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Fortnightly Magazine - October 1 1998

insurance premiums in Western's power rates. Again, this accusation is based on out-of-date information. Western is a rarity among Federal agencies engaged in business-like, revenue-producing activities, in that we will recover these costs in our rates.

Just like Tucson Electric, Western sets its rates based on costs. Despite some moves toward competition, most of the electric utility business still markets cost-based power to consumers. Western markets hydro-based resources that remain are relatively inflation resistant as compared to non-hydro generation, due to the absence of fuel costs. In addition, Western has no responsibility to meet load growth with relatively expensive additional power. It is because of these factors that Western's hydropower resources remain reasonably priced - not because of the alleged subsidies.

Kenneth G. Maxey

Chief Financial Officer

Western Area Power Administration

Editor's Note: For the record, we cut some portions of the original manuscript submitted by Charles Bayless, including these two sentences pertaining to his interpretation of WAPA's financial statements:

(1) "What makes this important is that the Flood Control Act of 1994 specifies that 'Rate Schedules shall be drawn having regard to ¼. the amortization of capital investment allocated to power over a reasonable number of years.' "

(2) "To me, not versed in public power accounting, reading WAPA's financial statements reminds one of Clairol advertisements - only their accountants know for sure." - B.W.R.

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