For example, if a preference customer of Southeastern paid a combined 3.5 cents per kWh for power from the PMA and other sources in 1995 and paid 3.9 cents for power from non-PMA sources, we assumed the customer’s rates would rise from 3.5 to 3.9 cents—a relatively small increase of 0.4 cent—if it had to pay market rates for all its power. Slightly more than half of the PMA’s preference customers may see increases of less than 0.1 cent per kWh. In most of Southeastern’s states, the maximum increase that a preference customer would pass on to its residential end-users ranges between $1 and $8 per month, depending on the state. In states served by Western, preference customers may see a variety of rate increases. Preference customers who may see these larger increases typically paid relatively low rates, ranging from 1.5 to 3.0 cents per kWh and bought most or all of their power from Western. Taken together, Southwestern’s preference customers may experience higher rate increases than Southeastern’s customers but lower increases than Western’s. As shown in figure 2, in most of Southwestern’s states, a majority of the preference customers may see relatively small increases of 0.5 cent per kWh or less on base rates that typically ranged from 1.5 to 3.5 cents. However, in Oklahoma, 79 percent of the preference customers may see larger increases that exceed 1.5 cents per kWh. A preference customer’s rate increase also depends on what portion of its total power comes from the PMA. Preference Customers Serve Varying Portions of Many States

As shown in figure 3, preference customers that are directly served by Southeastern, Southwestern, and Western reported serving varying portions of 29 states across the nation. In Income, End-Users Are Similar to the Population of the Entire State; Most Service Areas Are Either Urban or “Mixed”

Although preference customers serve areas with incomes lower than the national average, most of the households they serve have incomes that are similar to those in the entire state. In addition, about 47 percent of the towns preference customers reported serving are rural. Bonneville Power Administration Southeastern Power Administration Southwestern Power Administration Western Area Power Administration Both Western and Southwestern market power in Kansas. Others suggest that the PMAs be required to charge market rates for power. More specifically, you asked that we identify (1) the extent to which preference customers’ rates may change by state if market rates are charged, (2) the areas the three PMAs’ preference customers report serving, and (3) the incomes in these areas and the extent to which they are urban or rural. These customers buy power directly from the PMA. State-Specific Data on Potential Rate Impacts and Service Area Demographics

This appendix provides, for each state that receives PMA power from Southeastern, Southwestern, and/or Western, (1) the counties and towns that the preference customers included in our analysis report serving and a map showing these areas and (2) the estimated rate changes if market rates are charged, by number and percentage of preference customers; household incomes in areas potentially receiving power; the extent to which these areas are urban or rural; and the extent to which the individual state’s total power consumption is provided by the PMA(s) through the preference customers included in our analysis. 6. 7. 8. 10. 11. 12. 13. 14. 15.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided a state-by-state analysis of the preference customers who buy power from the Southeastern Power Administration, the Southwestern Power Administration, and the Western Area Power Administration, focusing on the: (1) extent to which preference customers' rates may change if market rates are charged; (2) areas the three power marketing administrations' (PMA) preference customers report serving; and (3) incomes in these areas and the extent to which they are rural or urban.

What GAO Found

GAO noted that: (1) overall, slightly more than two-thirds of the preference customers that purchase power directly from the Southeastern, Southwestern, and Western Area power administrations may see relatively small or no rate increases if these PMAs begin to charge market rates for the power they produce; (2) in particular, given GAO's assumptions, almost all of Southeastern's preference customers would see average rate increases of up to one-half cent per kilowatt hour (kWh) on rates that in 1995 typically ranged from 3.5 to 6.0 cents per kWh; (3) most of these preference customers would see increases of less than one-tenth cent per kWh; (4) if the preference customers served by Southeastern pass the higher rates on proportionally to their residential end users, most end users would see their monthly electricity bill increase by less than $1, while the maximum increase would range in most states between $1 and $8, depending on the state; (5) preference customers who receive power from Western may see a variety of rate increases if market rates are charged; (6) as a group, Southwestern's preference customers may see rate increases that lie between those for Southeastern's and Western's customers; (7) most of Southwestern's preference customers may see relatively low rate increases of up to one-half cent per kWh on rates that typically ranged between 1.5 and 3.5 cents per kWh; (8) however, almost all preference customers in Oklahoma may see larger rate increases that exceed 1.5 cents per kWh; (9) in general, a preference customer's rate increase depends primarily on what portion of its total power comes from the PMA and how close the PMA's rate is to the market rate; (10) preference customers included in GAO's analysis that purchased power directly from the PMAs serve varying portions of 29 states; (11) the populations in the areas preference customers serve generally have median incomes that are similar to the median income in the entire state; (12) in about two-thirds of the states GAO examined, the preference customers serve counties and towns whose median household incomes are within 15 percent of the statewide median income; (13) however, in some states, preference customers primarily serve poorer areas and households; (14) nationwide, about half of the towns that preference customers serve are urban and about half are rural; and (15) most of the counties are mixed, about 40 percent are rural, and the remainder are urban.