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Overview:

The Power Marketing Administrations (PMAs) are four federal agencies within the Department of Energy responsible for marketing hydropower—primarily excess power produced by federal dams and projects operated by the Corps of Engineers and the Bureau of Reclamation. The four federal PMAs, which market and distribute power to 60 million people in 34 states, are required to give preference to public utility districts and cooperatives, and sell their power at cost-based rates.

 
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History:

The federal power marketing program started in the early 1900s as a way to use excess power from federal water projects to repay their investment. The government needed to dispose of electric power produced by dams constructed largely for irrigation or flood control, and to promote electrification in small communities and farms, filling a void where private utility service would not have been profitable.
 
The PMAs were created to supply cheap power to poor, rural areas in the South and West, but now also service metropolitan centers such as Las Vegas and Los Angeles. The first PMA, Bonneville, was established in 1937, followed by four more PMAs that now market power generated at 133 federal dams across the county. (The fifth, Alaska, was divested in the 1990s.)
History of the Electric Power Industry (Edison Electric Institute)
 
Privatization
Modern efforts to privatize the energy industry—and PMAs—date at least to the Reagan administration. When Republicans took control of Congress in 1994, they set out to privatize the federal government, and the PMAs were at the center of their efforts. However, initiatives to privatize PMAs haven’t progressed far in Congress, with the exception of APA (see below and debate section on privatization). Others have suggested keeping the administration under federal control, but forcing the agencies to sell their power at market-based rates.
 
The Bush Administration’s FYO8 budget proposal didn’t suggest PMA privatization or market rates, but it did include an Office of Management and Budget (OMB) proposal to use revenue from surplus power sales above $500 million to accelerate repayments of the Bonneville debt to the US Treasury—rather than using it to keep rates as low as possible. Critics maintain that these higher rates would cause undue economic strain for BPA customers.
 
Alaska (APA) Divestiture
The fifth PMA, Alaska, was sold in 1995 after a termination and asset sale act passed in Congress. The move to divest was based in part on the argument that the regional needs ceased to justify the federal venture—which, according to proponents of the bill, had served its purpose, only filled a small market niche, and been replaced by other providers that emerged to service the region:

Privatization Alaska Offers a Lesson in How to Sell Power

(by Pam Kufahl, Transmission and Distribution World)

 

more
What it Does:

The federal government markets power from 133 hydroelectric projects throughout the country through the four PMAs. The multipurpose projects, constructed and owned by the Bureau of Reclamation and the U.S. Army Corps of Engineers (Department of the Interior), include flood control, navigation, irrigation, and recreation operations. Forty-five percent of the nation's hydroelectric power is produced as a by-product of these operations, and sold by PMAs to local public, private, and cooperative utilities at cost.
 
All four PMAs market federal power and provide low-cost electricity with preference to public customers (public municipal utilities and rural cooperatives, which in turn provide electricity to about a quarter of the nation’s retail consumers), but each is a “distinct and self-contained entity” within the DOE, like a “wholly owned subsidiary of a corporation,” and each is affected by its own unique regional issues and conditions.
 
Headquartered in Portland, Oregon, BPA markets to the Pacific Northwest’s public and private utilities as well as to some large industries. The agency provides around half the electricity used in the Northwest and operates more than three-fourths of the region’s high-voltage transmission. Although supported by the DOE, BPA is “not tax-supported through appropriations, but recovers all of its costs through electricity and transmission sales.”
Steve Wright, BPA Administrator
Steve Wright, the administrator of the Bonneville Power Administration, graduated from Central Michigan University in 1979 with a B.A. in journalism and received his masters in public affairs from the University of Oregon in 1981. He began his career at BPA in 1981 in the conservation office. Between 1987 and 1990 he managed the California office, and before that the Washington, D.C. office (1990-1998). From 1998-2000 he was Senior VP for BPA Corporate, and was thereafter appointed Acting Administrator. He became BPA Administrator in 2002.
 
