B-114858 Dear Mr. Secretary: ';r: The General Accounting Office has examined_ the Statement of Assets-----___ and Liabilities of the Commercial Power Program of the-Federal Columbia Riv~er Power S~m-(see~'note- 1 to the ?. "? / financial statements) as of June 30,'1971, and the related Statements of Commercial Power Revenues and Expenses and Szc%%nd Application of Funds for-fiscal year 1971. Our -c- ._.-_ .-.-- examlnatlon was made in accordance with generally accepted auditing standards and included tests of the accounting rec- ords of the Corps of Engineers, the Bureau of Reclamation, and the Bonneville Power Administration and such other auditing procedures as we considered necessary in the circumstances. On February 9, 1971, the Los Angeles earthquake severely damaged the Sylmar Converter Station owned by several public and private agencies in Los Angeles, California. The damaged Sylmar facility has temporarily made inoperable Bonneville's Celilo Converter Station and SOO-kilovolt direct-current line which runs to the southern Oregon border. Bonneville antici- pates that its facilities, which cost $74,000,000, will resume 40-percent operation in April 1972 and loo-percent operation in September 1972. The accompanying financial statements for the System were prepared on a cost-accounting basis which included deprecia- tion. They do not present the financial results on a basis designed to show whether power rates are adequate to repay the Federal investment in the System, either for the fiscal year or cumulatively. (See note 2 to the financial statements.) The accounts and financial statements are subject to retroactive adjustment, because firm allocations of the cost of joint-use facilities to power and other purposes have not been made for three projects recently placed in service and for five projects under construction as of June 30, 1971. (See note 3 to the financial statements.) At these eight projects, total joint-use costs are $934,000,000, of which $731,000,000 tentatively is allocated to power. Changes in allocations sometimes have resulted in significant adjustments 50 TH ANNJVERSARY 1921- ,,,I= B-114858 to plant investment allocated to power and to accumulated net revenues. The Bonneville Power Administration, in computing inter- est expense on the Government’s investment in the System, re- duces the amount by an interest credit on System revenues collected and deposited in the U.S. Treasury. In our opinion, Bonneville’s method of computing the interest credit was in- appropriate and resulted in an understatement of about $2,000,000 in the interest expense for fiscal year 1971 be- cause the interest credit was computed (1) at the rate of 4-7/8 percent applicable to new investments rather than at the lower rates --some as low as 2-l/2 percent--at which the in- terest expense was computed and (2) on the full amount of the revenues deposited rather than on the amount applied to re- duce the Government’s investment in the System. Subject to the financial effects of future adjustments related to adoption of firm cost allocations and the resolu- tion of the interest credit matter described above, the ac- companying financial statements, in our opinion, present fairly the assets and liabilities of the Federal Columbia River Power System at June 30, 1971, the financial results of its power operations, and the source and application of its funds for the year then ended, in conformity with accounting principles and standards prescribed for executive agencies of the Federal Government by the Comptroller General of the United States. These accounting principles and standards were applied on a basis consistent with that of the preceding year. Copies of this report are being sent to the Director, Of- fice’ of Management and Budget; the Chairman, Federal Power 2 .- ...~_ b _._-_-._.- -I.