a

GAO

United States General Accounting Office

Report to the Subcommittee on Energy 

and Water Development, Committee on 

Appropriations, House of 

Representatives

July 2004 BONNEVILLE 

POWER 

ADMINISTRATION

Better Management of 

BPA’s Obligation to 

Provide Power Is 

Needed to Control 

Future Costs

GAO-04-694
www.gao.gov/cgi-bin/getrpt?GAO-04-694.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jim Wells at 

(202) 512-3841 or wellsj@gao.gov. 

Highlights of GAO-04-694, a report to the 

Subcommittee on Energy and Water 

Development, Committee on 

Appropriations, House of Representatives 

July 2004

BONNEVILLE POWER ADMINISTRATION

Better Management of BPA's Obligation 

to Provide Power Is Needed to Control 

Future Costs 

BPA has advantages that have typically enabled it to sell electric power to its 

customers—primarily public utilities—at lower prices than other sellers in 

the Pacific Northwest. Most importantly, BPA sells power produced by the 

federal power system, which includes 31 hydroelectric dams that generally 

have lower costs as compared with other power sources. However, BPA 

also has disadvantages that potentially increase its costs. Specifically, BPA 

is required by law to meet the demands of utilities in the region, even if those 

demands exceed the production capacity of the federal power system. This 

open-ended requirement has at times required BPA to purchase additional 

power at relatively high prices. BPA has other costly obligations as well, 

including providing financial benefits to investor-owned utilities and 

protecting fish and wildlife that increase its costs relative to competing 

sources of electricity. 

BPA’s open-ended obligation to provide power to the region is the major 

cause of its recent cost increases. This obligation led to cost increases as 

BPA purchased large amounts of relatively expensive power to meet rising 

demand. BPA’s rate structure also contributed to increased demand and 

increased costs, because it did not reflect BPA’s incremental costs of 

acquiring additional power and therefore did not give customers adequate 

incentives to conserve or seek power from alternative sources. In addition, 

drought and other factors have also increased BPA’s costs in recent years. 

BPA has not resolved problems associated with its open-ended obligation to 

be the net provider of wholesale electricity in the region—the major cause of 

its recent cost increases. BPA officials intend to resolve this problem by 

seeking agreement with BPA’s customers to limit its commitment to provide 

power. BPA proposes to establish the amount of power each customer is 

able to buy at its lowest cost-based rate and is considering charging 

incremental rates for any power it sells beyond this amount. However, BPA 

has not clearly defined the limits for its commitments or how it would 

implement incremental rates. Whether this approach ultimately will be 

adopted is also unclear; BPA had similar plans in the late 1990s but did not 

implement them because of pressure from customers to serve more demand. 

In the meantime, BPA has taken positive steps to centralize its risk 

management process to better control costs. However, BPA’s plan outlining 

its new approach does not contain some key elements to successful 

implementation, including details on specific activities, resources, and time 

frames needed to implement the plan. 

The Bonneville Power 

Administration (BPA) has 

experienced significant financial 

problems in recent years. BPA’s 

cash reserves at the end of fiscal 

year 2002 had fallen to $188 

million, and BPA estimated in 

February 2003 that it had a 74 

percent chance of missing its 

Treasury debt payment that year. 

While BPA’s finances have recently 

improved, and the agency made its 

Treasury payment in 2003, BPA’s 

financial condition is still far from 

robust. In this context, GAO was 

asked to report on (1) the 

advantages and disadvantages BPA 

faces in marketing electric power 

in a more competitive environment, 

(2) the major causes of BPA’s 

recent cost increases, and (3) the 

extent to which BPA is taking 

actions to control its costs. 

GAO recommends that BPA 

• reduce its future risk of being 

overcommitted by (1) limiting 

the amount of power that BPA 

sells at its lowest cost-based 

rate and (2) charging 

incremental rates for any 

power sold beyond this amount 

that reflect BPA’s cost of 

acquiring that power, and 

• identify specific activities, 

resources, and time frames for 

implementing its risk 

management initiatives. 

BPA generally agreed with this 

report’s findings and 

recommendations. 
Page i GAO-04-694 Bonneville Power Administration 

Letter 1

Results in Brief 4

Background 7

Inherent Advantages Help BPA to Provide Low-Priced Power, but 

Its Open-ended Obligations Are a Competitive Disadvantage 11

BPA’s Open-ended Obligation to Provide Power and Other Factors 

Led to Large Cost Increases for BPA 22

BPA Has Not Resolved Problems That Led to Its Recent Cost 

Increases, but It Has Taken Steps to Control Other Costs 29

Conclusions 36

Recommendations for Executive Action 38

Agency Comments 38

Appendix I Scope and Methodology 40 

Appendix II BPA’s Costs Associated with Fish and Wildlife 

 Programs 42 

Appendix III BPA Costs Associated with Its Power Marketing 

Business, Fiscal Years 1997-2003 44 

Appendix IV Comments from the Bonneville Power 

Administration 47 

Appendix V GAO Contacts and Staff Acknowledgments 51 

GAO Contacts 51

Staff Acknowledgments 51

Tables 

Table 1: BPA’s Costs Associated with Fish and Wildlife Programs, 

Fiscal Years 1985-2003 42

Contents 
Page ii GAO-04-694 Bonneville Power Administration 

Table 2: BPA Costs Associated with Its Power Marketing Business, 

Fiscal Years 1997-2003 44

Figures 

Figure 1: Average Monthly Prices for Wholesale Electricity in the 

Pacific Northwest, 1997-2003 10

Figure 2: Average Production Costs for Different Types of 

Generating Plants in Idaho, Oregon, Washington, and 

Western Montana, 1996-2002 12

Figure 3: Average Wholesale Prices for Electricity Sold by BPA and 

the Five Largest Investor-Owned Utilities in the Pacific 

Northwest, 1996-2002 14

Figure 4: Average Retail Prices of Electricity, 1996-2002 16

Figure 5: BPA’s Average Power Rates, Fiscal Year 1972-2001 21

Figure 6: Power Purchased and Power Contracts Signed by BPA’s 

Major Customer Groups, Fiscal Year 1993-2006 23

Figure 7: Major Events and Electricity Prices during BPA’s 

Subscription and Ratemaking Processes 25

Abbreviations 

aMW average megawatt 

BPA Bonneville Power Administration 

FERC Federal Energy Regulatory Commission 

MWh megawatt-hour 

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Page 1 GAO-04-694 Bonneville Power Administration 

July 9, 2004 

The Honorable David L. Hobson 

Chairman 

The Honorable Peter J. Visclosky 

Ranking Minority Member 

Subcommittee on Energy and Water Development 

Committee on Appropriations 

House of Representatives 

The Bonneville Power Administration (BPA), which markets about 45 

percent of all electric power consumed in the Pacific Northwest, has 

experienced significant financial problems over the past few years. BPA’s 

core business of selling power lost more than $300 million each year in 

fiscal years 2001 and 2002, primarily as a result of increased costs. As a 

result, its cash reserves of $811 million at the end of fiscal year 2000 had 

fallen to $188 million by the end of fiscal year 2002. In February 2003, BPA 

announced that it had an estimated 74 percent chance of missing its 

repayment of Treasury debt that year. These difficulties have necessitated 

increases totaling more than 40 percent in the rates BPA charges its 

customers for power since October 2001. In large part because of these 

increased rates and, consequently, greater revenues, BPA’s financial 

condition has recently improved. BPA made its Treasury debt payment in 

2003, and its cash reserves have risen above $500 million. However, BPA 

has stated that its financial health is still far from robust, and BPA’s ability 

to manage its costs and risks has come under scrutiny from customers and 

stakeholders. 

BPA was formed in 1937 to market electric power produced by the 

Bonneville Dam to the Pacific Northwest. BPA’s marketing responsibilities 

have since broadened to include power from 31 federally owned 

hydroelectric projects, most located in the Columbia River Basin. BPA 

also markets power from one nonfederal nuclear plant. The 31 federal 

dams along with the nonfederal nuclear plant are collectively referred to in 

this report as the federal power system. While BPA markets the power 

produced, other entities are responsible for operating the system—the 

Army Corps of Engineers and the Bureau of Reclamation operate the 

hydroelectric dams; and Energy Northwest, a consortium of utilities, 

operates the nuclear plant. The dams in the federal power system are 

operated for flood control, irrigation, navigation, and recreational benefits 

as well as for the production of hydroelectric power. In addition, the river 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-04-694 Bonneville Power Administration 

system is home to many species of fish and wildlife, including some 

protected by the Endangered Species Act. 

BPA sells some of the power from the federal power system, at cost-based 

rates designed to recover BPA’s full costs, via long-term contracts with its 

customers in the Pacific Northwest—primarily public utilities and large 

industrial facilities such as aluminum smelters in Idaho, Montana, Oregon, 

and Washington. BPA distributes this power to its customers largely on 

transmission lines that BPA owns and operates, which account for more 

than 75 percent of the region’s transmission lines. When the federal power 

system generates more power than BPA has committed to provide its 

customers at its cost-based rates—for example, when spring run-off allows 

large volumes of hydroelectricity to be generated—BPA sells this surplus 

or “secondary” power to utilities and other entities in the Pacific 

Northwest and other western states. However, at times when the 

electricity generation of the federal power system is insufficient to meet 

BPA’s commitments to its customers, BPA purchases or otherwise 

acquires power from other generators to make up the difference. Because 

of the variability in the amount of water resources and therefore available 

power, BPA generally considers, for planning purposes, the “firm” output 

of the federal power system to be only the amount of power that can be 

produced in a low or “critical” water year.1

BPA is one of four power marketing administrations within the U.S. 

Department of Energy.2

 Unlike the other power marketing administrations, 

BPA does not receive annual appropriations from Congress; instead, BPA 

is a self-financing agency whose revenues are generated through its sale of 

power and transmission services. In the past, federal money was 

appropriated to construct the generating and transmission projects from 

which BPA markets power, and BPA currently repays these appropriations 

on an annual basis. As of September 30, 2003, the outstanding balance of 

BPA’s appropriated debt was about $4.7 billion. BPA also has authority to 

borrow up to an additional $4.45 billion from the Treasury on an ongoing 

basis; as of September 30, 2003, BPA had about $2.7 billion of additional 

Treasury debt. 

 1

A critical water year is a year in which the annual runoff in the Columbia River Basin is 

equivalent to the amount recorded in 1937, one of the lowest on record. 

2

The others are the Southeastern Power Administration, the Southwestern Power 

Administration, and the Western Area Power Administration. 
Page 3 GAO-04-694 Bonneville Power Administration 

With the passage of the Pacific Northwest Electric Power Planning and 

Conservation Act of 1980 (Northwest Power Act), BPA’s role in the region 

expanded in scope. For example, under the Northwest Power Act, BPA 

became responsible for ensuring an adequate, efficient, economical, and 

reliable power supply for the Pacific Northwest, which required BPA to 

address growing demand in the region—something BPA had previously 

not been required to do. In addition to its obligations to market and 

distribute power, the Northwest Power Act, along with various other 

statutes, treaties, and court cases, also requires BPA to “protect, mitigate, 

and enhance fish and wildlife” resources affected by the federal power 

system. BPA is also required under the Northwest Power Act to provide 

benefits to residential and small-farm customers of investor-owned 

utilities—these benefits have generally taken the form of financial 

payments. The restructuring of national wholesale electricity markets that 

began in the 1990s also changed the competitive environment in which 

BPA operates. Specifically, restructuring has created an environment with 

a greater degree of competition among generators and marketers of 

wholesale electricity. 

In light of BPA’s recent financial difficulties and cost increases, you asked 

us to determine (1) the advantages and disadvantages BPA faces in 

marketing electric power in a more competitive environment, (2) the 

major causes of BPA’s recent cost increases, and (3) the extent to which 

BPA is taking actions to control its costs. To answer our first objective, we 

reviewed BPA documents and historical data, as well as studies and 

position papers by industry experts. In addition, we analyzed historical 

data on costs, regional and national power prices, and power production 

at the federal hydroelectric dams. To answer our second and third 

objectives, we reviewed BPA documents related to costs, revenues, risk 

management practices, and rate-setting policies, as well as studies and 

position papers by industry experts. Unless otherwise noted, the financial 

data we obtained refer to BPA’s power business (i.e., the expenses and 

revenues embodied in its power rates). We also interviewed BPA officials 

and collected views from BPA’s customers and stakeholders, including 

groups that focus on fish and wildlife issues. In addition, we analyzed cost 

and rate data from BPA. Finally, we interviewed officials from the U.S. 