SEPA was created in 1950 by the Secretary of the Interior under the Flood Control Act of 1944, and transferred to the Department of Energy in 1977. Headquartered in Elberton, Georgia, Southeastern is responsible for marketing electric power and energy generated at reservoirs operated by the U.S. Army Corps of Engineers to more than 495 preference customers in Georgia, Florida, Alabama, Mississippi, southern Illinois, West Virginia, Virginia, Tennessee, Kentucky, North Carolina, and South Carolina.
Ken Legg, Southeastern Administrator
In a November 28, 2007, press release announcing the appointment of Jon Worthington as SWPA Administrator (formerly Administrator of SEPA), the DOE announced it would “conduct a search for a SEPA Administrator in the coming months.” This search reached fruition when Ken Legg was appointed administrator for Southeastern, effective July 6, 2008.
 
Established in 1943 by the Secretary of the Interior, SWPA is responsible for marketing power from 24 U.S. Army Corps of Engineers multipurpose dams in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas. SWPA provides service to one hundred “preference” customers which ultimately serve another seven million end-use customers. The agency operates 1,380 miles of high-voltage transmission lines, substations and a communications system. Power scheduling and dispatching are conducted from the Springfield operations center, while staff work from offices in Oklahoma, Arkansas and Missouri.
Jon Worthington, Southwestern Administrator
An Idaho native, Jon Worthington holds a B.S. in Business Administration from Westminster College in Salt Lake City, Utah. He began his government career in 1982 at the BPA in Spokane, Washington, later managing DOE’s National Laboratories site utilities planning and management program in Washington, D.C., and serving in the Rural Electrification Administration. He served as the Deputy Assistant Administrator for Southeastern and Southwestern in Washington, D.C. prior to his appointment as Southeastern Administrator (Georgia) in 2006. Worthington was appointed Administrator of Southwestern (Tulsa, OK) in 2008 (effective January 4, 2008).
 
Western Area markets and delivers hydroelectric power and related services from multi-use water projects within 15 central and western states. The agency’s system carries electricity from 55 hydropower plants operated by the Bureau of Reclamation, U.S. Army Corps of Engineers and the International Boundary and Water Commission—with a combined capacity of 10,600 megawatts. The agency’s wholesale power customers provide service to millions of consumers in Arizona, California, Colorado, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Texas, Utah and Wyoming. Western and its partners are separately managed and financed.
Timothy Meeks, Western Power Administration
A California native, Timothy Meeks earned a bachelor’s degree in electrical and electronics engineering and a master’s in engineering. He is a registered engineer in California and a member of the Institute of Electrical and Electronics Engineers.
 

Meeks’ career in the electrical utility industry spans more than 25 years. He joined Western as an electrical engineer in the 1980s, and served in progressively responsible positions with the agency, including Maintenance Manager for the Sierra Nevada Region and Assistant Administrator for Power Marketing Liaison in Washington, D.C. Prior to his appointment as WAPA administrator in late 2006 (effective January 4, 2007) Meeks served as Western’s Chief Operating Officer.

 

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Where Does the Money Go:

Beginning in 2007, the Bush Administration implemented an initiative to charge SEPA, SWPA and WAPA interest rates (at levels similar to those charged governmental corporations) on new capital investments occurring after September 30, 2006. The 2008 budget also reintroduced an initiative to for Bonneville to “apply net secondary market revenues in excess of $500 million toward the repayment of its outstanding treasury debt.” (Office of Management and Budget FY 2008)
 
According to the National Rural Electric Cooperative Association (NRECA), OMB’s “Agency Rate” for the three PMAs is an underhanded attempt to eventually raise rates and undermine the PMA system:

“OMB, once again, proposed a so-called “Agency Rate” for three PMAs (SEPA, SWPA and WAPA) to raise their interest rates to the level that government corporations pay to borrow funds from the federal government. The OMB argues that this is needed to cover a ‘perceived risk’ to the U.S. Treasury for non-payment. This action is punitive and unnecessary. These three PMAs are not government corporations and do not borrow funds from the U.S. Treasury. They also have an enviable record of repayment. The OMB proposal would open the door for budget gimmicks each year to raise rates for the PMAs through administrative fiat, bypassing Congress’ traditional oversight authority of the PMAs. Congress quashed both of these proposals during the FY08 appropriations process.”

