HUD FY2019 Appropriations: In Brief

Summary: The programs and activities of the Department of Housing and Urban Development (HUD) are designed primarily to address housing problems faced by households with very low incomes or other special housing needs and to expand access to homeownership. Nearly all of the department's budget comes from discretionary appropriations provided each year in the annual appropriations acts, typically as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD).

Summary: On February 12, 2018, the Trump Administration submitted its FY2019 budget request to Congress, including $41.4 billion in gross new budget authority for HUD (not accounting for savings from offsets or rescissions). That is about $11.3 billion (21.5%) less than was provided in FY2018. Most of that reduction ($7.7 billion) is attributable to proposed program eliminations, including Community Development Block Grants (CDBG), the HOME Investment Partnerships grant program, Public Housing Capital Funding, Choice Neighborhoods grants, and the programs funded in the Self-Help Homeownership Opportunity Program (SHOP) account.

Summary: On May 23, 2018, the House Appropriations Committee approved its version of a FY2019 THUD appropriations bill ( H.R. 6072 ; H.Rept. 115-750 ), which proposed $53.2 billion in gross funding for HUD. This was about 29% more in gross funding than was requested by the President and slightly more (1%) than was provided in FY2018. The bill did not include the program eliminations proposed by the President, and instead proposed to fund CDBG and the Public Housing Capital Fund at FY2018 levels while reducing funding for the HOME and SHOP accounts (-12% and -7%, respectively).

Summary: On August 1, 2018, the Senate approved H.R. 6147 , the Financial Services Appropriations bill, which had been amended to include the Senate Appropriations Committee-approved version of a FY2019 THUD appropriations bill ( S. 3023 , incorporated as Division D), along with three other appropriations bills. It included more than $54 billion in gross funding for HUD. This is 30% more in gross funding than was requested by the President, and about 2.5% more than was provided in FY2018. Like H.R. 6072 , the Senate-passed bill did not include the President's proposed program eliminations, and instead proposed to fund those programs at their prior-year levels.

Summary: Final FY2019 appropriations were not completed before the start of the fiscal year. Funding for HUD and most other federal agencies was continued under a series of continuing resolutions until December 21, 2018, at which point funding lapsed and a partial government shutdown commenced. It continued until January 25, 2019, when another short-term continuing resolution was enacted. Final FY2019 HUD appropriations were enacted on February 15, 2019 as a part of the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ).

Summary: Appropriations for Selected HUD Accounts, FY2018-FY2019 (dollars in millions)

M ost of the funding for the activities of the Department of Housing and Urban Development (HUD) comes from discretionary appropriations provided each year in annual appropriations acts, typically as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD).

HUD's programs are designed primarily to address housing problems faced by households with very low incomes or other special housing needs and to expand access to homeownership. Three main rental assistance programs—Section 8 tenant-based rental assistance (which funds Section 8 Housing Choice Vouchers), Section 8 project-based rental assistance, and public housing—account for the majority of the department's funding (about 78% of total HUD appropriations in FY2018; see Figure 1 ). All three programs provide deep subsidies allowing low-income recipients to pay below-market, income-based rents. Additional, smaller programs are targeted specifically to persons who are elderly and persons with disabilities.

Two flexible block grant programs—the HOME Investment Partnerships grant program and the Community Development Block Grant (CDBG) program—help states and local governments finance a variety of housing and community development activities designed to serve low-income families. Following disasters, special supplemental CDBG disaster recovery (CDBG-DR) grants are funded by Congress to help communities rebuild damaged housing and community infrastructure. Native American tribes receive their own direct housing grants through the Native American Housing Block Grant.

Other, more-specialized grant programs help communities meet the needs of homeless persons, through the Homeless Assistance Grants and the Continuum of Care and Emergency Solutions Grants programs, as well as those living with HIV/AIDS. Additional programs fund fair housing enforcement activities and healthy homes activities, including lead-based paint hazard identification and remediation.

HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to homebuyers with low down payments and to developers of multifamily rental buildings containing relatively affordable units. FHA collects fees from insured borrowers, which are used to sustain its insurance funds. Surplus FHA funds have been used to offset the cost of the HUD budget.

This In Brief report tracks progress on FY2019 HUD appropriations and provides detailed account-level, and in some cases subaccount-level, funding information ( Table 1 ) as well as a discussion of selected key issues.

For more information about the Transportation, HUD, and Related Agencies appropriations bill see CRS Report R45487, Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations for FY2019: In Brief , by Maggie McCarty and David Randall Peterman. For more information on trends in HUD funding, see CRS Report R42542, Department of Housing and Urban Development (HUD): Funding Trends Since FY2002 .

