270 Energy:Eliminate Subsidies for 
Power Marketing Administrations

Savings in Millions of Dollars
  • 2016
  • 2017
  • 2018
  • 2019
  • 2020
  • 2021
  • 2022
  • 2023
  • 2024
  • 2025
  • 2016-2020
  • 2016-2025


Savings are expressed as budget authority and were calculated by using the FY 2014 enacted spending levels as found on page 1 of U.S. Department of Energy, “Funding by Appropriation,” March 2014. Both spending levels were increased at the same rate as discretionary spending for 2016-2025 according to CBO’s most recent August 2014 baseline spending projections.


Technical Notes on Scoring

CBO Baseline

Unless otherwise noted, calculations for savings for each recommendation relies on the most recent Congressional Budget Office baseline, as found in “An Update to the Budget and Economic Outlook: 2014 to 2024,” published August 27, 2014, has been used.

Savings “Totals”

While totals for the five and 10 year savings are provided by section and for the complete set of recommendations, there are two reasons they should not be viewed as representing total savings for The Budget Book.

First, as noted in the introduction, The Heritage Foundation would recommend that the savings realized in the Function 050 Defense section would stay within the Department of Defense to strengthen the nation’s defense capabilities.

Second, the numbers cannot be deemed to represent the realized savings if every single recommendation were adopted because policy changes made in one program can impact spending levels in other programs.  Thus, the numbers in the table do not reflect any potential interactions between the various policy changes affecting spending or savings.


Heritage Recommendation:

Eliminate subsidies for Power Marketing Administrations (PMAs). This proposal saves $86 million annually, and $919 million over 10 years.


Eliminate subsidies for PMAs, sell electricity at market rates.

The DOE’s Power Marketing Administrations (PMAs) consist of four power entities that sell electricity that stems primarily from hydroelectric power. Formed in the early 1900s, PMAs were set up to provide cheap electricity to rural areas, mostly small communities and farms. PMAs originated as federal water projects currently operated by the Army Corps of Engineers and the Bureau of Reclamation. PMAs use the revenue generated from electricity sales to reimburse taxpayers for construction and operation costs, but PMAs can sell the electricity at below-market rates because of favorable financing terms—they receive federal tax exemptions and receive loans at below-market interest rates. The PMAs’ construction, rehabilitation, operation, and maintenance costs are financed through the main DOE budget, offset collections, alternative financing, and a reimbursable agreement with the Bureau of Reclamation.

PMAs are an outmoded form of providing rural areas with electricity, yet they still enjoy tremendous special privileges that interfere with market competition. The DOE should restructure PMAs to sell electricity at market rates by eliminating the subsidy for federal electricity rates. Congress should eliminate subsidies for PMAs.

Eliminate subsidies for PMAs, sell electricity at market rates.

Contributing Expert

Nicolas (Nick) Loris, an economist, focuses on energy, environmental and regulatory issues as the Herbert and Joyce Morgan fellow at The Heritage Foundation.

See publications by Nicolas Loris

Nicolas (Nick) LorisHerbert and Joyce Morgan Fellow

Heritage Experts

Jack Spencer oversees Heritage Foundation research on a wide range of domestic economic issues as director of the Roe Institute for Economic Policy Studies. Those topics include federal spending, taxes, energy and environment, regulation and retirement savings.

See publications by Jack Spencer

Jack SpencerVice President for the Institute for Economic Freedom and Opportunity

Katie Tubb is a Research Associate and Coordinator in the Thomas A. Roe Institute for Economic Policy Studies

See publications by Katie Tubb

Katie TubbResearch Associate and Coordinator

Additional Reading