 

more
Controversies:

Privatization

WAPA 25 Years, Chapter 5: Privatization Threats and Restructuring Challenges (PDF)

 

more
Suggested Reforms:

 
EPA Compliance

National Environmental Policy Act Implementing Procedures

 

more
Debate:

Will Privatization and Deregulation Lower Costs or Just Increase Profits?
Predictable tensions arise over deregulation of the power industry - which proponents claim will increase competition, while critics argue that it will consolidate market power in the hands of a few large corporations and raise costs to the most vulnerable consumers.
 
Required to sell excess power at cost-based prices, PMAs have historically filled a service gap by providing to residential and small business consumers, low-income households and rural areas - which are not profitable markets for investor-owned utilities and private companies. A “preference clause,” which applies to all federal utilities, directs the agencies to give first pick to municipal and cooperative utilities, and then sell to investor-owned utilities or directly to private companies. Thus the agencies have also provided a “yardstick” for pricing, and maintained competition.
 
However, proponents of privatization claim the energy is sold well below the cost of production and that government subsidies (and thus, taxpayers) make up the difference. The agencies’ self-descriptive rhetoric anticipates the privatization argument by offering that the projects are not tax funded and more than recover the cost of operations.
 
From the Left, Public Citizen advocates maintaining the traditional role of PMAs, which they view as necessary to keep prices down and prevent anticompetitive practices; the only thing standing in the way of market consolidation and privatization of the industry. The group also argues that deregulation puts added pressure on natural resources (like dams and other hydro facilities), and that privatization would lead to uncapped exploitation of the environment and decrease incentives for stewardship.
 
However, not all environmental advocates take the same position. On the other side of the debate, Friends of the Earth (FOE) argues that PMAs are an unnecessary middleman between consumers and electricity supply, and that they distort the market by selling (at cost) to select customers, while those without access to federal power are forced to develop higher-cost services—and thus advocates introducing market pricing. FOE contends that PMAs cause unnecessary environmental destruction and encourage customers to waste electricity by selling at below-market rates. (FOE cites a 1997 General Accounting Office (GAO) study listing federal indebtedness for the five PMAs (four plus Tennessee Valley Authority) at $24.4 billion, and costing the U.S. Treasury at least $400 million each year). Tax payers, they argue, pay for the bureaucracy, and the government would raise more money by retaining ownership of the project facilities but selling the right to market the energy at market rates.
 
Public utility companies and rural cooperatives oppose privatization for obvious reasons. The National Rural Electric Cooperative Association notes that privatization proposals would “interrupt long-standing contractual arrangements between PMAs and their customers, increase electric rates to millions of rural Americans, and disrupt the economic structure of the some of the most economically depressed regions in rural America.”
 
From the Right
Conservative factions (like CATO, Heritage and Reason) support privatization of the power industry, claiming that the purpose of federally subsidized electricity—to achieve the electrification of rural America—was achieved in the 1960s, thus making PMAs an unnecessary drain on the federal budget.
Time To Pull the Plug on Federally Subsidized Electricity (by Ben Lieberman, Heritage Foundation)
Privatization of the Power Marketing Administrations (by Clyde Wayne Crews, Competitive Enterprise Institute)
Government For Sale (by Tom Shoop, Government Executive)
 
Agency Rate in FY 2008 federal budget
Power Marketing Administration Agency Rate Proposal (Northern California Power Agency)
 
Northwest Power Act of 1980 and Bonneville: natural resources and energy production

Discussion Paper: The role of the Northwest Power Planning Council (Northwest Power and Conservation Council)

 

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Founded: 1937 (Bonneville)
Annual Budget: $217 million
Employees:
Power Marketing Administrations
Wright, Steve
Administrator
Steve Wright, the administrator of the Bonneville Power Administration, graduated from Central Michigan University in 1979 with a B.A. in journalism and received his masters in public affairs from the University of Oregon in 1981. He began his career at BPA in 1981 in the conservation office. Between 1987 and 1990 he managed the California office, and before that the Washington, D.C. office (1990-1998). From 1998-2000 he was Senior VP for BPA Corporate, and was thereafter appointed Acting Administrator. He became BPA Administrator in 2002.
 
 
more
Bookmark and Share
Overview:

The Power Marketing Administrations (PMAs) are four federal agencies within the Department of Energy responsible for marketing hydropower—primarily excess power produced by federal dams and projects operated by the Corps of Engineers and the Bureau of Reclamation. The four federal PMAs, which market and distribute power to 60 million people in 34 states, are required to give preference to public utility districts and cooperatives, and sell their power at cost-based rates.

 
more
History:

The federal power marketing program started in the early 1900s as a way to use excess power from federal water projects to repay their investment. The government needed to dispose of electric power produced by dams constructed largely for irrigation or flood control, and to promote electrification in small communities and farms, filling a void where private utility service would not have been profitable.
 
The PMAs were created to supply cheap power to poor, rural areas in the South and West, but now also service metropolitan centers such as Las Vegas and Los Angeles. The first PMA, Bonneville, was established in 1937, followed by four more PMAs that now market power generated at 133 federal dams across the county. (The fifth, Alaska, was divested in the 1990s.)
History of the Electric Power Industry (Edison Electric Institute)
 
Privatization
Modern efforts to privatize the energy industry—and PMAs—date at least to the Reagan administration. When Republicans took control of Congress in 1994, they set out to privatize the federal government, and the PMAs were at the center of their efforts. However, initiatives to privatize PMAs haven’t progressed far in Congress, with the exception of APA (see below and debate section on privatization). Others have suggested keeping the administration under federal control, but forcing the agencies to sell their power at market-based rates.
 
The Bush Administration’s FYO8 budget proposal didn’t suggest PMA privatization or market rates, but it did include an Office of Management and Budget (OMB) proposal to use revenue from surplus power sales above $500 million to accelerate repayments of the Bonneville debt to the US Treasury—rather than using it to keep rates as low as possible. Critics maintain that these higher rates would cause undue economic strain for BPA customers.
 
Alaska (APA) Divestiture
The fifth PMA, Alaska, was sold in 1995 after a termination and asset sale act passed in Congress. The move to divest was based in part on the argument that the regional needs ceased to justify the federal venture—which, according to proponents of the bill, had served its purpose, only filled a small market niche, and been replaced by other providers that emerged to service the region:

Privatization Alaska Offers a Lesson in How to Sell Power

(by Pam Kufahl, Transmission and Distribution World)

 

more
What it Does:

The federal government markets power from 133 hydroelectric projects throughout the country through the four PMAs. The multipurpose projects, constructed and owned by the Bureau of Reclamation and the U.S. Army Corps of Engineers (Department of the Interior), include flood control, navigation, irrigation, and recreation operations. Forty-five percent of the nation's hydroelectric power is produced as a by-product of these operations, and sold by PMAs to local public, private, and cooperative utilities at cost.
 
All four PMAs market federal power and provide low-cost electricity with preference to public customers (public municipal utilities and rural cooperatives, which in turn provide electricity to about a quarter of the nation’s retail consumers), but each is a “distinct and self-contained entity” within the DOE, like a “wholly owned subsidiary of a corporation,” and each is affected by its own unique regional issues and conditions.
 
Headquartered in Portland, Oregon, BPA markets to the Pacific Northwest’s public and private utilities as well as to some large industries. The agency provides around half the electricity used in the Northwest and operates more than three-fourths of the region’s high-voltage transmission. Although supported by the DOE, BPA is “not tax-supported through appropriations, but recovers all of its costs through electricity and transmission sales.”
Steve Wright, BPA Administrator
Steve Wright, the administrator of the Bonneville Power Administration, graduated from Central Michigan University in 1979 with a B.A. in journalism and received his masters in public affairs from the University of Oregon in 1981. He began his career at BPA in 1981 in the conservation office. Between 1987 and 1990 he managed the California office, and before that the Washington, D.C. office (1990-1998). From 1998-2000 he was Senior VP for BPA Corporate, and was thereafter appointed Acting Administrator. He became BPA Administrator in 2002.
 
