Federal Electric Power:

Bonneville's Residential Exchange Program

RCED-90-34: Published: Feb 6, 1990. Publicly Released: Mar 9, 1990.

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Pursuant to a congressional request, GAO reviewed the Bonneville Power Administration's (BPA) implementation of the Residential Exchange Program, which would reduce the disparity in power rates charged to residential consumers, focusing on: (1) the significance of the program to the participating utilities, the utilities' residential and small-farm customers, and BPA and its customers; and (2) BPA efforts to ensure that participating utilities passed the exchange energy cost savings to their customers.

GAO found that: (1) the exchange program provided benefits to utilities that had higher costs than BPA; (2) BPA estimated exchange benefits totalling about $1.3 billion between 1989 and 1995; (3) program benefits reduced the cost of electricity provided to residential and small-farm customers by between 10 and 25 percent in 1988; (4) although the program reduced the disparity in electricity rates, BPA more than tripled its rates between 1981 and 1987, which increased the cost of BPA power relative to the costs of utilities' power; (5) BPA needed about 9 percent of its operating revenues to cover $1.37 billion in program costs through 1988, of which it charged 45 percent to its industrial customers, 29 percent to its investor-owned utilities, and the remainder to its public utilities; (6) BPA relied on state utility regulatory commissions and public utility boards to determine whether utilities receiving program benefits passed the benefits to customers; (7) there were no independent reviews covering public utility districts, municipal utilities, and electric cooperatives, since those entities did not fall within the states' jurisdiction; and (8) although a BPA review of two public utilities showed that the utilities either did not pass on sufficient benefits or passed benefits to customers other than residential customers, BPA did not discuss its findings with the utilities.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: BPA developed procedures on September 30, 1990, to verify that rural and domestic customers of private and public utilities in the BPA service area receive BPA hydropower rates. Compliance reviews have been completed at five private and one public utility.

    Recommendation: The Administrator, BPA, should initiate benefit pass-through reviews of utilities that were and are now participants of the exchange program.

    Agency Affected: Department of Energy: Bonneville Power Administration

  2. Status: Closed - Implemented

    Comments: BPA compliance audit procedures include testing of customer billings to ensure timely and accurate pass-throughs. Also, BPA will meet with PUC to coordinate its reviews.

    Recommendation: The Administrator, BPA, should include in its review procedures for: (1) testing customer billings to ensure that the appropriate amounts of benefits are passed through to customers; (2) ensuring the timely pass-through of these benefits; and (3) coordinating BPA reviews with those performed by state utility regulatory commissions.

    Agency Affected: Department of Energy: Bonneville Power Administration

  3. Status: Closed - Implemented

    Comments: BPA agrees to rely on state PUC reviews where appropriate.

    Recommendation: The Administrator, BPA, should consider placing some reliance on state commissions' reviews. Before doing so, BPA should determine the adequacy of the commissions' reviews.

    Agency Affected: Department of Energy: Bonneville Power Administration

  4. Status: Closed - Implemented

    Comments: BPA will mail audit letters to PUC and meet with PUC officials to ensure that findings are resolved.

    Recommendation: The Administrator, BPA, should inform the two public utilities for which it conducted pilot benefit pass-through reviews of the review results and follow up to ensure that issues raised in the reviews are resolved.

    Agency Affected: Department of Energy: Bonneville Power Administration


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