Financial Management

Pursuant to a congressional request, GAO reviewed: (1) any ongoing expenses incurred by the federal government to support the electricity-related activities of the power marketing administrations (PMAs), Rural Utilities Service (RUS), and Tennessee Valley Authority (TVA); and (2) potential future losses from these activities given the move toward deregulation and increased competition in the electricity industry.

GAO noted that: (1) the federal government incurred net costs of over a billion dollars annually for fiscal years 1992 through 1996 to support the electricity-related activities of RUS and the PMAs; (2) GAO estimated that the net costs to the federal government for fiscal year 1996 totaled about $2.5 billion--$0.4 billion for the Bonneville Power Administration (BPA), $0.2 billion for the Southeastern, Southwestern, and Western PMAs, and about $1.9 billion for RUS, including about $982 million in RUS loan write-offs; (3) cumulatively, for fiscal years 1992 through 1996, GAO estimated that the net costs were about $8.6 billion in constant 1996 dollars; (4) the net costs associated with TVA were minimal; (5) the federal government will likely continue to incur many of the same types of costs, however future RUS loan write offs cannot be accurately predicted; (6) there is risk to the federal government of future losses from each of these business entities because of financial difficulties faced by RUS borrowers, BPA, TVA, and one or a few projects at each of the other three PMAs; (7) as of September 30, 1996, the federal government was exposed to the risks of future losses because of its more than $84 billion in direct and indirect financial involvement in the electricity-related activities of RUS, the PMAs, and TVA; and (8) the risk of future losses relates to the possibility that RUS borrowers, the PMAs, or TVA would be unable to repay the full $53 billion in debt owed to the federal government or that the federal government would incur unreimbursed costs as a result of actions it took to prevent default or breach of contact on the $31 billion in nonfederal debt owed by these entities.