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<br />,. <br /> <br />. <br /> <br />. <br /> <br />03Su <br /> <br />On February 22, 1983, when WAPA Administrator Robert <br />McPhail testified before the House Appropriations committee on <br />the Fiscal Year 1984 budget, the effect of the agreed cost <br />reallocation on the power rate was discussed. In response to a <br />question regarding the allocation of joint costs to the second <br />unit of the Mt. Elbert power plant, McPhail remarked that <br />"Power rates on the Fryingpan-Arkansas Project will be <br />increased from about $37 per kW per year to about $44 to <br />achieve payout as a result of the reallocation of costs." As <br />of April 1, 1984, WAPA had not initiated formal action on this <br />rate increase, and the rate developed before the audit remains <br />in effect. Thus, Fry-Ark hydroelectric capacity is being sold <br />today for approximately 16% less than the rate necessary to <br />recover Federal costs as identified by the Inspector General in <br />1980 and agreed to by BuRec before the first kW of commercial <br />power was ever delivered from the project. <br /> <br />Water Contract <br /> <br />BuRec and the Southeastern Colorado Water Conservancy <br />District (SCWCD) amended their original 1965 water repayment <br />contract on October 23, 1981. To date, court validation has <br />not taken .place. However, BuRec is operating under a <br />memorandum of understanding with SCWCD and is delivering water <br />under the terms of the non-validated amended contract. The <br />amended contract provides for an inccease in the price of water <br />from $5.4U to $8.00 per acr~-foot. Until the amended contract <br />is validated, the price difference is being held by BuRec in an <br />escrow account. <br /> <br />CONCLUSION <br /> <br />Under Secretary Hodel, acting for Secretary Watt, approved <br />only $9 million of the $69 million recommended cost <br />reallocations to reimbursable functions of the Fry-Ark <br />project. Inspector General Mulberry assented to this decision <br />and considered the matter closed. ~o date, not one additional <br />dollar has been recovered from power users based upon even this <br />minor reallocation, and increased payments from water users <br />have not reached the general Treasury'. <br /> <br />In view of Inspector General Brown's original findings, $60 <br />million still needs to be reallocated in order to prevent a <br />$218 million:1 accumulated deficit over the remainder of the <br />repayment period. The Inspector General believed that this <br />subsidization of the project beneficiaries by the general <br />taxpayers was not supported by the project's legislative <br />history or authorizing legislation. <br /> <br />:/NWF staff computation (see Appendix III). <br /> <br />65 <br />