5.3. ERMUSR 03-08-2005 - Laserfiche WebLink

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~~~'~ American Public Power Association FEBRUARY 2005 Straight Answers to False Charges about the Federal Power Marketing Administrations The federal Power Marketing Administrations (P;~1As) are a drain on American taxpayers The federal Power Marketing Administrations (PMAs) provide millions of Americans served b}' non-profit public power and rural cooperative electric systems with low~ost renewable hydroelectric power produced at dams operated by the U.S. Army Corps of Engineers and the Bureau of Reclamation. The power rates paid to the PMAs by their public power and rural electric cooperative customers cover all of the costs for generating and transmitting electricity and for repayment, with interest, of the federal investment in these hydro projects. None of the costs are borne by taxpayers. Power rates also help to cover the costs of other activities authorized by these multipurpose projects such as navigation, flood control, water suppl}', fish and wildlife conservation, and recreation. Since PMA rates are often lower than market-based rates, thc•c are subsidized. The power marketed by the PMAs is generally lowsr-st Fx•catrsc of the fuel source -falling water. Hydropower -unlike nuclear, gas and coal - tt:u nr~ fuel costs. It is this method of generating electricity and the fact that most of these• hcrlro projects were constructed many years ago when construction and labor cost_ti wc•rt• Irrwc•r that account for the favorable economics of PMA power. Private utilities th:u ficnerate electricity predominantly from hydropower enjoy similarly low rues. Requiring the PMAs to sell their power at market-hast•d r.ucs would better ensure the full recovery of the appropriated and other debt that is rccoycr:rhlc through the PMAs' power sales. This issue is really a question of whether the use of market-based rates by the PMAs (e.g.; they could charge whatever the market would bear for the power) to recover their costs is preferable to the current use of cost-based rates. Cost-based rates are tariffs for electric energy and capacity that are designed to recover the costs of generating or delivering the energy and capacity. In the case of investor~wned utilities, cost-based rates also include a "reasonable" return on shareholders' investments in the production facilities. Cost-based rates for public power systems, rural electric cooperatives and the PMAs do not include a profit or rate of return. Included in the rates that PMA customers pay to the PMAs themselves is an additional interest charge that goes to pa}' back the initial federal investment in the hydropower facilities. continued on the back of this p¢ge