Figure 1. Composition of HUD's Budget, FY2018Gross Budget AuthoritySource: Prepared by CRS, based on data in Table 1.Notes: Primary rental assistance programs include Tenant-based Rental Assistance (Housing Choice Voucher Program), Public Housing Capital Fund, Public Housing Operating Fund, Choice Neighborhoods, Family Self Sufficiency Program, and Project-based Rental Assistance. Formula grants include CDBG, HOME, Homeless Assistance Grants, Housing for Persons with AIDS (HOPWA), and Native American Housing Block Grants. Other programs and activities encompass the remainder of HUD accounts.

The FY2019 appropriations process spanned two Congresses, both of which took action, as summarized below.

On February 12, 2018, the Trump Administration submitted its FY2019 budget request to Congress. The budget request was released before final FY2018 appropriations were enacted and shortly after enactment of the Bipartisan Budget Act of FY2018 (BBA; P.L. 115-123 ), which, among other things, increased the statutory limits on discretionary spending for FY2018 and FY2019.

The President's FY2019 request proposed $41.4 billion in gross discretionary appropriations for HUD, which is the amount of new budget authority available for HUD programs and activities, not accounting for savings from offsets and other sources. That amount is about $11.3 billion (21.5%) less than was provided in FY2018. Most of that reduction ($7.7 billion) is attributable to program eliminations proposed by the President, including CDBG, HOME, Public Housing Capital Funding, Choice Neighborhoods grants, and the programs funded in the Self-Help Homeownership Opportunity Program (SHOP) account.

On May 23, 2018, the House Appropriations Committee approved its version of a FY2019 THUD appropriations bill ( H.R. 6072 ; H.Rept. 115-750 ), about a week after THUD subcommittee approval (May 16, 2018). The bill included $53.2 billion in gross funding for HUD, or $43.7 billion after accounting for savings from offsets and rescissions. This is about 29% more in gross funding than was requested by the President and slightly more (1%) than was provided in FY2018. The bill did not include the program eliminations proposed by the President, and instead funded CDBG and the Public Housing Capital Fund at FY2018 levels while reducing funding for the HOME and SHOP accounts (-12% and -7%, respectively).

On June 7, 2018, the Senate Appropriations Committee approved its version of a FY2019 THUD appropriations bill ( S. 3023 ; S.Rept. 115-268 ), two days after THUD subcommittee approval. It included more than $54 billion in gross funding for HUD, or $44.5 billion after accounting for savings from offsets and rescissions. This is 30% more in gross funding than was requested by the President, and about 2.5% more than was provided in FY2018. Like the House committee-passed bill, S. 3023 did not include the President's proposed program eliminations, and instead proposed funding those programs at their prior-year levels.

On August 1, 2018, the Senate approved H.R. 6147 , the Financial Services Appropriations bill, which was amended to include four regular appropriations acts, including the text of S. 3023 as Division D. Several HUD-related amendments were approved during floor consideration, none of which changed funding levels.

Continuing Resolutions and Funding Lapse

On September 28, 2018, a continuing resolution (CR) through December 7, 2018, was enacted as part of a consolidated full-year Defense and Labor, Health and Human Services, and Education spending bill ( P.L. 115-245 , Division C). The CR covered the agencies and activities generally funded under seven regular FY2019 appropriations bills that had not been enacted before the end of the fiscal year, including THUD.

On December 7, 2018, the previous CR was extended through December 21, 2018 ( P.L. 115-298 ).

No further funding action was completed before the expiration of the CR on December 21, 2018, and a funding lapse affecting the unfunded portions of the federal government, including HUD, commenced on December 22, 2018.

Legislative Action During the Funding Lapse

Following the start of the 116 th Congress and during the funding lapse, the House passed several full-year THUD funding bills, none of which were taken up in the Senate. These include the following:

H.R. 21 , an omnibus funding bill, which included THUD language identical to that which had passed the Senate in the 115 th Congress in H.R. 6147 ; H.R. 267 , a standalone THUD bill, again containing language identical to the 115 th Congress Senate-passed THUD language; and H.R. 648 , an omnibus funding bill containing provisions and funding levels characterized by the chairwoman of the House Appropriations Committee as reflecting House-Senate conference negotiations on H.R. 6147 from the 115 th Congress. (The Transportation, HUD, and Related Agencies Appropriations Act of 2019 was included as Division F.)

On January 16, 2019, the House passed H.R. 268 , a supplemental appropriations bill. As passed by the House, the bill would have provided supplemental appropriations to HUD (as well as other agencies) in response to the major disasters of 2018. The bill also contained CR provisions to extend regular appropriations through February 8, 2019, for agencies and programs affected by the funding lapse.