SEPA was created in 1950 by the Secretary of the Interior under the Flood Control Act of 1944, and transferred to the Department of Energy in 1977. Headquartered in Elberton, Georgia, Southeastern is responsible for marketing electric power and energy generated at reservoirs operated by the U.S. Army Corps of Engineers to more than 495 preference customers in Georgia, Florida, Alabama, Mississippi, southern Illinois, West Virginia, Virginia, Tennessee, Kentucky, North Carolina, and South Carolina.
Ken Legg, Southeastern Administrator
In a November 28, 2007, press release announcing the appointment of Jon Worthington as SWPA Administrator (formerly Administrator of SEPA), the DOE announced it would “conduct a search for a SEPA Administrator in the coming months.” This search reached fruition when Ken Legg was appointed administrator for Southeastern, effective July 6, 2008.
 
Established in 1943 by the Secretary of the Interior, SWPA is responsible for marketing power from 24 U.S. Army Corps of Engineers multipurpose dams in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas. SWPA provides service to one hundred “preference” customers which ultimately serve another seven million end-use customers. The agency operates 1,380 miles of high-voltage transmission lines, substations and a communications system. Power scheduling and dispatching are conducted from the Springfield operations center, while staff work from offices in Oklahoma, Arkansas and Missouri.
Jon Worthington, Southwestern Administrator
An Idaho native, Jon Worthington holds a B.S. in Business Administration from Westminster College in Salt Lake City, Utah. He began his government career in 1982 at the BPA in Spokane, Washington, later managing DOE’s National Laboratories site utilities planning and management program in Washington, D.C., and serving in the Rural Electrification Administration. He served as the Deputy Assistant Administrator for Southeastern and Southwestern in Washington, D.C. prior to his appointment as Southeastern Administrator (Georgia) in 2006. Worthington was appointed Administrator of Southwestern (Tulsa, OK) in 2008 (effective January 4, 2008).
 
Western Area markets and delivers hydroelectric power and related services from multi-use water projects within 15 central and western states. The agency’s system carries electricity from 55 hydropower plants operated by the Bureau of Reclamation, U.S. Army Corps of Engineers and the International Boundary and Water Commission—with a combined capacity of 10,600 megawatts. The agency’s wholesale power customers provide service to millions of consumers in Arizona, California, Colorado, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Texas, Utah and Wyoming. Western and its partners are separately managed and financed.
Timothy Meeks, Western Power Administration
A California native, Timothy Meeks earned a bachelor’s degree in electrical and electronics engineering and a master’s in engineering. He is a registered engineer in California and a member of the Institute of Electrical and Electronics Engineers.
 

Meeks’ career in the electrical utility industry spans more than 25 years. He joined Western as an electrical engineer in the 1980s, and served in progressively responsible positions with the agency, including Maintenance Manager for the Sierra Nevada Region and Assistant Administrator for Power Marketing Liaison in Washington, D.C. Prior to his appointment as WAPA administrator in late 2006 (effective January 4, 2007) Meeks served as Western’s Chief Operating Officer.

 

more
Where Does the Money Go:

Beginning in 2007, the Bush Administration implemented an initiative to charge SEPA, SWPA and WAPA interest rates (at levels similar to those charged governmental corporations) on new capital investments occurring after September 30, 2006. The 2008 budget also reintroduced an initiative to for Bonneville to “apply net secondary market revenues in excess of $500 million toward the repayment of its outstanding treasury debt.” (Office of Management and Budget FY 2008)
 
According to the National Rural Electric Cooperative Association (NRECA), OMB’s “Agency Rate” for the three PMAs is an underhanded attempt to eventually raise rates and undermine the PMA system:

“OMB, once again, proposed a so-called “Agency Rate” for three PMAs (SEPA, SWPA and WAPA) to raise their interest rates to the level that government corporations pay to borrow funds from the federal government. The OMB argues that this is needed to cover a ‘perceived risk’ to the U.S. Treasury for non-payment. This action is punitive and unnecessary. These three PMAs are not government corporations and do not borrow funds from the U.S. Treasury. They also have an enviable record of repayment. The OMB proposal would open the door for budget gimmicks each year to raise rates for the PMAs through administrative fiat, bypassing Congress’ traditional oversight authority of the PMAs. Congress quashed both of these proposals during the FY08 appropriations process.”

