The next Congress may see a real fight to privatize the federal Power Marketing Authorities (PMAs). Bills to this end were introduced in both the House and Senate late this year, but the real effort is planned for next year.

The PMAs were created just after WW II to sell hydroelectric power generated by federally built and owned facilities. The idea of privatizing the PMAs came to the forefront this year following a GAO report showing that the PMAs have failed to recover as much as $500 million in annual costs. The PMAs have long claimed to receive no subsidies, but the GAO report revealed that their $500 million shortfall is made up by the taxpayers.

Says Rep. Bob Franks, "Past arguments by PMA beneficiaries have been misleading at best...These beneficiaries and their Washington lobbyists have long asserted that they receive no federal subsidy. The GAO report rebuts those arguments clearly."

The American Public Power Association has objected to the GAO study. "The PMAs have unique characteristics that make certain comparisons against other utilities of limited value,"claims JM. Shafer, administrator of the Western Area Power Administration (WAPA), one of the PMAs examined in the study.

However, the GAO also revealed that the PMAs have been unable to fully maintain their generating capital, and total generating capacity has fallen to 87 percent of its potential. The result has been more outages and increasing utility rates.

Sponsors of a House bill to privatize the PMAs (HR 3878) and others criticize the PMAs for selling power for much less than market rates. These lower rates make local markets more attractive to businesses compared to neighboring ones that do not the have access to cheap federal power. Critics also accuse the PMAs of laxity in monitoring how much power their customers use and of not fully charging them for what they use.

As it currently stands, the proposal to privatize the PMAs has two parts. The first part reforms current PMA operations, with a focus on full cost recovery and market rates. The PMAs would be directed to sell all power at market rates using a bid auction procedure. In addition, all new power contracts must be at market rates and include full cost recovery. Time limits would be placed on all existing contracts that include sub-market rates. Finally, the PMAs would be brought under the regulatory oversight of the Federal Energy Regulatory Commission (FERC).

The second part of the proposal would direct the sale of all the PMAs' hydroelectric power generation facilities, contracts, interests, and obligations, as well as all federally owned transmission facilities operated by the PMAs. The PMAs themselves would be terminated, and FERC would license and regulate the sold facilities. The bill also includes a provision that the TVA receive the same treatment.

Proponents estimate that the Treasury could realize about $3.5 billion from the sale of the PMAs, plus collect $1 billion annually in taxes from them once they are private.