On January 24, 2019, the Senate considered H.R. 268 , the supplemental appropriations bill that previously passed the House. One amendment, S.Amdt. 5 , offered by Senator Shelby, included additional funding for border security, as well as full-year appropriations for those agencies affected by the funding lapse. The THUD provisions in Division G were identical to those that had passed the Senate in the 115 th Congress in H.R. 6147 . The Senate voted not to invoke cloture on S.Amdt. 5 on January 24, 2019.

Enactment of Third Continuing Resolution

Late on January 25, 2019, a CR ( H.J.Res. 28 ; P.L. 116-5 ) was enacted, providing funding through February 15, 2019, for THUD and the six other funding bills that had not received full-year funding, allowing HUD and the other agencies that had been subject to the funding lapse to resume full operations.

On February 15, 2019, the Consolidated Appropriations Act, 2019 ( P.L. 116-6 ) was enacted providing full-year appropriations for the remaining agencies that had lacked full-year appropriations. The Transportation, HUD, and Related Agencies Appropriations Act of 2019 was included as Division G and its text mirrored that of H.R. 648 .

The cost of renewing existing Section 8 Housing Choice Vouchers is generally one of the most high-profile HUD funding issues each year. It is the largest single expense in the largest account (the tenant-based rental assistance account) in HUD's budget. All of the roughly 2 million portable rental vouchers that are currently authorized and in use are funded annually, so for the low-income families currently renting housing with their vouchers to continue to receive assistance (i.e., renew their leases at the end of the year), new funding is needed each year.

If the amount ultimately provided proves to be less than the amount needed to fund all vouchers currently in use, then several things may happen. The Public Housing Authorities (PHAs)—the state-chartered entities that administer the program at the local level—with reserve funding from prior years, may spend some of those reserves to maintain current services. PHAs without reserve funding may apply to HUD for a share of the set-aside funding that is generally provided in the annual appropriations acts to the department and allowed to be used to prevent termination of assistance. And PHAs may undertake cost-saving measures, such as not reissuing vouchers to families on their waiting lists when currently assisted families leave the program. Conversely, if the amount is greater than the amount needed to renew existing vouchers, PHAs may be able to serve additional families from their waiting lists.

Although the President's budget request, the House committee-reported HUD appropriations bill, and the Senate bill all included different funding levels for voucher renewals for FY2019, each purported to provide enough to fund all vouchers currently in use. The final FY2019 enacted funding level was $22.598 billion, an amount between the House committee-reported and Senate-passed levels. Advocacy groups have estimated that the amount provided will be enough at least to renew all existing voucher holders' leases, as well as potentially serve some additional families.

The low-rent public housing program houses approximately 1 million families in properties owned by local PHAs but subsidized by the federal government. PHAs' budgets for public housing are made up of rent paid by tenants and formula grant funding from the federal government to make up the difference between the rents collected from tenants and the cost of maintaining the properties. The two primary formula funding programs are Operating Fund program and Capital Fund program. Additionally, PHAs may apply for competitive Choice Neighborhood Initiative grants.

The largest source of federal funding to support the low-rent public housing program is provided through the public housing Operating Fund account. Operating funds are allocated to PHAs according to a formula that estimates what it should cost PHAs to maintain their public housing properties based on the characteristics of those properties. When the amount of appropriations provided is insufficient to fully fund the amount PHAs qualify for under the formula, their allocation is prorated. Assuming the Operating Fund formula accurately reflects the costs of maintaining public housing, less than full funding means PHAs either will not be able to meet their full operating needs (e.g., maintenance, staffing, services for residents) or will have to spend down reserves they may have accumulated or seek other sources of funding.

According to HUD's Congressional Budget Justifications, the amount requested in the President's budget for the Operating Fund for FY2019 (a 28% decrease from FY2018) would be sufficient to fund an estimated 54% of PHAs' formula eligibility in CY2019 (the program runs on a calendar year basis). Both the House committee-passed bill and the Senate bill proposed more funding than requested, but neither proposed the full amount the President's budget estimated would be needed to fully fund PHAs' formula eligibility in CY2019. The final HUD appropriations law provided $4.65 billion for operating funding in FY2019, which is more than the House committee-passed bill, but less than the Senate level. While it is not expected to fund 100% of formula eligibility in CY2019, the funding increase may result in a higher proration level than CY2018.

