Power Marketing Administrations

https://www.downsizinggovernment.org/privatization

The federal government owns the Bonneville Power Administration, the Southeastern Power Administration, the Southwestern Power Administration, and the Western Area Power Administration. These four utilities transmit wholesale electricity in 33 states. The power is mainly generated by the 130 hydroelectric plants owned by the Army Corps of Engineers and Bureau of Reclamation. Power Marketing Administrations (PMAs) account for 7 percent of U.S. electricity consumption.

The PMAs sell most of their power at below-market rates to "preference" customers, meaning utilities owned by local governments and more than 600 nonprofit rural electric cooperatives. The PMAs and utilities benefit from numerous subsidies. None of them pay federal or state income taxes. The local utilities issue tax-exempt bonds. The PMAs can borrow from the U.S. Treasury at favorable rates, and PMA bonds have implicit federal backing. Finally, some of the PMAs receive direct subsidies from federal appropriations, which totaled $368 million in 2015.

Those subsidies distort the economy; they also harm the environment because they result in artificially low prices, which encourage overconsumption. However, a portion of the subsidies are likely dissipated by government inefficiencies, rather than benefiting consumers. A Congressional Budget Office study in 1997 found that the "managerial structure of the federal power program makes it hard to operate efficiently." And it found "inadequate maintenance of power assets, a problem that applies to all of the federal power agencies, and low utilization rates of hydropower generating capacity." Private hydro dams "produced an average of 20 percent more electricity per unit of capacity than did [federal] dams supplying the power marketing administrations." In addition to these hydropower shortcomings, one PMA — Bonneville also has a history of supporting boondoggle nuclear plants.

The Congressional Budget Office has concluded that the reasons for federal ownership of electricity assets that "might have been appropriate in the 1930s are no longer valid." That is true. There is no need for the government to be in the hydropower business today, especially since more than two-thirds of U.S. hydropower plants are already owned privately.

The PMAs and the generating plants owned by the Army Corps of Engineers and Bureau of Reclamation should be privatized. That would increase operating efficiency and allow prices to be set at market rates, thus ending incentives to overconsume power. For the government, privatization would reduce spending by ending subsidies, while raising revenue from the asset sales and taxation of the privatized entities.

President Reagan proposed privatizing the PMAs in his 1986 budget. President Clinton oversaw the sale of the Alaska Power Administration in 1996 but was unable to sell the other PMAs. Congress should dust off the Clinton reform plans and let the private sector run the electricity industry.

https://www.downsizinggovernment.org/privatization

Norb Leahy, Dunwoody GA Tea Party Leader