Association strongly opposes TVA, PMA transmission asset privatization

The American Public Power Association is voicing strong opposition to a recent proposal by President Trump to divest the transmission assets held by the Tennessee Valley Authority and three of the Power Marketing Administrations -- Southwestern Power Administration, Western Area Power Administration and Bonneville Power Administration.

The Association is also disappointed that President Trump’s Fiscal Year 2019 budget request proposes to change the current cost-based rate structure for the PMAs to market-based rates.

In its initial response to the proposal, the Association in February noted that the PMAs provide millions of Americans served by not-for-profit public power and rural electric cooperative utilities with cost-based hydroelectric power produced at federal dams.

PMA rates are set to cover all generation and transmission costs, as well as repayment, with interest, of the federal investment in these hydropower projects. None of the costs are borne by taxpayers. Similarly, TVA provides affordable electric power to more than nine million people in seven states at no cost to taxpayers, the Association said.

“Selling TVA and PMA transmission assets and/or increasing PMA rates by changing the current cost-based structure would threaten the ability of the PMAs to provide reliable, cost-based power to the approximately 1,200 public power systems and rural electric cooperatives in 33 states and the millions of customers they serve,” it went on to say in urging Congress to reject what it called “these misguided proposals.”

Association sends letter to Secretary of Energy

Sue Kelly, president and CEO of the Association, and Jim Matheson, CEO of the National Rural Electric Cooperative Association, questioned the TVA/PMA proposals on a number of fronts in a Feb. 26 letter to Secretary of Energy Rick Perry.

“We strongly disagree with the rationale provided in the proposal that ‘ownership of transmission is best carried out by the private sector where there are appropriate market and regulatory incentives’ and that increasing ‘the private sector’s role would encourage a more efficient allocation of economic resources and mitigate risk to taxpayers,’” Kelly and Matheson said in their letter to Perry.

There is no factual evidence that selling the transmission assets of the PMAs would result in a more efficient allocation of resources, they said.

"Rather, it is much more likely that any sale of these assets to private entities would result in attempts by the new owners to charge substantially increased transmission rates to the PMA customers for the same service they have historically received. These arguments are merely a pretext for actions that would raise electricity costs for millions of people and businesses,” the letter said.

In addition, Kelly and Matheson said that the Administration’s companion proposal to change the current cost-based rate structure for the PMAs to a “market-based” rate structure is similarly disappointing.

“There again is no factual evidence to support the Administration’s claim that ‘[e]liminating the requirement that PMA rates be limited to a cost-based structure and requiring instead that these rates be based on consideration of appropriate market incentives, including whether they are just and reasonable, would encourage a more efficient allocation of economic resources and could result in faster recoupment of taxpayer investments,’” the heads of the Association and NRECA told Perry.

Kelly and Matheson noted that PMA customers already pay all of the costs associated with generating and transmitting power produced at federal dams, positioning the federal government to profit off of retail customers already covering all of the costs for their power supplies.

“Such a move would undermine regional economic development and almost certainly invite legal challenges from wholesale customers holding long-term contracts with the PMAs,” they went on to say.

At the Association’s annual Legislative Rally in Washington, D.C., Kelly on Feb. 28 said that one of the Association’s legislative priorities in 2018 will be to protect the federal ownership of the PMAs and TVA.

She said that “we are quite concerned by these proposals and want our members to explain to Congress why they should oppose the Administration’s efforts to raise costs for PMA and TVA ratepayers.”

And in a recent blog, Kelly pointed out that similar efforts have been made in the past. The Obama Administration proposed to sell TVA and there have been prior efforts to sell the PMAs.

“Proposing the sale of the PMAs is much like proposing the sale of a public power utility — it is usually an attempt to get a one-time cash pay-out for short-term gain, at the cost of losing a valuable asset that otherwise would continue to benefit customers for many years,” she wrote in the blog.