The other major source of federal funding for public housing is the Capital Fund. Capital Fund formula grants are used to meet the major modernization needs of public housing, beyond the day-to-day maintenance expenses included among operating expenses. The most recent national assessment of public housing capital needs sponsored by HUD found that inadequate funding had resulted in a backlog of about $25.6 billion in capital/modernization needs across the public housing stock, with new needs accruing nationally at a rate of about $3.4 billion per year.

For FY2019, the President's budget requested no funding for the Capital Fund, citing federal fiscal constraints and a desire to "strategically reduce the footprint of Public Housing." Both the House committee bill and the Senate bill would have provided funding for the Capital Fund, with H.Rept. 115-750 explicitly stating that it rejected the Administration's proposed strategic reduction of public housing. The final FY2019 appropriations law provided $2.775 billion for the Capital Fund, a $25 million increase over FY2018 funding. That $25 million is provided as a set-aside to provide grants to PHAs to address lead hazards in public housing.

Similarly, the Administration's budget requested no new funding for competitive Choice Neighborhoods grants that are used to redevelop distressed public housing and other assisted housing. Both the House committee bill and the Senate bill proposed to fund the program. The House committee bill proposed even funding with FY2018 ($150 million) and the Senate bill proposed a decrease in funding relative to FY2018 (a reduction of $50 million, or 33%). The final FY2019 appropriations law funded the account at the FY2018 level of $150 million.

The President's budget request included a proposal to eliminate funding for several HUD grant programs that support various affordable housing and community development activities. Most notable among these are HUD's two largest block grant programs for states and localities, CDBG and HOME, as well as competitive grants funded in the SHOP account (i.e., funding for sweat-equity programs, like Habitat for Humanity, and certain capacity building programs). These grant programs were also slated for elimination in the President's FY2018 budget request, although they were ultimately funded in FY2018.

The press release accompanying the budget request suggested that the activities funded by these grant programs should be devolved to the state and local levels. Both the House committee bill and the Senate bill would have continued funding for these programs. The House committee bill would have provided level funding for CDBG, but funding reductions for the other accounts. The Senate bill would have provided level funding for all three accounts. Like the House committee and Senate bills, the final FY2019 appropriations law continued funding for all three accounts. In the case of CDBG and SHOP, it provided level funding with FY2018 at $3.365 billion and $54 million, respectively; in the case of HOME, the FY2019 law decreased funding by 8.2% relative to FY2018, bringing it down to $1.250 billion.

Under the terms of the Budget Control Act, as amended, discretionary appropriations are generally subject to limits, or caps, on the amount of funding that can be provided in a fiscal year. In addition, the annual appropriations bills also are individually subject to limits on the funding within them that are associated with the annual congressional budget resolution. Congressional appropriators can keep these bills within their respective limits in a number of ways, including by providing less funding for certain purposes to allow for increases elsewhere in the bill. In certain circumstances, appropriators also can credit "offsetting collections" or "offsetting receipts" against the funding in the bill, thereby lowering the net amount of budget authority in that bill.

In the THUD bill, the largest source of these offsets is generally the Federal Housing Administration (FHA). FHA generates offsetting receipts when estimates suggest that the loans that it will insure during the fiscal year are expected to collect more in fees paid by borrowers than will be needed to pay default claims to lenders over the life of those loans.  While usually not as large a source, the Government National Mortgage Association (GNMA), or Ginnie Mae, generally provides significant offsets within the THUD bill as well. GNMA guarantees mortgage-backed securities made up of government-insured mortgages (such as FHA-insured mortgages) and similarly generates offsetting receipts when the associated fees it collects are estimated to exceed any payments made on its guarantee.

The amount of offsets available from FHA and GNMA varies from year to year based on estimates of the amount of mortgages that FHA will insure, and that GNMA will guarantee, in a given year and how much those mortgages are expected to earn for the government. These estimates, in turn, are based on expectations about the housing market, the economy, the credit quality of borrowers, and relevant fee levels, most of which are factors outside of the immediate control of policymakers. If the amount of available offsets increases from one year to the next, then additional funds could be appropriated relative to the prior year's funding level while still maintaining the same overall net level of budget authority. If the amount of offsets decreases, however, then less funding would need to be appropriated relative to the prior year to avoid increasing the overall net level of budget authority, all else equal.

For FY2019, the Congressional Budget Office (CBO) estimated that offsetting receipts available from FHA would be lower than in FY2018 ($7.6 billion compared to $8.3 billion) while the amount of offsets available from Ginnie Mae would be higher (about $2 billion compared to $1.7 billion). The total combined amount of offsets, then, was estimated at about $500 million less in FY2019 as compared to the prior year. As a result of this lower amount of offsets, the increase in net budget authority proposed in both the House committee bill and the Senate bill, as well as that ultimately provided by the final FY2019 appropriations law, as compared to FY2018 is greater than the increase in gross appropriations for HUD programs and activities.


