Steps Congress can take to empower economic recovery

Steps Congress can take to empower economic recovery
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In the United States, some 49 million Americans, 2.6 million businesses, and thousands upon thousands of hospitals, police departments, fire departments, water treatment plants and the like rely on not-for-profit, community-owned utilities for electric power. These 1,900 public power utilities are critical to the life, safety, and economic health of the communities they serve. In the midst of this unprecedented pandemic, their top priorities are to keep customers and their 93,000 workers safe while continuing to provide power reliably.

It may take several months for the full effect of pandemic-related challenges for public power utilities to become apparent — workers laid off in April may decide not to pay their bills in May but won’t be 30-days late until June. But the trendline today is clear and troubling. Public power utilities face increased costs from extraordinary measures needed to continue operating and declining revenues because of the economic slowdown and customers’ inability to pay.

Congress has taken swift action in responding to this pandemic. Increased funding for the Low Income Home Energy Assistance Program (LIHEAP) and Coronavirus Relief Funds could help customers pay their bills. But most of the relief provided by Congress will not directly benefit public power. For example, public power utilities do not receive payroll tax credits that offset the cost of providing COVID-related emergency sick leave or paid family leave. Likewise, public power utilities have no access to the small business loans authorized by the CARES Act — even though all but 20 of the nation’s 1,900 public power utilities would be considered “small” based on Small Business Administration’s size standards.

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Not all utilities are the same, but some are facing this bleak outlook with just 30 days of cash-on-hand and worried they will be forced to make unacceptable choices: furloughing staff, not paying their own bills, or increasing rates for customers when they can least afford it.

Congress can — and should — take action in the coming weeks to provide direct financial assistance for public power customers and workers during this ongoing public health crisis and the resultant economic challenges. This could come in the form of a forgivable loan akin to the Paycheck Protection Program, a direct grant from the Department of Energy, or even a refundable tax credit. But whatever form this takes, it should alleviate the immense financial pressures facing public power utilities caused by customer delinquencies and declining power usage.

The American Public Power Association, of which I am president and CEO, also joins with consumer advocates and other utility groups in asking Congress to consider a $4.3 billion supplemental appropriation for LIHEAP. Again, Congress’s initial supplemental appropriation for LIHEAP — the nation’s single most powerful tool for providing energy security based on economic need — will be helpful. Six million Americans use this program every year, but the National Energy Assistance Directors Association estimates the economic downturn will throw another 8 million Americans onto LIHEAP’s eligibility rolls.

Likewise, Congress is to be commended for creating the Municipal Liquidity Facility at the Federal Reserve to help state and local governments hurt by the pandemic borrow money. We believe when implemented, this facility could provide a needed service as a lender of last resort for short-term municipal debt. But this facility is limited to short-term debt and will almost certainly be limited to the nation’s largest state and local entities.

As a result, we recommend Congress adopt a pair of bipartisan proposals that will help with longer-term financing:

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  • The Municipal Bond Market Support Act (H.R. 3967) expands the number of smaller issuers that banks — historically, smaller local banks — are encouraged to lend to by increasing the small issuer exception from $10 million to $30 million.
  • The Investing in Our Communities Act (H.R. 2772) reinstates the ability to issue tax-exempt advance refunding bonds. These bonds saved public power utilities more than $600 million from 2013 to 2017 — savings passed onto utility customers or reinvested — and could provide needed financial relief today and in the future.

Finally, our industry appreciates the emergency funding provided under the CARES Act to the nation’s Power Marketing Administrations, Army Corps of Engineers, and Bureau of Reclamation hydropower programs. The CARES Act, however, failed to amend current law, which requires that these emergency appropriations be recovered with rate increases by electric customers. Congress should explicitly state that CARES Act emergency funds may not be recovered in rates from customers of the Federal Power Program. Now is not the time to raise rates.

Public power utilities are critical to the life, safety, and economic health of the communities they serve.

By providing direct lines of financial relief, Congress can keep the power flowing to tens of millions of Americans. In doing so, they will help our industry empower America through the economic recovery that lies ahead.

Joy Ditto is the president & CEO of the American Public Power Association.