CITIZEN POWER ALLIANCE

In May 2007, Senator Lamar Alexander asked the Energy Information Administration (EIA) to develop an analysis of Federal energy subsidies focusing on subsidies to electricity production. Senator Alexander also specified that the analysis should be limited to subsidies provided by the Federal government, those that are energy-specific, and those that provide a financial benefit with an identifiable budget impact. Federal energy subsidies and interventions discussed in the body of this report take four principal forms:

• Direct Expenditures. These are Federal programs that directly affect the energy industry and for which the Federal government provides funds that ultimately result in a direct payment to producers or consumers of energy.
• Tax Expenditures. Tax expenditures are provisions in the Federal tax code that reduce the tax liability of firms or individuals who take specified actions that affect energy production, consumption, or conservation in ways deemed to be in the public interest.
• Research and Development (R&D). Federal R&D spending focuses on a variety of goals, such as increasing U.S. energy supplies, or improving the efficiency of various energy production, transformation, and end-use technologies. R&D expenditures do not directly affect current energy production and prices, but, if successful, they could affect future production and prices.
• Electricity programs serving targeted categories of electricity consumers in several regions of the country. Through the Tennessee Valley Authority (TVA) and the Power Marketing Administrations (PMAs), which include the Bonneville Power Administration (BPA) and three smaller PMAs, the Federal government brings to market large amounts of electricity, stipulating that “preference in the sale of such power and energy shall be given to public bodies and cooperatives.” The Federal government also indirectly supports portions of the electricity industry through loans and loan guarantees made by the U.S. Department of Agriculture’s Rural Utilities Service (RUS).

With the exception of the Federal electricity programs, this report measures subsidies and support on the basis of the cost of the programs to the Federal budget provided in budget documents. Support associated with Federal electricity programs is measured by comparing the actual cost of funds made available to these entities to EIA estimates of the cost of funds that they might otherwise have incurred in the absence of Federal support.

(Click to read Summary of Findings)