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Rural Utilities Service:


Still a Great Bargain for the Nation National Rural Electric Cooperatives Association


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s of year-end 2012, electric co-ops had invested more than $150 billion to build critical infra- structure spanning 75 percent of the United


States. T is network includes 66,500 miles of bulk transmission lines and 2.5 million miles of distribution lines, or 42 percent of the nation’s total. Co-ops also own all or part of 200 power plants with a combined installed capacity of more than 50,000 MW. T ese generate roughly 5 percent of U.S. electricity capacity, distribute 10 percent of all kilowatt-hours sold, em- ploy more than 70,000, and pay more than $1.4 billion annually in state and local taxes. T e linchpin behind these numbers, and the key to


helping electric co-ops “keep the lights on” in some of the most sparsely populated and rugged regions of America for more than seven decades, has been a small amount of support through the federal Rural Utilities Service (RUS). Of course, federal assistance for elec- tric utilities is not unique. For-profi t, investor-owned utilities (IOUs), receive tax breaks, while city-owned municipal electric systems are able to issue tax-exempt bonds. A comparison of electric utilities shows:


• Privately-owned electric co-ops serve an average of 7.4 consumers and receive annual revenue of $15,000 per mile of line. Based on current interest rates, RUS loans (with an average interest rate of 4.57 percent, compared to the government’s cost of borrowing at


6 - Northeast Connection


3.91 percent) actually make money for the U.S. Trea- sury--$163 million combined from 2009 to 2011, more than $274 million during fi scal year 2012, and a pro- jected $369 million in 2013. • Stockholder-driven IOUs average 34 customers and collect $75,000 in revenue per mile of line. In virtual- ly every case, IOUs charge electric rates that include amounts for presumed federal tax liabilities. However, available tax breaks (investment tax credits and accel- erated depreciation) allow IOUs to retain most of the taxes collected, roughly $124 billion to date. At a cost to the government of $4.8 billion in 2011 (the last year available), this federal subsidy to IOUs works out to about $47 per customer. • Publicly-owned municipal electric systems average 48 consumers and collect $113,000 in revenue per mile of line. T e federal government loses revenue when municipals issue tax-exempt bonds because interest paid to bond owners is not taxed. T e cost of this sub- sidy in 2003 (the last year available) was $909 million, or $55 per consumer. “In short, RUS electric loans do not cost taxpayers a


single penny,” indicates Mike Ganley, director of strate- gic planning & analysis for the National Rural Electric Cooperative Association, the national trade organi- zation for America’s electric cooperatives. “Coupled with strong and innovative management and local, consumer governance, electric cooperatives have used


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