On Wednesday May 7, FERC will host a conference in Washington, D.C. that might prove extraordinary. The commission staff promises not only to review the forward capacity markets now operating in...
PMAs: Taxpayer Rip-off
Power marketing administrations (PMAs) suffered a setback on May 2 when the U.S. House Subcommittee on Water and Power Resources held an oversight hearing on the Pick-Sloan Eastern Division of the Western Area Power Administration (WAPA). According to a General Accounting Office (GAO) report issued that morning, about $454 million of the Division's irrigation and flood control investment in hydropower facilities will not be recoverable, because the irrigation projects will not be completed. The GAO recommended that Congress force repayment, but noted that if WPA passes the cost on to customers, the wholesale power rate could increase as much as 14.6 percent.
At the hearing, Ward Uggerud, vice president for operations at Otter Tail Power Co., recalled that he first learned that PMAs were giving away free power at taxpayer expense during a secret meeting of preference customers to which he was inadvertently invited. That meeting on July 17, 1995, in Sioux Falls, SD, was held by PMA advocates opposed to the federal sale of PMAs. The main speakers: Alan Richardson of the American Public Power Association, Glenn English of the National Rural Electric Cooperative Association, and Jeff Nelson of East River Power Co-op.
Noting that PMAs do not pay tax because of federal sovereignty, English pointed out that leasing PMA facilities would cure the problem for preference customers, because the facilities would remain exempt from future taxes. Then Jeff Nelson passed out a study on the Pick-Sloan portion of WAPA, which estimated that $204 million of Pick-Sloan's costs were not being recovered because irrigation projects were not being built and the generation construction costs allocated to the future irrigation projects were not being charged to existing power customers. Because the costs were not recovered, the electricity for the future irrigation projects is being used now at zero cost to existing PMA customers.
At the May 2 hearing, Reps. Bob Franks (R-NJ) and Marty Meehan (D-MA) have called loudly on Congress "to end the rip-off." Finding no reason why his taxpayers should pay for someone else's electricity, Franks demanded that the federal government be removed from the power business. Meehan was angered that consumers in the Northeast and Midwest are paying some of the highest electric rates, while taxpayer dollars are used to keep electricity in other regions at below-market rates: "To make matters worse, other states are using this low-cost electricity, which my constituents unwittingly subsidize, to lure away businesses from the Northeast and Midwest."
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