The Western Area Power Administration was created in 1977. Rates Do Not Recover All Power-related Costs

Some costs related to producing and marketing federal hydropower are not being recovered through power rates by the three PMAs. Pension and Postretirement Health Benefits Are Not Fully Recovered

The three PMAs do not recover the full costs to the federal government of providing postretirement health benefits and CSRS pensions for current PMA employees and operating agency employees engaged in producing and marketing the power sold by the PMAs. Washoe Project

The Washoe Project (Stampede Dam) is not generating sufficient revenue to cover annual power-related O&M expenses and interest and repay the federal investment. In addition, interest is not being paid on the $454 million. PMAs are required to recover several nonpower costs, which is a disadvantage compared to other utilities. In addition, Western is required to repay about $1.5 billion of capital costs related to assistance on completed irrigation facilities (irrigation debt). POGs rely primarily on debt financing from the capital market for capital projects.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed three power marketing administrations' (PMA) cost recovery practices, and financing for capital projects, focusing on how these PMA differ from nonfederal utilities.

What GAO Found

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.