Army Corps of Engineers, one of the agencies that operate the dams of the 

federal power system. We focused our review on the group within BPA 

that is responsible for marketing power from the federal power system, 

and on its costs in the current rate period, which began in fiscal year 2002. 

We tested the reliability of data on generation costs in the Pacific 

Northwest, and on BPA’s costs and rates, and found them to be adequate 

to answer the objectives of this report. 
Page 4 GAO-04-694 Bonneville Power Administration 

We conducted our review from August 2003 through April 2004 in 

accordance with generally accepted government auditing standards. For a 

more detailed discussion of the scope and methodology of our review, see 

appendix I. 

BPA has inherent advantages that have generally enabled it to sell power 

at lower prices than other sellers of wholesale power in the Pacific 

Northwest. BPA’s most important competitive advantage is that it markets 

electricity produced primarily at hydroelectric dams in the federal power 

system, which generally have lower costs, as compared with power 

produced by other sources. In addition, as a federal agency, BPA enjoys 

financial advantages such as access to federally financed debt, which 

generally offers lower interest rates than those available to private-sector 

entities. However, unlike other sellers of wholesale power, BPA has openended obligations to provide power and other benefits to its customers 

and others in the Pacific Northwest that increase its costs. In particular, 

unlike the other power marketing administrations, BPA is required by its 

governing statutes to serve the “net” demand of utilities in the region (that 

is, the demand that these utilities cannot meet with their own generation 

resources) when requested. Over time, this open-ended requirement has 

increased the demands on BPA’s finite resources; and at times, BPA has 

purchased power from other sources to augment the generation resources 

of the federal power system. Other statutory obligations that increase 

BPA’s costs relative to some of its competitors include providing financial 

benefits to certain customers of regional investor-owned utilities and 

protecting fish and wildlife. Regarding financial benefits to residential and 

small-farm customers of the region’s investor-owned utilities, BPA is 

required to provide these benefits to off-set the higher prices that—for 

historical reasons—these customers generally pay for power, as compared 

with public utility customers. Regarding fish and wildlife protection, BPA 

is the sole source of funding for the Northwest Power and Conservation 

Council—a regional agency established by the Northwest Power Act to 

balance the Northwest’s environment and energy needs, including 

developing a program to protect and rebuild fish and wildlife populations 

affected by hydropower development in the Columbia River Basin. In 

addition, the multiple-use nature of the dams in the federal power system 

constrains the amount of power that BPA can sell. For example, water 

diverted for irrigation purposes is generally unavailable for generating 

electricity. These open-ended obligations and constraints on the 

generation of power have increased pressure on BPA over time and 

contributed to increases in BPA’s costs relative to the costs of competing 

sources of power. Specifically, BPA’s costs—as reflected in its cost-based 

Results in Brief 
Page 5 GAO-04-694 Bonneville Power Administration 

rates—more than doubled in the 30 years between fiscal years 1972 

through 2001, when adjusted for inflation, while the average costs of some 

other sources of power fell. By 1995, as BPA reported in its 1995 Business 

Plan, for the first time in its history, BPA’s rates had risen to the level of 

the costs of other sources of generation—namely gas-fired electricity 

generators. 

BPA’s open-ended obligation to be the net provider of wholesale power to 

the region is the major cause of its recent cost increases. This obligation 

led to BPA’s overcommitment to provide power to its customers in the 

current rate period—from fiscal years 2002 to 2006—and consequently, to 

BPA’s cost increases as it purchased large amounts of power at average 

prices much higher than the costs of the federal power system. The 

demand from BPA’s public utility customers in the current rate period 

increased by more than 50 percent over the previous rate period—a 

demand that BPA is statutorily required to serve. BPA also agreed to 

provide power to investor-owned utilities and large industrial customers, 

although BPA was not statutorily required to do so. To meet this increased 

level of demand, BPA spent approximately $900 million in fiscal year 2002 

and $760 million in fiscal year 2003, necessitating a rate increase of more 

than 40 percent for the majority of BPA’s customers. BPA’s rate structure 

also contributed to the increase in demand and increased costs, because 

BPA did not charge incremental rates equal to its costs of acquiring 

additional power and therefore did not give customers adequate incentives 

to conserve or seek power from alternative sources. In addition, drought 

conditions and other factors have also increased BPA’s costs in recent 

years. 

BPA has not resolved problems associated with its open-ended obligation 

to be the net provider of wholesale electricity in the region—the major 

cause of its recent cost increases. While BPA has issued a draft strategic 

plan that includes an objective of clarifying how much power it will 

provide to its customers, and at what price, starting in fiscal year 2007, this 

plan lacks specificity. According to its plan, BPA will contractually set the 

amount of power each customer is able to buy at BPA’s lowest cost-based 

rate. BPA’s plan also states that BPA will consider using incremental rates3

to define pricing and terms for supply beyond this amount of power. 

 3

BPA has generally used the term “tiered rates” to describe the rate design that 

differentiates between a rate that applies to sales at the lowest embedded-cost rate and a 

rate that applies to sales beyond that amount. 
Page 6 GAO-04-694 Bonneville Power Administration 

However, BPA’s plan does not specify the amount of power BPA will allow 

its customers to buy at its lowest rate nor the specific manner in which 

incremental rates will be charged. If the amount of power sold to 

customers at its lowest rate exceeds the firm output of the federal power 

system—the amount of power that can be generated during a critical 

water year—BPA could still need to purchase power from other sources to 

meet its commitments during low water years. Further, if the incremental 

rates do not fully reflect BPA’s costs of acquiring any additional power it 

sells, BPA’s customers will not have appropriate incentives to conserve or 

seek alternative sources of power. Finally, whether BPA’s strategic plan 

will ultimately be implemented remains unclear. BPA has not carried out 

similar proposals made in the past—such as in the late 1990s, when a fourstate panel recommended that BPA limit its commitments to the firm 

output of the federal power system and charge incremental rates to cover 

its cost of acquiring any additional power. BPA officials said that BPA 

ultimately declined to implement such an approach under strong regional 

pressure from its customers to provide more power. 

Regarding other costs, BPA has taken steps to reduce costs or control the 

extent of future cost increases in the areas of power generation, fish and 

wildlife programs, and internal operations. For example, BPA has reduced 

funding in general areas such as travel, training, supplies, and staffing, as 

compared with 2001 funding levels. In addition, BPA has taken steps to 

centralize its risk management process to better control its costs. Among 

other things, BPA has established a management plan outlining a new 

approach to risk management and has hired a Chief Risk Officer. However, 

BPA’s plan to date generally does not identify specific activities, resources, 

and time frames for completing implementation of its new approach; and 

this lack of specificity prevented us from reviewing the plan’s progress in a 

meaningful way. 

We are making four recommendations to BPA to ensure that the agency 

can control costs of future power purchases and that it clarifies key 

elements of the implementation of its new risk management process. 

Specifically, we are recommending that BPA reduce its future risk of being 

overcommitted by (1) defining rights to purchase the firm output of the 

federal power system so that the amount of power that BPA sells at its 

lowest, cost-based rate is equivalent to the firm output of the existing 

federal power system, (2) charging incremental rates for any power sold 

beyond this amount that reflect BPA’s cost of acquiring that power, and 

(3) studying the feasibility of issuing a rule under the Administrative 

Procedure Act to define the rights to purchase power and the terms of 

incremental rates. We are also recommending that BPA identify specific 
Page 7 GAO-04-694 Bonneville Power Administration 

activities, resources, and time frames for implementing its risk 

management initiatives. In commenting on a draft of this report, BPA 

generally agreed with our findings and recommendations. 

Although BPA is a self-funded agency, it has ongoing authority to borrow 

from Treasury to fund capital expenditures and is repaying funds 

appropriated in the past to finance the construction of dams and 

generating and transmission facilities. According to the Northwest Power 

Act, BPA’s revenues from selling power and transmission services must 

cover its costs, which include repayment of its debt, interest, operating 

and maintenance costs, and the cost of any power purchased for resale to 

meet its customers’ needs, among other things. BPA’s current 5-year rates 

include the ability to adjust rates in response to changing cost and revenue 

conditions. 

BPA’s customers include public utilities in the Pacific Northwest, as well 

as a few aluminum companies and other large industrial customers, 

known as direct service industries. BPA also provides power to some 

investor-owned utilities in the Pacific Northwest. In addition, BPA sells or 

exchanges power with utilities and power marketers in Canada and the 

western United States. Preference—the opportunity to obtain first access 

to BPA power—is defined by statute and gives priority to public utilities 

and other public entities to ensure that the federal hydropower projects 

are operated for the benefit of the general public, particularly residential 

and rural customers. However, BPA’s nonpublic customers in the Pacific 

Northwest have priority in access to BPA power over public utilities in 

other parts of the country. 

BPA sells power to its customers through two mechanisms. First, BPA 

sells power through long-term contracts at cost-based rates that are 

established in periodic rate cases, which have recently taken place every 5 

years. The Federal Energy Regulatory Commission (FERC)—pursuant to 

the Northwest Power Act—approves BPA’s rates after determining that 

the rates BPA proposes for its firm power are sufficient to cover BPA’s 

costs. Second, BPA often sells secondary power, defined as power 

produced beyond the amount that BPA has committed to sell to its 

customers at its cost-based rates. These secondary sales are often 

Background 
Page 8 GAO-04-694 Bonneville Power Administration 

transacted at market-based prices.4 The time frames of these secondary 

sales range from hourly to as much as 18 months in advance. 

The amount of power produced by the federal power system is highly 

variable, largely depending on prevailing water conditions. For example, 

according to BPA, in the last 10 fiscal years, the annual runoff of the 

Columbia River at The Dalles Dam has varied from a low of about 79 

million acre-feet in fiscal year 2001 to a high of about 194 million acre-feet 

in fiscal year 1997; and the amount of power generated by the federal 

power system has varied from a low of about 7,300 average megawatts 

(aMW) to a high of nearly 12,000 aMW.5

 Since BPA’s revenues from 

secondary sales depend on the amount of power produced by the federal 

power system, these revenues are also highly variable. Because of this 

inherent uncertainty about how much power BPA will have to sell in any 

given year, BPA officials estimate for planning purposes that the firm 

output of the federal power system is about 8,000 aMW. 

To promote competition in wholesale electricity markets, the federal 

government took several actions in the 1990s that affect BPA’s operations. 

For example, in 1992, the Congress passed the Energy Policy Act, 

authorizing FERC to require utilities, on a case-by-case basis, to allow 

competitors to use their transmission lines for wholesale sales of 

electricity. In 1996, FERC ordered that electric transmission systems be 

opened to all qualified wholesale buyers and sellers of electricity. FERC 

also required utilities to separate operations and management of their 

generation and transmission businesses to prevent discriminatory 

practices, such as denying competitors equal access to transmission lines. 

While BPA’s transmission system is outside of FERC’s jurisdiction, BPA 

voluntarily complied with key features of FERC’s orders. For example, in 

1997, BPA split its operations into a Power Business Line and 

Transmission Business Line. BPA took other actions to attempt to position 

 4

BPA sells secondary power at market prices, subject to a self-imposed average annual 

price cap—this average annual price cap is determined by the cost to BPA of power 

produced at the Energy Northwest operated nuclear plant. BPA may actually receive more 

than this amount when it sells its power in a formal market and when the market-clearing 

price exceeds BPA’s self-imposed price cap. 

5

An acre-foot is the volume of water necessary to cover one acre to a depth of one foot and 

is equivalent to 325,851 gallons. A watt-hour is a measurement equal to 1 watt of power 

supplied to, or taken from, an electrical circuit steadily for 1 hour. A megawatt-hour is one 

million watt-hours, or enough power to serve the needs of about 750 homes for 1 hour. An 

aMW is equal to 8,760 megawatt-hours, or the average number of megawatt-hours over the 

course of 1 year (i.e., 24 hours x 365 days x 1 megawatt). 
Page 9 GAO-04-694 Bonneville Power Administration 

itself in the more competitive market that was emerging in the 1990s. For 

example, in its 1995 Business Plan, BPA announced its intent to expand its 

position in the wholesale electricity market. Responding to the increased 

choices and falling prices that were available to its customers, BPA 

planned to increase its long-term revenue by entering new markets with 

new product lines. Specifically, the Business Plan proposed an Energy 

Services Business Line to provide planning and analytic services to 

customers and advocated increased spot-market power purchases to 

provide it resource flexibility in a time of shifting demands and increasing 

obligations to migrating salmon. 

