Power Marketing Administrations: Offsetting Collections in the President’s FY2006 Budget Proposal

Power Marketing Administrations: Offsetting Collections in the President’s FY2006 Budget Proposal

Order Code RS22080
March 14, 2005
CRS Report for Congress
Received through the CRS Web
Power Marketing Administrations:
Offsetting Collections in the President’s
FY2006 Budget Proposal
Kyna Powers
Analyst in Energy and Environmental Policy
Resources, Science, and Industry Division
Summary
The federal government operates four Power Marketing Administrations (PMAs)
to market hydropower generated at federally constructed dams. The President’s FY2006
budget proposal includes a reclassification of receipts to allow three of these PMAs —
Southeastern Power Administration, Southwestern Power Administration, and Western
Area Power Administration — to fund their program direction and their operation and
maintenance (O&M) expenses through offsetting collections. It also proposes that the
PMAs use offsetting collections to directly finance some Corps of Engineers and Bureau
of Reclamation hydropower expenses. The PMAs currently deposit receipts into the
Treasury and Congress appropriates general Treasury funds to the PMAs, Corps, and
Bureau for these power-related expenses. The President’s proposal would have little or
no effect on PMA’s power rates, while the effect on Corps and Bureau funding is
uncertain. It would, however, reduce the amount of money PMAs deposit into the
Treasury. This report will not be updated.
Introduction
The federal government operates four Power Marketing Administrations (PMAs) —
Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA),
Southwestern Power Administration (SWPA), and Western Area Power Administration
(WAPA) — to market hydropower generated at federally constructed multi-purpose dams.
These dams are generally operated and maintained by the Corps of Engineers or the
Bureau of Reclamation. The PMAs are required to set power rates sufficient to recover,
among other expenses, some of the costs of operating and maintaining these federal
facilities.1
1 For more information on the PMAs budgets, see CRS Report RL32798, Power Marketing
Administrations: Proposals for Market-Based Rates, by Kyna Powers.
Congressional Research Service ˜ The Library of Congress

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Current and Proposed Funding Mechanism. Under current law, the PMAs
are required to recover — through their rate-payers — certain costs. Included in these
costs are their program direction expenses (i.e., salaries, travel, support services, etc.) and
O&M expenses for selected Corps and Bureau hydropower facilities.2 While all of the
PMAs recover these costs, only BPA, which is self-financed, directly funds these
expenses. SEPA, SWPA, and WAPA deposit their revenues, minus certain offsetting
collections, into the federal Treasury. Congress then appropriates funds from the general
Treasury for O&M and other expenses.
The President’s FY2006 budget would alter how the three PMAs finance certain
expenses. Specifically, it would allow the PMAs to spend some of their revenues — up
to a congressionally specified cap — on their program direction expense without the
money passing through the appropriations process. Therefore, this revenue would not be
deposited into the Treasury, nor would it be appropriated to the PMAs.
The President’s budget would also allow the three PMAs to directly reimburse the
Corps and Bureau — up to a congressionally specified amount — for the power share of
their O&M activities at selected hydropower facilities. Under this system, PMA
collections that cover these federal expenses would not go to the Treasury. Rather, the
PMAs would deposit these revenues directly into the agencies’ accounts and this funding
would appear in the Corps and Bureau budgets as collections offsetting their
appropriations.
Funding for PMAs. Implementing the President’s proposal for offsetting
collections would have little effect on the overall amount of money the PMAs have to
conduct their operations. As shown in Table 1, the amount of new budget authority for
the PMAs would decrease from FY2005 to FY2006, but new offsetting collections3 for
their program direction and O&M expenses would make up for this amount.
Table 1. New Budget Authority and Offsetting Collections
PMAs’ New Budget Authority
New Offsetting Collections for
PMA
($ in thousands)
PMA Expenses in FY2006
FY2005
FY2006
Difference
($ in thousands)
SEPA
$5,158
$0
-$5,158
$5,600a
SWPA
$29,177
$3,166
-$25,951
$27,000b
WAPA
$171,715
$53,957
-$117,758
$186,800c
Source: Office of Management and Budget, Department of Energy FY2006 Congressional Budget Request,
DOE/ME-0051 (Feb. 2005). This excludes Corps and Bureau offsetting collections.
a Offsetting collections for program direction.
b Offsetting collections for O&M.
c Offsetting collections for program direction and O&M. This figure does not reflect that PP&W offsetting
collections, which existed prior to FY2006, decreased by $79,100 from FY2005 to FY2006.
2 The PMAs also recover expenses related to transmission (purchase power and wheeling or
PPW). The PMAs already use offsetting collections for most PP&W costs, thus they are outside
the scope of this report.
3 This does not include existing offsetting collections for PP&W or outlays to the Corps or
Bureau for their O&M expenses.

