Budgetary Consequences of Selling Federal Power Assets

This article reports on an analysis of the long-term budgetary effects of selling federal power programs at market value. The analysis looks at changes in future budgetary receipts and costs for power operations and at changes in future federal taxes as a result of new ownership. Under current rate-setting policy, federal agencies must generate a future operating surplus (and hence, budgetary income) worth about $46 billion in today's dollars to repay past capital investments. With optimistic assumptions about rising power rates, market values for all federal power assets (including the power-generation assets of the Bureau of Reclamation and the Corps of Engineers) could be as high as $62 billion. In that case, their sale would produce long-term budgetary savings of about $16 billion, in today's dollars. The analysis also notes that budgetary savings are not a measure of the gains in economic efficiency from privatization. Such considerations as efficiency or fairness to particular groups will be important in any debate about the future of federal power programs.