Electricity Restructuring and Tax-Exempt Bonds: Economic Analysis of Legislative Proposals

Description:

Tax-exempt bonds reduce public power's interest cost on debt and enable it to lower the price of electricity. This subsidy makes taxpayers better off only if the private market fails to provide the correct amount of electricity. In general, the private market can provide the correct amount of electricity; in those cases when it can not, the tax-exempt bond subsidy is unlikely to correct the problem. Tax-exempt bond legislation has been consistent with this perspective that an interest subsidy for electricity production does not correct a market failure; its focus has been to prohibit the spread of subsidized public power beyond its traditional service areas.

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Creation Date: January 20, 2000
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UNT Libraries Government Documents Department
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Congressional Research Service Reports
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Place of Publication: Washington D.C., USA
Date(s):
  • Creation: January 20, 2000
Description:

Tax-exempt bonds reduce public power's interest cost on debt and enable it to lower the price of electricity. This subsidy makes taxpayers better off only if the private market fails to provide the correct amount of electricity. In general, the private market can provide the correct amount of electricity; in those cases when it can not, the tax-exempt bond subsidy is unlikely to correct the problem. Tax-exempt bond legislation has been consistent with this perspective that an interest subsidy for electricity production does not correct a market failure; its focus has been to prohibit the spread of subsidized public power beyond its traditional service areas.

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UNT Libraries Government Documents Department
Collection:
Congressional Research Service Reports
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Resource Type: Report
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