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Funding for the Corps and Bureau. The President’s proposal would alter the
way the Corps4 and Bureau receive funding for their power-related expenses at selected
facilities. Specifically, the FY2006 request would reclassify PMA receipts, allowing them
to be credited into Corps and Bureau accounts. The intent is for the PMAs to directly
reimburse the agencies for their O&M activities at selected hydropower facilities, rather
than their being reimbursed indirectly through annual appropriations.
The current process for paying for Corps and Bureau hydropower O&M starts with
the Corps and Bureau estimating their power-related expenses for a given year, and
submitting these figures as part of their budget request for general appropriations. In its
appropriations reports, Congress recommends specific O&M figures for Corps and
Bureau facilities; the PMAs collect this amount from rate-payers and deposit it into the
Treasury. The President’s proposal would remove these activities from the appropriations
process. The PMAs would coordinate directly with the Corps and Bureau to determine
O&M needs for the upcoming fiscal year and ask Congress to approve their proposal for
offsetting collections. Then, the PMAs would directly finance these Bureau and Corps
O&M expenses by depositing the PMAs’ collections in the agencies’ accounts through
offsetting collections.
While it is unclear how this process would affect Corps and Bureau O&M funding
(i.e., whether hydropower O&M funding would increase or decrease), it likely would
increase communication and coordination among these federal entities.
Treasury Receipts. Under the offsetting collections proposal, the main budgetary
change would be a decrease in PMA-related Treasury receipts. The President’s budget
indicates that the PMAs’ total proprietary receipts, which are equivalent to their Treasury
deposits, would decrease by $293.2 million from FY2005 to FY2006. The decrease is
primarily attributable to all new PMA-related offsetting collections — including those for
the PMAs (Table 1) and for the Corps and Bureau — which would correspond to a
decrease in general Treasury appropriations.5 (See Table 2.) Therefore, reclassifying
some of the PMAs’ current Treasury deposits as offsetting collections would reduce the
flexibility of Congress to use these receipts to fund non-PMA expenses. However,
Congress would retain the authority, through the appropriations process, to place a cap
on PMAs’ use of offsetting collections.
4 For more information on the Corps of Engineers, see CRS Issue Brief IB10120, Corps of
Engineers Civil Works Program: Issues for the 109th Congress, by Nicole T. Carter and Pervaze
A. Sheikh.
5 From year to year, the size of Treasury deposits change based on a combination of factors
including the PMAs’ revenues and debt repayment.

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Table 2. Change in Treasury Receipts Relative to
New Offsetting Collections
Total Proprietary Receipts
Change in Total
($ in thousands)
PMA
Offsetting Collections
($ in thousands)
FY2005
FY2006
Difference
SEPA
$174,493
$94,262
-$80,231
$82,271a
SWPA
$100,700
$19,331
-$81,369
$83,735b
WAPA
$273,405
$141,786
-$131,619
$167,845c
Total
$548,598
$255,378
-$293,219
$333,851
Source: Office of Management and Budget, Department of Energy FY2006 Congressional Budget Request,
DOE/ME-0051 (Feb. 2005). Includes offsetting collections for the PMAs and for the Corps and Bureau.
a $77,958 in new direct funding for Corps Hydropower O&M, plus a $4,313 increase in PP&W offsetting
collections.
b $85,400 in new offsetting collections ($58,400 for Offsetting Collections Realized, Corps of Engineers’
O&M/R, $27,000 Offsetting Collections Realized for Southwestern program direction and O&M),
minus $1,661 in existing offsetting collections for PP&W.
c $246,945 in new offsetting collections ($27,453 transferred to the Corps, $30,000 transferred to the
Bureau, $186,800 WAPA O&M offsetting collections, and $2,692 in Falcon Amistad O&M) minus
$79,100 for decrease in existing offsetting collections for PP&W.