[Congressional Record Volume 141, Number 72 (Wednesday, May 3, 1995)]
[Senate]
[Pages S6021-S6025]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PUBLIC POWER
Mr. PRESSLER. Mr. President, I rise today to express my opposition to
the administration's proposal to sell the Western Area, Southwestern,
and Southeastern Power Marketing Administrations--collectively known as
the PMA's.
Public power serves many functions in South Dakota. As a sparsely
populated State, utilities are faced with the challenge of how to get
affordable electricity into small cities and communities where there
are less than two people per mile of transmission line. Public power
provides the solution.
In public power utilities, the only investors are the consumers.
Revenues are reinvested in the community--in the form of taxes and
services. And, the low cost of power is essential to encourage economic
development in small cities and towns.
Public power, purchased through the Western Area Power
Administration, known as WAPA, costs South Dakotans an average of 2.5
cents less than the market rate. This allows revenue to be reinvested
in additional transmission lines, and better service. The availability
of hydropower from the Missouri River to rural cooperatives and
municipals have helped to stabilize rates. With 7,758 miles of
transmission lines in the Pick-Sloan region, WAPA can serve 133,100
South Dakotans--without charging them an arm and a leg.
Public power has brought more than electricity to South Dakota. For
example, Missouri Basin Municipal Power Agency, based in Sioux Falls,
has embarked on a program offering incentives for planting trees. The
goal is to plant at least one tree for each 112,500 meters in the
Agency's membership territory. In fact, Missouri Basin was recognized
by the Department of Energy for outstanding participation in this
Global Climate Change Program. I congratulate Tom Heller of Missouri
Basin for this excellent community service program.
Public power also brings new jobs to the communities it serves. In
part due to the low cost of power from East River Electric, there are
now three injection molding plants based in Madison, SD--creating
snowmobile parts. Arctic Cat, PPD, and Falcon Plastics employ
approximately 200 people in Madison.
East River also is involved in other economic development activities.
It provides classes to help the community attract businesses, and
offers grants for feasibility studies associated with economic
development projects. South Dakota clearly has benefited from the work
of Jeff Nelson, as the general manager of the East River Electric Power
Cooperative.
Public power is a South Dakota success story. It is the source of
innovation, development, and community pride. I am sure the same is
true in other towns and communities across America. In spite of
these success stories, the Clinton administration--and several Members
of Congress--want to put an end to this success.
Specifically, President Clinton has proposed selling WAPA and two
other power marketing administrations in order to pay for the modest
tax cut he has promised the American people.
In essence, this would force South Dakotans--and public power
consumers in small cities and rural areas--to cover for the rest of
America.
Under the President's plan, South Dakotans would not be able to enjoy
the promised tax cut. Why? Because the sale of the PMA's could result
in rate increases totaling more than $47 million.
In addition, I question the claim made by the administration that the
[[Page S6022]] sale of the PMA's would generate revenue for the Federal
Government. Will it? Let us look at the facts.
PMA's still owe $15 billion in principal. Also, more than $9 billion
in interest already has been paid to the Federal Government. By selling
the PMA's, the Government would forfeit future interest payments.
In fact, a recent report prepared by the Congressional Research
Service demonstrates just how much money the PMA's are expected to
contribute to the Federal Government. This year, WAPA is expected to
pay back $225.1 million borrowed from the Federal Government. But WAPA
will also return another $153.4 million to the Treasury. Given these
figures, it is clear that the Clinton plan does not make good economic
sense.
As my colleagues know, this is not a new issue. I have been fighting
the proposed sale of the PMA's ever since I came to Congress. In 1986,
the Reagan administration made similar attempts to privatize the PMA's.
We stopped them by passing a law to prevent the Department of Energy
from pursuing any future plans to sell the PMA's, unless specifically
authorized by Congress. I suspect the Clinton administration may have
forgotten that law.
Mr. President, once again, we are fighting to prove the worth of
public power. Once again, we must demonstrate how necessary it is to
the lives of rural Americans. The people of South Dakota have stated
their message loudly and clearly--through thousands of postcards,
letters, and phone calls. South Dakotans such as Ron Holstein, Bob
Martin, and Jeff Nelson have been leaders in their opposition to the
proposed PMA sale and I appreciate all their hard work.