The Power Marketing Administrations: Background and Current Issues

Summary: The federal government, through the Department of Energy, operates four regional power marketing administrations (PMAs), created by statute: the Bonneville Power Administration (BPA), the Southeastern Power Administration (SEPA), the Southwestern Power Administration (SWPA), and the Western Area Power Administration (WAPA). Each PMA operates in a distinct geographic area. Congressional interest in the PMAs has included diverse issues such as rate setting, cost and compliance associated with the Endangered Species Act (ESA; P.L. 93-205; 16 U.S.C. §§1531 et seq.), and questions of privatization of these federal agencies.

Summary: In general, the PMAs came into being because of the government's need to dispose of electric power produced by dams constructed largely for irrigation, flood control, or other purposes, and to achieve small community and farm electrification—that is, providing service to customers whom it would not have been profitable for a private utility to serve. With minor exceptions, these agencies market the electric power produced by federal dams constructed, owned, and operated by the U.S. Army Corps of Engineers (Corps) and the Bureau of Reclamation (BOR). By statute, PMAs must give preference to public utility districts and cooperatives (e.g., "preference customers"), and sell their power at cost-based rates set at the lowest possible rate consistent with sound business principles. The Federal Energy Regulatory Commission regulates PMA rates to ensure that they are set high enough to repay the U.S. Treasury for the portion of federal facility costs allocated to hydropower beneficiaries.

Summary: With energy and capacity markets changing in the western United States (especially with the growing need to integrate increasing amounts of variable renewable sources), and the development of the Energy Imbalance Market in the West, BPA and WAPA may have to adapt their plans with regard to generation needs and how transmission systems are developed.

Summary: In 2018, the Trump Administration proposed to sell the transmission assets (lines, towers, substations, and/or rights of way) owned and operated by the federal Power Marketing Administrations. The proposal suggested that "eliminating or reducing" the federal government's role in owning and operating transmission assets, and increasing the private sector's role, would "encourage a more efficient allocation of economic resources and mitigate unnecessary risk to taxpayers." The resulting PMA entities would then contract with other utilities to provide transmission services for the delivery of federal power, similar to what SEPA does currently. Reportedly, the proposed sale of PMA assets was dropped after opposition to the plan emerged from stakeholders. Under Section 208 of the Urgent Supplemental Appropriations Act, 1986 (P.L. 99-349), the executive branch is prohibited from spending funds to study or draft proposals to transfer from federal control any portion of the assets of the PMAs unless specifically authorized by Congress.

Summary: Environmental, fishing, and tribal advocates have sued the federal government over concerns that operating rules for hydropower dams on the Columbia and Snake Rivers (i.e., the National Marine Fisheries Service Biological Opinion) are inadequate to ensure survival of species threatened or endangered under the ESA. In 2016, a federal judge overturned a previous management plan for the dams, finding that it would not be sufficient to protect salmon runs, and ordered a new management plan that could include removing the dams. However, in 2018, President Trump issued a Presidential Memorandum accelerating the process for a new management plan, requiring the biological opinion to be ready by 2020.

Summary: Since FY2011, power revenues associated with the PMAs have been classified as discretionary offsetting receipts (i.e., receipts that are available for spending by the PMAs), thus the agencies are sometimes noted as having a "net-zero" spending authority. Only the capital expenses of WAPA and SWPA require appropriations from Congress.

The federal government, through the Department of Energy, operates four regional power marketing administrations (PMAs), created by statute: the Bonneville Power Administration (BPA), the Southeastern Power Administration (SEPA), the Southwestern Power Administration (SWPA), and the Western Area Power Administration (WAPA). Each PMA operates in a distinct geographic area of the coterminous United States (see Figure 1 ). Congressional interest in the PMAs has included diverse issues such as rate setting, cost and compliance associated with the Endangered Species Act (ESA; P.L. 93-205 ; 16 U.S.C. §§1531 et seq.), and questions of privatization of these federal agencies.

In general, the PMAs came into being because of the government's need to dispose of electric power produced by federal dams constructed largely for irrigation, flood control, or other purposes, and to achieve small community and farm electrification—that is, providing service to customers whom it would not have been profitable for a private utility to serve. With minor exceptions, these agencies market the electric power produced by federal dams constructed, owned, and operated by the Corps of Engineers (Corps) and the U.S. Bureau of Reclamation (BOR). PMAs must give preference to public utility districts and cooperatives (e.g., "preference customers"), selling their power at cost-based rates set at the lowest possible rate consistent with sound business principles. The Federal Energy Regulatory Commission (FERC) regulates PMA rates to ensure that they are set high enough to repay the U.S. Treasury on schedule for the portion of federal facility costs that have been allocated to hydropower beneficiaries.

