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8-217826 On the basis of existing contracts with San Felipe water customers, we estimate that water rates will be insufficient to repay any of this cost until such rates can be adjusted (20 years after the first deliveries of M&I water). As a result, unless these contracts can be renegotiated before then, a deficit of between $166 million and $224 million may accumulate on San Felipe before rates can be increased to start repayment of this facility. SCOPE AND METHODOLOGY The information presented on the Bonneville Unit was obtained by interviewing Bureau officials and reviewing documents at the Bureau's Upper Colorado Regional Office in Salt Lake City, Utah, and its Utah Projects Office in Provo, Utah. To obtain background information on the Bonneville Unit and assess potential repayment, we reviewed reports prepared by the Department of the Interior's Office of the Inspector General, the National Wildlife Federation, and the Utah Natural Resources Department. Because of time constraints, we did not verify or assess the reliability of cost data that the Bureau used for repayment analyses. TO obtain the information presented on the rate-setting policies for the Central Valley Project, we interviewed Bureau officials and reviewed documents at the Bureau's Mid-Pacific Regional Office in Sacramento, California. To obtain background information on the Central Valley Project, assess potential obstacles to repayment, and identify steps being taken to implement new rate-setting policies, we reviewed Federal Register notices: Bureau instructions: financial statements, cost data, water yield information, and repayment and rate-setting documents: water service contracts: congressional correspondence and hearings: reports prepared by the Department of the Interior's Office of Inspector General: and public comments on the Bureau's proposal from the National Wildlife Federation, the Natural Resources Defense Council, and various water districts and associations. We did not verify water delivery and cost data developed by the Bureau, which were used for rate-setting and repayment analyses, because of our short time frame. Nor did we assess the reliability for any computer-produced data and analyses. 'I Our review was performed in accordance with generally accepted government audit standards except that we did not verify or assess the reliability of data provided by the Bureau. The views of directly responsible officials were sought during the course of our work and are incorporated in the report where appropriate. In accordance with your request, we did not request the Department of the Interior to review and officially comment on a draft of this report. 7 I