Financing Rural Electric Generating Facilities:

A Large and Growing Activity

CED-81-14: Published: Nov 28, 1980. Publicly Released: Nov 28, 1980.

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The Rural Electrification Administration (REA), through insured and guaranteed loans, makes available billions of dollars in financing to construct electric generating and transmitting facilities to meet the increasing demands for electricity in rural areas.

To gain better budgeting control and increase private credit involvement, GAO believes that changes are needed in how this financing is budgeted for and funded. In making and guaranteeing loans, the prime concern of REA must be the borrower's ability to repay the loans. The agency has little funding flexibility to finance demonstration projects, studies, or programs designed to solve the Nation's energy problems. Other organizations are funding such efforts. REA should act as a catalyst by evaluating and disseminating information about these studies and projects to its borrowers. REA may wish to seek broader funding authority to conduct its own demonstration projects.

Matters for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should require that certificates of beneficial ownership be treated as agency obligations and, therefore be treated in the Federal budget as borrowing.

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should revise the Rural Electrification Act of 1936 to limit REA's guarantee of loans made by non-FFB lenders to 90 percent or some other appropriate percentage.

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should revise the Rural Electrification Act of 1936 to eliminate the prohibition against REA charging a fee for the guarantee and, instead, require that a loan guarantee fee be assessed and used for funding a reserve for losses.

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should require that FFB's receipts and disbursements be included in the Federal budget totals.

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should require that the receipts and disbursements of all off-budget Federal agencies that borrow from FFB be included in the Federal budget totals.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to assimilate information on and evaluate the various energy-related demonstration and study projects funded by other agencies and organizations so that this information can be disseminated to and used by all REA borrowers.

    Agency Affected: Department of Agriculture

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to determine whether REA's efforts to help solve our Nation's energy problems could be significantly enhanced if REA had authority to fund its own demonstration and study projects and, if necessary, recommend appropriate legislative changes to obtain such authority.

    Agency Affected: Department of Agriculture

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to improve the power demand forecasts made by power supply systems (1) require borrowers to prepare multiple forecasts of demand to reflect different levels of conservation efforts and (2) implement those recommendations made by the NRECA/CFC task force which are compatible with the revised forecasting methodology to be adopted.

    Agency Affected: Department of Agriculture

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to have a cost data bank developed for use by REA officials in determining the reasonableness of estimated costs of proposed projects.

    Agency Affected: Department of Agriculture

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to revise REA's loan approval process with a view toward intensifying the agency's evaluation of the adequacy of the feasibility study supporting the loan request.

    Agency Affected: Department of Agriculture

  6. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to require that REA's borrowers take aggressive action to solicit the views and opinions of individual consumer/members and other private citizens, as appropriate, in the early stages of the power supply systems' long-range planning process and in other major decisions.

    Agency Affected: Department of Agriculture

  7. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to help improve the planning for major generation and transmission facilities financed by REA and better meet our Nation's energy goals, revise REA's power planning bulletin to require power supply systems to (1) perform in-depth, systemwide studies of all reasonable alternatives and supplemental power supply options to ensure that the most appropriate mix of alternatives for meeting the energy needs of rural consumers is chosen and (2) incorporate such studies in their loan application packages and long-range plans.

    Agency Affected: Department of Agriculture

  8. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the Administrator of REA to require applicants seeking a guaranteed loan to obtain at least part of their loan from CFC or other private lenders, which portion would be gradually increased as conditions warrant.

    Agency Affected: Department of Agriculture

 

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