In the mid-1990s, wholesale power prices dropped in the Pacific 

Northwest, and power marketers began to offer wholesale power prices 

lower than the prices BPA charged its customers. BPA’s customers 

responded by reducing their purchases of BPA power by about 1,800 

aMW—a reduction in demand of almost 25 percent. Because of this drop 

in demand from its customers, BPA became concerned that it would not 

be able to sell its power at prices high enough to cover its costs. In 

response to concerns about BPA’s competitiveness and to establish 

regional consensus on BPA’s role in a competitive wholesale marketplace, 

the governors of Idaho, Montana, Oregon, and Washington convened a 

committee in 1996 representing BPA and its major customer and 

stakeholder groups. The committee issued a report—known as the 

Comprehensive Review of the Northwest Energy System—recommending 

that BPA return to its historic role of marketing power from the federal 

power system, rather than becoming an aggressive marketer of products 

and services in the emerging competitive power market.6

 Accordingly, the 

Comprehensive Review report recommended that BPA avoid acquiring 

resources to meet load growth, except on a direct bilateral basis where the 

customer takes on the risk, and that BPA manage and control its costs to 

remain competitive. 

After the low prices of the mid-1990s, Pacific Northwest electricity prices 

became more volatile. Trends in Pacific Northwest wholesale electricity 

prices are shown in figure 1. Average monthly wholesale electricity prices 

increased somewhat in 1998 and 1999, as demand in the region grew while 

little new generation capacity was added. In mid-2000, electricity prices in 

California skyrocketed due in part to low water conditions that reduced 

 6

Comprehensive Review of the Northwest Energy System—Final Report: Toward a 

Competitive Electric Power Industry for the 21st Century, December 12, 1996. 
Page 10 GAO-04-694 Bonneville Power Administration 

the total supply. Because hydroelectric power provides such a large part 

of the total power supply in the region, low water years tend to cause high 

prices due to the consequent reduction in the total supply of power. 

Because California’s electricity market is integrated with the rest of the 

western region, prices in the Pacific Northwest quickly followed 

California’s lead and rose to unprecedented levels. Average wholesale 

prices in the Pacific Northwest remained high until the summer of 2001. 

Since then, prices have returned to levels similar to those seen in the late 

1990s. 

Figure 1: Average Monthly Prices for Wholesale Electricity in the Pacific Northwest, 

1997-2003 

Note: Wholesale electricity prices are expressed in dollars per megawatt-hour (MWh) and are not 

adjusted for inflation. These prices are from the Mid-Columbia Hub and are representative of 

wholesale electricity prices in the Pacific Northwest. 

0

50

100

150

200

250

300

350

400

450

01/1997

07/1997

01/1998

07/1998

01/1999

07/1999

01/2000

07/2000

01/2001

07/2001

01/2002

07/2002

01/200307/2003

Date

Dollars per megawatt-hour 

Source: GAO analysis of Platts'/RDI PowerDAT data.
Page 11 GAO-04-694 Bonneville Power Administration 

BPA has inherent advantages, including its access to power from the 

federal power system, that have generally enabled it to provide power to 

customers in the Pacific Northwest at prices lower than other sellers of 

wholesale power. However, unlike other sellers of wholesale power, BPA 

has open-ended obligations to provide power and other benefits to its 

customers and others in the Pacific Northwest that have increased BPA’s 

costs. In addition, the multiple-use nature of the dams in the federal power 

system constrains the amount of power that BPA has available to sell. 

These open-ended obligations and constraints have increased pressure on 

BPA over time, engendering disputes in the region over the allocation of 

the limited resources of the federal power system, and contributing to 

increases in BPA’s costs relative to the costs of competing sources of 

electricity. 

BPA’s most important cost advantage is that power from the federal power 

system is primarily produced at hydroelectric dams, which overall have 

low costs. According to BPA data, hydroelectric generation has accounted 

for more than 90 percent, on average, of the generation output of the 

federal power system over the past 2 decades. Many of these hydroelectric 

facilities were built decades ago and had relatively low construction costs 

compared with newer generating facilities. In addition, these hydroelectric 

facilities tend to have lower operating costs than other sources of 

electricity that consume costly fossil or other fuels. As a result of these 

advantages, hydroelectric power plants in the Pacific Northwest typically 

produce power for less than $5 per MWh (as shown in fig. 2), compared 

with the region’s coal and nuclear plants, which produce power for 

between $15 to 20 per MWh, or combined cycle turbine facilities that burn 

natural gas or oil, which produce power for more than $20 per MWh. 

Inherent Advantages 

Help BPA to Provide 

Low-Priced Power, 

but Its Open-ended 

Obligations Are a 

Competitive 

Disadvantage 

BPA’s Access to 

Hydroelectric Power and 

Federal Financing Offer 

Competitive Advantages 
Page 12 GAO-04-694 Bonneville Power Administration 

Figure 2: Average Production Costs for Different Types of Generating Plants in 

Idaho, Oregon, Washington, and Western Montana, 1996-2002 

Note: In inflation-adjusted dollars, base year 2003. Production costs are measured in dollars per 

MWh and reflect data for the North American Electric Reliability Council’s Northwest Power Pool 

subregion. Production costs reflect variable and fixed costs associated with a generating plant. 

Source dataset does not have a value for nuclear generation in 2002. Combined cycle turbine 

generators use natural gas or oil. 

BPA also enjoys advantages related to financing due to its status as a 

federal agency. BPA has access to federally financed debt, which generally 

offers lower interest rates than those available to private-sector entities. 

BPA’s federal financing is divided into two categories—appropriated debt 

$27.01

$19.12

$16.99

$3.21

0

5

10

15

20

25

30

Type of generation

Dollars per megawatt-hour

Source: GAO analysis of Platts’/RDI PowerDAT data.

Combined-cycle turbine

Nuclear

Coal

Hydroelectric
Page 13 GAO-04-694 Bonneville Power Administration 

and Treasury debt. Appropriated debt7 consists of appropriations received 

by BPA and the generating agencies to construct the generating and 

transmission projects from which BPA markets power. As of September 

30, 2003, the outstanding balance of BPA’s appropriated debt was about 

$4.7 billion. As a result of legislation passed in 1996, BPA’s appropriated 

debt was restructured in 1997 to increase the interest rates to bring them 

in line with the prevailing Treasury rates. However, the principal on this 

debt was adjusted downward so that, except for the interest on the $100 

million that BPA paid as part of the restructuring, the annual interest BPA 

pays on the debt remains the same.8

In addition to its appropriated debt, BPA has authority to borrow from the 

Treasury on an ongoing basis. BPA’s Treasury borrowing stems from 

authority granted in the Federal Columbia River Transmission System Act 

of 1974, as amended, which allows BPA to have up to $4.45 billion in 

Treasury debt outstanding at any one time. The $4.45 billion consists of 

two separate borrowing limits: $1.25 billion is reserved for conservation 

and renewable resource loans and grants, and $3.2 billion for transmission 

and other capital investments. This debt is issued at market interest rates 

that are comparable to other government agency obligations, and these 

rates are higher than Treasury rates. As of September 30, 2003, BPA had 

about $2.7 billion of debt held by the Treasury. As BPA pays off debt, it has 

greater funds available for future borrowing. 

BPA’s status as a federal agency also has conferred advantages in securing 

financing from the private sector. BPA does not have authority to borrow 

directly from nonfederal sources, but BPA has secured private sector 

financing by taking responsibility for the debt of other entities. For 

example, BPA is responsible for the debt service of bonds issued by 

Energy Northwest, a consortium of public utilities, to build three nuclear 

plants, only one of which is currently operating. While the federal 

government explicitly does not guarantee Energy Northwest bonds, 

Moody’s Investors Service views them as having an implicit federal 

guarantee. In addition, Moody’s Investors Service and Fitch Ratings give 

 7

We refer to this as appropriated debt because BPA is required to repay appropriations 

used for capital investments, with interest. However, these reimbursable appropriations are 

not technically considered lending by the Treasury. 

8

At the time this debt was restructured, BPA’s appropriated debt of $6.85 billion carried a 

weighted-average interest rate of about 3.5 percent. Effective the first day of fiscal year 

1997, the principal of the outstanding debt was reduced to an estimated $4.29 billion and 

the associated interest rate was increased to 7.1 percent. 
Page 14 GAO-04-694 Bonneville Power Administration 

credit strength to BPA’s ties to the federal government. Thus, the interest 

that BPA pays on Energy Northwest bonds is lower than would be paid 

without BPA’s ties to the federal government. 

As a result of BPA’s inherent cost advantages, it generally has been able to 

sell electricity at lower wholesale prices than other major investor-owned 

utilities in the Pacific Northwest, as shown in figure 3. 

Figure 3: Average Wholesale Prices for Electricity Sold by BPA and the Five Largest 

Investor-Owned Utilities in the Pacific Northwest, 1996-2002a

Note: Prices are given in inflation-adjusted dollars, base year 2003. 

a

Average wholesale prices are expressed in cents per kilowatt-hour, where a kilowatt-hour is equal to 

one thousand watt-hours. Average wholesale prices are calculated by dividing a utility’s total revenue 

from power sales by the total amount of power it sold. The resulting weighted average may not 

represent the actual price paid by any particular customer, but it reflects the average annual prices 

paid by customers as a group. 

BPA’s advantages contribute significantly to the relatively low retail price 

of electricity sold in the Pacific Northwest. Because BPA sells about 45 

3.48

2.94

4.06

4.65

6.19

0

1

2

3

4

5

6

7

Cents per kilowatt-hour

Average wholesale price, 1996-2002

Avista

Corp.

Idaho

Power Co.

PacifiCorp.

Portland General

Electric Co.

Puget Sound

Energy Inc.

BPA average wholesale price (2.86 cents per kilowatt-hour),1996-2002

Source: GAO analysis of Energy Information Administration data.
Page 15 GAO-04-694 Bonneville Power Administration 

percent of all the electricity used in the Pacific Northwest, its wholesale 

prices play a large role in determining the average retail price of electricity 

throughout the Pacific Northwest. As shown in figure 4, the average retail 

price of electricity (as expressed in average revenue per kilowatthour) in 

states in the Pacific Northwest is generally lower than electricity sold in 

much of the rest of the United States. While the nationwide average retail 

price of electricity from 1996 to 2002 was 7.41 cents per kilowatthour, 

Washington state’s average price of electricity over this period was 4.81 

cents per kilowatthour, Oregon’s was 5.46 cents per kilowatthour, Idaho’s 

was 4.63 cents per kilowatthour, and Montana’s was 5.61 cents per 

kilowatthour.9

 9

Figures are presented in constant dollars using 2003 as the base year. 
Page 16 GAO-04-694 Bonneville Power Administration 

Figure 4: Average Retail Prices of Electricity, 1996-2002 

Note: Prices are given in inflation-adjusted dollars, base year 2003, and have been rounded to 

hundredths of a cent per kilowatt-hour. Average retail prices are expressed in cents per kilowatt-hour, 

calculated by dividing total revenue from power sales by the total amount of power sold in a state. 

The resulting weighted average may not represent the actual price paid by any particular customer, 

but reflects the average annual prices paid by customers as a group. 

MT

5.61

NE

5.74

AL

5.93

TN

5.93

ND

5.94

OK

6.03

SC

6.05

WI

6.05

MN

6.19

AR

6.30

CO

6.39

MS

6.41

IA

6.42

MO

6.50

IN

5.66

LA

6.59

SD

6.73

KS

6.76

GA

6.77

TX

6.88

OH

6.90

NV

7.02

NM

7.25

MD 7.28

DE 7.34

NJ 10.62

MI

7.56

NC

7.01

FL

7.67

IL

7.75

AZ

7.83

DC 8.01

PA

8.35

VT 10.98

NH 12.15

WA

4.81

OR

5.46 ID

4.63

WY

4.71

UT

5.49

KY

4.45 WV 5.46

AK

10.89

HI 13.72

NY

11.85

ME

10.73

MA 10.78

RI 10.68

CT 10.75

Ranges in price (in cents per kilowatt-hour)

4.4 - 5.6

>5.6 - 7.0

>7.0 - 8.4

>8.5

CA

10.79

Source: GAO analysis of Energy Information Administration data.

