5.3. ERMUSR 03-08-2005 - Laserfiche WebLink

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Existing federal policy has and continues to recover the federal investment in these facili- ties, with interest, so no change in policy is necessary or required. Furthermore, if the PMAS were to be required to sell their power at market-based rates, then public power sys- tems and rural electric cooperatives would be subject to daily, widespread fluctuations in wholesale power costs (that would increase retail power rates in the hundreds of cities, towns and rural areas served by these entities) and the generation of federal hydropower would occur mainly on-peak when market rates are highest, thereb}' restricting or elimi- nating off-peak releases made to benefit flood control, fish and wildlife conservation, recreation, navigation and water supply. The PMAs should be sold to the private sector to provide a cash infusion to the L.S. Treasury and to reduce the budget deficit. In commenting on a Clinton Administration proposal to sell the PMAs, the Congressional Research Service (CRS) stated that while the U.S. Treasury would receive a windfall in receipts at the time of the initial sale of the PMAs, eventually the foregone annual rc•y- enues to the Treasury from business activities of the PMAs would actually contrihute• to the deficit. "Thus, the fiscal advantage to the Federal Government of selling the P~L~.c is time- limited," CRS said. "Over the standard five-year scoring period, the Administration c•cu- mates the net receipts at $3.675 billion. Yet, if the sale were scored over a longer lx•ricxl• the net receipts would be less. In theory, if receipts were scored over the life of the• proj- ects involved, the net receipts would be zero." In other words, selling the P~t.•~.. Mc~ullike cashing in your entire 401k plan to pay off your credit card debt - there•M (urrg~~ing the long-term benefit of the annual tax deferral and future income gencratc•d t>, ttrc• il-I k. Thu economic and budgetary value of the PMAs is the reason that the Congressiond B~dgef Officr guidelines do not allow the sale of federal assets such as the PMA.s to score as deficit n+dretaiow. The PMAs reduce competition in the electric utility industry by prodding Icw~[c..t Irele•r.-1 hydropower to preference customers -public power systems and rural ele•<tru c~M~Ix•rw- tives. Public power systems and rural electric cooperatives serve as a "}•ardstick' .+};.rrrr.t wtru h customers and regulators can compare the rates offered by investor<iMne•d uuhc,r. ,end other private generators, thereby promoting competition in the electric uuhr~ rn~fu.tn The significance of yardstick competition was discussed in a paper presented tc. the \c•w England Conference of Public Utility Commissioners Symposium in tilav 1!t!r<r. t» ata~rne~ Harvey L. Reiter. Mr. Reiter highlighted the importance of having a de~ice• tur nx•a.unng the performance of utilities in the marketplace. He explained, "...yardstick comlx•uuun. or the competition that occurs when the regulator can compare the relative• lx•rlernnanc e•. of utilities it regulates with other utilities it regulates, or with neighboring utilitie•> in other jurisdictions, places pressure on regulated utilities to perform better for fear of coming up short in the comparison process." As one of the few providers of cost-based w•hole•salc power, the PMAs serve as a yardstick against which consumers, regulators, and polic~mak- ers can measure the profit margin embedded in the cost of power from other sources. This is a key piece of market information needed to further the goal of a health}• and competitive marketplace. ^