It’s time to privatize the Power Marketing Administrations
Published: Saturday, March 5th, 2005
Politicians and interest groups already seem to have snuffed out one of the more sensible money-saving recommendations in President Bush’s fiscal 2006 budget — his proposal that four Department of Energy-run utilities start charging closer-to-market rates for electricity generated by federal dams. The episode illustrates how difficult it is to win Congressional backing for any budget cut — even no-brainers like this one — if it means someone’s constituents will be asked to give up a seat on the federal gravy train. As it now stands, the utility bills of millions of Americans served by the nation’s four power marketing administrations are kept artificially low through subsidies and federal price controls. PMAs were established decades ago in connection with federal reclamation and rural electrification efforts, yet remain government-run to the present day, enjoying unfair competitive advantages over private-sector counterparts. PMAs should have been sold off long ago, after their original purpose had been served. But every effort to do so has been scuttled by politicians loath to see the power bills of their constituents go up. The president’s budget had hardly cleared the printing press when an anguished outcry went up from Congressional critics complaining that bringing the PMA’s wholesale electricity rates in line with what private utilities charge would mean hardship for folks back home. Others worried that it could be a first step toward privatizing the PMAs. “The attempt to switch power to market rates — at great expense to Northwest ratepayers — is clearly a first step toward privatization,” said Sen. Ron Wyden, a Democrat from Oregon, who has threatened to block the confirmation of a deputy energy secretary unless the administration backs away from the plan. Less than a month after the idea surfaced, members of Congress already have shouted it down, in a preview of the fate that likely awaits virtually all the president’s budget-cutting recommendations. It’s another demonstration of the near-impossibility of freeing ourselves from the federal octopus, once we’ve become entangled. The idea of selling off the PMAs has been batted around by government reformers for years, based on four compelling arguments. The first is that the circumstances that once justified federal involvement in such enterprises — the electrification of rural areas, for instance, or irrigation of the arid West — no longer exist. The second is that the federal government shouldn’t be in the utilities business, or be competing against private utilities. The third is that it’s patently unfair to subsidize one group of utility ratepayers at the expense of another, or the taxpayers at large. The fourth is that taxpayers could recoup tens of billions of dollars by privatizing the PMAs, leaving the Department of Energy with one less function to perform. These arguments have been made at least dating back to the mid-1980s and Ronald Reagan’s Grace Commission. They resurfaced roughly 10 years later, as part of then-Vice President Al Gore’s half-hearted effort to “reinvent” government. Ten years later, almost like clockwork, the idea pops up again in the president’s budget, with equally disappointing results. And then people wonder why the growth of government can’t be controlled. “Selling the Power Marketing Administrations, especially Bonneville, is an idea whose time has finally come,” according to David Williams, vice president for policy at Citizens Against Government Waste, a fiscal watchdog group that evolved out of the Grace Commission. “There has been one excuse after another why not to privatize the PMAs, but with a $420 billion deficit there is simply no justification for the federal government to be subsidizing electricity.This is a great way to literally give power back to the people.” Perhaps. But it sometimes seems the people and their leaders want subsidies and handouts more than they want power.
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