 

more
Controversies:

Privatization

WAPA 25 Years, Chapter 5: Privatization Threats and Restructuring Challenges (PDF)

 

more
Suggested Reforms:

 
EPA Compliance

National Environmental Policy Act Implementing Procedures

 

more
Debate:

Will Privatization and Deregulation Lower Costs or Just Increase Profits?
Predictable tensions arise over deregulation of the power industry - which proponents claim will increase competition, while critics argue that it will consolidate market power in the hands of a few large corporations and raise costs to the most vulnerable consumers.
 
Required to sell excess power at cost-based prices, PMAs have historically filled a service gap by providing to residential and small business consumers, low-income households and rural areas - which are not profitable markets for investor-owned utilities and private companies. A “preference clause,” which applies to all federal utilities, directs the agencies to give first pick to municipal and cooperative utilities, and then sell to investor-owned utilities or directly to private companies. Thus the agencies have also provided a “yardstick” for pricing, and maintained competition.
 
However, proponents of privatization claim the energy is sold well below the cost of production and that government subsidies (and thus, taxpayers) make up the difference. The agencies’ self-descriptive rhetoric anticipates the privatization argument by offering that the projects are not tax funded and more than recover the cost of operations.
 
From the Left, Public Citizen advocates maintaining the traditional role of PMAs, which they view as necessary to keep prices down and prevent anticompetitive practices; the only thing standing in the way of market consolidation and privatization of the industry. The group also argues that deregulation puts added pressure on natural resources (like dams and other hydro facilities), and that privatization would lead to uncapped exploitation of the environment and decrease incentives for stewardship.
 
However, not all environmental advocates take the same position. On the other side of the debate, Friends of the Earth (FOE) argues that PMAs are an unnecessary middleman between consumers and electricity supply, and that they distort the market by selling (at cost) to select customers, while those without access to federal power are forced to develop higher-cost services—and thus advocates introducing market pricing. FOE contends that PMAs cause unnecessary environmental destruction and encourage customers to waste electricity by selling at below-market rates. (FOE cites a 1997 General Accounting Office (GAO) study listing federal indebtedness for the five PMAs (four plus Tennessee Valley Authority) at $24.4 billion, and costing the U.S. Treasury at least $400 million each year). Tax payers, they argue, pay for the bureaucracy, and the government would raise more money by retaining ownership of the project facilities but selling the right to market the energy at market rates.
 
Public utility companies and rural cooperatives oppose privatization for obvious reasons. The National Rural Electric Cooperative Association notes that privatization proposals would “interrupt long-standing contractual arrangements between PMAs and their customers, increase electric rates to millions of rural Americans, and disrupt the economic structure of the some of the most economically depressed regions in rural America.”
 
From the Right
Conservative factions (like CATO, Heritage and Reason) support privatization of the power industry, claiming that the purpose of federally subsidized electricity—to achieve the electrification of rural America—was achieved in the 1960s, thus making PMAs an unnecessary drain on the federal budget.
Time To Pull the Plug on Federally Subsidized Electricity (by Ben Lieberman, Heritage Foundation)
Privatization of the Power Marketing Administrations (by Clyde Wayne Crews, Competitive Enterprise Institute)
Government For Sale (by Tom Shoop, Government Executive)
 
Agency Rate in FY 2008 federal budget
Power Marketing Administration Agency Rate Proposal (Northern California Power Agency)
 
Northwest Power Act of 1980 and Bonneville: natural resources and energy production

Discussion Paper: The role of the Northwest Power Planning Council (Northwest Power and Conservation Council)

 

more

Comments

Leave a comment

captcha

Founded: 1937 (Bonneville)
Annual Budget: $217 million
Employees:
Power Marketing Administrations
Wright, Steve
Administrator
Steve Wright, the administrator of the Bonneville Power Administration, graduated from Central Michigan University in 1979 with a B.A. in journalism and received his masters in public affairs from the University of Oregon in 1981. He began his career at BPA in 1981 in the conservation office. Between 1987 and 1990 he managed the California office, and before that the Washington, D.C. office (1990-1998). From 1998-2000 he was Senior VP for BPA Corporate, and was thereafter appointed Acting Administrator. He became BPA Administrator in 2002.
 
 
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