Business relationships matter. Some of the most vocal opposition to PMAs in Congress has come from liberal Democrats and moderate Republicans. Why? Because they hail from districts in the Northeast or industrial Midwest that don't receive PMA power. And these parts of the country have energy prices far above the national average. "It's hard to convince energy-intensive businesses to stay in the Northeast or Midwest when they can pack up and move to the South or West and pay much lower energy bills," says Rep. Bob Franks (R-N.J.), co-chairman of the Northeast-Midwest Congressional Coalition. Indeed, thanks to the Bonneville Power Administration, the largest of the PMAs, the Pacific Northwest has attracted much of the energy-intensive aluminum industry.
Klug says he wants more formal ties with the business community, rather than the "ad hoc coalitions" he relied on in the last Congress. A number of investor-owned utilities are eager to buy a stake in the PMA projects. But the industry's priority is to end the government subsidy, particularly as electricity deregulation builds momentum. In the regulated environment, utilities didn't really compete with one another, so PMAs weren't a major issue. But following deregulation of the wholesale power market in 1992 and with California beginning the early stages of retail competition in 1998, investor-owned utilities are more concerned. "You can't have an open market where some are subsidized and some aren't," says the Alliance for Power Privatization's Bill Marson.
At the same time, deregulation is reducing the PMAs' price advantage, which means that privatization would have an even smaller impact on customers' rates. Competitive prices also could affect the PMAs' ability to repay their large outstanding loans, according to a 1995 GAO report. Bonneville, burdened with a disastrous investment in nuclear energy, already has had to lower its rates to keep several of its major customers from leaving.
It's going to take time. "We thought it was going to be a sprint, but it turns out it's more like a marathon," says Klug. Yet time is on their side. Republicans are confident that they'll hold the House for at least the next four years, and conditions for privatization are likely to improve over that time. In the short term, working on a balanced budget agreement and dealing with entitlement spending may suck up all the political oxygen. (The House Budget Committee may include Shadegg's plan in its budget proposal, but the administration's budget probably will not include any PMA proposals this time, and the Senate remains hostile territory.) But as the deadline for eliminating the deficit approaches, Congress -- which presumably will delay serious spending cuts until 2000 or later -- will be scrambling to find any sources of revenue. "The budget numbers get so tough that eventually we'll have to sell them off," Klug says.
Critics may chafe at the slow pace of change, but they need to remember that the federal government has had little experience with asset sales. PMA sales will serve as a guide for future privatization efforts. So when privatization proponents move on to the air traffic control system, the Tennessee Valley Authority, or even the post office, they may be able to avoid the political landmines and minimize resistance from the entrenched special interests.
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