VA

6.48
Page 17 GAO-04-694 Bonneville Power Administration 

BPA also has competitive disadvantages—stemming mainly from statutory 

obligations—that increase its costs relative to other sellers of wholesale 

power. Most importantly, unlike other power marketing administrations, 

BPA has a legislative mandate under the Northwest Power Act to be the 

“net provider” of wholesale electricity in the region—i.e., BPA must meet 

the power needs of all utilities in the region to the extent that the utilities’ 

own generating resources are insufficient to meet the demand of their 

retail customers. If a utility requests power from BPA, BPA must provide 

this power regardless of whether its own generating resources are 

sufficient to meet the demand. 

Past attempts by BPA to meet growing regional demand have led to 

significant cost increases that BPA has had to cover in its power rates. For 

example, in the early 1970s, BPA entered into financing agreements with 

Energy Northwest to acquire the generating capability of three nonfederal 

nuclear power plants.10 Later, a variety of events, including construction 

cost overruns and lower-than-estimated power demand growth, made it 

clear that some of these plants would not be economical to complete or 

operate. Accordingly, construction was halted on two of these plants. As a 

result, BPA is currently responsible for about $3.8 billion in nonfederal 

debt associated with two nonoperating nuclear plants, along with $2.2 

billion in nonfederal debt for the one operating nuclear plant, the 

Columbia Generating Station. Servicing the debt related to the 

nonoperating plants that don’t generate any revenue to help offset this 

cost has raised BPA’s average costs significantly, requiring BPA to charge 

more for its power sales. In 1994, BPA again tried to expand the capacity 

of the federal power system by entering into a financing agreement to 

acquire the capacity of a proposed nonfederal gas-fired power plant for a 

20-year period. Later, as wholesale market prices for power fell, some of 

BPA’s customers reduced their demand for BPA power, and BPA found 

that it did not need the power from the gas-fired plant. BPA then breached 

its contract, which cost the agency over $280 million in net settlement 

payments. 

Under the requirements of the Northwest Power Act, BPA also provides 

financial payments to some of its customers in lieu of providing power 

 10At the time these agreements were made, Energy Northwest was known as Washington 

Public Power Supply System, a joint operating agency in the state of Washington made up 

of representatives of public utility districts and municipalities. Under these agreements, 

BPA contracted to pay all or part of the annual project budgets, including debt service, 

whether or not the projects were completed. 

BPA Has Competitive 

Disadvantages That 

Increase Its Costs 
Page 18 GAO-04-694 Bonneville Power Administration 

through a program called “residential exchange.” The residential exchange 

program is designed to share the benefits of low-cost power from the 

federal power system with residential and small-farm customers of 

investor-owned utilities.11 Because investor-owned utilities in the Pacific 

Northwest have typically had higher costs than the region’s public utilities, 

the residential exchange program attempts to compensate for the 

difference and reduce the prices paid by the investor-owned utilities’ retail 

customers by making financial payments to the investor-owned utilities. 

The size of these payments is determined by comparing an investor-owned 

utility’s average cost of producing power to the rates BPA charges its 

public utility customers, with BPA making up the difference. Between 

fiscal years 1982 and 2003, BPA’s financial records show that the annual 

cost of the program has averaged about $210 million.12

The Northwest Power Act also requires BPA—along with the other federal 

agencies responsible for managing, operating, or regulating hydroelectric 

facilities in the Columbia River Basin—”to protect, mitigate, and enhance 

fish and wildlife” resources impacted by the development and operation of 

those facilities. Under the Act, BPA is required to implement and fund 

measures supporting fish and wildlife in a manner consistent with the 

program developed by the Northwest Power and Conservation Council—a 

regional agency established by the Northwest Power Act to balance the 

Northwest’s environment and energy needs, including developing a 

program to protect and rebuild fish and wildlife populations affected by 

hydropower development in the Columbia River Basin. BPA must also 

implement and fund actions contained in the biological opinions directed 

at avoiding jeopardy to and recovering the 14 Columbia River Basin fish 

populations listed as threatened or endangered under the Endangered 

Species Act. Because BPA is the primary source of funding for the 

Northwest Power and Conservation Council’s program and for the 

implementation of the actions contained in the biological opinions, BPA’s 

costs are impacted by the costs of protecting fish and wildlife to a greater 

degree than some of its competitors. BPA financial records show that 

between fiscal years 1985 and 2003, BPA’s costs to implement these 

 11Some public utilities also can receive payments under this program, but the cost to BPA is 

much smaller, averaging less than $23 million annually (in 2003 dollars) from 1982 to 2003. 

12Average costs are in constant dollars, base year 2003. In 2002, BPA began providing 

payments and power to investor-owned utilities under a settlement agreement rather than 

under the residential exchange provisions of the Northwest Power Act. The $210 million 

average includes these costs. 
Page 19 GAO-04-694 Bonneville Power Administration 

actions have increased on an annual basis, from about $85 million in 1985 

to about $256 million in 2003, in 2003 dollars. BPA’s total spending on 

these programs during the same period was over $3.3 billion. (For more 

detailed information on the growth in BPA’s program spending on fish and 

wildlife from 1985 through 2003, see app. II.) 

In addition, the multiple-use nature of the dams in the federal power 

system can reduce the amount of power that BPA has available to sell, 

which increases BPA’s average costs of providing power. In addition to 

generating power, the dams of the federal power system are also operated 

for the protection of fish and wildlife, flood control, irrigation, navigation, 

and recreational benefits. These other uses change the timing and amount 

of the water flow, which in turn can reduce the total amount of power that 

the federal power system produces—and therefore, the amount of power 

that BPA has to market. For example, to fulfill the obligations of the 

Northwest Power Act and the Endangered Species Act, water is released 

from storage reservoirs in the Columbia River Basin to aid migrating 

salmon and steelhead, including many threatened or endangered fish 

populations. Water releases for fish migration can generate power, but 

such releases typically occur during springtime when water flows are 

already high and, consequently, power prices are low. As a result of these 

releases, less water is retained behind the dams to be released later to 

generate power when prices are higher. In addition, water is sometimes 

spilled without generating electricity to aid fish migration instead of being 

sent through the dams’ turbines to generate power. As a result of these 

constraints on power production at the federal dams, BPA must at times 

purchase power to meet its contractual obligations; and at other times, 

BPA’s revenues from secondary sales are reduced. Purchasing additional 

power and having less power to sell combine to increase BPA’s average 

costs—defined as BPA’s total costs divided by the total power generation 

that BPA sells. According to BPA estimates for fiscal years 1985 through 

2003, water releases for fish and wildlife purposes have cost BPA almost 

$4 billion in power purchases to meet contractual obligations and in 

foregone revenues.13 Diverting water for irrigation purposes has a similar 

effect on BPA’s revenues and average costs. BPA estimates that foregone 

 13These estimates are adjusted for inflation using 2003 as a base year. 
Page 20 GAO-04-694 Bonneville Power Administration 

revenues attributed to irrigation withdrawals are currently about $180 

million per year.14

As population and economic activity in the Pacific Northwest region have 

grown, the demand for power from the federal power system has 

increased. While in the past BPA typically provided power to public 

utilities and had power left over for some large industrial customers, 

demand from public utilities has grown so that, according to BPA officials, 

this demand is currently about equal to the entire firm output of the 

federal power system. Demand from investor-owned utilities has also 

grown, and consequently, the number of these utilities’ customers who are 

entitled to financial benefits through the residential exchange program has 

increased. In addition, the demands on the operation of dams for other 

uses—particularly for fish and wildlife programs—have increased. These 

increasing and often competing demands for the resources of the federal 

power system have led to disputes among the beneficiaries over how these 

resources are distributed. For example, the method by which BPA 

calculates residential exchange payments has spurred disputes within the 

region. Investor-owned utilities and state regulators have argued that BPA 

has manipulated the method to reduce payments below appropriate levels. 

Conversely, public utilities have argued that payments to investor-owned 

utilities have been too high and that BPA has inaccurately applied a 

statutory provision designed to protect public utilities from increased 

prices. Some public utilities recently filed a lawsuit against BPA, claiming 

that a settlement agreement BPA signed with investor-owned utilities 

inappropriately increased program costs. 

BPA’s costs—as reflected in its cost-based power rates—more than 

doubled in the 30 years between fiscal years 1972 through 2001, when 

adjusted for inflation, and increased by a factor of about 7 in nominal 

terms (not adjusted for inflation).15 Figure 5 shows BPA’s rates from 1972 

through 2001 both in dollars adjusted for inflation and in nominal dollars 

 14BPA officials told us that they are not required to track the costs of irrigation water 

releases as they are with fish and wildlife related releases. Therefore, they do not have 

annual figures for the dollar impact on revenues of irrigation releases. According to BPA 

officials, flood control, navigation, and recreational uses of the dams do not have a 

significant affect on the amount of power BPA has to sell. 

15BPA is required by statute to set its rates to recover its costs. Thus, when BPA’s costs 

increase over time, its rates must increase by an equal amount. 
Page 21 GAO-04-694 Bonneville Power Administration 

(not adjusted for inflation).16 During this period, BPA’s backing of the 

construction of the nuclear plants and the gas-fired plant, discussed 

previously in this report, contributed to the agency’s cost increases as 

reflected in its rising rates. 

Figure 5: BPA’s Average Power Rates, Fiscal Year 1972-2001 

Note: Data are for BPA’s historical average priority firm power rates. Nominal prices refer to BPA’s 

rates that have not been adjusted for inflation. Real prices refer to BPA’s rates that have been 

adjusted for inflation with fiscal year 2003 as the base year. 

Since the late 1970s, while BPA’s rates increased significantly, the cost of 

new sources of power generation decreased as the efficiency of new 

technologies improved. For example, in its 1995 Business Plan, BPA 

 16The figure shows that in periods, such as in much of the 1970s, when BPA’s average 

nominal rates were nearly constant, inflation caused the “real” or inflation-adjusted rates to 

fall, but that on average, increases in BPA’s rates exceeded inflation over the entire three 

decades. 

0

0.5

1

1.5

2

2.5

3

3.5

4

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

19861987

1988

1989

1990

1991

1992

1993

19941995

1996

1997

19981999

2000

2001

Fiscal year

Cents per kilowatt-hour

Nominal price

Real price (2003 dollars)

Source: GAO analysis of BPA data.
Page 22 GAO-04-694 Bonneville Power Administration 

reported that a number of factors, including “falling fuel prices and the 

emergence of new and aggressive competition” had led to a situation 

where for the first time in BPA’s history, BPA’s rates were as high as the 

costs of alternative sources of electric power. As a result, as discussed 

previously in this report, some of BPA’s customers began to reduce their 

demand for BPA power in favor of these cheaper sources of power. BPA 

has more recently reported that since the West Coast energy crisis of 2000 

and 2001, and with recent increases in natural gas prices, the costs of new 

power plants are again higher than BPA’s rates. However, after 1995, BPA 

stopped regularly tracking and reporting consistent data on the cost of the 

least expensive alternative form of power generation, so we were unable 

to compare the agency’s rates relative to the cost of such alternatives after 

that year. 

BPA’s open-ended obligation to be the net provider of wholesale power to 

the region is the major cause of its recent cost increases. This obligation 

led the agency to overcommit to provide power to its customers in the 

current rate period—from fiscal years 2002 to 2006. BPA’s costs rose 

dramatically as the agency purchased large amounts of power, at average 

prices much higher than the costs of power from the federal power 

system, and took other steps to meet its obligations. BPA’s rate structure, 

which did not charge incremental rates equal to BPA’s costs of acquiring 

additional power, contributed to the rising costs because it did not give 

customers adequate incentives to conserve or seek power from alternative 

sources. Drought conditions and other factors have also caused BPA’s 

costs associated with its power marketing business to increase in recent 

years. 

BPA experienced a demand increase of more than 50 percent from its 

public utility customers in the current rate period, which began in fiscal 

year 2002. Figure 6 shows the amount of power that BPA’s three main 

customer groups purchased from fiscal years 1993 to 2001 and the amount 

of power these same groups signed contracts to purchase during the 

current rate period. Demand from the public utilities increased from an 

average of approximately 4,300 aMW during the fiscal year 1997 to 2001 

rate period to an average of approximately 6,800 aMW during the current 

rate period. As described earlier, the Northwest Power Act requires BPA 

to serve the net requirements of public utilities if these utilities request 

power, regardless of whether BPA’s own generating resources are 

sufficient to meet this demand. Therefore, BPA was required to serve this 

increased demand. 

