WSP03268

• File Number: 8220.101.10
• Description: Colorado River-Water Projects-Glen Canyon Dam/Lake Powel-Glen Canyon Adaptive Management
• Basin: Colorado Mainstem
• Water Division: 5
• Date: 1/1/1993
• Title: Western Area Power Administration-Issues for Discussion-Proposed SLCA/IP Firm Power Rate Adjustment
• Water Supply Pro - Doc Type: Report/Study

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P:\User\Thomas\95Rate\Deficit

Mav 13. 1993

Deficit Repayment

Issue

. Repayment of the deficit showing in the SLCA/IP PRS.

Background

. When total operating revenues are. insufficient to cover all annual
obligations, Western's RS computer program recognizes a deficit condition.
Because Western is not allowed to leave any annual obligation unpaid, it
is assumed that money is borrowed from the Basin Fund to pay any
outstanding annual costs. plus any required payments. The RS program
establishes a hypothetical "loan" to meet the obligation.

.~--

.

The "borrowed" money is considered a repayment requirement of the PRS in
all subsequent years (until repaid), with priority ahead of every other
repayment obligation except annual expenses and required payments. All
deficits are charged annual interest at the U.S. Treasury Bond coupon rate
in effect during the year in which the deficit first occurred.

/'

. The Final FY 1992 SLCA/IP PRS showed a cumulative outstanding deficit of
about $63 million at the end of FY 1992. All of the CRSP deficits have
occurred since FY 1988. The combination of greatly increased funding
requirements for environmental expenses, and a record-setting drought in
the Upper Basin, resulted in a negative annual net revenue for each year
for FYs 1989 through 1992. A cumulative increase in SLCA/IP firm power
rates of 68.5 percent since October 1990 kept the deficit from increasing
even more during those years.

Discussion

. The outstanding cumulative FY 1992 deficit is expected to increase by
approximately $30 million in FY 1993.

. Making many environmental costs nonreimbursable, as provided in the CCPA
of 1992, is anticipated to significantly impact the cumulative SLCA/IP
deficit. Approximately $51 million in already-expended funds will be
applied toward the repayment of the deficit; reducing the outstanding FY
1992 balance to an estimated $12 million.

. The rate increase anticipated to become effective in FY 1995 will earn
sufficient revenues to retire the deficit in approximately three to four
years.

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