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<br />B-217826 <br /> <br />As stated previously, based on the Bureau's current <br />estimates of total M&I costs, the new contracts being negotiated <br />would be sufficient to recover the district's share of the <br />costs. We questioned, however, the basis for the actions taken <br />by the Bureau in 1981 in a letter to the Assistant Secretary of <br />the Interior on April 22, 1985. In this letter, we also <br />requested clarification on the issues of whether the 1981 <br />deferral would result in an interest-free period as allowed under <br />the Water Supply Act, the basis and approvals needed for the <br />modified cost allocation procedure, and the appropriateness of <br />the Bureau's estimates of irrigators' ability to pay. We have <br />not yet received a response to our letter. However, as agreed <br />with your office, we will provide you their response and our <br />evaluation of it when available. <br /> <br />We also identified several planned actions which could <br />affect repayment. First, the Bureau and the Western Area Power <br />Administration have been seeking nonfederal participants to <br />construct Bonneville Unit power plants that would provide revenue <br />to supplement M&I repayment. In July, the prospective <br />participants expressed an interest in funding a scaled-down <br />version of the power plants, but they did not want to contribute <br />to M&I repayment. Second, Bonneville Unit water, which will <br />otherwise be available for irrigation and production of power" <br />might be needed to satisfy two Bureau agreements--the 1965 Ute <br />Indian Deferral Agreement and the 1980 Instream Flow Agreement. <br />However, the Bureau currently plans to develop alternatives to <br />using unit water which would not affect water supply, <br />reimbursable costs, or repayment. <br /> <br />THE CENTRAL VALLEY PROJECT <br /> <br />In the late 1970's, Interior's Inspector General wrote two <br />reports to the Secretary of the Interior concerning the Bureau's <br />CVP water marketing and repayment practices. In addition to <br />questioning the Bureau's contracting practices, the Inspector <br />General commented on the Bureau's <br /> <br />--extending or rolling the repayment period for <br />all CVP facilities each time a new facility was <br />placed in service, <br /> <br />--establishing irrigators' water rates on <br />estimates of their ability to pay, <br /> <br />--applying interest rates to annual M&I operating <br />deficits that were lower than those actually <br />incurred by the Treasury to finance such <br />deficits, and <br /> <br />--not having a definite policy regarding who would <br />repay costs of facilities, such as the San <br />Felipe Unit, that were being constructed <br />exclusively to serve specific customers. <br /> <br />5 <br />