BPA’s Open-ended 

Obligation to Provide 

Power and Other 

Factors Led to Large 

Cost Increases for 

BPA 

Open-ended Obligation to 

Provide Power and BPA’s 

Rate Structure Led to 

Large Cost Increases for 

BPA 
Page 23 GAO-04-694 Bonneville Power Administration 

Figure 6: Power Purchased and Power Contracts Signed by BPA’s Major Customer 

Groups, Fiscal Year 1993-2006 

In addition to signing contracts to provide more power to its public utility 

customers, BPA also signed contracts to provide power to customers that 

it was not statutorily required to serve during the current rate period. For 

example, BPA agreed to provide approximately 1,500 aMW of power to the 

direct service industries during the fiscal year 2002 to 2006 rate period, 

despite the fact that BPA’s statutory mandate to serve the direct service 

industries ended at the end of fiscal year 2001. BPA officials told us that 

the decision to serve the direct service industries was made at the request 

of the then Secretary of Energy and that BPA management also felt it was 

the correct thing to do, given BPA’s previous requirement to provide 

power to these customers. BPA also agreed to provide 1,000 aMW of 

power to the investor-owned utilities as part of a settlement agreement—

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Fiscal years 

Public utilities

Direct service industries

Investor-owned utilities 

Power sales contracts

signed during subscription

Actual power sales

Average megawatts

Source: BPA.
Page 24 GAO-04-694 Bonneville Power Administration 

previously, BPA had only provided financial payments to investor-owned 

utilities as part of the residential exchange program. 

The substantial increase in customer demand that occurred at the 

beginning of fiscal year 2002 coincided with the expiration of the 20-year 

power sales contracts that BPA signed with the majority of its customers 

after the passage of the Northwest Power Act. To allow customers to sign 

new long-term contracts for firm power, BPA established a “subscription 

window”—from April to October 2000. During this subscription process, 

the majority of BPA’s customers signed 10-year contracts for fiscal years 

2002 through 2011. 

Figure 7 shows a time line of BPA’s major actions during its subscription 

and ratemaking processes against a backdrop of wholesale electricity 

prices in the Pacific Northwest. When BPA began planning for the 

subscription process in early 1997, customers had recently reduced their 

power purchases from BPA by approximately 1,800 aMW to take 

advantage of low wholesale market prices. BPA officials told us that, due 

to the reduction in customer demand, they were concerned about the 

possibility that they might not be able to sell enough power to cover their 

costs. In BPA’s December 1998 record of decision on the subscription 

process, BPA stated that two of its principal goals were to spread the 

benefits of the federal power system as broadly as possible and avoid rate 

increases. Toward that end, BPA committed itself to providing power to 

investor-owned utilities and direct service industries, as well as serving all 

public utility demand placed on it. 
Page 25 GAO-04-694 Bonneville Power Administration 

Figure 7: Major Events and Electricity Prices during BPA’s Subscription and Ratemaking Processes 

Note: Wholesale electricity prices are expressed in dollars per MWh and are not adjusted for inflation. 

These prices are from the Mid-Columbia Hub and are representative of wholesale electricity prices in 

the Pacific Northwest. 

BPA officials told us that when wholesale electricity prices rose slightly 

during the late 1990s, they became concerned about customers demanding 

more power than BPA could provide from the federal power system. In 

May 2000, at the beginning of the subscription window, BPA filed a rate 

case with FERC to set power rates for fiscal years 2002 through 2006. In 

the rate case, BPA estimated that it would be called on to serve 

approximately 1,700 aMW of power beyond the firm output of the federal 

50

100

150

200

250

300

350

400

450

January

April

July

April

April

April

April

April

October

January

October

October

October

October

July

January

July

January

July

January

July

January

April

October

July

January

July

0

Dollars per megawatt-hour

1997 1998 1999 2000 2001 2002 2003

Dec. 1998

BPA files record

of decision

establishing

subscription

process

Apr. - Oct. 2000

Subscription

window

May 2000

BPA files rate case 

for FY 2002-2006

period

Oct. 2001

New rate period

begins - BPA rates 

increase by over

40 percent

Source: GAO analysis of Platts'/RDI Powerdat data on wholesale electricity prices and data from BPA officials.
Page 26 GAO-04-694 Bonneville Power Administration 

power system, based on input from customers on their expected power 

demand. 

In June 2000, immediately after BPA filed its rates for 2002 through 2006 

with FERC, wholesale power prices increased to levels never before seen 

in the Pacific Northwest, and BPA’s public utility customers turned to BPA 

to avoid the high market prices. By the end of the subscription process, 

BPA’s public utility customers had requested 1,600 aMW more power than 

BPA anticipated in its May 2000 rate case. In total, BPA’s customers signed 

subscription contracts for 3,300 aMW of power (roughly equivalent to 

three times the power used by the city of Seattle) beyond the firm output 

of the federal power system. 

BPA’s rate structure for the fiscal year 2002 to 2006 rate period 

contributed to the increase in demand for BPA power. According to BPA 

officials, BPA planned to meet customer demand for power by purchasing 

additional power from other sources in contracts of varying durations. In 

its May 2000 rate case, BPA decided to sell all of its power at a single rate, 

which averaged the cost of the purchased power with the lower cost of 

power produced by the federal power system. This averaged rate spread 

the costs of serving the additional demand over all of BPA’s customers 

and, as a result, did not distinguish between the price of low-cost power 

from the federal power system and the higher cost of power from other 

sources. In addition, the averaged rate structure gave customers poor 

incentives to seek alternative power sources during the subscription 

process, because customers were not exposed to the incremental cost of 

acquiring additional power on the market. While BPA considered the 

possibility of charging differentiated rates prior to its May 2000 rate case, 

it ultimately declined to do so. 

To meet the substantial increase in customer demand, BPA spent about 

$900 million in fiscal year 2002 and about $760 million in fiscal year 2003 

on power purchases and payments to customers to reduce their demand. 

These costs comprised approximately 25 percent of BPA’s total costs in 

each year. Due to large increases in the wholesale price of power, the 

power that BPA purchased from other sources to meet the substantial 

increase in customer demand generally cost much more than power 

generated by the federal power system. For example, BPA’s average cost 

for the power it purchased for 2002 and 2003 is approximately $37 per 

MWh, while the average price of BPA’s power, as established in its May 

2000 rate case, was about $22 per MWh. When purchasing power from the 

wholesale market became extremely expensive, BPA reduced its power 

purchases and instead paid its customers to reduce their demand for BPA 
Page 27 GAO-04-694 Bonneville Power Administration 

power, in transactions referred to as “buy-backs.” BPA’s costs associated 

with buy-backs were about $450 million in fiscal year 2002 and about $370 

million in fiscal year 2003. The majority of the buy-back payments went to 

investor-owned utilities and direct service industries. BPA was eventually 

forced to raise its rates by more than 40 percent for the majority of BPA’s 

customers to recover its costs and ensure that it had the funds to meet its 

payments on Treasury debt. 

While BPA’s overcommitment to provide power is the major cause of its 

cost increases in 2002 and 2003, other factors have also contributed to its 

cost increases in recent years. In 2001, severe drought conditions reduced 

the amount of power produced by the federal power system. According to 

BPA data, the annual runoff volume in the Columbia River Basin in 2001 

was 40 percent below average and the second lowest since fiscal year 

1929. To meet its customers’ demand for power, BPA spent about $2.2 

billion on power purchases in fiscal year 2001, an increase of $1.9 billion 

over average annual expenditures on power purchases in fiscal years 1997 

through 2000. 

In addition, some of BPA’s other costs associated with marketing power 

have increased in recent years for a variety of reasons. These costs are 

associated with power generation (including costs for the residential 

exchange program), the fish and wildlife program, and BPA’s internal 

operations. (For a more detailed presentation of BPA’s costs associated 

with its power marketing business from fiscal year 1997 to 2003, refer to 

app. III.) 

BPA’s power generation costs have increased consistently since 2000 

because of increases in the cost of maintaining and operating the federal 

power system, as well as increases in payments to investor-owned utilities 

under the terms of a settlement agreement. BPA has reported that the 

increased costs for the federal power system were needed to make up for 

past under-investment. For example, a benchmarking study conducted in 

2000 demonstrated that the federal hydropower system had not been 

maintained at the same level as comparable facilities and that increased 

investment was needed to improve its reliability, capacity, and safety. In 

addition, under the terms of a settlement agreement related to the 

residential exchange program, BPA’s payments to investor-owned utilities 

increased in 2002 and 2003 by about $59 million per year, on average, 

Drought Conditions and 

Other Factors Have Also 

Led to Cost Increases for 

BPA 
Page 28 GAO-04-694 Bonneville Power Administration 

compared with 1997 to 2001.17 This increase is due to a change in how BPA 

calculates payments to these utilities. 

BPA’s average annual fish and wildlife program costs for 2002 and 2003 are 

33 percent higher ($42 million) than they were from 1997 to 2001, adjusting 

for inflation. According to BPA officials, the increase is due primarily to 

requirements to protect fish species listed under the Endangered Species 

Act. These requirements include measures designed to improve fish 

passage at the dams, analyze and refine hatchery management practices, 

study and report on ocean conditions, and improve spawning and rearing 

habitat. Fish and wildlife costs also increased because additional staff 

were needed to handle the contracting and administrative workload 

associated with threatened and endangered species recovery actions. 

BPA’s fish and wildlife program staff increased from 35 in 1997 to 63 by 

2003. 

Finally, BPA’s average annual internal operations costs associated with its 

power marketing business for 2001 to 2003 are 34 percent higher (or $32 

million, adjusting for inflation) than they were from 1997 to 2000, largely 

because of new requirements regarding employee retirement costs and 

increased demand placed on BPA during the current rate period.18

Beginning in 2001, BPA began to pay certain retirement costs for its 

employees and some partner agency employees that it previously was not 

required to pay.19 Between 2001 and 2003, these costs averaged almost $17 

million, adjusting for inflation, accounting for more than half the increase 

in internal costs, as compared with 1997 to 2000 average cost levels. In 

addition, according to BPA officials, a more complex rate structure 

created by greater demand for BPA power and new contracts increased 

 17These numbers have been adjusted for inflation, base year 2003. This increase does not 

include the average annual cost to BPA of about $245 million to buy back the majority of 

the 1,000 aMW of power it agreed to provide to investor-owned utilities under the 

settlement agreement, according to BPA officials. 

18BPA has reported to its customers that its internal costs were 10 percent lower in 2003 

than in 2001. In making this calculation, BPA excluded the costs associated with the 

retirement costs it was not previously required to pay. While BPA’s calculation is correct, 

we believe that including these costs presents a more complete picture of BPA’s expenses. 

In addition, since BPA’s expenses in 2001 were already higher than in previous years, we 

calculated BPA’s average costs for 1997 to 2000 in order to determine how much BPA’s 

internal operations expenses have increased, on average, since 2001. 

19According to BPA officials, BPA was required to cover these costs beginning in 1998. 

However, BPA deferred payment until 2001, thus increasing BPA’s payments between 2001 

and 2003. 
Page 29 GAO-04-694 Bonneville Power Administration 

BPA’s need for staffing and support, which raised its staffing and support 

costs. 

BPA has not resolved problems associated with its open-ended obligation 

to be the net provider of wholesale electricity in the region—the major 

cause of its recent cost increases. BPA has issued a draft strategic plan 

that includes an objective of clarifying its commitments to sell power to its 

customers. BPA proposes to contractually define the amount of power it 

will sell its customers at its lowest, cost-based rates and is also 

considering charging incremental rates for any power it sells beyond this 

amount. However, BPA has not clearly defined how much power it will 

sell at its lowest cost-based rates or the way it will implement incremental 

rates. It is also unclear whether BPA’s draft plan will be implemented. BPA 

had similar plans in the late 1990s but did not implement them because of 

pressure from customers to increase, rather than limit, the amount of 

demand BPA served. BPA has, however, taken steps to reduce costs or 

control the extent of future cost increases in the areas of power 

generation, fish and wildlife programs, and internal operations. Further, 

BPA is improving its risk management process in order to maintain better 

control over its costs. However, regarding its risk management process, 

BPA’s plan outlining its new approach does not contain some key 

elements, including details on specific activities, resources, and time 

frames. 

BPA has not established a final, formal policy on how it plans to manage 

its open-ended obligation to be the net provider of wholesale electricity in 

the region—the major cause of its recent cost increases. In March 2004, 

BPA issued a draft strategic plan to define a direction for the agency. As 

part of that plan, BPA established an objective of clarifying how much 

power it will provide to its customers, and at what price, starting in fiscal 

year 2007. BPA’s plan states that it will establish, via long-term power 

contracts with its customers, the amount of power that customers are able 

to buy at a low rate.20 If customers request power beyond this amount, 

BPA’s plan states that BPA will consider use of incremental rates to 

distinguish between low-cost power from the federal power system and 

 20According to BPA officials, the use of long-term contracts is an integral part of BPA’s 

proposal and may be the best means to protect U.S. taxpayers’ investment in the federal 

power system. 

