Small Engine Troubleshooting Problems? Ask a Mechanic Now.
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If it is running fine with PTO off, the issue is going to be either the PTO or the power going to the PTO. Sounds like the PTO is not getting the power it needs to turn properly and it is dragging the engine down to try and compensate. What is the voltage reading at the battery and also the reading going into the clutch? Check all wires going to the clutch for breaks or melted spots