||Thursday, February 11,
FOR IMMEDIATE RELEASE
FOR MORE INFORMATION:
Jim Owen 202-508-5659
THERE THEY GO AGAIN -- NEW PUBLIC POWER TAX BILL STILL
DOES NOT CREATE LEVEL PLAYING FIELD, EEI SAYS
WASHINGTON, DC (February 11) – New so-called “compromise”
legislation introduced to clarify the use of tax-exempt financing by
municipal utilities makes some changes but still falls short of
creating a level playing field in future competitive markets, the
Edison Electric Institute said today.
An EEI analysis of S. 386, introduced this week by Sens. Slade
Gorton (R-Wash.) and Robert Kerrey (D-Neb.), shows that the bill
does not create a level playing field between government-owned
utilities -- which pay no income tax and enjoy tax-free financing, a
drain on the federal treasury -- and shareholder-owned utilities,
which pay billions in taxes.
“S. 386 has been touted as a ‘compromise’ aimed at leveling the
playing field, but this bill in reality will continue providing
public power with substantial federal subsidies,” said EEI Executive
Vice President David K. Owens. “This legislation in some ways
actually broadens the ability of government utilities to leverage
their tax preferences to compete against taxpaying utilities.”
“Private use” laws restrict the ways in which municipal electric
utilities can use tax-exempt bonds, generally limiting them to serve
the residents of their own municipalities.
But with the advent of retail competition -- now approved by
one-third of the states and counting -- municipal utilities would
like to use their tax exemptions to underwrite their efforts to
compete against tax-paying, shareholder-owned companies in
deregulated markets across the country.
"Moreover, the Gorton bill would extend these benefits to
municipal utilities which do not even offer retail competition to
their own customers,"
Owens said. "The fact is, S.386 would allow the munis to keep
their monopoly franchises while using the subsidies to compete
beyond their borders in newly opened markets." Owens noted that S.
386 would also:
“This bill is not a compromise,” Owens said. “In a
competitive marketplace, it is unfair for the federal government to
subsidize government entities competing with private, taxpaying
businesses. By expanding subsidies for government utilities, S. 386
would expand the role of government in the electric industry — an
outcome few people want.”
- Allow public power entities to sell power from federally
subsidized facilities in competitive markets, outside the
utility’s traditional service territory, without even paying
income tax on those sales.
- Broaden the ability of publicly-owned utilities to build new
transmission facilities with tax-exempt bonds, facilitating public
control of transmission as the industry restructures.
- Run contrary to the Clinton administration’s position, which
would bar new tax-exempt debt for building new transmission lines.
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Edison Electric Institute is the association of investor-owned
electric utilities and international affiliates whose domestic
members serve about three-quarters of the nation’s electric
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