By Steve Johnson, ECT Staff Writer, Published February 14, 2012
Electric cooperatives say a budget reform measure passed by the House of Representatives could place unnecessary limits on Rural Utilities Service lending and potentially lead to higher electric bills.
“This legislation will have a negative effect on the economy of rural America, raising electricity rates unnecessarily,” said NRECA CEO Glenn English.
English’s comments came as the House passed the Budget and Accounting Transparency Act of 2012 on a 245-180 vote Feb. 7. It now goes to the Senate.
The bill, H.R. 3581, is described as incorporating market risk in the cost of government credit programs, with particular aim at mortgage giants Freddie Mac and Fannie Mae.
“Obviously, this legislation lumps all programs together. The repayment history of electric co-ops is far better than others included under the bill,” said English.
Under provisions in the measure, the Office of Management and Budget would have to increase its cost estimates for lending programs like the RUS Electric Loan Program, even though co-ops have a long track record of prompt loan repayment.
English bluntly warned the legislation employs the same gimmickry associated with Arthur Andersen, the accounting firm entwined in the Enron scandal, and actually would inhibit rural America’s access to capital.
“If enacted, this legislation with its funny math would needlessly drive up the cost of capital for electric cooperatives that borrow funds through the USDA’s Rural Utilities Service by requiring the government to use new Arthur Andersen-style math in determining the cost of federal loan programs to the government,” he said.
“The approach seems aimed more toward a political objective than an accurate assessment of taxpayer risk.”
Because the bill would make the RUS program more expensive on government balance sheets at a time of a tight budget, co-ops would likely not have access to the same $6.5 billion loan level as in recent years.
That also means they would have to turn to non-RUS lenders at higher costs to build and maintain the infrastructure needed to ensure safe, affordable and reliable electricity, English said.
“That means higher electric bills for electric cooperative consumer members―your constituents,” English said in a letter to House Speaker John Boehner, R-Ohio, Minority Leader Nancy Pelosi, D-Calif., and several House committee leaders.
English urged lawmakers to rewrite the legislation in a way that doesn’t needlessly hurt the economy of rural America.