BPA Has Not 

Resolved Problems 

That Led to Its Recent 

Cost Increases, but It 

Has Taken Steps to 

Control Other Costs 

BPA Has Not Resolved 

Problems That Led to 

Recent Cost Increases 
Page 30 GAO-04-694 Bonneville Power Administration 

power from higher-cost resources. According to BPA, establishing rights 

to BPA’s power and using incremental rates would send appropriate price 

signals to its customers and would be consistent with broad customer 

interest in allocating rights to power from the federal power system. 

However, BPA’s draft strategic plan does not provide key details on how it 

plans to implement its approach to defining rights to purchase power and 

using incremental rates. For example, BPA’s plan does not specify the 

amount of power that its customers would be able to buy at BPA’s lowest 

rates. If this amount exceeds the firm output of the federal power system, 

then during low water years, BPA could still need to buy power to meet its 

contractual obligations. In addition, BPA’s plan does not clarify how BPA’s 

approach to incremental rates would be implemented. As long as BPA’s 

rates do not fully reflect its costs of acquiring power to meet excess 

demand, then customers will not have appropriate incentives to conserve 

or seek alternative power supplies. 

In addition, it remains unclear whether BPA will succeed in making these 

changes once they are more clearly defined. While BPA officials told us 

that they have the discretion to implement BPA’s plan, they said that they 

would strongly prefer to have regional agreement before making a final 

policy decision. Accordingly, BPA intends to hold a series of public 

meetings with its customers and stakeholders in 2004 to discuss its 

proposals. According to BPA officials, once they have received input and 

comments from all their customers and other stakeholders, the BPA 

Administrator will make a final policy decision and sign a record of 

decision in the fall of 2004. However, even if BPA reaches regional 

agreement on its plan, BPA has not followed through on similar proposals 

made in the past when faced with pressure from its customers. As 

discussed previously in this report, in the mid-1990s, BPA endorsed the 

recommendations of the Comprehensive Review report, which 

represented the views of BPA and its major customer and stakeholder 

groups. The report specifically recommended that BPA not acquire 

additional resources to serve its customers’ load growth, except where the 

customers take on all the risk of the acquisition, such as by paying 

incremental rates that cover BPA’s full cost of acquiring the additional 

power. However, under what BPA has characterized as strong regional 

pressure from its customers, BPA ultimately declined to implement such 

an approach in its 2000 rate case. 

The possibility remains that BPA will face similar pressures again, 

although BPA officials identified several reasons why the agency is less 

likely to need to purchase significant amounts of power in the future, 
Page 31 GAO-04-694 Bonneville Power Administration 

compared with recent years. For example, most of BPA’s direct service 

industry customers, such as aluminum smelters, are no longer in 

operation, and some smelters are being dismantled. However, public 

utility demand is currently about equal to the firm output of the federal 

power system, according to BPA officials, and this demand is expected to 

increase over time. Since public utilities have a statutory right to purchase 

power from BPA, if future demand from public utility customers exceeds 

the firm output of the federal power system, BPA may again face pressure 

to average the cost of federal system power with higher cost power from 

other sources. 

In a recent report, the Northwest Power and Conservation Council 

expressed concern that BPA’s plan to allocate rights to power from the 

federal power system and charge incremental rates, using policy 

statements and records of decision, may not be sufficient to provide a 

necessary level of policy durability, leaving open the possibility that BPA 

could change its policy in the future.21 To improve the durability of BPA’s 

plan, the Council stated that BPA must clearly identify the priority issues 

that are to be resolved, the process by which they will be addressed, and 

adopt an aggressive schedule for doing so. That schedule should result in 

offering new long-term contracts by October of 2007. Further, while the 

Council decided not to press for substantive rulemaking at this time, it 

noted that if BPA’s current approach proves incapable of resolving issues 

within that time frame, alternative processes should be considered, 

including issuing a rule under the Administrative Procedure Act to 

establish a policy on allocating rights to power from the existing federal 

power system and charging incremental rates. If adopted, this policy 

would be implemented through subsequent contract and ratemaking 

procedures. Unlike a record of decision, a policy adopted through a 

rulemaking procedure would have the force of law, bind future BPA and 

customer actions, and could not be altered unless BPA conducted a 

similar process. Such measures would increase assurance that BPA would 

not change direction in the future because of customer pressure. 

BPA has recently taken a number of actions to reduce costs or to control 

the extent of future cost increases in the areas of power generation, fish 

and wildlife programs, and internal operations. When setting its current 

 21Northwest Power and Conservation Council, Recommendations on the Future Role of the 

Bonneville Power Administration in Regional Power Supply, May 2004. 

BPA Is Taking Actions to 

Reduce and Control Costs 

in Other Areas 
Page 32 GAO-04-694 Bonneville Power Administration 

rates, BPA estimated that the average costs of its generating partners (the 

Army Corps of Engineers, Bureau of Reclamation, and Energy Northwest) 

for the 2002 to 2006 rate period would be $24 million less per year than 

from 1997 through 2001. BPA officials based this estimate primarily on a 

1998 review of BPA’s costs that projected (1) savings by increasing 

coordination of and investment in the federal hydropower system and (2) 

operation and maintenance cost reductions and increased revenues from 

the nuclear power plant. While BPA and its partner agencies developed a 

strategy for jointly operating the federal power system with the goal of 

reducing system costs,22 BPA has acknowledged that it did not develop 

adequate cost management plans to achieve the projected reductions and 

that BPA’s partner agencies never committed to the reductions. For 

example, Corps officials stated that they had previously underinvested in 

maintenance and needed to increase expenses to improve the reliability, 

capacity, and safety of the hydroelectric facilities. BPA officials agree that 

increased investment in the power system is warranted but said that BPA 

is working with the partner agencies to minimize these cost increases. For 

instance, BPA has worked with Energy Northwest to defer maintenance 

and alter the fuel replacement schedule to reduce costs for the nuclear 

plant. In all, BPA has reduced the projected increase in the average annual 

costs of its generating partners by $36.4 million for 2003 through 2006. 

BPA has also taken several actions to control its costs associated with the 

fish and wildlife direct program and reduce their uncertainty. The direct 

program includes costs associated with (1) noncapital expenditures for 

measures funded in support of the Endangered Species Act and the 

Northwest Power and Conservation Council’s fish and wildlife program, 

(2) off-site capital projects (i.e., capital costs not associated with a federal 

power system facility), and (3) a portion of BPA’s internal costs associated 

with its fish and wildlife related support activities. In light of its financial 

problems, BPA directed the Northwest Power and Conservation Council 

to ensure that actual expenses for the direct program did not exceed $139 

million annually for fiscal years 2002 and 2003.23 In addition, BPA has 

taken other measures to control direct program costs, including placing a 

temporary hold on funding for land purchases and easements while BPA 

 22Bonneville Power Administration, Asset Management Strategy for the Federal Columbia 

River Power System (Portland, OR., June 1999). 

23BPA originally set a funding target for the direct program in the 2002 to 2006 rate period 

at $150 million annually, with the expectation that actual expenses would average $139 

million. 
Page 33 GAO-04-694 Bonneville Power Administration 

reviewed its financial and liquidity position. While BPA’s actions have 

achieved its desired result of holding direct program expenses in fiscal 

year 2003 to approximately $139 million, they have also generated 

controversy among some stakeholders. For example, some stakeholders 

maintain that BPA cut funding for the direct program when it decided not 

to carry over more than $38.8 million that remained when an earlier 

funding agreement for the direct program expired in 2001. According to 

BPA officials, this decision was made in 1996, as the funding agreement 

was being negotiated, and should not be considered part of their recent 

efforts to control costs. In addition, some stakeholders stated that BPA 

had cut another $17.4 million from its direct program budget when it 

changed its planning and budgeting methods for fish and wildlife programs 

in November 2002. This change meant that because some costs incurred 

for projects in 2002 and prior years were not identified and paid by a 

certain date, they had to be paid from the 2003 and 2004 budgets, thereby 

reducing the amount of funding available for new projects by an estimated 

$17.4 million in those years. According to BPA officials, BPA changed its 

fish and wildlife planning and budgeting methods to align them with the 

budgeting and planning processes used in its other program areas. 

Finally, to reduce internal operations costs, BPA initiated two agencywide 

initiatives. As a first step, BPA reduced the fiscal year 2002 budget of each 

manager in its power marketing business and has reduced funding in many 

general areas, such as travel, training, supplies, staffing, research and 

development, and building upgrades. For example, BPA reduced agency 

travel expenses by about half and training expenses by about two-thirds 

from 2001 levels. According to BPA officials, these steps have helped BPA 

reduce its internal operations costs by $42 million from fiscal year 2002 to 

2003. Second, BPA is consolidating functions, such as procurement and 

information technology, that were previously dispersed throughout the 

agency. In addition, in March 2004, BPA contracted with a consulting firm 

to perform a comprehensive overview of BPA’s major functions, systems, 

and processes to identify specific opportunities for program and 

performance improvement, which may yield additional savings. 

While some of these actions have led to decreased costs in certain areas, 

BPA projects that its overall costs for the three categories in fiscal years 

2004 to 2006 will remain 27 percent higher than its average from fiscal 

years 1997 to 2000. BPA officials said that without the cost control 

measures, costs for these categories would be expected to increase even 

more. They also noted that some of the cost increases—such as those 

required for fish and wildlife under the Endangered Species Act—are 

largely beyond BPA’s control. 
Page 34 GAO-04-694 Bonneville Power Administration 

BPA recently concluded that its risk management process had not kept 

pace with the changes taking place in the electricity industry and the 

increasing demands being placed on it by its stakeholders, and that this 

problem has contributed to BPA facing increased financial risk. 

Specifically, in an April 2003 report to its customers and Northwest 

citizens, BPA stated that, while it has historically assumed and managed 

significant amounts of risk on behalf of its customers, BPA’s decision to 

take on demand beyond the firm output of the federal power system has 

gone beyond the limits of risk that it can accept. As a result, BPA is taking 

steps to improve its risk management process. 

In June 2002, BPA hired a consulting firm to independently evaluate its 

risk management process. Risk management includes risk assessment and 

monitoring, which are two of the key elements of internal control.24 Risk 

assessment identifies and analyzes the relevant risks associated with 

achieving an organization’s objectives, while monitoring assesses the 

quality of performance of the risk management process over time and 

identifies any departures from this process. In its contract with the 

consultant, BPA asked the firm to 

• identify, evaluate, and rank BPA’s enterprise-wide risks; 

• assess the state of BPA’s risk management; 

• compare BPA’s risk management approach and structure with the 

industry’s best and emerging practices; 

• identify gaps in its risk management and control framework where 

improvements may be appropriate; and 

• recommend an “Enterprise Risk Management” model and alternative 

organizational structures. 

The consultant found that although BPA had significant risk management 

resources in specialized areas, based on BPA’s business lines or specific 

types of risk, the agency’s risk management efforts were decentralized and 

 24Effective internal control should provide for an assessment of risks an organization faces 

from both external and internal sources. U.S. General Accounting Office, Standards for 

Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: 

November 1999). 

BPA Is Taking Steps to 

Improve Its Risk 

Management Process and 

Better Control Costs 
Page 35 GAO-04-694 Bonneville Power Administration 

were not integrated into an enterprise-wide structured approach.25 The 

consultant made numerous recommendations for improvements in the 

following areas: planning and preparedness; risk identification and 

prioritization; monitoring, control, and reporting; follow-through and 

organizational learning; and general organization and leadership. 

In March 2003, BPA developed a management plan to implement some of 

the consultant’s key, high-level recommendations. The plan calls for two 

main strategies. First, the plan calls for the establishment of a Chief Risk 

Officer position and organization. According to the plan, the Chief Risk 

Officer position is designed to elevate risk issues to the senior 

management level on a par with business, financial, and program 

strategies. The Chief Risk Officer would lead BPA’s revamped risk 

assessment and mitigation efforts and work across BPA’s business lines 

and program offices. 