- .I_ -,- , B-114858 Commission; the Administrator, Bonneville Power Administration; the Commissioner of Reclamation; the Secretary of the Army; and the Chief of Engineers. Sincerely yours, (sy,,-!! @.Z. B;me Jp* r_ & Comptroller General of the United States Enclosures The Honorable The Secretary of the Interior UNITED STATESOF AMERICA FE!XXALCOLUMBIARIVER POWERSYSTEM NCTESTO THE FINANCIAL STATEMENTS Note 1. Composition of the Federal Columbia River Power System The Federal Columbia River Power System (FCRPS) consists of the facilities and operations of the Bonneville Power Administration (BPA) and the hydro- electric generating plants constructed and operated by the Corps of Engineers (Corps) or the Bureau of Reclamation (Bureau) for which BPA transmits and markets the power. Although each entity is separately managed and financed, the facilities are operated as an integrated power system with the financial results consolidated under the nsme Federal Columbia River Power System. Projects in service and under construction at June 30, 1971, are listed in Schedule A. Note 2, Basis of Financial Reporting These financial statements are prepared on the cost accounting basis and in- clude compound interest depreciation. They do not purport to show financial results on a repayment basis either for the fiscal year or cumulatively. Wholesale power rates are baaed upon the repayment analysis rather than these cost based statements. The depreciation life for fixed assets allocated to power averages about n years. However, inihe separate FCRPSrepayment analysis the repayment period is 50 years for the generating projects and 45 years for the trans- mission system. Since the depreciation period is longer than the repayment period, depreciation eh.arges acoumuJ.ated dux&g the rep ent perids will be moh less than the plant repayment requimments, and. rates set to cover repayment wiU. be higher on the average than if rates were set $o cover depreciations Note 3. Cost Allocations West aUoca%ion~~ describes the prooess of assigdng the costs of a multi- purpose project to the tiaitiati purposes served, In this process, joint- use costs of plant and operations are allocated among the 638sserved such as power, irrigs.tion, navi ione and flood control, The portion of tot& project costs allocated to power is irxludea in the FCRBSfinancial statmentss Cost allocations v be tentative or firm, A tentative cost allocation may be adjusted retmmtively when replaced tith a f3.m allocation, while a fim allocation may only be adjusted on a prospective basis0 Ih.ming fiscal year 1971 the Corps adopted a firm allocation for the Green Peter- Foster pmjeat, The fasfnaallocation increased plant costs @&located to power about $$2,026,000 and decreased Aceumlated let Remmes by about wls, ooo, Cost sXLoca.ti0n.s at three projects recently pkaced 3x1 setice and five projects now under construction me desbgmted as tentativ-e as shown on Schedule A, At the eight projects9 total joint-me coats are ~9349000,000 of which 731,000,000 are tediatively a.xloeated to g>omr, Rote 4@ IMerest P&es An interest rate of is applied to the unpsdd Federal investment for the projects listed in Schedule A, except for the foELo mhiehu9ea higher rate. Bureau projects in service, al1 using a 3% rate, ares Boise, Columbia Basin, HL?rlg~ Horse, ua0lca, Rosa Division. 2 For Bureau projects under construction, a rate of 3-l/@ ill applied to the Gmud Coulee Third Powerplant and 3.342% is applied to the Teton project, Corps projects andt portions thereof which are under construction and which use rates higher than 2$$ are: Bonneville Second Power House and Peaking Modifications M Chief Joseph Additional Units 3-m% Dwmshak 2-5/S% Libby 3-m% Lost Creek 3-m% The Dalles Additional Units s-m% EPA used the 2$& rate through fiscal year 1943. Subsequently, the foUow% rates were used for each year*s new investment: Fiscal Year 1964 2-7/e Fiscal Year 1965 3% Fiscal Yeass 1966 through 1968 3-m% Fiscal Years 1969 and 1970 3-l/4$ Fiscal Year 197l 4-7/8% Interest rates for repayment of new Federal investment in power projects started after Janumy 29, 1970 are to be set in accordance with Secretarial Order 2929. This Order directs that rates will be adjusted by not more than one-half of one percent each year until the rate equals the then current avenge yi,eld -Pate on long-tern U.S. Treammy obligations. The rate $3 6-l,&% at June 30, 1971. Based upon the Order, BPA used a rate of 4=-7/E%. for new i.nveS~ent in Ziscal yem 1971, and will use rates on new invesimnt of 5-3/S% in fiscal year 1972 and j-7/8$ in fiscal year 1973, At June 30, 1971, the Corps and the Bmeau were 2x1 the process of reSOl'Ving