5.3. ERMUSR 03-08-2005 - Laserfiche WebLink

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%%V~1 Position statement Minnesota Municipal Uti/ities Association Oppose the Administration's Proposed Rate Increases for WAPA and other PMAs The Western Area Power Administration (WAPA) provides cost-based wholesale power to forty-seven communities in Western Minnesota. Because the power is generated using a public resource, it is sold on a preferential basis to municipal and cooperative electric utilities and other not-for-profit institutions as required by law. The partnership between WAPA and these communities has been in place for more than half a century, and the low-cost power provided by WAPA to these communities is essential to their economic well-being. The Bush Administration's budget proposes to raise rates annually until the rates reach "market" rates. This could lead to a rate increase of 107% in just four years! This outrageous proposal is both unfair and unnecessary. The proposal is based on a discredited GAO report that the PMAs are subsidized by taxpayers. GAO used an arbitrary methodology for calculating supposed "subsidies," as well as several other erroneous assumptions, including assumptions related to market rates. Congress has never seen fit to act on that faulty report. Power rates paid to WAPA by municipal and cooperative customers cover all the costs for generating and transmitting electricity and for repayment, with interest, of the federal investment in these hydro projects. Hydropower is the only authorized purpose of federal water resource projects that is required to repay 100 percent of the costs of construction, operation, and maintenance -plus interest. 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 supply, fish and wildlife conservation, and recreation. WAPA's cost-based rates serve as a valuable yardstick to judge the reasonableness of the market-based rates of other providers. The relative stability and predictability of WAPA's rates should not be sacrificed in pursuit of some arbitrary and volatile "market" standard. The administration's proposal for drastic rate increases to WAPA customers is unwarranted, unsupported by the facts, and would cause irreparable harm to the communities that have relied on WAPA power for half a century. It should be rejected.