Second, BPA’s plan calls for the establishment of two oversight 

committees to operate under the direct, delegated authority of the BPA 

administrator. The Enterprise Risk Management Committee would oversee 

BPA’s risk management program and would identify, analyze, evaluate, 

treat, monitor, and communicate risks across BPA’s business lines and 

program offices. This committee is to consist of senior executives and 

would facilitate integration of risks across BPA and ensure that risk and 

strategy are considered in tandem. The committee would also establish the 

acceptable zones or boundaries for risk, often referred to as risk 

tolerances, within which the business lines will operate. The second 

committee, called the Transacting Risk Management Committee, would be 

headed by the Chief Risk Officer and handle the more tactical and 

technical transacting risks within business lines. This committee would 

focus on risks inherent in commodity market transactions and 

counterparty credit exposures. It would also oversee policies and 

procedures and establish risk monitoring and limits that will govern the 

commodity transaction risks. 

BPA has taken several significant actions to implement its management 

plan. As of April 2004, BPA had made the following major changes to its 

risk management process: 

 25BPA has two main business lines—Power Business Line and Transmission Business Line. 

These business lines are supported by several corporate units that also carry out significant 

functional responsibilities of the agency, such as the Environment, Fish, and Wildlife 

group. 
Page 36 GAO-04-694 Bonneville Power Administration 

• centralized its risk management operations into a newly created Chief Risk 

Office that is headed by a newly appointed Chief Risk Officer, completed 

the initial transfer of risk-related jobs to the new Chief Risk Office, and 

announced additional staff recruitment for the office through the federal 

merit and competitive process; 

• chartered and established the Transacting Risk Management Committee 

and hired a staff manager for the Enterprise Risk Management Committee, 

which has not yet been established; and 

• instituted a requirement for its power marketing business that decisions in 

which the total lifetime costs, revenues, or potential risks are estimated to 

exceed $500,000 will be formally documented in a standard form BPA 

refers to as a “Decision Support Template.” 

While BPA continues its efforts to implement its plan and establish a more 

centralized risk management process, work remains to be done to ensure 

that the plan is successful. At this point, the plan provides limited 

information on how BPA will complete its implementation of the new 

approach to risk management. While the plan includes strategies and highlevel descriptions, it generally does not yet identify specific activities, 

resources, and time frames for completing the implementation of BPA’s 

new approach. Neither does the plan address when, and to what extent, 

BPA will address all of the consultant’s detailed recommendations. 

Without this type of information, it is unclear when BPA intends to fully 

implement its new approach and to what extent its approach will address 

the consultant’s recommendations. According to BPA, its management 

plan is not intended to provide the full details necessary to implement its 

approach, and BPA intends to monitor the implementation of the plan and 

perform an internal assessment by September 2004. BPA officials told us 

that the Chief Risk Officer will lead the effort to revise BPA’s risk 

management process, including responding to the consultant’s detailed 

findings. However, BPA was unable to provide documentation of the 

activities, resources, and time frames it plans to take to fully implement its 

plan. Without such documentation, it was not possible to review the plan’s 

progress in a meaningful way. 

Growing population in the Pacific Northwest region, combined with BPA’s 

open-ended obligation to provide power, have increased financial 

pressures on BPA. Past BPA attempts to meet growing demand—by 

providing financial backing for the construction of two nuclear power 

plants that were never completed and one gas fired power plant, the 

Conclusions 
Page 37 GAO-04-694 Bonneville Power Administration 

power from which BPA later determined it did not need—caused BPA’s 

costs to rise. This obligation to provide power was also the fundamental 

cause of recent cost increases and financial difficulties. Looking forward, 

this obligation remains a major source of risk for BPA. BPA must control 

its costs or risk not being able to compete with other power producers, 

potentially forcing it to default on its debt to the Treasury. One way to 

avert this risk and resolve the problems associated with BPA’s open-ended 

obligation is to allocate (or define) the rights to purchase the firm output 

of the existing federal power system and use incremental rates to 

distinguish between this “low-cost” power and any other power that BPA 

sells. While BPA currently plans to contractually set the amount of power 

its customers can buy at its lowest rate and to use incremental rates, 

similar intentions in the recent past were not implemented, in part because 

of pressure from BPA’s customers to provide more power. It is therefore 

important for BPA to credibly commit to allocating rights to purchase the 

firm output of the federal power system and using incremental rates. To 

assist BPA with its commitment to implement its draft strategic plan and 

increase assurance that BPA will not change direction in the future, the 

Northwest Power and Conservation Council has stated that a rule issued 

under the Administrative Procedure Act to establish a policy on allocating 

rights to power from the existing federal power system and charging 

incremental rates may provide greater durability. If established, such a 

rule would be implemented through subsequent contract and ratemaking 

procedures and would be more difficult to change than would an identical 

plan adopted in a record of decision. 

In addition to growing pressure to provide power and financial benefits, 

BPA has faced a changing business environment as the electricity industry 

has undergone restructuring. These changes have posed management 

challenges for BPA and highlighted areas that need improvement. In 

particular, BPA’s decision to serve demand beyond the firm output of the 

federal power system at average rates puts the agency at risk of becoming 

uncompetitive. Recognizing this vulnerability, BPA has taken positive 

steps by developing a new approach to managing its risks. Following 

through on this approach with specific activities, resources, and time 

frames to fully implement its risk management initiatives is crucial to 

BPA’s ability to anticipate and prepare for challenges to its overall 

competitiveness. Better risk management should also help BPA in the 

future to avoid the kinds of decisions that contributed to its recent 

financial difficulties. 
Page 38 GAO-04-694 Bonneville Power Administration 

We recommend that the Administrator of BPA take the following four 

actions: 

To reduce the risk that BPA will be overcommitted in the future and to 

help BPA control the costs of future power purchases, define the rights to 

purchase the firm output of the federal power system so that 

• the amount of power that BPA sells at its lowest, cost-based rate is 

equivalent to the firm output of the existing federal power system, and 

• customers who demand additional power from BPA are charged 

incremental rates that fully reflect the additional costs BPA incurs in 

acquiring or otherwise providing such power. 

As a way to lend credibility to and reinforce BPA’s actions, study the 

feasibility of issuing a rule under the Administrative Procedure Act to 

define the rights to purchase the firm output of the existing federal power 

system and set the terms of incremental rates for any power sold beyond 

that amount. 

To strengthen BPA’s management plan and to ensure that progress is 

made in implementing its new risk management approach, identify specific 

activities, resources, and time frames to implement BPA’s risk 

management initiatives. 

We provided BPA with a draft of this report for review and comment. BPA 

generally concurred with our recommendations and said that the report, 

as a whole, accurately portrays the advantages and disadvantages BPA 

faces in marketing electricity as well as the root causes of its financial 

difficulties and associated rate increases during the last few years. 

Regarding our recommendation that BPA study the feasibility of issuing a 

rule under the Administrative Procedure Act to define the amount of 

power it sells at its lowest cost-based rate and to charge incremental rates 

for additional power, BPA stated that it plans instead to establish longterm contracts and rates under the terms of section 7(i) of the Northwest 

Power Act, which apply to the establishment of all BPA rates. However, 

this statement does not directly address our recommendation. We 

continue to believe that it would be prudent for BPA to consider the 

feasibility of issuing a rule under the Administrative Procedure Act 

because such a rule would have the force of law and could improve the 

durability of BPA’s policy decisions. Concerning our presentation of BPA’s 

increasing average annual internal operations costs associated with its 

Recommendations for 

Executive Action 

Agency Comments 
Page 39 GAO-04-694 Bonneville Power Administration 

power marketing business for 1997 to 2003, BPA stated that the inclusion 

by GAO of employee retirement costs in BPA’s internal operations costs 

skews the costs upward in the latter years because those years included 

catch-up payments that accrued but were not paid in earlier years. We 

have discussed this point in the report and acknowledged that a large part 

of the increase in BPA’s internal costs were the result of these catch-up 

payments for employee retirement costs. However, we continue to believe 

that including costs associated with employee retirement payments 

presents a more complete picture of BPA’s internal operations costs since 

1997 because these retirement payments represent a significant increase in 

BPA’s internal costs going forward. The complete text of BPA’s comments 

on our draft report is presented in appendix IV. BPA also made technical 

clarifications, which we incorporated in this report as appropriate. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution of it until 30 days from 

the report date. At that time, we will send copies of this report to 

interested Members of Congress and make copies available to others upon 

request. In addition, the report will be available at no charge on the GAO 

Web site at http://www.gao.gov. 

If you have any questions about this report or need additional information, 

please call me at (202) 512-3841. Key contributors to this report are listed 

in appendix V. 

Jim Wells 

Director, Natural Resources 

 and Environment 
Appendix I: Scope and Methodology 

Page 40 GAO-04-694 Bonneville Power Administration 

To address the overall objectives, we interviewed and obtained 

documentation from Bonneville Power Administration (BPA) officials, 

BPA’s customers, and a variety of regional stakeholders. Among BPA’s 

customers, we interviewed representatives of public utilities from each of 

the four primary states where BPA sells its power—including 

representatives from small and large public utilities as well as urban and 

rural public utilities. We also interviewed representatives of investorowned utilities and direct service industries in the region, as well as 

members of state commissions regulating the investor-owned utility 

customers of BPA. Among BPA’s regional stakeholders, we interviewed 

officials from the Northwest Power and Conservation Council, Columbia 

Basin Fish and Wildlife Authority, Columbia River Intertribal Fish 

Commission, Industrial Customers of Northwest Utilities, Northwest 

Energy Coalition, and Renewable Northwest Project. We also collected the 

views of several experts on the electricity market in the Pacific Northwest 

and BPA’s role in that market. 

To determine the advantages and disadvantages that BPA faces in 

marketing electric power in a more competitive environment, we 

interviewed and obtained documentation from BPA and its major 

customers and stakeholder groups. To compare BPA’s power rates and 

generation costs with those of other wholesale providers of electricity, we 

obtained data from the Energy Information Administration and Platts’/RDI 

PowerDat. In assessing the reliability of these data through (1) interviews 

with knowledgeable officials and (2) electronic data testing, we 

determined that the reliability of these data was adequate to describe 

BPA’s power rates and generation costs. To understand BPA’s financing 

mechanisms, we examined published and unpublished financial data from 

BPA, interviewed BPA officials, and interviewed representatives from 

Standard and Poors and Fitch Ratings. We also reviewed pertinent laws 

and documents describing the history of the federal power system. 

To determine the major causes of BPA’s recent cost increases, we focused 

our review on the costs related to BPA’s Power Business Line that are 

included in the power rates that BPA charges its customers. These costs 

differ from those available in BPA’s annual reports, which include costs 

for the entire agency. We reviewed publicly available records that BPA 

produced to document the subscription and augmentation processes, 

including its 1998 record of decision on its subscription policy, rate cases 

filed in May 2000 and June 2001, and the April 2003 Report to the Region. 

We also interviewed BPA officials and reviewed internal BPA documents 

related to its power purchase and buy-back contracts. In assessing the 

reliability of data related to BPA’s costs through (1) review of related 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 41 GAO-04-694 Bonneville Power Administration 

documentation, (2) interviews with knowledgeable officials, and (3) 

electronic data testing, we determined that the reliability of these data was 

adequate to describe BPA’s costs associated with its power marketing 

business. Where possible, we compared data received from BPA with 

BPA’s audited financial statements. Finally, we interviewed Northwest 

Power and Conservation Council officials, BPA customers, and other 

stakeholders to obtain their views on the reasons for BPA’s cost increases. 

To determine the extent to which BPA has taken actions to control its 

costs, we obtained relevant documentation and interviewed officials from 

BPA, the Northwest Power and Conservation Council, the Corps of 

Engineers, the Columbia River Intertribal Fish Commission, and the 

Columbia Basin Fish and Wildlife Authority. To determine the steps BPA 

has taken to improve its risk management process, we reviewed 

documents related to risk management standards—including GAO’s

Standards for Internal Control in the Federal Government, and

Enterprise Risk Management Framework, prepared by the Committee of 

Sponsoring Organizations of the Treadway Commission—and reviewed 

relevant BPA documents, including reports prepared by a consultant hired 

by BPA to evaluate its risk management process and make 

recommendations for improvement. We also examined the BPA 

Administrator’s performance contract and BPA’s strategic plan as they 

related to BPA’s risk management process. In addition, we obtained 

documentation and interviewed BPA officials on proposed changes to 

BPA’s financial information system—the Bonneville Enterprise System—

that manages its accounting data and budgetary allocations. However, we 

were unable to obtain consistent information on the nature and need for 

BPA’s proposed changes, and thus could not determine to what extent 

these proposed changes would allow BPA to control its costs. 