implmenting details, 3 Note 5. The entities of BYXPS each tint&n a separate account& system resigned to meet its particular requirements, and vacations in reporting practices exist among the entities. However, cooperation among the entities in prior years has led to the adoption of standard practices such as use of the compound interest method of depreciation, The unresolved variations existing during fiscal year 1971 are as folbows: a. The Bureau includes in the costs of its pmjec-tia, general investi- gation and development costs which are incurred prior to project authorization, It is the pol.icy of the Corps not to include fol KRFS purposes such costs which are incurred prior to project authorization, The Corps has excluded about $2,123,1)00 of such costs at June 30, 1971. b. The accounts of the Corps end BPA reflect the Jiability for accrued but unused annual leave0 However, the accounts of the bureau projects do not include an amount for annual, leave, esti- uated to bs $754,000 a8 of June 30, 1971. Note 6. Pursuant to legisLati.on, revenues of the PCRPS must repay to the United States Treasury that portion of the cost of irrkgation facilities ~3 the ~Paci50 Northwest &ich tne Bureau habs determined that ben&fi%ing wtiter users LX-e u3dCie Cj .YZp!t<ra ia-> ;iune x30, 19’91, this 2illiOlJllt iS $g402ep+4C,tJ0@e deter&nation of water users' repsyment ability will be madz at the time the irrigation facilities are proposed for turthorization euid dev&opm&t. Ii water users? repayment ability is insufficient to meet the repayment requirements, irrigation assistance msy be required from power l'evenues9 if authorized by Congress. These costs are not included in the accompanying statements becaurae a final detetination as to potential L*epayment from power revenues has not been made. Mote 7. Commitments to hkchange Power and Acquire Project Curability aa Word Plant No, 1 BPA, the Washington Public Bower Supply System (WPSS!, and 76 utiljLies have made agreements under which BPA receives the capability of this 860 negawatt plent constr~~cted and operated by WPPSS. The agreements call for payments to WPPSSby each utility for its portion of project costs based on the Annual i)perating Budget, All output from the project is delivered tc BPA who in turn furnishes the utilities an EUKRU~&cJf goweT fXp& in VaLUS, at BPA rates, to the annual costs of o:+rat~ng thr! pro Jecz am ::eti..i+.ng the bends ivsued in 1203 lo construct the plant;. FW tk;,r? year ending June 30, 19'119 the Annu.& Ctparating Budget ms ~4,395,000, A-t Jurle 30, 2971, $78,?45,000 i,f bonds were o~~ttimndmg and due to be fully retired by 1996. OhfiT 3396, BP& is a?equired to provide power $0 retire the bxid~ F.YXL if the projeci becomes inoperable. Ihri.t~ ;iricki ykxn- lWL9 the Atomic J3neqg Ckmikuisaion (AX) nuclekxf zactur which suppli& steam to tine WPPSj: project was shut down. Since then, sgreaents were reached with AEC restoring the reactor to service for fiscal years 1972, 1973, and 1274 with increased payments for steam0 For the year endi!% June 30, 1972, it is estimated that the agreements to restore the reactor to service will increase the Annual Operating Budget by $15,000pOO0 over the 1971 emount. According to the new agreements9 SPA and WXTSSmust decide, during fiscal year 197’2, whether or no? to continue operating the project after June TO9 19'?4c Unti:* iI:e original agreements BPA mq~ acquire own~ship or" tk prv~ect, subject to Congressional approval. ce Centmis Coal-Fired Steam Plant BPA entered into an agreenent with eight utilities to acquire varying portione of project capability r&ngi.ng from 273 megawzMx to 973 megawatts from the in-service dates scheduled for January 1, 1972,‘for Unit I and September ls 1972, for Unit II to April 1, 1974. BPA*a portion of tot&l project costs for the tot&. period is esttited at $58,110,000. M’ter each unit is commerci&CLly operable, BPA*e commitmew&will rem&n whether or not full capability can be acbigved, d. BPA entered into wreements to acquire, beginning approzimately September lo 1974, a &are of thas I9163 megawatt pz.vject, under oorwkuction br Portland General Electric Comapny, BPA wil.3. acquire ene Water ex& EXeetrio Board@s 33% owner&&p ahaze until at t July 1, 1984, Effective on that date, ene hw the option to wit it3 %M, For the ten year period this &axe of project capability will cost BPA about $103,310,000 baaed on e&l ted pro3eot eosteo GM.1 July 1, 1984, BPA i.e com- mitted to 30$ of 891zltadbll costs whether or not the pl.snt is completed, opesable, or operat&g. es Hanford Pknt lV0, 2 BPA entered into agreements with WPPSSti 94 public wency customera to aqtire the capability of this lo100 awatt nucleex fmility, which will be eonetructed and oper&ed by WPPSS. The plant is scheduled for ~osnmericsl operation in 1977. 