Electrify Africa Act budget wonkery explained

We have gotten a lot of questions about how the Electrify Africa Act (H.R. 2548) can actually reduce the budget deficit while helping to increase energy access by 50 million people by 2020.  Sounds kind of crazy, right?  Luckily, it’s not thanks to the novel investment-based approach this bill takes.

The strictly non-partisan Congressional Budget Office (CBO) is the official “scorekeeper” for Congress.  Its staff of economists, lawyers, accountants and other policy experts are required to analyze legislation and estimate the bills cost to the federal government, and any mandates on the private sector or costs to state, local or tribal governments.

On March 12, CBO released its cost estimate for the Electrify Africa Act, which states: “CBO estimates that implementing the legislation [H.R. 2548] would save $86 million over the 2014-2019 period, assuming appropriation actions consistent with the bill.” 

At the outset, CBO makes some assumptions about the bill…it would be enacted in 2014, the programs in the bill would follow historical spending patterns, etc.  These are basic assumptions in most CBO scores.  The CBO report then looks at various sections of the bill and estimates the impact on the federal budget.

Overseas Private Investment Corporation (OPIC): As ONE members have come to know, OPIC helps U.S. companies invest overseas by providing direct loans, loan guarantees, and insurance.  Some of the loans and insurance products OPIC provides result in a profit for the U.S. government and that money is returned to the Treasury every year, minus administrative expenses for OPIC.  OPIC’s authorization to continue to operate expires at the end of the year, so by extending the life of OPIC for 3 years, the Electrify Africa Act also ensures that OPIC’s profits continue to flow into the Treasury.  CBO estimates that the extension of OPIC’s authority will result in $270 million over the next 5 years.  However, the bill will also increase some costs at OPIC, including administrative expenses.  CBO estimates that, taken together, the OPIC section of H.R. 2548 will result in a net savings for the federal government of $96 million over the next 5 years.

National strategy and other reporting requirements:  The bill requires a coordinated national strategy to increase access to electricity in sub-Saharan Africa and reporting requirements to ensure that we are actually meeting the goals of the legislation.  CBO estimates that these reports will cost less than $500,000 per year and about $1 million over the next 5 years in total.

Inspector General:  OPIC does not currently have its own Inspector General (IG). Instead, it shares an IG with USAID.  H.R. 2548 sets up a new, independent IG at OPIC to increase accountability.  CBO estimates that the new IG will cost $9 million over the next 5 years.

After doing a little math, you get to a savings of $86 million over the next 5 years.

The bill directs numerous other federal agencies, including USAID, to increase their focus on electricity access within existing resources. This requirement is in line with the President’s Power Africa initiative.

CBO uses a lot of technical budget-geek jargon.  Hopefully, this summary helps explain how utilizing a smart investment-based approach and prioritizing existing resources can help world’s poorest without breaking the bank.

Congress has a bill that could provide 50 million people in Africa with reliable electricity. Sign the petition now and let them know it’s time to electrify Africa. 

Sign our petition here