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Power agency facing questions of overcharging customers, storing huge pot of extra money

Posted: 8:25 PM, Feb 28, 2017
Updated: 2017-03-01 18:15:24Z

The Western Area Power Administration is storing hundreds of millions of dollars in an unobligated fund and it’s raising questions about whether the federal agency has overcharged customers for power.

Whistleblowers allege the agency’s unobligated balance once topped $1.1 billion – an amount WAPA officials dispute.

At its peak, a spokesperson said the balance reached $793 million. At the end of the agency’s most recent fiscal year, WAPA said there was $767 million.

RELATED: Out-of-control waste, abuse, and fraud inside federal power agency

WAPA is a division of the United States Department of Energy that takes power from plants and sells it to wholesale electric utilities, municipalities, tribes and other agencies in 15 western states, including Arizona.

In short, WAPA sells power to the utilities and other entities that sell power to millions of people.

WAPA only receives a small portion of its funding from budget appropriations, which means almost all of its money comes from selling power. That’s the reason why the significant sum of the extra funds troubles U.S. Senators John McCain and Jeff Flake.

“The expenditures are suspect, and they keep rolling money over year to year,” Flake said in a  December interview with ABC15. “At some point, you have to have the consumers benefit. It doesn’t seem that they are.”

WAPA officials declined interview requests and instead released a series of statements to ABC15. A full statement is posted at the end of this report.

WAPA officials deny that the agency has overcharged for power and said a large unobligated balance is needed in case of emergencies, like a drought, and to fund future capital projects.

The agency also pointed to a Government Accountability Office (GAO) audit that said the agency has no major issues with its unobligated funds. But the GAO report looked at unobligated balances related to the 2013 Government sequester, when WAPA’s balance was hundreds of millions of dollars less than it is now.

WAPA executives also appear to have concerns about what GAO would think about the current size of its fund. 

In a 2015 email sent between top WAPA executives, it said the total balance was $755 million. It continues, “Fully realizing there may be some optics issues with GAO (or possibly others) we have to address.”

ABC15 obtained a copy of the email from sources. When a reporter official requested the email from WAPA, the “optics issue with GAO” line was redacted.

In a video posted online about unobligated balances, WAPA said the extra funds don’t impact customer rates.

“That doesn’t really make any sense at all,” said Kris Mayes, an Arizona State University professor and two-term state corporation commissioner. “If somebody is overcharging, somebody pays the price and that’s always the ratepayers.”     

Mayes also didn’t know WAPA was carrying an outside balance of that size.

“I find that very surprising and frankly, frustrating,” she said.

Mayes said that money could be used to upgrade “decomposing” infrastructure in Arizona and other states.

“If that money isn’t going to be used by WAPA, and it should be, then it needs to be returned to ratepayers,” she said. “If it’s not being used, let’s give it back to the people who provided it in the first place.”

Stored in the large balance, ABC15 discovered WAPA also holds onto funds for outside utilities.

ABC15 obtained an audio recording of COO Anthony Montoya talking about it to a room of WAPA employees addressing questions raised about the agency’s unobligated funds.

An 11-minute copy of the audio clip is posted above. But here’s an excerpt of Montoya discussing WAPA holding other utilities’ funds:

We also do a lot of what we call “trust fund work” or work for others. So what happens is we identify a need and we spend the money. But a customer might identify a need. Uh, in the Upper Great Planes again, they have a lot of it. In the Upper Great Planes, a lot of their customers came to us and said, we are getting interconnections because of the, uh, Keystone Pipeline, the pipeline from  central Alberta to the central United States, we’re going to need to supply to both the pumping plants or the injection plants. So they put money in our accounts, to do that, and the Keystone Pipeline has been on hold ever since. Those customers don’t really want the money back. They want to use it for their next project. The reason they don’t want it back pertains to the earnings problem I talked about. I’m a co-op member, and all of a sudden, I see some money showing up in that earnings account, and I want it back in a dividend or a reduction in my rates. So it makes sense for the co-ops or municipalities to keep it on an account with us. So they can use it when they need it. But it adds to that balance.

 “It raises questions,” Mayes said. “I don’t know of any utilities that I regulated during my time on the corporation commission that served as a bank to story money for other utilities.”

Here’s is WAPA’s full statement on the unobligated funds:

“As a federal organization WAPA does not have the same tools as private utilities to raise money quickly to execute projects needed to keep the lights on. That is why customers have told us to hang on to the funds. This is not a pile of money sitting around, it is an authorization. The money is held at Treasury, lawfully retained, to ensure WAPA has the funds when needed to ensure continuity of service to WAPA customers in the future. This practice has been in place since the beginning of our organization’s history. The Government Accountability Office recently audited this practice and found that it was generally managed effectively, but also recommended that WAPA finalize an unobligated balances strategy, which was released last fall. ”   

Contact ABC15 Investigator Dave Biscobing at dbiscobing@abc15.com .