$12.7-Billion Garage Sale

Should the government sell the interstate highways to the trucking companies? The waterways to the shipping companies? Or the air to the airlines? That’s silly, of course. Yet the Reagan Administration is promoting such a concept in its proposal to “privatize” the federal system of hydroelectric-power plants and 33,000 miles of electric transmission lines.

For a paper reduction of $12.7 billion in the federal debt, the Administration wants to peddle the Bonneville Power Administration and its four sister power-marketing administrations to the highest bidders. The rationale is twofold: that the marketing agencies sell power at subsidized rates, and that power marketing no longer should be a federal responsibility.

Whenever critics talk about Bonneville power, it is always identified not only as subsidized but also as “cheap.” But then hydro power is cheap to produce. It also is renewable, non-polluting and far less heavily subsidized than much of the private power that Americans use.

The idea of putting Bonneville in private hands is appealing and simple-sounding. But its flaws go far beyond the fact that the marketing agencies’ assets may be worth more than $60 billion and not the $12.7-billion price tag of the Office of Management and Budget.


The proposal overlooks the 80-year history of marketing the power generated on publicly controlled streams to hundreds of cities, towns and cooperative utilities. It ignores the fact that the marketing administrations constantly wheel power to places of need for both public and private utilities; that federal power sales are the major source of revenue for the financing of irrigation, navigation and flood-control projects, and that there is a national interest in maintaining a vast power-transmission system that is subject only to the public interest.

Bonneville power is subsidized: by getting construction funds from the Treasury at low interest rates. But there is no direct subsidy as, for instance, with Amtrak. In fact, Bonneville had a net operating income of $218 million last year.

One can question now whether the Northwest’s aluminum industry should get a break on public power, as it does. But there is no doubting the economic disruption that would be caused if the industry faced a fivefold increase in rates. Certainly the national interest in maintaining a viable aluminum industry should be considered.

There are other benefits to the present system that transcend a one-time deficit cut of $12.7 billion. The City of Los Angeles and Southern California Edison routinely buy surplus Bonneville power to replace oil and natural-gas generation, and the Metropolitan Water District of Southern California and others underwrote the construction of Hoover Dam by promising to buy the power. Without it, the cost of pumping Colorado River water to the Los Angeles area would be five times the present bill.


The idea of selling the federal system was so outrageous to Richard Pelz, a senior power-marketing attorney for the Energy Department, that it prompted his retirement. He said, “I cannot in good conscience work to implement this proposal because I believe it is economically disruptive, fiscally irresponsible, administratively harmful and intellectually dishonest.”

The power-marketing administrations are too valuable a public resource to be peddled at a federal garage sale.