[BETA] Fortnightly

"Sensible Approach" or Misguided Meddling?

The proposal by Reps. Franks and Meehan to sell federal power at market rates provokes conflicting responses from readers.

I am writing in response to an article written by Reps. Franks and Meehan entitled, "The Sensible Approach: Federal Power at Market Rates," published in the Nov. 1, 1999 edition of Public Utilities Fortnightly (see pp. 44-47). I agree that it is outrageous that electricity services for people in the Northwest are subsidized (regardless of the customers' ability to pay) by the rest of the people in this country.

I must note that similar unjust subsidies exist in the telecommunications industry as well. As a direct result of orders issued by the Federal Communications Commission, taxpayers in high-density areas like Illinois, New Jersey and Massachusetts are forced to subsidize telecommunications services in so-called "high-cost" areas. In the March 1, 1999 edition of this magazine, my executive legal assistant, Joe Donovan, and I co-authored an article proposing to revise one of the most egregious examples of these unjust subsidies - the High Cost Loop portion of the Universal Service Fund.

The current High Cost Loop Fund financing system shifts costs among customers regardless of their ability to pay the actual cost of providing local telephone service. Because the subsidy is structured in this manner, the telephone customers in high-density areas, including the poor of Chicago, Boston and Newark are subsidizing customers who live in high-cost areas, regardless of the customers' ability to pay the actual costs of providing service. Unfortunately, the taxes that support these subsidies are also escalating. Recently, the FCC more than doubled the size of the High Cost Loop Fund - which, of course, doubles the taxes the constituents of Reps. Franks and Meehan pay - to subsidize below-cost service to all customers in other areas. We are talking about "real" money!

Just to keep the readers apprised of the latest developments with the High Cost Loop Fund, let's take a look at the figures. As a result of the FCC's Nov. 2, 1999, decision, the updated numbers show the High Cost Loop Fund for non-rural carriers will jump from the current level of $207 million annually to a whopping $438 million. This increase also raises the total High Cost Loop Fund for both rural and non-rural carriers from $1.7 billion currently to an astounding $1.925 billion annually of taxpayer money. Shocking as these numbers are, they don't include the taxes paid by telephone customers to finance the other Universal Service Fund components such as the Schools and Libraries Fund, the Lifeline Fund and the Link-up Fund.

The concerns expressed by the congressmen relative to the electric industry tax subsidies mirror my concerns relative to the telecommunications industry. My proposal would require customers to pay the actual costs of providing service, thus decreasing the amount needed to finance the High Cost Loop Fund. However, if a customer in a high-cost area could not afford to pay the actual cost of service, the High Cost Loop Fund would provide assistance based upon the economic needs of the