Bonds and Financing

Trump budget proposal on PMAs would raise electricity costs for millions

The American Public Power Association (Association) strongly disagrees with President Trump’s recent FY 18 budget proposal to divest the transmission assets of three Power Marketing Administrations (PMAs)—Southwestern Power Administration, the Western Area Power Administration, and the Bonneville Power Administration. The PMAs are operated by the U.S. Army Corps of Engineers and Bureau of Reclamation. They provide millions of Americans served by not-for-profit public power and rural cooperative electric 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.

Over the last 22 years, different administrations have attempted to sell or divest the PMAs under the mistaken belief that such a move would save the federal government money or that the PMAs are no longer needed. The Trump Administration’s most recent proposal asserts that “ownership of transmission is best carried out by the private sector where there are appropriate market and regulatory incentives.” The proposal also asserts that increasing the “private sector’s role would encourage a more efficient allocation of economic resources and mitigate risk to tax payers.” There is no rationale behind these assertions.

The PMAs are financed by customers and not the federal government. Selling PMA transmission assets would not lead to a more efficient allocation of economic resources; nor would it mitigate risk to taxpayers. Divesting assets is the first step to privatize the PMAs and would threaten the reliable, low-cost power enjoyed by customers of 1,200 public power systems and rural electric cooperatives in 34 states.

The Association reacted immediately to this proposal with a strong statement to the press and followed up with letter (jointly with the National Rural Electric Cooperative Association) to Department of Energy Secretary Rick Perry expressing staunch opposition. Additionally, on June 7, a bipartisan group of 21 senators sent a letter to Energy Secretary Perry expressing opposition to the Trump budget proposal to sell the PMA transmission assets.

The American Public Power Association will continue to educate members of Congress on why divesting PMA assets is a bad idea.