Public power is a solid investment for the Nation. Public power is
one of the great success stories of South Dakota. I urge all my
colleagues to stand united behind the continued success of public
power, and the essential service it provides to the Americans who
reside in small cities and towns. Now is not the time to mess with
success.
power marketing administrations
Mr. BUMPERS. Mr. President, I rise today to join my colleagues in
expressing opposition to the privatization of the Federal Power
Marketing Administrations [PMA's]. This ill-conceived concept, which
proponents claim would help reduce the deficit, is simply a bookkeeping
gimmick that would accomplish little except for raising the electric
rates of millions of consumers served by municipal and cooperative
utilities.
A number of years ago customers of municipal and cooperative electric
utilities entered into a covenant with the Federal Government. In
exchange for the right to purchase the hydroelectric power generated at
multipurpose Federal water projects at cost-based rates, these
customers have provided a significant portion of the funds needed to
build and operate the water projects. In addition to power production
these projects serve other significant purposes, including making water
available for irrigation, flood control, navigation, municipal and
industrial water supply, wildlife enhancement, recreation, and salinity
control. In many instances, the beneficiaries of these nonpower
purposes of the water projects have paid little, if anything, for the
projects.
Some are not suggesting that the Government renege on its agreement
with the power customers by eliminating their right to purchase the
power produced at Federal water projects. In addition to being patently
unfair, the breach of this covenant with the power customers raises
serious questions about the integrity of future agreements entered into
between the Government and private parties.
The five power marketing administrations currently sell power to
municipal and electric cooperative utilities serving millions of
consumers in 34 States. Privatization of the PMA's could result in
tremendous rate increases for these customers. In some areas, retail
residential rates could triple. A recent study prepared by the
Congressional Research Service estimated that PMA privatization could
cause electric rates to rise by $1.2 to $1.3 billion per year.
The Southwestern Power Administration [SWPA] currently sells power
produced at Federal water projects to customers in my home State of
Arkansas, as well as in Kansas, Louisiana, Missouri, Oklahoma, and
Texas. The privatization of SWPA could cause serious adverse economic
consequences in the region. A study prepared when President Reagan
first proposed privatizing SWPA indicated that consumers in Arkansas
alone could stand to pay as much as 343 percent more to replace the
power currently purchased from
SWPA. Mr. President, I don't want to go back to my constituents and
tell them that they are going to have to pay three times as much for
electricity because the Government no longer wants to honor a
contractual commitment.
Rather than roll up our sleeves and make the tough choices in order
to reduce the Federal budget deficit, some Members of Congress instead
want to resort to budgetary gimmicks. The sale of Government assets to
increase the Government's cash flow, in the short term, might be the
most cynical gimmick of them all. Because budget scoring periods run
for 5 or 10 years, it is tempting to take actions that would reduce the
deficit during the scoring period, but would actually increase the
deficit in the out-years. This is exactly what would happen if the
PMA's are privatized. Selling-off the PMA's could very well produce $2
billion in revenues immediately. However, because the PMA's would no
longer be selling power on the Government's behalf, the immediate
increase in revenues would be offset by the revenues forgone resulting
from the sale of the assets.
In 1990 Congress amended the Budget Act to prohibit the use of
receipts from the sale of Federal assets to be scored as a reduction in
the deficit. The purpose of this provision is to prevent the use of
gimmickry to create an illusion that we are balancing the budget. Mr.
President, I fully expect that efforts will be made this year to repeal
this prohibition. I intend to fight any such efforts that would make it
more difficult to honestly balance the budget.
Mr. President, I recognize that we live in a new era and that
streamlining Government and making it more efficient are not only
desirable, but necessary. In this spirit, I am willing to wok with
critics of the PMA's in order to make them more efficient. But I will
not support any legislation that would abrogate the covenant between
the Government and the PMA customers which provides reasonably priced
power to more than 1,000 consumer owned electric systems in the United
States.
power marketing administration
Mr. WARNER. Mr. President, I rise today in opposition to President
Clinton's budget proposal for fiscal year 1996 to sell the Western
Area, Southwestern, and especially the Southeastern Power
Administrations to private investors.
