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Policy and Legislation

Congress established Western Area Power Administration in December 21, 1977 under Section 302 of the Department of Energy Organization Act. Under this statute, the power marketing functions and the responsibility of construction, operation and maintenance of the transmission facilities previously managed by the U.S. Bureau of Reclamation were transferred to Western.

Except for the Central Arizona Project's Navajo generation, the power facilities from which Western sells power are part of 11 rate-setting systems. These are made up of of multipurpose water resource projects and two transmission projects. Each project maintains a separate financial system and records. These projects were built by the U.S. Bureau of Reclamation, the U.S. Army Corps of Engineers and the International Boundary and Water Commission. Each agency operates and maintains its portion of the multipurpose projects. Costs are allocated among individual project purposes, such as navigation, irrigation, flood control, power, fish and wildlife, recreation, municipal and industrial water supply and international treaty obligations specific to each project's legislation.

Legislation requires that the U.S. Treasury be repaid by those who benefit from the Federal investments in these projects. For example, the Reclamation Act of 1939 specified the repayment responsibility of power users. It states that any sale of electric power must produce enough power revenues to cover power users' share of annual operation and maintenance project costs, plus interest on their share of the construction investment.

Specific legislation and orders authorizing each project often address repayment as well. Executive agencies that administer the specific projects have developed procedures to determine these repayment obligations.

In addition, DOE has set policy for repayment. For example, Power Marketing: Financial Reporting Order No. RA 6120.2 states that the current rates are adequate only if expected annual revenues are sufficient to recover operation and maintenance costs, the cost of acquiring power through purchases and exchanges, interest on unpaid investment in Federal power facilities, the capital costs associated with power and other miscellaneous costs. The power repayment study is based on the criteria for repayment defined in law, policies and regulations.

 

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