Mandatory Spending

Function 270 - Energy

Divest Two Agencies of Their Electric Transmission Assets

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

This option would reduce the government's role in electricity markets by divesting it of the transmission assets of the Southwestern Power Administration and the Western Area Power Administration. Those federal agencies market and transmit electricity for wholesale customers, such as cooperative, public, and private utilities. Once the assets were sold, the agencies would neither spend money on new transmission projects nor collect income from customers repaying the costs of past investment in electric transmission. CBO estimates that implementing this option would save $2.0 billion in mandatory spending over the 2019–2028 period, a sum reflecting $2.3 billion in sale proceeds and $0.3 billion in costs from forgone receipts. In addition, CBO estimates that implementing the option would reduce discretionary spending by $0.1 billion over that period. Those savings are uncertain and depend on various factors, such as the terms and characteristics of each asset sale and whether the past cash flows of the assets—which, once privatized, would no longer be subject to some statutory constraints—would accurately inform CBO's estimates of the assets' private-sector valuations.