We conducted our work from August 2003 through April 2004 in 

accordance with generally accepted government auditing standards. 
Appendix II: BPA’s Costs Associated with 

Fish and Wildlife Programs 

Page 42 GAO-04-694 Bonneville Power Administration 

This appendix provides details on BPA’s costs associated with its fish and 

wildlife programs for fiscal years 1985 to 2003. See table 1. 

Table 1: BPA’s Costs Associated with Fish and Wildlife Programs, Fiscal Years 1985-2003 

Dollars in millions 

Year 

Direct program 

costs 

BPA internal 

support costsa

Reimbursable 

costs

Capital investment 

costs 

High priority/action 

plan costsbTotal 

1985 $24.2 $0 $30.3 $30.0 $0 $84.5

1986 29.1 0 35.2 32.8 0 97.2

1987 32.1 0 43.0 41.3 0 116.4

1988 26.4 0 26.7 43.5 0 96.6

1989 31.1 0 31.9 43.1 0 106.1

1990 42.7 0 30.5 44.7 0 117.9

1991 41.4 0 30.5 48.0 0 119.9

1992 82.1 0 34.8 51.3 0 168.2

1993 59.4 0 36.5 64.2 0 160.1

1994 65.5 0 40.9 71.9 0 178.3

1995 82.0 0 41.5 73.0 0 196.5

1996 77.2 0 39.9 82.4 0 199.4

1997 91.0 0 39.8 84.5 0 215.3

1998 114.8 0 39.8 81.1 0 235.7

1999 107.9 9.0 42.0 82.2 0 241.1

2000 106.7 7.8 39.8 81.7 0 236.0

2001 94.3 9.1 43.9 79.7 3.0 230.0

2002 128.9 10.5 51.9 57.5 7.2 256.0

2003 $128.7 $11.9 $52.6 $56.7 $6.5 $256.4

Source: GAO analysis of BPA data. 

Note: In constant dollars, base year 2003. 

a

Prior to fiscal year 1999, these costs were included within direct program costs but not shown 

separately. 

b

Special program implemented in fiscal year 2001 to help offset fish losses resulting from the power 

emergency declarations caused by the drought. 

1. Direct program costs—These costs are the noncapital expenditures for 

fish and wildlife activities funded directly by BPA as well as off-site 

(not part of a federal power system facility) capital projects. The 

activities funded are based on measures in the Biological Opinions and 

the Council’s Fish and Wildlife Program. Prior to fiscal year 1999, this 

Appendix II: BPA’s Costs Associated with 

Fish and Wildlife Programs 

Definition of Cost 

Categories 
Appendix II: BPA’s Costs Associated with 

Fish and Wildlife Programs 

Page 43 GAO-04-694 Bonneville Power Administration 

category also includes the part of the budget that BPA devotes 

internally to fish and wildlife related support activities. 

2. BPA internal support costs—These costs are BPA’s internal 

expenditures for program support as well as contracts and other 

expenditures on behalf of the fish and wildlife program. Until fiscal 

year 1999, these costs were included as part of the Direct Program. 

They remain part of direct program costs but are now shown 

separately. 

3. Reimbursable costs—These costs consist of the hydroelectric share of 

operation and maintenance and other noncapital expenditures for fish 

and wildlife related activities by the Corps of Engineers (Corps), 

Bureau of Reclamation (Bureau), and U.S. Fish and Wildlife Service 

that are funded by appropriations and then reimbursed to the U.S. 

Treasury by BPA. In addition, this category includes the part of the 

Council’s operating budget allocated to fish and wildlife activities. 

These costs are now funded under direct funding agreements signed 

with each of the three agencies. 

4. Capital investment costs—These costs consist of the projected 

amortization, depreciation, and interest payments for (1) past fish and 

wildlife related borrowing by BPA; (2) the portion of past fish and 

wildlife capital investments by the Corps and Bureau for which BPA is 

already obligated to repay the U.S. Treasury; (3) the hydroelectric 

share of future fish and wildlife related capital investments by the 

Corps and Bureau that will be funded by appropriations and then 

reimbursed to the U.S. Treasury by BPA, based on activities called for 

in the Biological Opinion, the Council’s Fish and Wildlife Program, and 

other authorities; and (4) other capital investments directly funded by 

BPA borrowing that are based on activities called for in the Biological 

Opinion and the Council’s Fish and Wildlife program. 

5. High-priority/action plan costs—Costs for a special program designed 

to mitigate for damages to fish resulting from the 2001 power system 

emergency. Criteria for projects included (1) addressing imminent 

risks to the survival of one or more species listed under the 

Endangered Species Act that represent a time-limited opportunity or 

are broadly recognized as projects that would achieve direct 

anadromous fish benefits; (2) are appropriate mitigation for the federal 

power system and not in lieu of expenditures or actions authorized or 

required by other entities and are otherwise consistent with the Power 

Act; and (3) the proposed project had all planning, permitting, and 

landowner agreements completed so that on-the-ground work could 

begin not later than September 30, 2001. 
Appendix III: BPA Costs Associated with Its 

Power Marketing Business, Fiscal Years 1997-

2003 

Page 44 GAO-04-694 Bonneville Power Administration 

This appendix provides details on BPA’s costs that are associated with its 

power marketing business and are charged to its power rates for fiscal 

years 1997 to 2003. (See table 2.) According to a BPA official, these data 

are consistent with BPA’s audited financial statements. 

Table 2: BPA Costs Associated with Its Power Marketing Business, Fiscal Years 1997-2003 

Dollars in millions 

1997 1998 1999 2000 2001 2002 2003

Power purchases—short term $66.4 $151.8 $288.2 $661.4 $2,191.1 $306.6 $228.8

Power purchases—long term 0 0 0 0 0 456.0 395.1

Power buy-backs 0 0 0 0 123.3 461.7 368.4

Power system generation 639.4 647.9 503.5 477.2 591.2 641.8 672.7

Fish and wildlife 109.4 133.0 136.3 135.5 127.1 170.2 170.3

Internal operations 102.4 90.3 99.7 94.7 115.5 157.3 115.0

Transmission and ancillary services 271.4 303.8 320.1 261.7 234.6 193.1 156.9

Other 896.2 994.4 1,074.5 949.5 1,020.9 992.2 932.1

Total $2,085.2 $2,321.2 $2,422.3 $2,580.0 $4,403.7 $3,378.9 $3,039.3

Source: GAO analysis of BPA data. 

Note: In constant dollars, base year 2003. 

1. Power purchases (short term)—Costs of the power BPA purchases in 

the short term to use the flexibility of the federal power system to 

optimize its value and to provide operational stability to the system. 

2. Power purchases (long term)—Costs of the power that BPA signed 

contracts to purchase in 2002 and 2003 to meet demand beyond the 

firm output of the federal power system. 

3. Power buy-backs—Costs of buy-back payments that BPA made to 

investor-owned utilities, direct service industries, and public utilities in 

addition to power purchases. 

4. Power system generation—Costs associated with operation and 

maintenance costs for the federal dams, the nonfederal nuclear plant, 

and long-term generating projects. Includes BPA expenditures for the 

residential exchange program, energy conservation, and renewable 

energy development. Also includes BPA’s share of costs to 

decommission nonoperating power projects and expenses for the 

benefits BPA receives from storage projects in Canada. Does not 

include payments to investor-owned utilities to buy back power BPA 

Appendix III: BPA Costs Associated with Its 

Power Marketing Business, Fiscal Years 1997-

2003 

Definition of Cost 

Categories 
Appendix III: BPA Costs Associated with Its 

Power Marketing Business, Fiscal Years 1997-

2003 

Page 45 GAO-04-694 Bonneville Power Administration 

agreed to sell under a settlement agreement of the residential 

exchange program; these costs are included under power buy-backs. 

5. Fish and wildlife—Costs associated with BPA’s direct program, high 

priority actions, the Northwest Power and Conservation Council, and 

Lower Snake River Hatcheries. Direct program costs include BPA’s 

direct noncapital expenditures to protect, mitigate, and enhance fish 

and wildlife affected by the development of the federal power system. 

The activities funded are based on measures in the Biological Opinions 

and the Council’s Fish and Wildlife Program. Direct program costs also 

include BPA’s internal expenditures for program support. High priority 

actions costs are for a program designed to mitigate for damages to 

fish resulting from the 2001 power system emergency and designed to 

address imminent risks to the survival of one or more species listed 

under the Endangered Species Act. BPA funds the Northwest Power 

and Conservation Council’s annual operating budget, which averaged 

almost $8 million per year, from fiscal year 1997 to 2003. 

Approximately half its budget, including staff time, is dedicated to fish 

and wildlife activities. Lower Snake River hatcheries costs include 

payments to the U.S. Fish and Wildlife Service to fund fish hatcheries 

on the Snake River. 

6. Internal operations—Costs associated with BPA power nongeneration 

operations, shared services and administration, and the civil service 

retirement system. Power nongeneration operations costs include 

BPA’s portion of expenses related to the joint management of the 

federal power system; oversight of the nonfederal nuclear project, 

development, and administration of power contracts; tribal 

relationship management; Canadian Treaty management; public 

involvement and policy development; power rates setting, power 

financial management, and power billing; short-term and long-term 

marketing and support; development and management of conservation 

and energy efficiency programs; system operations support (such as 

weather and stream flow forecasting, scheduling, load forecasting); 

maintenance of automated systems for Power Business Line 

application and system management; and projects to improve overall 

performance and meet market challenges, such as increasing 

forecasting capabilities to optimize federal power system generation. 

Shared services and administrative costs include the costs for 

information technology services; infrastructure and maintenance; 

building rent, maintenance, and security; and mail services, personnel 

services, library and printing services, as well as the portion of 

corporate general and administrative costs allocated to power rates. 

Civil service retirement system costs are associated with the unfunded 
Appendix III: BPA Costs Associated with Its 

Power Marketing Business, Fiscal Years 1997-

2003 

Page 46 GAO-04-694 Bonneville Power Administration 

liability of the Civil Service Retirement and Disability Fund, the 

Employees Health Benefits Fund, and the Employees Life Insurance 

Fund, which had not been covered prior to fiscal year 1998. These 

costs also include the power related portion of the Army Corps of 

Engineers, Bureau of Reclamation, and the U.S. Fish and Wildlife 

Pension and Post-retirement Benefits. 

7. Transmission and ancillary services—Costs associated with services 

necessary to support the transmission of energy from resources to 

loads, including reliability, scheduling and dispatch, spinning reserves, 

emergency reserves, load following and regulation, automatic 

generation control, energy imbalance, transmission losses, control 

area reserves for resources and for interruptible purchases. 

8. Other—Include costs associated with the nonfederal debt service, 

depreciation, amortization, net interest, and bad debt/expense 

adjustment. Nonfederal debt service costs include BPA’s portion of the 

debt of Energy Northwest and various nonfederal conservation and 

hydroelectric projects. Depreciation costs are the allocation of 

expenses associated with property, plant, and equipment to each 

period benefited by the asset. Depreciation is calculated by dividing 

the costs of the asset, less any applicable salvage value, by its 

estimated useful life or allowable period of time. Amortization costs 

are the allocation of expenses associated with intangible capital 

investments, such as for conservation and fish and wildlife. Net 

interest expense costs are the net expenses resulting from money 

borrowed to construct and maintain the federal power system and 

other projects. Costs associated with bad debt expenses include 

money BPA did not receive from parties who have declared 

bankruptcy. Expense adjustments represent miscellaneous accounting 

entries not associated with specific programs. 
Appendix IV: Comments from the Bonneville Power Administration 

Page 47 GAO-04-694 Bonneville Power Administration 

Appendix IV: Comments from the Bonneville 

Power Administration 
Appendix IV: Comments from the Bonneville Power Administration 

Page 48 GAO-04-694 Bonneville Power Administration 
Appendix IV: Comments from the Bonneville Power Administration 

Page 49 GAO-04-694 Bonneville Power Administration 
Appendix IV: Comments from the Bonneville Power Administration 

Page 50 GAO-04-694 Bonneville Power Administration 
Appendix V: GAO Contacts and Staff 

Acknowledgments 

Page 51 GAO-04-694 Bonneville Power Administration 

Jim Wells (202) 512-3841 

Frank Rusco (202) 512-4597 

In addition to the individuals named above, Jill Berman, Jonathan Dent, 

Samantha Gross, Jason Holliday, Jon Ludwigson, Don Neff, Cynthia 

Norris, Eric Wenner, and Doris Yanger made key contributions to this 

report. Important contributions were also made by Janice Lichty, 

Lisa Shames, and Barbara Timmerman. 

Appendix V: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Staff 

Acknowledgments 

(360378) 
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