Summary

Pursuant to a congressional request, GAO reviewed the policies and practices used by the Bureau of Reclamation to recover the federal investments in the Central Utah Project and the Central Valley Project.

GAO noted that: (1) the existing repayment obligation was not adequate to recover the anticipated municipal and industrial (M&I) water costs because of a lengthened construction period; (2) the Bureau is negotiating contracts to increase the M&I repayment obligation; (3) irrigation revenues have been insufficient to cover annual operating expenses incurred by the federal government; and (4) the Bureau has established ratesetting policies aimed at recovering, within 50 years, that portion of the plant allocated to irrigation and M&I water. GAO found that under the proposed policies: (1) the new contracts negotiated would be sufficient to recover the water district's share of the costs based on the Bureau's current estimate of total M&I costs; (2) all new or renewed contracts would provide for annual water rate adjustments to recover potential increased costs; (3) irrigation water rates would be based on cost of service; (4) rolling repayment would be discontinued and replaced by a requirement to repay all existing facilities in service by year 2030; and (5) irrigation and M&I water operations will still experience annual operating deficits for the next several years until existing water service contracts can be renewed and water rates are increased.