Each PMA also has unique elements and regional issues that affect its business. They are discussed in alphabetical order.

Created by the Bonneville Project Act of 1937 (16 U.S.C. §832) just before the completion of two large dams in the Pacific Northwest—Bonneville Dam in 1938 and Grand Coulee Dam in 1941—BPA was the first PMA. Though it serves a smaller geographical area, BPA is on par with WAPA (which serves the largest area) in the size of its transmission system. The agency operates and maintains about 75% of the high voltage transmission lines in its service territory, which includes Idaho, Oregon, Washington, western Montana and small parts of eastern Montana, California, Nevada, Utah, and Wyoming. BPA also markets wholesale electricity from 31 federally owned hydropower facilities in the Northwest. These generation facilities are owned both by the Corps and BOR.

BPA differs from the other three PMAs in that it is self-financed: it receives no federal appropriations. Since passage of the Federal Columbia River Transmission System Act of 1974 (16 U.S.C. §838), BPA has covered its operating costs through power rates set to ensure repayment to the Treasury of capital and interest on funds used to construct the Columbia River power system. BPA also has permanent Treasury borrowing authority, which it may use for capital on large projects. This money is repaid with interest, through power sales.

As of 2018, BPA had $5.53 billion of bonds outstanding to the U.S. Treasury, with BPA's current borrowing authority capped by Congress at $7.70 billion. BPA has also looked at other financing options as it approaches its debt limit, looking at nonfederal debt refinancing, lease-purchases, and other asset management strategies.

BPA has initiated strategies and a financial plan to address a changing power generation and demand market, as it endeavors to meet its mandate for cost-based electric power rates. These plans are outlined in its Strategic Plan for 2018 to 2023, and address goals from financial health to infrastructure modernization.

Wholesale power prices in the United States are generally trending downward, while BPA's firm power rates have trended upward. BPA repays its funding from the U.S. Treasury largely through electricity sales to customers. While BPA generates its electricity from hydropower (which is traditionally one of the lower-cost means of power generation), increasing amounts of renewable electricity from growing wind and solar capacity installations in the Pacific Northwest are challenging BPA's price competitiveness, and perhaps its ability to repay its debts in a timely manner.

In 2014, BPA entered into the Regional Cooperation Agreement (RCA) with the State of Washington to address the debt of Energy Northwest, a "joint action agency formed by the Washington state legislature in 1957" to manage public power utility costs. Energy Northwest owns and operates four electric power generation facilities: White Bluffs Solar Station, Packwood Lake Hydroelectric Project, Nine Canyon Wind Project, and the Columbia Generating Station.

The Regional Cooperation debt is "the issuance of new bonds by Energy Northwest to refund outstanding bonds shortly before their maturities when substantial principal repayments were and are due." According to BPA, this allows for "integrated debt management" for the combined total debt portfolios of BPA and Energy Northwest, with a net effect reducing the "weighted average interest rate and the maturity of BPA's overall debt portfolio" over the life of the program. This refinancing, according to BPA, has enabled BPA to prepay higher-interest-rate federal obligations, and has "preserved or restored U.S. Treasury borrowing authority." However, the debt service of the RCA is "borne by BPA ratepayers through BPA rates."

BPA estimates that the "aggregate potential principal amount" of RCA refunding through bonds issued in fiscal years 2019 through 2030 could exceed $4.0 billion.

Grid Balancing Role and Infrastructure Modernization

BPA is responsible for maintaining and modernizing the generation and transmission infrastructure of its systems, and preserving and enhancing its physical and cybersecurity. With energy and capacity markets changing in the western United States (especially with the growing need to integrate increasing amounts of variable renewable sources), and the development of the Energy Imbalance Market (EIM) in the West, BPA is considering whether to join the EIM, and how this might affect its operations and customers.

Environmental, fishing, and tribal advocates have sued the federal government over concerns that operating rules for hydropower dams on the Columbia and Snake Rivers (i.e., operations consistent with the National Marine Fisheries Service Biological Opinion) are inadequate to ensure survival of species threatened or endangered under the Endangered Species Act. In addition, several environmental groups filed a lawsuit blaming the dams for warm river waters in summer 2015 that resulted in the deaths of about 250,000 adult sockeye salmon migrating up the Columbia and Snake Rivers. Some of these parties have sought to remove the four lower dams on the Snake River to ensure survival of some salmon and steelhead species. In 2016, a federal judge overturned a previous management plan for the dams, finding that it would not be sufficient to protect salmon runs, and ordered a new management plan that could include removing the dams.

