Federal Power:

The Evolution of Preference in Marketing Federal Power

GAO-01-373: Published: Feb 8, 2001. Publicly Released: Feb 13, 2001.

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Congress has enacted many statutes that designate types of customers or geographic areas for preference and priority in purchasing electricity from federal agencies. In general, the preference has been intended to (1) direct the benefits of public resources--relatively inexpensive hydropower--to portions of the public through nonprofit entities, (2) spread the benefits of federally generated hydropower widely and encourage the development of rural areas, (3) prevent private interests from exerting control over the full development of electric power on public lands, and (4) provide a yardstick against which the rates of investor-owned utilities can be measured. The applications of various preference provisions have been challenged several times in the courts, which have directed a power marketing administration (PMA) to provide power to preference customers. In other instances, they have supported the denial of power to such customers. The characteristics of the electricity industry have changed. During the last 20 years, competition has been replacing regulation in major sectors of the U.S. economy. Several proposals have come before Congress to restructure the electrical industry, including some that would encourage the states to allow retail customers a choice in selecting their electricity supplier. As it debates these proposals, Congress has continued to consider the role of preference in the PMA's sale of electricity.

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