not required to repay the $454 million allocated to its incomplete irrigation facilities; (5) PMA rely primarily on debt financing for their large capital construction projects; and (6) compared to other nonfederal utilities, PMA benefit from their reliance on inexpensive hydropower, lower construction costs, and tax-exempt status.