The Trump administration has figured out a way to engender bipartisanship: Propose selling off U.S. federal power marketing administration assets, including Bonneville’s 15,000-mile high-voltage electric transmission system.
Fourteen Democratic U.S. senators — including Oregonians Ron Wyden and Jeff Merkley — have joined with nine Republicans in a letter to budget director Mick Mulvaney opposing the proposal made last month in the president’s fiscal year 2019 budget.
“Privatizing these assets will likely not result in incentivizing new transmission infrastructure that many of us support,” the senators wrote. “Instead, it will simply shift economic value from families and businesses in our states to investors.”
Along with BPA, the power marketing administrations include the very large Western Area Power Administration and the smaller Southwestern Power Administration. Altogether they touch every state west of the Mississippi River, selling wholesale power, mostly to public utilities, at generally cheap rates from federal dams. They own some 33,000 miles of transmission.
Separately, the administration has also proposed selling off the Tennessee Valley Authority.
The administration says “introducing more market-based incentives, including rates, for power sales from federal dams, would encourage a more efficient allocation of economic resources and mitigate risk to taxpayers.”
Bonneville’s assets would bring $5.2 billion over 10 years, the Trump budget says. A related proposal for the trio of power marketing administrations to sell federal power at cost-based instead of market-based rates would yield another $1.9 billion, according to the budget proposal.
Similar proposals have been made before regarding the power marketing administrations, most recently by the George W. Bush administration, and the Obama administration at one point asked Congress “to explore options for ending federal ties to TVA.”
The senators’ letter notes that Moody’s Investor Services panned the idea in a research note that focused on BPA and TVA.
“We believe that TVA’s and BPA’s assets have operated well from a reliability and cost standpoint,” the bond credit rating firm said. “We also believe that any divestiture is likely to raise transmission rates for BPA and TVA customers because the new private owners would have higher capital costs that would need to be recovered in rates.”
BPA is not without its challenges, however, amid shifting market dynamics.
In a five-year strategic plan unveiled in January it not that as of the end of 2017, it had consumed $5 billion of its federal borrowing authority, and that it was on a course to run up against a $7.7 billion limit by 2023. One of the planks of the strategic plan is to meet capital needs on a 10-year rolling basis and preserve $1.5 billion in borrowing authority.
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