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GAO Study Fans Latest Fire to Threaten Federal PMAs

Fortnightly Magazine - March 1 1999

is preparing for competition in Arizona, pursuant to that state's 1998 competition law. (See "BPA, TVA, Salt River: Playing Fair in Power Markets?" by Courtney Barry, and "Time's Up for Public Power," by Charles E. Bayless, Public Utilities Fortnightly, July 1, 1998, pp. 24, 32.)

In a Dec. 22 letter to SRP management from DOE General Counsel Mary Anne Sullivan, DOE concluded that commingling of preference power and non-preference power does not result per se in an illegal sale of preference power. Sullivan wrote, "The analysis concludes that SRP is not illegally selling preference power obtained from the United States through WAPA and that there is no prohibition on the sale of preference power to utilities (such as SRP) that sell portions of their preference power."

"Tucson Electric Power's allegations that SRP is selling federal preference power illegally through New West Energy are incorrect, and hopefully this analysis by DOE will put an end to these claims by one of New West's competitors," said Richard Silverman, SRP's general manager.

But Tucson Electric Power disagrees, according to TEP communications director Allen Lee Bunnell. He said that DOE's letter constitutes a narrow response to a fundamental question. Bunnell said the DOE decision still does not address "whether and how a public power entity can use tax-exempt status to support a private for-profit enterprise."

In fact TEP does not consider the DOE letter to be a final resolution of the issue. Bunnell pointed out that the DOE letter leaves the door open for the Department of Interior and the Department of Treasury to answer a lot of questions. TEP is waiting to hear their opinions and then will decide on how to proceed. But at present there is no timetable as to when those decisions will be made.

Lori A. Burkhart is a contributing legal editor to Public Utilities Fortnightly.

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