Originally created 05/02/00

Answers criticism of utility bill



Re your recent editorial "Anti-free market power play," which criticizes legislation I have introduced in Congress -- the Bond Fairness and Protection Act:

While I commend you for your sincere interest in this important subject, you obviously have only a superficial understanding of my bill and the tax law that applies to electric utilities.

First, because of the principle of sovereign immunity, it is unconstitutional for the federal government to tax the operating functions of municipal utilities. (It would be like the federal government trying to tax South Carolina's state lottery.) So this legitimate constitutional protection is not the special "subsidy" as you suggest in your editorial.

Second, while my bill allows municipal utilities to continue to issue tax-exempt bonds, those municipal utilities that choose to expand outside their traditional service area and need relief to do so would be prevented from issuing additional tax-exempt bonds for new, competitive power generation. This provision essentially says that if you want to compete in the free market for energy and supply electricity outside your traditional service area, then you have to compete on a level playing field with investor-owned utilities.

Third, we can debate the question of whether municipal utilities should have been created in the first place. But the reality is that they were an essential part of electrifying the country and are here to stay. It would be incredibly naive to imagine that we could simply abolish the more than 2,000 municipal utilities that serve more than 40 million Americans.

Finally, you also suggest that my legislation "runs counter to every electric restructuring proposal." Baloney. It is not only substantially similar to the administration's bill, its provisions have been included in the comprehensive electricity restructuring bill approved by a key House subcommittee. Indeed, the basic principles of my bill reflect a compromise position that has been accepted by all but extreme elements in the debate.

As a pro-free market member of the House Ways and Means Committee, ensuring a robust competitive market in electricity is of the highest concern to me. Consequently ... in the future I would appreciate having the opportunity to provide information about how this section of the federal tax code actually operates.

U.S. Rep. J.D. Hayworth, Washington, D.C.