Portion of Trump budget proposal worries Kansas rural electric co-ops

? Some Kansas utility officials say they’re concerned about a portion of President Donald Trump’s budget proposal that calls for making some big changes in a group of obscure federal agencies that supply electric power to much of rural America.

The White House budget proposal calls for selling off to the private sector all of the transmission assets of agencies known as regional “power marketing administrations,” or PMAs, federal agencies that distribute hydroelectric power from federal dams to rural electric cooperatives, municipal utilities and other not-for-profit utilities, including some military bases.

One of those agencies, the Southwestern Power Administration, is headquartered in Tulsa, Okla., and supplies power to approximately 600,000 customers of rural electric cooperatives and municipal utilities in Kansas, including FreeState Electric Cooperative, which serves much of rural Douglas County.

Marcus Harris, executive vice president and CEO of the Kansas Electric Power Cooperative, or KEPCO, a generating and transmission cooperative that serves several rural co-ops in Kansas, including a portion of FreeState’s territory, said he has heard similar proposals come and go from federal officials for years.

“Honestly, when this comes up, typically through the budget proposals, we look at it as sort of — I don’t know if ‘uninformed’ is the right word, but an uninformed, or misinformed thought that maybe there’s some hidden value in these hydro projects,” he said in a phone interview.

“And the fact is, there really is not,” he said. “We pay the full cost to run those units. We even pay for pretty major upgrades over periods of time at those dam facilities across the Southwest.”

One of the concerns about Trump’s plan for the PMAs is that there is currently no estimate of what those assets might be worth. And that is no accident.

Beth Nielsen, spokeswoman for the Southwestern Power Administration in Tulsa, said a federal law enacted during the Ronald Reagan administration in 1986 prohibits anyone in the government from spending any money to draft proposals or conduct studies aimed at transferring out of federal control any portion of the assets of those power marketing administrations, unless Congress specifically authorizes it.

“That’s been interpreted for us as we can’t even begin to look at the effects of this thing because Congress hasn’t appropriated money for us to do so,” Nielsen said.

Although the hydroelectric power that co-ops and municipal utilities receive from the power marketing administrations is only one part of the overall power mix of those utilities, Nielsen said it’s a significant part and one that the customers of those utilities have paid for.

The Southwestern Power Administration, she said, gets 2,174 megawatts of hydroelectric power from 24 federal reservoirs in Missouri, Arkansas, Oklahoma and Texas. The PMA distributes that power to customers in those four states, as well as in Kansas and Louisiana.

Nicki Fuller, executive director of the Southwestern Power Resources Association, a trade organization of utilities that buy power from the PMA, said it is inaccurate to suggest that the PMAs are taxpayer-subsidized entities.

“The PMAs are a very unique beast in the federal government in that the taxpayers pay nothing,” she said. “We as customers pay everything. Every single dollar, we pay it. It’s not subsidized by the taxpayers, and in no way is there taxpayer risk or taxpayer subsidy.”

The biggest impact from selling off the transmission assets, she said, would most likely be higher electric rates for customers.

“Most of my members have had their federal hydro-power allocation for well over 50 years, and they’ve been paying for these assets for all of that time,” she said. “And then, if these assets get sold to someone else, (customers) will have to pay an additional fee to use these assets because right now, they’re sold at cost-based rates.”

Kansas state Rep. Tom Sloan, R-Lawrence, who serves on a federal advisory committee to the U.S. Department of Energy, agreed that the result would likely be higher rates for customers.

“Whoever buys it is going to have to recover their investment, and that means they’re going to have to have price increases,” he said in a recent interview.

“I think it will result in higher electric costs to rural residents,” he said. “On the other hand, if the president gets what he wants — if he wants to take whatever the selling price is and invest that in other infrastructure — if he’s going to help Kansas repair our roads or get more high-speed internet deployed in rural areas, those would be good,” he said.

According to an article in one trade industry publication, Transmission and Distribution World, the Trump administration expects the sale of transmission assets to generate about $5 billion for the federal government over a 10-year period, from 2018 through 2027.

The article stated that it is one part of the president’s plan to cut $3.6 trillion in federal spending over that period, while increasing revenues by $2.7 trillion over the same period.

The president’s budget proposal is still pending before Congress.