Budget cuts seem fine until they're to your pet project

Nearly 50 House Republicans say a deficit-cutting proposal from President Bush goes too far: It hurts their constituents. The members, some of whom come from the reddest of states, object to an Energy Department budget proposal allowing the four power-marketing administrations (PMAs) — quasi-governmental entities that sell power in 33 states, from Florida to Washington — to raise their rates.

Nearly 50 House Republicans say a deficit-cutting proposal from President Bush goes too far: It hurts their constituents.

The members, some of whom come from the reddest of states, object to an Energy Department budget proposal allowing the four power-marketing administrations (PMAs) — quasi-governmental entities that sell power in 33 states, from Florida to Washington — to raise their rates.

The lawmakers sent a letter March 4 to House Budget Committee Chairman Jim Nussle (R-Iowa) and Resources Committee Chairman Richard Pombo (R-Calif.) as Congress prepares to debate the budget resolution, which will set spending caps on the federal government.
The members said they supported efforts to cut the deficit, which the White House projects to be $427 billion for 2005. But the energy proposal — projected to raise $12 billion in 10 years — would “unfairly target our constituents that receive power from one of the four” PMAs.

“We oppose this proposal to unjustifiably increase our constituents’ power bills to boost the Federal Treasury,” states the letter, which is signed by 48 Republicans.

The objection parallels similar complaints from a number of senators, including Energy and Natural Resources Chairman Pete Domenici (R-N.M.). Key budget writers on Capitol Hill have also questioned the proposal, providing further proof of two political facts: Regional concerns often trump party preferences in energy-policy matters, and cutting the deficit is easier to say than do.

As the House and Senate budget committees prepare to mark up budget resolutions in meetings scheduled for today it appears that opponents of the rate increase are likely to prevail.

Bush, saying the administration is taking new steps to curb federal spending, sent a 2006 budget to Capitol Hill on Feb. 7 that cuts or eliminates 150 programs. That would save about $15 billion a year, according to the spending watchdog group Citizens Against Government Waste.

Some in Congress have been less than pleased. Caps proposed for farm subsidies have drawn complaints from Republicans such as Sens. Saxby Chambliss of Georgia and Thad Cochran of Mississippi, who fear for farmers in their states.

Peach State members have also criticized proposed cuts to the F/A-22 and C-130J, two Air Force planes built in Georgia. Republican and Democratic lawmakers from Florida, meanwhile, have objected to a plan to retire a Navy carrier. And GOP Sens. Trent Lott (R) of Mississippi and John Warner of Virginia, the chairman of the Senate Armed Services Committee, have questioned proposed shipbuilding cuts.

“It is unfortunate that the first thing that members do is protect their projects and programs, but nobody seems to come up with another list,” said Tom Schatz, president of Citizens Against Government Waste.

The Energy Department proposal doesn’t rein in federal spending, critics of the plan say. It instead tries to cut the deficit by increasing revenues through what the letter calls a “discriminatory tax.”

Under the proposal, the four PMAs would eventually be able to charge market rates for their power. Rates now cover the cost to produce the power and to repay low-interest government loans used to finance capital projects. Rates could increase by only 20 percent per year, until the market rate was reached.

To critics in the Midwest and Northeast, areas that don’t benefit from PMAs, the loans amount to a federal subsidy of power production, a position that has received support from the Government Accountability Office.

“Why should one particular section of the country be receiving subsidized electricity in the 21st century?” said Dick Munson, the executive director of the Northeast Midwest Institute, a nonprofit group that promotes economic and environmental policies beneficial to the two regions. Regional coalitions in the Senate and House support the institute’s positions.

“It made sense 75 years ago when rural America needed electricity. … Last time I checked, Seattle residents, like everyone else, had access to electricity,” Munson said.

Supporters say the loans are repaid with interest and therefore don’t cost the government anything.

More than a decade ago, the Clinton administration proposed the privatization of PMAs, which would have had largely the same effect as a rate increase. That effort failed after a widespread legislative outcry.

Despite past successes, proponents of PMAs remain nervous.
“There is this sense that everything is on the table,” said Ted Case, a lobbyist for the National Rural Electric Cooperative Association (NRECA). About two-thirds of the NRECA’s 900 member co-ops purchase power from PMAs.

The NRECA and the American Public Power Association have helped build opposition to the plan.

“We took this very seriously,” Case said.

Members from the Northwest, which benefits from low-cost power generated by hydropower dams run by the Bonneville Power Marketing Administration, have been among the most vocal critics. The three other PMAs are the Western Area Power Administration, the Southwestern Power Administration and the Southeastern Power Administration.

Customers in the Northwest pay the lowest electricity prices in the country. Washington residents pay 4.10 cents a kilowatt-hour. In Oregon the price is 4.87 cents/kwh, and in Idaho the price is 3.98 cents/kwh.

By comparison, customers in New York pay 10.4 cents per kilowatt-hour. In Illinois, the cost is nearly 7 cents.

But cheaper power rates haven’t led to a quick economic turnaround for the Northwest, stung by the dot-com bust. Its unemployment rates are among the highest in the country.

A study by the Northwest Power Council, a group created by Congress to balance energy development with other resource uses, found that the administration’s proposal could cost consumers in the Northwest $1.6 billion a year.

Energy Department officials have said the effects would be gradual and less severe. Nearly 10 million people get their power from the Bonneville PMA.

“This would have a devastating effect on our economy,” said Angela Wilhelm, a spokeswoman for Rep. Greg Walden (R-Ore.), who signed the letter. Others signing the letter include Steven Pearce of New Mexico, Doc Hastings of Washington and Charlie Norwood of Georgia.

Senate Budget Committee Chairman Judd Gregg (R-N.H.) has said the administration proposal will not be in the Senate budget resolution. It isn’t clear if Nussle, Gregg’s counterpart in the House, feels the same, although it appears that he may.

“We are well aware of the concern and we share the concern,” said Budget Committee spokesman Sean Spicer.

But Energy Department spokesman Joe Davis called the proposal sensible.
“We’d like to level the playing field in these areas for others in the power business,” he said.