However, in 2018, President Trump issued a Presidential Memorandum accelerating the process for a new management plan, requiring the biological opinion to be ready by 2020. The memorandum ordered the Secretary of the Interior and the Secretary of Commerce "to appropriately suspend, revise, or rescind any regulations or procedures that unduly burden" water infrastructure projects so they "are better able to meet the demands of their authorized purposes." How this will affect the fish endangerment finding is unclear at this time.

The Southeastern Power Administration was created in 1950 by the Secretary of the Interior to carry out the functions assigned to the Secretary by the Flood Control Act of 1944 (P.L. 78-534) in 11 states (Alabama, Florida, Georgia, Illinois, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia). SEPA is unique among the four PMAs in two ways. It is the smallest PMA, with just over 40 employees, and, unlike the other three agencies, SEPA does not operate or maintain any transmission facilities, and thus contracts with other utilities for transmitting the federal power it markets to more than 12 million consumers.

Southeastern markets approximately 3,400 MW of power produced at 22 multipurpose water projects, operated and maintained by the Corps. SEPA's facilities are aging; for instance, in 2018 it reported that its Cumberland System customers have agreed to fund $1.2 billion of planned rehabilitations of the nine hydroelectric facilities in the Corps' Nashville District.

According to SEPA, it has an overcapacity issue. Projections for electricity load growth (in consultation with its preference customers) made before the 2008 economic downturn reportedly led to SEPA acquiring additional capacity it currently does not use. As a result, municipalities and electric cooperatives in SEPA's service area will have to make economic decisions regarding how to handle this excess capacity. As of 2018, at least one preference customer has terminated its contract with SEPA due to this issue.

Section 5 of the Flood Control Act of 1944 (P.L. 78-534) established the Southwestern Power Administration. SWPA markets hydroelectric power in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas from 24 multipurpose Corps dams with a combined capacity of 2,194 MW. SWPA serves more than 100 preference customer utilities with more than 8 million end-use customers. The agency manages nearly 1,400 miles of high-voltage transmission lines.

SWPA is the only U.S. electrical balancing area supported solely by hydroelectric generation, and its use of the reservoirs and river systems within the SWPA marketing area must be balanced with flood control and other required uses so that the power needs of its customers can be met. SWPA states that it uses alternative financing and offsetting collection authorities to fund expenses and purchase power to help SWPA meet its obligations while minimizing congressional appropriations.

Periodically, SWPA has been challenged by low water conditions. It has a rain-based water supply—rather than one that is snow-based, like the mountain snowpack water supply of WAPA and BPA—and sells power from a comparatively small reservoir system which stores that water. Extended dry periods sometimes mean that SWPA must purchase replacement power and energy to meet its contractual obligations. This means that SWPA requires congressional authority to use its revenues from power sales over the long term—across high and low water years.

Prior year balances have been available to Southwestern so that we are financially prepared and able to achieve rate stability for our customers. This authority is critical to operating our program according to sound business principles. Southwestern's program is funded by authority to use receipts, alternative financing, and other authorities approved by Congress, including appropriations, which represent only 6.5% of Southwestern's total program.

Created by the Department of Energy Organization Act of 1977 ( P.L. 95-91 ), WAPA is the newest and largest of the PMAs in terms of service area. WAPA's service area covers 1.3 million square miles, and its power—transmitted by a high voltage grid over 17,000 miles long—serves customers in 15 western states. WAPA markets and transmits hydropower from 56 federal dams operated by BOR, and the Corps. It also sells hydropower power produced by facilities administered by the International Boundary and Water Commission, and markets the United States' 24.3% share (547 megawatts) of the coal-fired Navajo Generating Station in Arizona. In addition to the types of public bodies traditionally served as preference customers by the other PMAs, WAPA has developed a policy to give preference to Native American tribes regardless of their utility status.

WAPA has been working with other regional entities to address the changing electric power needs of its customers. In 2014, WAPA published its Strategic Roadmap 2024, titled "Powering the Energy Frontier." The document is intended to serve as WAPA's strategic plan to guide the agency's actions for the next 10 years. However, according to some, the developing Energy Imbalance Market in the West may provide additional options for WAPA to address transmission development needs to balance regional generation and demand.

An issue of continuing importance to WAPA is its role in relieving transmission congestion within its marketing area. There are a number of constrained transmission paths in the West whose limited capacity to transfer power may reduce the ability of utilities to serve electric loads on a seasonal or ongoing basis.

