Changing the Rules in the Middle of the Game?

Everyone knows it's not fair to change the rules in the middle of the game, but that's just what's happening.

With electric utility deregulation, states are changing the rules about how electricity is being sold. These changes in state law have made the federal rules about electric facilities financed with tax free bonds unworkable. Unless Congress acts to fix this problem and update its federal tax rules, community-owned utilities may not be able to participate in deregulation threatening the financial stability of the community and, increasing electricity costs. As states change their rules on electric utility services, Congress must modify the federal tax laws to preserve local control and community choice.

"I rely on local electric utility bonds as a part of my retirement income. Now there is a bill in Congress that would protect my investment from being jeopardized because of electrical deregulation."

The Problem

Community-owned electric utilities built their systems using municipal bonds that are tax-free, like those used to build our schools and supply water to our communities.

Some private utilities don't like the fact that community-owned utilities are not-for-profit organizations. Since community-owned utilities are not-for-profit, they don't pay income taxes. They pass the savings on to us -the consumers- through lower rates. These large private companies want Congress to put a tax on these not-for-profit sales. Their real goal is to force our consumers to pay the same high rates they charge their customers.

"Our town provides community power allowing our consumers to have low rates and local control. We need to pass legislation that keeps the promise we made to our consumers and to the bondholders. Without it, our town's financial stability may be threatened." -Calvin Waite City Council Member Oberlin, Ohio

The Solution

The campaign is bas on the principles found in the Bond Fairness & Protection Act authored by Congressmen J.D. Hayworth (R-AZ) and Bob Matsui (D-CA) as H.R. 721; Senators Slade Gorton (R-WA) and Bob Kerrey (D-NE) introduced an identical bill as S. 386. An industry-wide agreement has been reached; H.R. 4971 and S. 2967 have recently been introduced as the "Electric Power Industry Tax Modernization Act.." This legislation still embodies our goals and includes important pro-competitive provisions for the entire utility industry. Municipal bondholders support the legislation because it still protects $75 billion in bonds held in over 40 states. Cities support the legislation because it allows them to decide how to handle future debt, which may or may not be taxable, depending on the degree they want to compete. This new proposal puts power back into the hands of the community.