Utility Opposes Output Facilities Regs

William L. Gipson, The Empire District Electric Company, Joplin, Mo., has written in opposition to the proposed regs regarding output facilities. In Gipson's view, the proposed regs would distort competition by expanding special privileges for governmentally owned utilities.

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February 4, 1998

Internal Revenue Service

RE: CC:DOM:CORP:R (REG-110965-97)

[1] I am writing to express my strong opposition to the proposed Internal Revenue Service (IRS) rules regarding TAX-EXEMPT BOND REGULATIONS FOR OUTPUT FACILITIES.

[2] The stated purpose of the regulations was to provide immediate guidance to governmentally-owned utilities for evaluating their participation in the evolving competitive electricity market. Instead, these regulations would distort competition by expanding special privileges for governmentally-owned utilities.

[3] The proposed regulations would allow:

o Governmentally-owned utilities to make unlimited sales into

o Short-term sales to be made, without limitation, to non-

o Governmentally-owned utilities to enter into 3-year contracts

[4] Subsidies, from any level of government, do not have a place in a truly competitive marketplace. By expanding the subsidies for governmentally-owned utilities, the IRS would expand the role of government in the electric industry. Certainly, this is contrary to a true competitive electricity marketplace.

[5] The proposed regulations do not distinguish between sales to traditional customers of governmental utilities and sales to the wider marketplace, where there is no connection between the governmental seller of electricity and the consumer. There is no legitimate purpose for governmentally-owned utilities, using their tax-exempt status and exemptions, to sell beyond their service areas.

[6] In the end, it is Congress, not the IRS, that should determine how and where Federal funds from ALL taxpayers are spent. The proposed IRS regulations would effectively handicap the efforts of the States and members of Congress in their attempt to establish a more level playing field for the emerging competitive electricity marketplace, one which would benefit all consumers.

Sincerely,

William L. Gipson

c: Senator Bond