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Taxpayer-financed subsidies are hard to eliminate — no matter how egregious — but some are crumbling. Consider the case of Power Marketing Administrations (PMAs). PMAs receive an array of federal benefits that result in low electricity rates for a select group of consumers in the West and South. By placing electric generators on the Hoover, Grand Coolee, and numerous other federal dams, PMAs were created early in this century in order to electrify rural America. Rural America, of course, long has been electrified, but PMAs continue to provide subsidized power to select residents of Hilton Head, Steamboat Springs, Palo Alto, and other areas that don't really need taxpayer benefits. The subsidy may be outmoded, but preferential customers like it and have fought diligently to preserve it. The power benefit, however, is becoming harder and harder to defend. In this era when lawmakers are trying to balance the federal budget by the year 2002, it makes no sense to offer hundreds of millions of taxpayer dollars annually so a few consumers can enjoy low-cost power. In this era when lawmakers are trying to advance competition in the electricity market, it makes no sense to distort that market with federal subsidies for a select group. PMAs also raise regional controversies since they do not benefit northeastern and midwestern states. Indeed, taxpayers from the Northeast-Midwest region unwittingly subsidize electricity rates for a few southerners and westerners, who in turn try to lure away our region's businesses and jobs with the promise of cheap electricity. The well-heeled lobbyists for PMA beneficiaries long have denied receiving any federal benefits, but they lost credibility recently when the United States General Accounting Office confirmed the existence of a substantial subsidy. According to government auditors, the three smallest PMAs annually fail to recover $300 million of their costs, leaving federal taxpayers to pick up the tab. The Congressional Budget Office calculated an even higher subsidy — $1.2 billion annually — by comparing the difference between what PMAs charge for power and the market rate for that electricity. A steady stream of logic and studies, of course, will not stop PMA beneficiaries. Self-serving lobbyists will try to hide behind the shield of environmental protection, even though PMAs encourage waste and the construction of unnecessary power plants. They will try to hide behind the politics of public power, even though municipal utilities and rural electric cooperatives in most of the country receive no PMA benefits. PMA beneficiaries will try to obfuscate the issue, to make it sound complex. Yet the situation is simple: taxpayers across the country should no longer pay to have a select group of consumers enjoy cheap electricity. PMA lobbyists also hope most lawmakers will not focus on an issue that doesn't affect them directly. Yet leaders of the Northeast-Midwest Congressional Coalition are finding that their constituents dislike paying for PMA subsidies. Rep. Bob Franks (R-NJ) recently created the New Jersey Coalition to End Federal Power Subsidies, which attracted almost 100 public- and private-sector leaders to its first meeting. Rep. Marty Meehan (D-MA) finds similar outrage among New England consumers. To eliminate the outmoded and unfair subsidy, reformers can either auction off PMA hydroelectric assets (e.g. turbines and transmission lines) or have the federal government sell PMA power at market rates. Both approaches can be achieved through the federal budget or electricity deregulation legislation that the 105th Congress soon will consider. PMA beneficiaries maintain powerful lobbyists who will struggle to protect the status quo. Yet reformers have the powerful arguments. In an era of budget cutting and competition promoting, those arguments will prevail.
7 November 1996 |