APPA News

By Paul Ciampoli
APPA News Director
Posted February 27, 2018

The American Public Power Association and the National Rural Electric Cooperative Association are voicing strong opposition to a proposal in President Trump’s Fiscal Year 2019 budget request to sell the transmission assets of three federal Power Marketing Administrations and the Tennessee Valley Authority.

In a Feb. 26 letter to Secretary of Energy Rick Perry, the Association and NRECA said that they are equally opposed to President Trump’s companion proposal to change the current cost-based rate structure for all four of the PMAs.

“The PMAs provide millions of Americans served by not-for-profit public power and rural electric cooperative utilities with cost-based hydroelectric power produced at federal dams,” wrote Sue Kelly, president and CEO of the Association, and Jim Matheson, CEO of NRECA, in their letter to Perry.

Kelly and Matheson noted that PMA rates are set to cover all generation and transmission costs, as well as repayment, with interest, of the federal investment in these hydropower projects. “None of the costs are borne by taxpayers,” they wrote.

“Similarly, TVA provides affordable electric power to more than nine million people in seven states at no cost to taxpayers. For many decades, these partnerships have been a win-win for the federal government and for public power and rural electric cooperative utilities, their retail customers, and their communities,” Kelly and Matheson said.

Given the long and productive history between the PMAs and TVA and their customers, Kelly and Matheson told Perry that they were very disappointed to see the Administration’s FY 2019 budget request proposal to divest the transmission assets of the Bonneville Power Administration, Southwestern Power Administration, Western Area Power Administration and TVA.

“We strongly disagree with the rationale provided in the proposal that ‘ownership of transmission is best carried out by the private sector where there are appropriate market and regulatory incentives’ and that increasing ‘the private sector’s role would encourage a more efficient allocation of economic resources and mitigate risk to taxpayers,’” they went on to say.

Kelly and Matheson said that there is no factual evidence that selling the transmission assets of the PMAs would result in a more efficient allocation of resources.

"Rather, it is much more likely that any sale of these assets to private entities would result in attempts by the new owners to charge substantially increased transmission rates to the PMA customers for the same service they have historically received. These arguments are merely a pretext for actions that would raise electricity costs for millions of people and businesses,” the letter said.

“Market-based” rate structure also disappointing

In addition, Kelly and Matheson said that the Administration’s companion proposal to change the current cost-based rate structure for all four of the PMAs to a “market-based” rate structure is similarly disappointing.

“There again is no factual evidence to support the Administration’s claim that ‘[e]liminating the requirement that PMA rates be limited to a cost-based structure and requiring instead that these rates be based on consideration of appropriate market incentives, including whether they are just and reasonable, would encourage a more efficient allocation of economic resources and could result in faster recoupment of taxpayer investments,’” the heads of the Association and NRECA told Perry.

Kelly and Matheson noted that PMA customers already pay all of the costs associated with generating and transmitting power produced at federal dams, positioning the federal government to profit off of retail customers already covering all of the costs for their power supplies.

“Such a move would undermine regional economic development and almost certainly invite legal challenges from wholesale customers holding long-term contracts with the PMAs,” they went on to say.