Federal Power:

Regional Effects of Changes in PMAs' Rates

RCED-99-15: Published: Nov 16, 1998. Publicly Released: Dec 16, 1998.

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Pursuant to a congressional request, GAO provided a state-by-state analysis of the preference customers who buy power from the Southeastern Power Administration, the Southwestern Power Administration, and the Western Area Power Administration, focusing on the: (1) extent to which preference customers' rates may change if market rates are charged; (2) areas the three power marketing administrations' (PMA) preference customers report serving; and (3) incomes in these areas and the extent to which they are rural or urban.

GAO noted that: (1) overall, slightly more than two-thirds of the preference customers that purchase power directly from the Southeastern, Southwestern, and Western Area power administrations may see relatively small or no rate increases if these PMAs begin to charge market rates for the power they produce; (2) in particular, given GAO's assumptions, almost all of Southeastern's preference customers would see average rate increases of up to one-half cent per kilowatt hour (kWh) on rates that in 1995 typically ranged from 3.5 to 6.0 cents per kWh; (3) most of these preference customers would see increases of less than one-tenth cent per kWh; (4) if the preference customers served by Southeastern pass the higher rates on proportionally to their residential end users, most end users would see their monthly electricity bill increase by less than $1, while the maximum increase would range in most states between $1 and $8, depending on the state; (5) preference customers who receive power from Western may see a variety of rate increases if market rates are charged; (6) as a group, Southwestern's preference customers may see rate increases that lie between those for Southeastern's and Western's customers; (7) most of Southwestern's preference customers may see relatively low rate increases of up to one-half cent per kWh on rates that typically ranged between 1.5 and 3.5 cents per kWh; (8) however, almost all preference customers in Oklahoma may see larger rate increases that exceed 1.5 cents per kWh; (9) in general, a preference customer's rate increase depends primarily on what portion of its total power comes from the PMA and how close the PMA's rate is to the market rate; (10) preference customers included in GAO's analysis that purchased power directly from the PMAs serve varying portions of 29 states; (11) the populations in the areas preference customers serve generally have median incomes that are similar to the median income in the entire state; (12) in about two-thirds of the states GAO examined, the preference customers serve counties and towns whose median household incomes are within 15 percent of the statewide median income; (13) however, in some states, preference customers primarily serve poorer areas and households; (14) nationwide, about half of the towns that preference customers serve are urban and about half are rural; and (15) most of the counties are mixed, about 40 percent are rural, and the remainder are urban.

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