Building Transmission to Access Renewable Energy

In 2009, Section 402 of the American Recovery and Reinvestment Act ( P.L. 111-5 ) amended the Hoover Power Plant Act of 1984 to give WAPA authority to borrow up to $3.25 billion from the U.S. Treasury to pursue transmission projects that integrate renewable generation sources into the electric transmission grid. The law provides authority to construct and upgrade transmission lines to help deliver renewable resources to market. Western created the Transmission Infrastructure Program, also known as TIP, to implement this new initiative. Several transmission projects have been initiated under the program. Previous budget proposals and legislation have proposed repealing WAPA's loan authority, but to date, none of these proposals have been enacted.

WAPA Region Joins the Southwest Power Pool

In 2015, WAPA's Upper Great Plains (UGP) region joined the Southwest Power Pool (SPP), a Regional Transmission Organization (RTO). Under the operating agreement with SPP, WAPA was required to transfer functional control of UGP's eligible transmission facilities to SPP. WAPA is the first PMA to formally join an RTO, and states that benefits to date from joining SPP have significantly exceeded the original estimate of $11.5 million per year. WAPA reports that two of its other regions are considering joining SPP.

For Water Year 2017, WAPA reported that it delivered 26,148 gigawatt-hours of hydroelectric power to its customers, which is 101% of average annual power sales.

The West has been experiencing periodic droughts for a number of years, resulting in lower snowmelts and less water in storage and available for power generation. To help smooth the resulting annual differences, a "drought-adder" reduction program has been implemented in recent years.

A drought-adder charge was levied to help repay deferred drought costs accrued during the 2000s in the Rocky Mountain and Upper Great Plains regions. The balance was paid a year ahead of schedule and, as of this year, has resulted in $40 million annual savings for more than 50 percent of WAPA's customers in Colorado, Wyoming, Montana, Kansas, Nebraska, the Dakotas and the western sections of Minnesota and Iowa. This is the second year that 417 of WAPA's customers, out of 700, have had a rate reduction.

The drought-adder component of the rate remains available to WAPA to adjust to the variable hydropower resource—a lasting risk if drought conditions persist in WAPA's territory. Moderate to extreme drought conditions have been reported in parts of the western United States.

Proposed Power Marketing Administration Reforms

In addition to issues specific to individual PMAs, some recent proposals have applied to multiple PMAs. In 2018, the Trump Administration proposed to sell the transmission assets owned and operated by the federal Power Marketing Administrations.

The proposal suggested that "eliminating or reducing" the federal government's role in owning and operating transmission assets and increasing the private sector role would "encourage a more efficient allocation of economic resources and mitigate unnecessary risk to taxpayers." The proposal calls for federal transmission infrastructure assets (lines, towers, substations, and/or rights of way) to be sold, with the private sector and/or state and local entities potentially taking over the transmission functions now provided by the PMAs.

The Federal entities that would result after such sales could contract with other utilities to provide transmission service for the delivery of Federal power just as the Southeastern Power Administration, which does not own transmission lines, already does.

The proposal reports that according to the Administration's FY2019 budget justification, the sale of federal transmission assets would result in a net budgetary savings of $9.5 billion, in total, over a 10-year window.

Reportedly, the Administration dropped the plan due to stakeholder opposition, with the Department of Energy stating that such a sale of PMA transmission assets would not proceed unless directed by Congress.

Proposals to sell all or part of the PMAs are not new, and have been made in some form by almost every President since Reagan. However, Congress has sought to prevent executive branch alterations of PMA structures and authority. Under Section 208 of the Urgent Supplemental Appropriations Act, 1986 ( P.L. 99-349 ), the executive branch is prohibited from spending funds to study or draft proposals to transfer from federal control any portion of the assets of the PMAs unless specifically authorized by Congress.

The Trump Administration divestment proposal could have had an indirect impact on the original congressional intent for the PMAs to provide electricity at the lowest possible cost. This in turn could require changes to the following provisions:

Flood Control Act of 1944, as amended (FCA; 16 U.S.C. §825s et seq. ); The 1937 Bonneville Project Act (BPA; 16 U.S.C. §832c ); and The Reclamation Project Act of 1939 (RPA; 43 U.S.C. §485h(c)) .

These laws also stipulate a preference of public bodies for the sale of federal power. Selling federally owned transmission assets could potentially affect the "lowest possible" rates of sale, and the statutory preference for publicly or cooperatively owned utilities to be the vehicle for sale of electric power produced by federal facilities.