In Virginia, the electric cooperatives and the municipal power
systems represent almost a million citizens who receive a significant
portion of electricity from the Kerr-Philpott hydro facilities located
in southside Virginia. It is estimated that preferred customers under
the electric cooperatives can expect annual increases of approximately
$100 per year should the Southeastern Power Administration be sold.
I believe that it is fiscally irresponsible to turn the Power
Marketing Administrations over to private interests, which will in turn
penalize our consumers by driving up their rates. These members have
already paid for a significant portion of investment in these
facilities and nearly twice that amount in interest. SEPA has already
repaid $433 million, or 30 percent, of the $1.442 invested.
The Federal Government is currently recovering its investment in SEPA
facilities through the rates charged for the hydroelectric power
generated to the customers in southside. This investment should be
viewed as a contract with the ratepayers of the cooperatives to
continue service with the Federal Government.
While the sale of the PMA's would provide the Department of the
Treasury with the desired instant cash flow, we must consider how these
Federal power sales will continue to generate revenue long after the
projects are repaid.
The Power Marketing Administration should be valued for its assets,
for the income it produces to pay its own way, and for the service it
provides to the members of the cooperatives. For
[[Page S6023]] these reasons, I believe that the sale of the Power
Marketing Administrations is not an efficient means of contributing to
deficit reduction and should not be considered as a means of deficit
reduction.
power marketing administrations
Mr. EXON. Mr. President, I will not take a great deal of time this
morning, but I wanted to reiterate my strong opposition to the sale of
the Power Marketing Administrations. I've made similar points with the
Director of the OMB. And I sat to discuss this matter with the
President.
We seem to go through this exercise just about every year, regardless
of who is in the White House or who controls Congress. Until someone
can show me some real benefits of privatization, I will continue to
oppose the sale of the PMA's.
The Power Marketing Administration's deliver a critically important
service to a large portion of the Nation. They are an example of what's
right with Government. It seems ironic and very ill advised that they
should be put on the auction block and I will not stand for any
wholesale dismantling of the PMA system.
Ms. MOSELEY-BRAUN. Mr. President, I concur and agree with Senator
Exon and I want the Record to state that.
Mrs. MURRAY. Mr. President, I have spoken in the past about my
commitment to continuing the production and distribution of clean,
reliable hydropower through Federal Power Marketing Administrations.
Today, I reaffirm this commitment.
The Federal power program has served well both the taxpaying public
and energy consumers. It serves the taxpaying public by paying its own
way--and paying interest on its debt. It also serves the general public
by providing navigation, flood control, recreation, fish and wildlife
conservation, and irrigation. Few Federal programs can claim such far-
reaching benefits at such a low cost.
Mr. President, if we sell our PMA's, we cannot be assured that the
general public will continue to reap these many benefits. While the
sale of PMA's would product short-term revenue, the sale will do little
to solve the long-term problem of our Nation's debt. In fact, the
permanent loss of these productive assets will result in foregoing
future revenues likely to be in the billions of dollars.
At this time, the Bonneville Power Administration is not immediately
threatened with sale. Several months ago, however, officials within the
administration suggested to the President that he sell BPA to finance a
tax cut. Fortunately, after hearing from Senators and Representatives
from the Pacific Northwest, President Clinton elected to decline that
advice. Recognizing the special attributes of BPA, he has said he does
not intend to offer it for sale. So, my constituents appear to be safe
for now.
I speak in opposition to the sale of the other PMA's because I
believe their sale is not in the best interest of either the taxpaying
public or the tens of millions of consumers who will certainly be
saddled with higher electricity bills. Let us reject this short-term
solution to our deficit and protect our Federal assets for the next
generations of Americans.
Sale of the Power Marketing Administrations
Mr. ROBB. Mr. President, like may of my colleagues, I rise today to
briefly address the President's fiscal year 1996 budget proposal to
privatize some of the Power Marketing Administrations [PMA's],
including the Southeastern Power Marketing Administration [SEPA], which
serves many Virginians.
