Benton REA Member Power

02/24/05

Lawmakers Reject PMA Rate Hike

Published with permission from NRECA by Jerry Lipson

The ink was barely dry on President Bush’s 2006 budget when key lawmakers jumped on one proposal that would raise rates charged by the federal Power Marketing Administrations to private sector levels.

Sen. Pete Domenici, R-N.M., chairman of the Senate Energy and Natural Resources Committee, which oversees the PMAs, called it “politically untenable,” adding that, “every once in a while, administrations of either party come up with this idea and I won’t support it.”

Other members of the Energy committee voicing opposition to the move included Sens.Gordon Smith, R-Ore., and Maria Cantwell, D-Wash.

Gordon vowed to “exhaust every right and privilege I have, as a Senator, to kill this proposal,” noting that customers of the Bonneville Power Administration already have been hit with rate hikes and “they can’t afford any more.”

Cantwell and Sen. Patty Murray, D-Wash., in a joint letter to President Bush, urged him to drop the idea, saying it would “deal a severe blow to the economy of the Pacific Northwest.”

On the House side, Rep. Greg Walden, R-Ore., a member of the Energy and Commerce Committee, said, “it makes absolutely no sense to artificially and substantially jack up power rates.”

PMA Rate Hike Would Wallop Co-ops

Published with permission from NRECA By Jerry Lipson

“I’m not sure our members could afford any increase,” says one GM.

The proposal in the fiscal 2006 Bush budget to boost rates charged by federal Power Marketing Administrations to market levels has triggered an eruption of political and consumer opposition because of the devastating impact it would have on electric co-ops and their consumer-members.

      The proposal, which calls for an annual 20 percent increase in rates until the market level is reached, could add $2.5 billion to bills of Bonneville Power Administration customers alone over the next three years, industry analysts said.

However, NRECA experts said that, based on the administration’s own figures, the increases in revenues to the government would be closer to 41 percent.

      NRECA CEO Glenn English called the proposal a “back-door tax on millions of Americans” who live in the 33 states served by the 1,180 consumer-owned utilities, including nearly 700 co-ops, that receive all or some of their power from PMAs.

      English and Alan H. Richardson, president and CEO of the American Public Power Association, issued a joint statement within hours after the president’s $2.57 trillion ’06 budget was sent to Congress on Feb. 7.

      NRECA analysts said the proposal, which they termed a first step towards privatizing federal power, is not new, noting that the Reagan and Clinton administrations had tried to “marketize” the PMAs or even sell them outright. 

Bush budgeters, citing the Government Accountability Office, said that “PMA rates are artificially low because taxpayers across the nation have borne some of [their] costs,” and thus have “helped subsidize the cost of PMA power purchased by electricity wholesalers.”

      The proposal, they added, “will create a more level playing field for the Nation’s electricity suppliers and encourage appropriate energy conservation.”

      However, English and Richardson said the current system of cost-based rates ensures that “all federal costs, with interest, from generation, transmission and sale of federal power are recovered” through the rates charged.

      Moreover, they added, this system provides “an important yardstick by which regulators and others can determine whether market-based rates charged by others are just and reasonable.”

      NRECA analysts also observed that the proposal fails to consider the potential impact of other uses of federal water resources, such as fish and wildlife conservation, navigation, irrigation and flood control.

      These benefits could be eliminated should an administration (or private owner) realize that on hot summer days, with electricity at peak demand and going for $1,000 per MWh or more, water could be horded for power supply, to the detriment of these other purposes, said Ted Coombes, executive director of the Southwestern Power Resources Association.

      The burden would be especially hard on ratepayers in economically depressed areas, such as the rural Northwest, where Jim Stubblefield is general manager of Columbia Power Co-op, Monument, Ore., with 1,700 meters.

      With the virtual disappearance of the timber industry, the jobless rate in the co-op’s three-county service territory that ranges across east-central Oregon , runs above 10 percent, more than twice the national average, Stubblefield said.

      “We used to have 14 sawmills on our system, now we have none. I’m not sure our members (70 percent of whom are residential) could afford any increase,” he noted.

      Elsewhere in Oregon , Bud Tracy, general manager and CEO of Blachly-Lane Electric Co-op, Eugene, said, “Many of our people are barely able to meet the cost of electricity today.”

            Noting that the region’s economy has been developed on the basis of preference power provided at cost, Tracy said the proposal is “just asking the co-ops to become a tax collector that would pay the government in another form.”

Troy Berglund
Benton Rural Electric Association
Marketing & Communications
786-2913 or 1-800-221-6987
E-mail Troy Berglund for more information.