LEXIS-NEXIS® Academic Universe-Document
Copyright 1999 Journal of Commerce, Inc.
Journal of Commerce
May 5, 1999, Wednesday
SECTION: EDITORIAL/OPINION; Pg. 4A
LENGTH: 577 words
HEADLINE: Uneven utilities playing field
BYLINE: BY STANFORD L. LEVIN
The Clinton administration has opened the way for public power companies -
municipal utilities and co-ops - to use their
tax exemptions and other special benefits and subsidies to compete with
investor-owned utilities in the developing competitive electricity market. The
administration says that the
tax exemption is needed to protect municipal utilities, but the facts tell a
tax break will put private, investor-owned utilities at a great disadvantage, and
the administration's policy stands to undermine electricity
deregulation and the development of competitive electricity markets.
Opening up the electricity industry to competition promises much good, and it
will provide tangible benefits to both small consumers and large electricity
If the electricity market is really to be competitive, however, all of the
market participants must play by the same set of rules. As long as public power
companies have special advantages, the market will not be competitive.
Public power companies should be allowed to continue to provide electricity
within their own service territories but not to expand outside their service
territories in competition with investor-owned
electric companies. Any public power companies that want to participate in the
competitive market should be privatized.
Public power companies have significant artificial financial advantages. They
receive more than $6 billion in taxpayer-financed benefits each year, as they
taxes, borrow money at
rates, and receive preferential access to low cost federal power. The result of
these subsidies is that public power companies would have to increase their
average prices 20 percent just to be comparable to investor-owned utilities
that do not receive these subsidies.
Public power companies are now allowed to take these subsidies, including their
tax exemptions and their ability to issue
tax free bonds at government interest rates, to compete against investor-owned
utilities around the country. Taxpayers, both federal and state, are
subsidizing the public power companies' forays into the competitive electricity
market. There is no justification for this increased taxpayer subsidy.
Moreover, a number of public power companies are unloading excess power on the
electric power market. This is in addition to any direct sales to electricity
The current $6 billion subsidy will grow ever larger as sales by
public power companies not subject to federal, state, and local
taxes replace sales by private investor-owned utilities that do pay
taxes. Not only does increased subsidization of public power waste taxpayer dollars,
it also distorts the policy goal of achieving competitive electricity markets.
Congress should immediately act to insure that only private, investor-owned
electricity companies are able to participate in competitive electricity
markets. Subsidized public power companies should be restricted to serving
customers in their own territories.
This is the only way to insure that competitive markets work. In competitive
markets, companies that are successful should be so because of their merits and
not just because they have artificial advantages as a result of subsidies.
Keeping public power companies out of competitive markets is also the only way
to insure that taxpayers do not subsidize any expansion of public power
companies into competitive
LOAD-DATE: May 5, 1999