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RELIABILITY OF THE ELECTRIC POWER INDUSTRY
Western states particularly should be aware of reliability as a key issue in restructuring the electric industry. "Reliability" means just that -- electricity where it needs to be at the moment demanded for the duration required at the level necessary.
Electric reliability is addressed in Title II of H.R. 2944, the Electricity Competition and Reliability Act. If H.R. 2944 is not successful, Title II may be offered as a stand alone bill with with support possible by the National Electric Reliability Council (NERC).
Power in the United States is divided basically into East and West, with Texas having its own grid. The East-West grids divide at the west edge of the Dakotas, coming through Nebraska, the Kansas/Colorado border and on down to Texas.
Eastern states as a grid never have coordinated for reliability. As many as eight councils exist in the eastern grid, and at least one state, New York, has enacted legislation creating its own authority regarding reliability. Title II allows this independent state action as a "state savings provision", compounding the lack of coordination.
While states' rights also is a key issue in restructuring, Western states nearly 40 years ago recognized reliability demanded cooperation and formed the Western Systems Coordinating Council (WSCC). WSCC recently adopted the Reliability Management System to ensure compliance with operating criteria among interconnections of western grid electric generation and transmission systems, building on nearly four decades of success.
Consequently, Title II could be an excellent example of, "We're the government, we're here to help you." Granted, Title II now includes three provisions sought by western states:
- deference to differences in Western systems' interconnections;
- delegation of authority on an interconnection basis; and
- delegation of state oversight for each interconnection.
The problem is these deference's and delegations are at the behest of the federal government
-- the Federal Energy Regulatory Commission (FERC). Title II would:
- concentrate more power in FERC's hands;
- force membership of all utilities -- public and private;
- impose a levy for funding any national and subnational organizations formed, increasing the cost of power when competition demands lower prices;
- bring consumer-owned public power under FERC jurisdiction;
- replace utility-directed NERC with a federal North American Electric Reliability Organization (NAERO);
- create "self-regulating reliability organizations" (SRROs), paradoxically named due to new, overarching power given FERC; and
- establish a foundation of a one-size-fits-all approach to electric reliability.
Reliability is an Eastern grid interconnection issue because Eastern states have not achieved coordination as Western states' interconnecting systems so effectively continue to do.
1/28/00
Platte River Power Authority
A COMPARISON OF PUBLIC POWER* AND INVESTOR-OWNED
UTILITY TAX BENEFITS
FACT #1 BOTH PAY THE SAME PERCENTAGE OF TAXES OR THEIR EQUIVALENT TO STATE AND LOCAL GOVERNMENTS. Payments of state and local taxes by investor-owned utilities (IOUs) and payments in lieu of taxes for public power are nearly identical In 1994. For example, the median amount of net payments and contributions for public power systems was 5.7 percent of electric operating revenues, compared to 5.8 percent for the IOUs.
FACT #2 PUBLIC POWER'S 17 PERCENT RATE ADVANTAGE OVER THE IOUs RESULTS FROM ITS CONSUMER-OWNED, NOT-FOR-PROFIT STRUCTURE. The majority of public power's rate differential is explained by its public service purpose, local cost scrutiny tiny and non-profit operations, not by access to federal hydropower or tax-exempt bonds.
FACT #3 PUBLIC POWER AND IOU COSTS TO THE U.S. TREASURY ARE COMPARABLE Cost to the Treasury of IOU tax breaks amounted to $8.85 billion in 1994 alone. Cumulative amount of foregone Treasury' collections from 1954 to 1994 totals $231 billion. Comparatively, if Treasury could tax the interest income of state and local bonds, revenues collected from public power, at most would have been $1.5 billion in 1994.
IOU TAX TREATMENT
- Deferred income taxes - taxes the IOUs collect from rate payers but delay paying by using accelerated depreciation for tax purposes - however, IOUs use straight-line depreciation for rate-making purposes, resulting in the availability of capital at no cost.
- Investment tax credits - one-time reduction of an IOU's tax bill for each project which is eligible for the investment tax credit
- Tax-exempt bonds - allow IOUs to issue lower cost tax-exempt debt in place of higher cost taxable debt.
PUBLIC POWER TAX TREATMENT
- Exemption from federal income tax - operations do not produce profits subject to taxation.
- Authority to access tax-exempt bonds - as units of state and local government.
Compared to each sector's share of the market by total electric revenues, IOUs' and public power's percentage shares of cost' to the U.S. Treasury art approximately the same.
*As used here, "public power" relates to customer-owned utilities that operate as non-profit entities of state, local and governments, not rural electric cooperatives, federal power, marketing administrations, or Tennessee Valley Authority.
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