I am concerned about the devastating effects of the privatization of
the Southeastern Power Administration and other PMA's on rural electric
providers and their consumers. Prior to the fiscal year 1996 budget
submission, I contacted President Clinton and OMB Director Alice Rivlin
and asked for this proposal to be reconsidered. Like many of my
Democratic colleagues. I was disappointed to find this one-time asset
sale in the final budget proposal.
Nationwide 650 rural electric systems receive allocations of power
from Federal projects. Eleven of our thirteen Virginia rural electric
cooperatives get a portion of their power direct from the Southeastern
Power Administration. Over the years, Federal hydropower has helped
rural electric cooperatives keep their rates competitive with investor-
owned utilities.
If we are serious about deficit reduction, we must ensure that all of
our Federal programs continue to provide significant benefits to our
taxpayers. In my opinion, this proposal to sell SEPA and other PMA's is
penny-wise, but pound-foolish. I would favor any proposal for deficit
reduction, so long as the savings result from sound public policy. Our
Federal power program benefits consumers, taxpayers, and continues to
facilitate economic growth and development in rural areas across the
country. Privatizing the PMA's will not produce benefits that outweigh
the current program and is, in my judgment, bad public policy.
We should oppose the sale of the PMA's for several budgetary reasons.
In the first place, the Government would lose a stream of revenue
flowing into the Federal Treasury if the PMA's were sold. The estimated
revenues which go to the Treasury exceed the appropriations for the
PMA's. In fiscal year 1995, it is estimated that the net positive
receipts to the Federal Treasury will be $243 million.
Given this situation, the fiscal advantage to the Federal Government
of selling the PMA's is time limited. During the year in which sales
are actually occurring, the Treasury would receive a windfall in
receipts as monies received from the sales and saved from
appropriations overwhelm the revenues lost as a result of the sale.
However, as the foregone
revenues exceed the saved appropriations in the years after the sales,
we would be adding to the deficit.
Because capital asset sales are a one-time event. We have a budget
rule that assets sales should not be counted in the budget. If we were
to count the proceeds from selling Government assets as though they
were receipts of the Federal Government, then these one-time receipts
could be used to fund new spending programs or tax cuts that outlive
the stream of receipts. We should follow the budget rule and not allow
these fleeting savings to be counted as budget savings.
Another budgetary reason to oppose the sale of the PMA's is that the
Federal Government could actually lose money if the sale price were
inadequate to cover the present value of the federally-held debt. One
study indicates that the revenue from the Alaska Power Administration
under the current program would be higher than under its proposed sale.
If this is the case with the APA, it could be equally true of the
others. Given these budgetary uncertainties, we should not be rushing
to privatize these entities.
The PMA's remain an integral part of our commitment to bring
affordable and efficient hydroelectric power to the many Americans
dependent on rural cooperatives and municipal power systems. PMA's are
a wise and profitable investment on behalf of rural America.
We have made great strides in bringing electric power and other
utilities to rural areas, largely through the work of rural electric
cooperatives, and we should carefully consider the consequences of
eliminating this valuable supply of electricity now.
I respectfully urge all of my colleagues to join me and support the
continuation of Federal power.
power marketing administrations
Mr. HATFIELD. Mr. President, I am pleased to join with a number of my
colleagues from both sides of the aisle who have come to the floor this
morning to shed some light on proposals to sell off the Federal power
marketing administrations. I continue to oppose such proposals, not
only as they relate to the Bonneville Power Administration, but also as
they relate to the other power marketing administrations.
Power Marketing Administrations are entities that have been created
to market the power generated by Federal hydropower projects operated
by the Army Corps of Engineers. PMA's are part of the Department of
Energy's Federal power marketing program. One of the central features
of this program is the preference clause, which allows consumer-owned,
nonprofit local utility systems to have the preferential access to the
power produced by Federal dams.
