Summary: To deliver electric power to large parts of rural America, the government created five power marketing administrations (PMA) during the New Deal, along with the Tennessee Valley Authority. Now that nearly all of America has electricity, some believe that the PMAs should be divested, particularly because greater competition exists in the electricity industry. Others suggest that the PMAs be required to operate more like private utilities, including charging market rates for power. However, the PMAs sell power primarily to preference customers--cooperatives and public bodies, such as municipal utilities, irrigation districts, and military installations--at average rates that, from 1990 to 1995, were from 40 to 50 percent below the rates that nonfederal utilities charged. Concerns have been raised that a change in PMAs' ownership or the way in which they set rates could boost rates and harm the rural and poor areas they serve. Those raising such concerns believe that the PMAs should continue to operate as they do now. This report provides 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. GAO (1) identifies the extent to which preference customers' rates may change if market rates are charged, (2) the areas the three PMAs' preference customers serve, and (3) the incomes in these areas and the extent to which they are rural or urban.