7 ilur* the e&-ted 35 year life of the project, WA*, tot&L costs are estimated to be Kk.,4970770,000. BPA m obligated mdes the agree~lent~l whether ox+ not the project Is completed, operable, or operating. Note 8. Contingent I[riabilities Cant-ent liabilities applicable to commercial power at June 30, 1971, total. approxim%teYy J19tY968000 of which $16,07’EpOO0 represent various contractor claim and $$30P2$,000 represent cILa&m under the Federal Tort CZa&s Act, Note go Adjustmenl;s to Accumlated Net Revenues The following table expl&ms the adjustments which have camed the net decrease in Accmulat& Net Revenues of S519423,000 shown on ExkibZts 1 and 2: Ez1LHIBITI UNITED STATES OF AMERICA FEDERALCOI,UI!&LU RIVER POWERSYSTE% STAT= OF COMMERCIALPOWERREVENUESAND MPFXSES FOR THE FISCAL YEARS ENDED JUNE 309 1971 AI?D JUXE 309 1970 (NOTE I m 2) (In Thousands) Fiscal Fiscal Year Yt?SX 1971 1970 OPERATING REVENUES: Sales of electric energy by Bonneville Power Administration: Publicly owned utilities $ 64,078 $ 58,420 Privately owned utilities 25,121 20,319 Federal sgencies 59403 4,090 Aluminum industry 40,058 449614 Other industry 5,361 59449 Tot&L 140,021 132,892 Other operating revenues: Wheeling revenues 10,386 9,507 Other revenues 59271 58281 Total 159657 14,788 Total operating revenues 155p678 1479680 OPERATING EXPWSES: Ptarchase and exchange power 12,813 11,468 Operation 290680 26,022 Maintenance 14?802 13,373 Depreciation 249512 21,645 Total operating expenses 81,807 72,508 Net operating revenues 73,871 759172 INTEREST AND OTRER DEDUCTIONS: (Note 4) Interest on Federal investment (projects in 67$742 57,258 service) Related interest charged to construction 8,603* 6,896" Miscellaneous income deductions, net 105 98 Net interest and other deductions 599244 50,460 NE!7 REWW # 149627 $ 24,712 ACCLlKJUTEDREI' REVENUES: Bahnce 63 beginning of year $346,388 $322,584 Net revenues--current yesr 149627 24?'312 Prior yesrs adjustments (Note 9) 9,423" Balance at end of year $3519 592 *Denotes deduction "Notes to the financial statementso we an integral part of this statement. UNITED STATES OF AMERICA FEDERALCOLXIMBiA RIVEB POWW SYSTl!Zd STATGWNT OF MSErS AND LLABILITIFS OF THE COmIAi, EXHIBIT 2 PoWW PROGRAMAd OF JUNE 30, 1971 AND JUNE 30, 1970 (NOT= 1 and 2) (In thsusands) ASSFTS LIABILITIES June 30 June 30 197l 1970 1971 1970 FIXED ASSEX: INVESTMENT OF U.S. GOVERNWXI!: Completed plent (Schedule A) $2,927,203 $2,749,012 Congressional appropriation6 $4,181,368 $3,846,213 Retirement work in progress 20,049 ._-. 28,2j5 Revenues transferred to continuing fund 4,033 4,033 Transfers from other Federal agencies, net 27,983 27,764 29947,332 2,777,247 Interest on Federal investment (Note 4) 857,647 776,287 Less aawmulated depreciation 253,375 -- 2&jTjg Gross Federal investment 5,on,o3i 4,654,297 29541,250 Constructiun work in progress (Schedule A) 673,421 Less funds returned to U.S. Treasury 1.822.167 1,690*018 Total fixed assets 3.214.671 Net investment of U.S. Government 3.2481864 2.964.272 ACCUMULATEDNE!l! REVENUES: Balance at beginning of year 346,388 322,584 Net revenues current--year (uhibit I) 14,627 24,n2 Prior years adjustments (Mote 9) 9.423% LOB* Balance at end of year 351.592 346.388 CURRENTASSETS: COMMITMENTS (Note 7) Unexpended funds 89,094 112,242 CURRENT LTABILITI~: Special funds 6,500 2,202 Accounts receivable 29,182 23,897 Accounts payable 57,153 550832 Hateriale and supplies 17,056 17.582 Bployees accrued leave (Note 5) 4,890 4.336 Total current assets 141,832 155,923 Total current liabilities 62,043 60,168 DEE%RREDCHARGEPOR PA?XENT OF IRRIGATION LIABTLITY OF U.S. GOVERNMmT FOR PAYNENT OF ASSISTANCE (Schedule A) (Note 6) 401,440 390,466 IRRIGATION