The five PMA's are as follows: The Southeastern Power Administration
[[Page S6024]] [SEPA], the Southwestern Power Administration [SWPA],
the Western Area Power Administration [WAPA], the Bonnville Power
Administration [BPA], and the Alaska Power Administration [APA].
The President's budget includes provisions for the sale of each of
these PMA's except BPA. Proposals are pending in the House to either
sell all or some of the PMA's or require them to sell their power at
market rates, the definition of which appears to this Senator to lead
to highly inflated and unrealistic prices.
My opposition to the sale of the PMA's is based on my view that it is
shortsighted public policy to sell one of the few revenue generating
assets of the Federal Government. It is important to remember that BPA
is repaying, with interest, the capital investments in the Federal
hydropower projects in the Columbia Basin. The other PMA's are making
similar payments. When the repayment is completed, the Federal
Government will be the owners of these projects. The PMA's pay their
way and then some. I ask unanimous consent that a table showing project
investments and repayment by PMA's be printed at this point in the
Record.
Mr. FORD. Mr. President, I wish to voice my opposition to any efforts
to privatize parts of the Federal Power Marketing Administrations
including the Southwestern, Southeastern, or Western Area Power
Administration.
This Nation made a commitment to bring affordable and efficient
hydroelectric power to rural customers. In conjunction with thousands
of rural cooperatives and municipal power systems across the country,
Federal Power Marketing Administrations [PMA's] have met that
commitment.
The utilities purchase power through the PMA's and the revenues cover
PMA operating expenses, construction costs, and interest payments. And
these sales put money into the Federal Treasury.
The proposed sale of these PMA's not only jeopardizes that commitment
to rural Americans, but upsets the sensitive dynamics of the many dam
projects from which the PMA's market their power.
These dams perform an array of services, including power generation,
navigation, flood control, water supply, recreation, and fish and
wildlife preservation. As a government entity PMA's have effectively
balanced these sometimes diverse, and often competing functions.
As several colleagues and I told President Clinton in a letter back
in January, there is no indication that a private, for-profit entity
can be expected to become a full-partner in these interests at an
almost certain loss of profits.
And what about the consumer? They essentially lose twice. Estimates
show increases of as much as 30 to 50 percent per month for some
residential rates. That's a frightening prospect for many families who
are already living from paycheck to paycheck.
The consumer gets hit a second time when the Federal Treasury
experiences a loss of that steady revenue I mentioned earlier. Because
the Federal Power Program pays for all investments made, once
construction, and interests costs are repaid, the Federal Government
will own the power plants. But once sold, no revenue. And that's bad
news for consumers at a time when reducing the deficit is critical to
continued economic stability.
The Federal Power Program is one that assures access for rural
residents to affordable electricity, returns much-needed revenue to the
Federal Treasury, and effectively balances the many demands on these
dams--from flood control to water supply to recreation. Clearly, this
is not the kind of program Congress should add to the auction block,
and I urge my colleagues to oppose any such efforts.
There being no objection, the table was ordered to be printed in the
Record, as follows:
pma's pay back principal with interest
Customers of the federal power marketing administrations
are required by law to pay back the investment in federal
hydropower facilities with interest. They are doing so, as
shown in the table below:
STATUS OF REPAYMENT AS OF SEPT. 30, 1993\1\
[Cumulative dollars in millions]
----------------------------------------------------------------------------------------------------------------
Operation Interest Cumulative
Location Power Power & maint. Purchased paid thru repayment Unpaid
investment\2\ revenues (O&M) power 1993 thru 1995 investment
----------------------------------------------------------------------------------------------------------------
Alaska................... $205 $144 $52 0 $53 $39 $166
Bonneville............... \3\12,260 34,723 5,572 $20,825 5,914 \3\2,412 \4\9,848
Southeastern............. 1,442 2,325 1,043 65 781 435 1,007
Southwestern............. 997 2,042 688 520 536 298 699
Western.................. 5,631 \5\11,210 4,311 3,013 1,911 2,198 \4\3,433
--------------------------------------------------------------------------------------
PMA total.............. 21,658 47,466 11,166 22,554 8,831 5,133 14,525
----------------------------------------------------------------------------------------------------------------
\1\All data are on accrual basis of accounting, except as noted, and are based on the best information
available.
