Government urged to privatize federal electric utilities; sale of TVA, PMAs would benefit consumers, taxpayers, says study Business & News Editors/Energy & Government Writers
LOS ANGELES–(BUSINESS WIRE)–March 14, 1996–The federal government is the nation’s largest producer of electric power, via the Tennessee Valley Authority (TVA) and five power marketing administrations (PMAs), yet they are poorly managed and grossly inefficient, and receive substantial federal subsidies to insulate them from pricing competition, according to the study “Federal Power: The Case for Privatizing Electricity,” released Thursday by the Los Angeles-based Reason Foundation.
The Clinton administration, in its 1996 budget, has proposed privatizing the four smaller PMAs and restructuring the Bonneville Power Administration into a federal corporation similar to the TVA.
According to Dr. Douglas Houston, author of the Reason Foundationstudy and professor of business economics at the University of Kansas:
“The primary reason to shift the assets of the five PMAs and the TVA into the private sector is to build them into energy organizations that cannot evade commercial accountability.”
“By delaying privatization and hiding behind fences, the TVA will not face a true-market test to increase the value of its assets.”
As the study indicates, federal electricity providers will be much better equipped to cope with fast-approaching electricity deregulation as they are transformed into entrepreneurial companies.
The United States, however, lags behind many other countries in electric-power privatization. Worldwide asset privatization in the electric-utility industry totaled $12.9 billion in 1995, leading all other industries.
Many nations, from Chile to Great Britain, have entered ambitious electric-power privatization programs for two primary reasons: (1) to raise capital to reduce their national debts, and (2) to improve the efficiency and performance of their electric-power industries.
According to the study, the sale of all U.S. federal power enterprises would raise between $15 billion and $30 billion, which could be applied to reducing the national debt. William Malec, former chief financial officer of the TVA, estimated that the TVA alone could sell for as much as $10.5 billion.
In addition to a divestiture of federal power assets, the report recommends the removal of tax advantages to government-owned utilities and cooperatives, which would increase future federal income-tax revenue flow by an estimated $3 billion per year; states would gain another $2 billion per year.
“Rate shock to formerly subsidized federal electricity customers can be minimized by transitional price caps and stock- purchase options,” said Houston.
“Privatization of federal power is generally viewed as a win-win proposition,” explained Robert Poole, president of the Reason Foundation and an authority on federal privatization.
“Consumers nationwide will benefit from the lower prices provided by enhanced access to federal transmission lines for long-distance power sales. The environment will benefit, as the removal of subsidies leads to energy conservation.”
According to Houston, “The near-term prospects for electric- power privatization are promising, but as the industry undergoes deregulation, we still have many federal power assets that are interfering with an emerging competitive process; this damages the foundation of a nation’s productivity and its capacity for economic growth.”
Related studies that address the issue of electric-utility privatization include “Toward Accountability and Efficiency: Reform of the Bonneville Power Administration,” “Public vs. Private: Alternative Ownership Scenarios for Electric Utilities” and “Privatization of the Tennessee Valley Authority.”
Copies are available for $15 (plus $1.50 s/h) each and may obtained by calling the Reason Foundation at 310/391-2245.
The Reason Foundation is a national public-policy research organization with a practical, market-based approach and an outside Washington perspective. Founded in 1978 and based in Los Angeles, the Reason Foundation has earned a reputation for sound economic research and a how-to approach that benefits policy-makers and elected officials who require practical solutions.
CONTACT: The Reason Foundation, Los Angeles
Brandon Shamim, 310/391-2245
In this issue: . . . . . . . . .
Washington DC Tampa Meeting UFTO Topics Cold Fusion
1. My Washington trip was packed with meetings, including the “Technology Partnering” conference. A number of interesting developments, as outlined in the attached notes.
2. The Breakthrough Conference is taking shape nicely. EPRI and EEI are now sponsors, and we’re working on DOE. (See the ad on page 45 in the February Electrical World.) You’ll receive a registration package in the mail soon.
PLEASE: respond to me about who’ll come to Tampa, and in particular who will be coming to the UFTO MEETING on Wednesday April 24. And if dinner on Thursday sounds like a good idea. And on what we want to accomplish at our meeting.
3. I may be able to announce one or two new UFTO members soon. (It’s all but certain, but I’d prefer to be certain.)
4. Filemaker! Enclosed is an example of a “cut & paste” topic report on NOx and SOx, from the new UFTO Topics database, now in “pre-prerelease.”
Alpha testers wanted. Prerequisite — familiarity with, and your own copy of, Filemaker Pro 3.0 for PC or Mac.
It’s important that everyone understand that this is strictly “as-is” software. You may prefer to simply ask me to do topic reports for you, rather than deal with the database yourself.
5. Many of you asked for copies of the Cold Fusion tapes and materials. Any thoughts or reactions?
ENECO, the company that provided the 1994 CBC tape and put together the booklet, is exploring the possibility of doing a state-of-the-art survey for interested parties, on a multi-client basis. A two page proposed outline is enclosed. The price hasn’t been set yet –that will depend on the number of subcribers and what their interests are. Probably in the neighborhood of $5K-$10K. Would your company want to participate? Let me know if you’re interested, and I can put you in touch with them.
6. See some new “UFTO Tech Nuggets” attached.
7. Upcoming events you might want to know about. (I could attend for you if you want.)
I have a little more information on each of these meetings if you want it….
• 1st Annual Conference of SMES Customer Interest Group, April 15-16, Chicago.
A half dozen manufacturers, Sandia and the US Air Force will be making presentations. Call 608-831-5773.
• DOE/EPRI Green Pricing Workshop, April 11-12, Golden CO. Open to anyone.
Call Lori Adams, EPRI Conferences, 415-855-8763.
• World Renewable Energy Congress, Denver, June 15-21. Call NREL 303-275-4358
UFTO Tech Nuggets
March 7, 1996
• Biochemical Upgrading of Petroleum (“BUP”)
Work at Brookhaven National Lab has shown that certain catalysts can effectively upgrade crude and processed oils in ways that have significant economic potential. These processes enchance lighter oil fractions, reduce organic sulfur and nitrogen content, and remove trace metals such as nickel and vanadium.
To date, processes have been demonstrated at 50 gallon bench scale. BNL, assisted by the Long Island Research Institute(LIRI), has set up a company and is seeking industrial partners. They’ve prepared a detailed commercialization plan that discusses a wide range of potential applications.
The Technology can be applied in upstream and downstream processing of oils and oil fractions, and in pretreatment of oils in many applications. Calculations show net financial benefits (i.e. after capital and operating costs) of $0.30 to $1.20 per barrel.from changing high sulfur oil into low sulfur oil.
Related technology can also treat waste streams from geothermal energy production, recovering valuable trace metals and converting geothermal sludges into commercially viable products.
Contact Ed Beardsworth, UFTO, or Phil Palmedo, LIRI, 516-361-6800
• Lighting Technology Screening Matrix (LTSM) is a software tool the calcualtes the life-cycle cost of an existing fixture and potential energy efficient replacements. Funded by the DOE Federal Energy Management Program, it was developed at the Pacific Northwest National Lab (PNNL). It can be ordered through the Battelle Memorial Institute at 1-800-451-3543. The price is $499.
• Small Gas Turbines for Distributed Generation Workshop, was held in San Francisco in February 1995, sponsored by EPRI, GRI, PG&E, and DOE. The 2-volume proceedings are available on request from Sargent and Lundy. Call J. N. Darguzas, 312-269-6902.
• CAGT? ICAD? Do these acronyms mean anything to you? See attached letter….
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