ASSISTANCE (Schedule A) (Note 6) 401,440 390.466 OTHERASE2S ANDDEFEEtRDCRARGES: OTHZR LiKBiLiTiEs AND DEFERREDCREDITS: Trust funds 6,218 6,099 Truet fund advances 6,218 6,099 Other asueta and deferred charges 4,663 4.303 Other deferred credits 4,450 4.062 Total other assets and deferred charges -,I 10 881 lo&o2 Total other liabi!ities and deferrcd credits 10,668 _- 10.161 TOTAT ASSKCS p.7n,462 TOTAL LTAt(lLITI~ m74.607 83s771.462 --&J&741607 --- --et-- *Denotes deduction "IJo$es to the financial statrmerlls~~ are an inteeral part of! this stateqient. EXHIBIT 3 UNITED STATES OF AMERICA FEDERAL COLUMBIA RIVER POWERSYSTEM STATEMENTOF SOURCEAND APPLICATION OF FUNDS OF COYiMEZlCIAL POWIERPROGM FOR FISCAL YEAR ENDING JUNE 30, 1971 (NOTES 1 AND 2) (In thousands) SOURCE OF FUNDS: Congressional appropriations $335,155 Transfers from other Federal agencies 219 Gross investment 8335,374 Revenue from sale of electric energy, including adjustment for prior year of $742 140,763 Other operating revenue, including adjustment for prior year of $148 15,805 Total revenues 156,568 Decrease in other assets and deferred charges, net of other liabilities and deferred credits 28 Decrease in current assets and liabilities, net 15,966 Total source of funds APPLICATION OF FUNDS: Operation and maintenance expense, purchase and exchange power, miscellaneous income deductions and adjustments for prior years of $39 48 57,361 Investment in electric utility plant (does not include capitalized interest of Wp603 on projects in service and $12,433 on projects under construction) 318,426 Return of funds to U,S, Treasury 132,149 Total application of funds $507,936 "Notes to the fin&ncial statements" are an integral part of this statement. UNITED STATES OF AKERICA FEDERAL COLUMBIA RIVER 'MB SYSTB! SCHEDULE A AMOUliT AND ALLOGTIOI: OF FLN:T INVESRQW AS OF JUNE 30, 1971 (NOTES 1 AND 3) PROJECTS IN SERVICE AND IJNDKRCOIISTRULTIOG (In thousands) ---- --- -- Li3xF.LT!.-. - LINrrPE Percent of Total Returnable from Completed Total Flacd Fiah and COlllKIBlWial Total -.iaaDt-- Tat&- Irrircation Navigation Control Wildlife Recreation Other &yer Revenues $155,683 my4 loo.0 $ 134 173 $ 672 97.0 4:904 s 10,722 $ 35,026 $ L5,748 14,961 23.8 Fkem@itik (CE) 96,028 61,687 6,06;: 67,751 28,121 156 70.6 ChieP Jompb (CE) 1,826 156,656 765 765 218 ccbl& Basin (KK) 157,639 762,600 :3;:," 130,908 311,265 376,158 68,033 404,191 1,000 45,605 $ 539 $1; ccQ@rm p; 40,368 17:671 17,676 31082 3,082 5l4 35,955 . I4boit-Kig Cliff (CE) : 4',373 5,029 218 20,772 fiT"asn PetYw-Fost.sr (CB) 87:062 49,030 49$03O 2% 6,056 29,569 380 1,670 2:: EELa crfmk km 48,767 17,302 5 17,307 4:584 4,584 22: 26,251 35.5 hm?rY FLzJme ml 102,226 n,.Ln 76 77,553 24,673 ha Barbor (CE) 139,638 93,893 1,006 94,899 g,;%$ z-z John Day (CE) (c) 487,105 333,933 26,991 360,924 13,980 26,296 (a) 74:1 Little Come (CE) (cl 160,270 111,281 111,282 44:869 3,653 (a) 69.4 94,633 45,574 IL; 45,717 1,4l2 46,6ol 197 48.3 30 1w,180 45,z 1,034 75.1 188,051 308,126 3:2; 50,721 769 83.3 37,@47 2:583 ;i: 2526sE; 34,loC 34,100 28 294 59,930 10,726 lo:728 10.013 9,345 19,358 29,700 322 291,957 222,648 26.73; 2499378 % 22 S5a4 63,675 4,597 I.2 4,609 10,235 47,679 57.931, 11,152 2363 217,395 196,899 196,899 6,924 12,125 1,447 90.6 282,670 213#557 213,557 52,922 16,192 (a) 75.5 U,9Sl 1,447 1,447 268 268 6,537 2,830 2,892 1,007 9.7 82,615 64,033 64,033 18.406 81 95 (a) 77.5 4@2 958 958 2,001 598 2,599 483 42 72.5 3c.eq -- 30&Q -- 100.0 5,163,788 2,9?7,283 826,497 39753,780 400,581 215,212 615,793 335,613 3,982 l4,7m 49,7@ 80.5 Rqmyixent obligation retained by Calwbim Ektxin Project (b) AJ 1,35~ 859 - -- loD.o -w 80.5 lfrrmnamlle Pmer Admlnistraticm ( Nanreimbursable road oosto. CE - cwpa of i+T?J@nesre (: +.nt facilities transferred to Bureau of Sport Fi~skwies wd Wildlife. kmw portion is included in the Enlance Sheet as a Deferred Item. (c) Projecta En service that have tentative cost dl&tions at June 30, 197l. Projects under construction have tentative coat ellociltions (Note 3). .
Examination of the Statement of Assets and Liabilities of the Commercial Power Program of the Federal Columbia River Power System
Published by the Government Accountability Office on 1971-12-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)