Bonneville Power Administration:
Borrowing Practices and Financial Condition
AIMD-94-67BR, Apr 19, 1994
Pursuant to a congressional request, GAO provided information on the borrowing practices and overall financial condition of the Bonneville Power Administration (BPA).
GAO found that: (1) BPA currently finances all of its capital programs using debt financing; (2) all BPA new borrowing is projected to come from the Treasury Department; (3) based on current BPA projections, the bond borrowing caps will be reached in 1997 for transmission investments and in 1999 for conservation and renewable energy investments; (4) BPA faces significant operating and financial risks because of its heavy reliance on borrowing, recent operating losses, and various uncertainties; (5) although BPA has taken several steps to reduce its risks, including deferral of capital programs, increasing rates, cutting costs, and negotiating an interim rate adjustment that is triggered if reserves fall below a certain level, the risks remain; (6) low financial reserves provide little flexibility for BPA to respond to further operating losses; and (7) if the gap between BPA rates and the cost of alternative energy sources continues to narrow, some BPA customers may look elsewhere to meet their energy needs, jeopardizing BPA financial viability.