\2\The power investment to be repaid includes irrigation and other nonpower investment assigned to power for
repayment for Bonneville and Western.
\3\Cash rather than accrual basis.
\4\The unpaid investment does not include construction work in progress or capitalized deficits.
\5\Net of income transfers of $109 million.
Mr. HATFIELD. Mr. President, the five PMA's carry out a distinctive
mission, including both power and nonpower functions. For example, the
Bonneville Power Administration's primary function is to market power
generated by the Corps of Engineers dams in the Columbia River Basin.
They also have significant involvement in implementing regional
conservation measures, regional fishery recovery and conservation
measures, and regional renewable energy programs. It is unlikely that
the private sector would be willing to fulfill these public duties in
the absence of PMA's.
This is of particular interest to the Northwest, where BPA is, under
current plans, expected to shoulder the vast majority of the costs of
salmon recovery. While many in the Northwest have argued that BPA
should not be required to bear the entire burden of these recovery
costs, to remove BPA from the picture leaves a void that would be
difficult if not impossible to fill.
A number of economists have questioned the true fiscal benefit of
selling Federal assets such as the PMA's. Not only would such a sale
require the budget scoring rules of the Senate and the House to be
fundamentally altered in order to show any positive deficit impact, it
would also be of questionable benefit to the deficit problems we face.
As Harvard Prof. Martin Feldstein has pointed out:
Although Government accounting methods would make it look
as if Federal spending and receipts are in better balance,
these asset sales would do nothing to lessen the burden of
the deficit. That burden occurs because Government borrowing
to finance the deficit preempts savings that would otherwise
be available for private investment in plant and equipment
and in housing construction. The administration's proposed
assets sales would preempt private savings every bit as much
as a Federal sales of new debt of the same value.
Mr. President, over the last decade, I have seen many shortsighted
proposals by successive administrations to sell off or alter
substantially the power marketing administrations. I have had to fight
these proposals each time and will continue to do so. As budget
deficits grew, a cash-starved Federal Government looked to all sources
of revenue generation to produce more dollars. The power marketing
administrations, which produce large sums of annual revenues, became
easy targets for those who look only at the bottom line. Little or no
consideration was given to the impacts on local economies or the
overall impact on Federal revenues.
[[Page S6025]] While none of these proposals ultimately was
successful, each created a cost for the economies which depend on PMA
electric power. Electricity is the cornerstone of much of the Nation's
economy, particularly in the Pacific Northwest. The high reliability
and low cost of electric power provides the United States, and
especially the Pacific Northwest, with a global competitive advantage
which benefits the entire Nation.
As each of these proposals were made, uncertainty over the future
cost of electricity was created. In the Pacific Northwest, where over
half the electric power consumed is marketed by the Bonneville Power
Administration, these proposals cast a cloud of uncertainty over future
electric power prices. Rate increases of the magnitude contemplated by
the proposals would devastate the economy of the region by discouraging
investment in infrastructure, including modernization of new plants and
equipment, and close factories and businesses which operate on the
margin, many of which were attracted to the availability of low cost
hydroelectric power in the region. The benefit of these proposals has
overstated by every administration because the potential for lost tax
revenue as a result of business failure or lack of investment was never
taken into account.
In conclusion, Mr. President, proposals to sell off these revenue
generating entities that are such fundamental importance to the local
and regional economies they serve are misguided and will be opposed by
this Senator. I am pleased to join with my colleagues to reinforce the
importance of this issue.
I yield the floor.
Mr. CONRAD. Mr. President, I would like to speak for just a moment on
this PMA matter and then direct my attention to another issue. Who
controls time?
The PRESIDING OFFICER. The Chair would inquire of the Senator from
North Dakota if he is speaking on the time of his colleague from North
Dakota?
Mr. DORGAN. Mr. President, I ask unanimous consent the Senator from
North Dakota be allowed to speak for 9 minutes in the time reserved for
morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from North Dakota is recognized for up to 9 minutes.
____________________