Electricity Markets

Association says it will strongly oppose TVA, PMA grid asset privatization

The American Public Power Association on Feb. 12 expressed disappointment that the Fiscal Year 2019 budget request released by President Trump proposes 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 said that it will “adamantly oppose any effort by the federal government to privatize TVA and PMA assets that have been paid for by electricity customers.” 

The Association also said it is disappointed to see that the FY 2019 budget request proposes to change the current cost-based rate structure for the PMAs to market-based rates.

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, the Association noted.

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.”

Trump asked Congress to give the executive branch the authority to privatize federal assets, including PMA transmission assets.

“Federal ownership of these assets can result in sub-optimal investment decisions and create risk for taxpayers,” Trump wrote in his “Legislative Outline for Rebuilding Infrastructure in America.” The outline was submitted to Congress in connection with release of the President’s FY 2019 budget.

In response to Trump’s 2019 budget proposal, TVA on Feb. 12 said that the transmission assets described in the budget schedule include more than 16,000 miles of line paid for by the power customers of the Tennessee Valley over the past 85 years.

“The transmission system is an integral part of TVA’s power system, which has delivered power at 99.999 percent reliability for the past twenty years,” it said in a news release. “TVA is also a major reliability coordinator for large sections of the U.S. power grid, helping ensure that America’s vital energy infrastructure runs safely and reliably every day,” it said in the news release. 

TVA noted that it does not receive any funds from the federal government, but rather is completely self-funded from its power revenues and the public debt markets, and TVA’s obligations are not guaranteed by the federal government. “TVA has among the lowest power rates in the country, which in combination with the high reliability of its transmission system, have led to significant economic expansion in U.S. manufacturing and other industries and businesses in the Tennessee Valley. Over the last five years, TVA has supported the creation or retention of 400,000 jobs and $48 billion in new capital investment,” TVA said.

Public Power Council voices opposition

The Public Power Council on Feb. 12 stated its opposition to proposals in the budget that would divest the electricity transmission system of BPA and would also have BPA change the way it sets its power rates. 

“We are looking to the future, and are already working with BPA to modernize its transmission system and to take concerted action to address its cost of power,” said PPC Executive Director Scott Corwin.  “The bottom line is this budget proposes to raise an extra $5 billion to $7 billion on the backs of Northwest electricity customers over the next ten years without any added benefit.”

The transmission asset proposal would help fund the federal government “by selling off a critical system that electricity consumers in the West have paid to construct and maintain,” the PPC said.

The PPC also said the proposal to have the PMAs charge market rates raises several implementation problems, including a conflict with BPA’s statutes and with its current power contracts with utilities that continue through 2028.

The PPC said its staff will be analyzing specifics of the proposals if and when they become available. 

“Reading from the Budget Summary, the proposals raise several concerns including: (1) significant increased costs to local residents and businesses; (2) loss of regional control and value; (3) potential for remote areas of the system to be neglected, harming rural communities; and, (4) impacts to reliability of what is currently a complex and integrated system,” the PPC said in a news release.

The PPC is a not for profit association that represents about 100 consumer-owned electric utilities in the Pacific Northwest on issues regarding the Federal Columbia River Power System and is a forum to discuss and build consensus around energy and utility issues. 

Proposal also authorizes commercial O&M activities at hydropower facilities

Trump’s proposal would also authorize commercial operation and maintenance activities at U.S. Army Corps of Engineer (USACE) hydropower facilities.

Trump wrote that prohibiting privatization of O&M at USACE facilities “creates unnecessary bureaucracy and restricts open competition that leads to excess costs for operations that can easily be done at a lower cost and more efficiently.”

The proposal would amend the law to allow the Secretary of the Army to determine whether O&M functions at hydropower facilities on USACE projects are commercial activities and appropriate for performance by non-Federal entities and “would increase the opportunity for open competition and lead to more efficient operations and maintenance.”

The infrastructure plan is largely focused on non-electric resources -- roads, bridges, airports, ports, waterways, and water resources.

Two exceptions are hydropower and rural electric.

The plan would allow hydropower facilities to qualify for a $100 billion infrastructure incentives program and expand the use of tax-exempt private activity bonds to include hydropower construction.  PABs currently can finance hydropower environmental enhancements, but not other investments.

The plan would also allow governmental generation, transmission, and distribution to qualify for a $50 billion rural infrastructure program.

Plan proposes spending $200 billion on federal infrastructure initiative

Overall, the plan proposes spending $200 billion on the federal infrastructure initiative, the same amount proposed in Trump’s 2018 budget.

Trump estimates the proposal would incentivize an additional $1.5 trillion in infrastructure investments, up from the $1 trillion estimated last year for a comparably-sized program.