Power Marketing Administration Reform Act of 1998

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Power Marketing Administration 
Reform Act of 1998''.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds that:
            (1) The use of fixed allocations of joint multipurpose 
        project costs and the failure to provide for the recovery of 
        actual interest costs and depreciation have resulted in 
        substantial failures to recover costs properly recoverable 
        through power rates by the Federal Power Marketing 
        Administrations and the Tennessee Valley Authority and have 
        resulted in the imposition of unreasonable burdens on the 
        taxpaying public.
            (2) Existing under allocations and under recovery of costs 
        have led to inefficiencies in the marketing of Federally 
        generated electric power and to environmental damage.
            (3) With the emergence of open access to power transmission 
        and competitive bulk power markets, market prices will provide 
        the lowest reasonable rates consistent with sound business 
        principles, consistent with maximum recovery of costs properly 
        allocated to power production and consistent with encouraging 
        the most widespread use of power marketed by Federal Power 
        Marketing Administrations and the Tennessee Valley Authority.

SEC. 3. PURPOSE.

    The purpose of this Act is to provide for full cost recovery rates 
for power sold by Federal Power Marketing Administrations and the 
Tennessee Valley Authority and a transition to market-based rates for 
such power.

SEC. 4. MODIFICATION OF EXISTING POWER MARKETING ADMINISTRATIONS.

    (a) Accounting.--Notwithstanding any other provision of law, the 
Secretary of Energy shall, in consultation with the Federal Energy 
Regulatory Commission, immediately upon enactment of this Act develop 
and implement procedures to ensure that the Federal Power Marketing 
Administrations utilize the same accounting principles and 
requirements, including those with respect to the accrual of actual 
interest costs during construction and pending repayment for any 
project and recognition of depreciation expenses, as are applied by the 
Commission to the electric operations of public utilities.
    (b) Development and Submittal of Rates to the Commission.--
Notwithstanding any other provision of law, each Federal Power 
Marketing Administration and the Tennessee Valley Authority shall, not 
later than 1 year after enactment of this Act (and periodically 
thereafter but not less frequently than once each 5 years), submit to 
the Federal Energy Regulatory Commission rates for the sale or 
disposition of Federal energy that will ensure the recovery of all 
costs incurred by such Federal Power Marketing Administration or the 
Tennessee Valley Authority for the generation and marketing of such 
Federal energy. Such costs shall include all fish and wildlife 
expenditures required under existing treaty and legal obligations 
associated with the construction and operation of the facilities from 
which the federally marketed power is generated and sold. Such costs 
shall not include any cost of transmitting such Federal energy.
    (c) Commission Review, Approval or Modification.--The Federal 
Energy Regulatory Commission shall review and either approve of or 
modify rates for the sale or disposition of Federal energy submitted to 
the Commission by each Federal Power Marketing Administration and the 
Tennessee Valley Authority under this section, to ensure that such 
rates will recover all costs of generating and marketing such Federal 
energy (including all fish and wildlife costs associated with such 
Federal energy as required under existing treaty and legal obligations, 
but not including any cost of transmitting such Federal energy). Such 
review by the Commission shall be based on the record of proceedings 
before the Federal Power Marketing Administration or the Tennessee 
Valley Authority, except that all persons shall be afforded an 
opportunity by the Commission for an additional hearing in accordance 
with the procedures established for ratemaking by the Commission 
pursuant to the Federal Power Act.
    (d) Application of Rates.--Immediately upon approval or 
modification by the Commission of rates under this section for the sale 
or disposition of Federal energy by a Federal Power Marketing 
Administration or the Tennessee Valley Authority, the Federal Power 
Marketing Administration shall apply such rates, as approved or 
modified by the Commission, to each existing contract for the sale or 
disposition of Federal energy by such Federal Power Marketing 
Administration or the Tennessee Valley Authority to the maximum extent 
permitted by such contract. This section shall not apply to any Federal 
Power Marketing Administration or the Tennessee Valley Authority if and 
at such time as it no longer has any outstanding commitments under any 
contract for the sale or disposition of Federal energy that were in 
existence as of the date of enactment of this Act.
    (e) Accounting Principles and Requirements.--In developing or 
reviewing the rates required by this section, the Federal Power 
Marketing Administrations, the Tennessee Valley Authority, and the 
Commission shall rely upon the accounting principles and requirements 
developed pursuant to subsection (a).
    (f) Interim Rates.--Until market pricing for such power sales is 
fully implemented, such full cost recovery rates shall be implemented 
for all new contracts for power sales by the Federal Power Marketing 
Administrator and the Tennessee Valley Authority entered into after the 
enactment of this Act and for renewals after the enactment of this Act 
for existing contracts for power sales by Federal Power Marketing 
Administrations and the Tennessee Valley Authority.
    (g) Transition to Market-Based Rates.--If the transition to full 
cost recovery rates would result in rates that exceed market rates, the 
Secretary of Energy is authorized to price power sold by Federal Power 
Marketing Administrations at market rates, and the Tennessee Valley 
Authority is authorized to price power sold by the Tennessee Valley 
Authority at market rates, if--
            (1) operation and maintenance costs are recovered, 
        including all fish and wildlife costs required under existing 
        treaty and legal obligations;
            (2) the contribution toward recovery of investment 
        pertaining to power production is maximized; and
            (3) purchasers of power under existing contracts consent to 
        the remarketing by the relevant Federal Power Marketing 
        Administration or the Tennessee Valley Authority of such power 
        not later than 3 years thereafter through competitive bidding.
Competitive bidding shall be utilized to remarket power that is not 
accepted by existing customers under this section.
    (h) Market-Based Pricing.--Within 2 years after the enactment of 
this Act, the Secretary of Energy shall develop and implement 
procedures to assure that all power sold by Federal Power Marketing 
Administrations and the Tennessee Valley Authority is sold at prices 
set by demand and supply within the relevant bulk power supply market. 
The Secretary of Energy shall establish through notice and comment 
rulemaking bid and auction procedures to implement market-based pricing 
for power sold pursuant to any power sales contract entered into by a 
Federal Power Marketing Administration or the Tennessee Valley 
Authority after the date 2 years after the enactment of this Act, 
including power that is under contract but which is declined by the 
party entitled to purchase such power and remarketed after such date.
    (i) Use of Revenues Collected Through Market-Based Pricing.--
            (1) In general.--Revenues collected through market-based 
        pricing shall be disposed of as follows:
                    (A) Revenues shall be remitted to the Secretary of 
                the Treasury, first, to cover all power-related 
                operations and maintenance expenses, all fish and 
wildlife costs required under existing treaty and legal obligations, 
and the project investment cost pertaining to power production.
                    (B) Such revenues as shall remain after remission 
                to the Secretary of the Treasury pursuant to 
                subparagraph (A) shall be divided as follows:
                            (i) 50 percent of such revenues shall be 
                        remitted to the Secretary of the Treasury for 
                        the purpose of reducing the Federal budget 
                        deficit.
                            (ii) 35 percent of such revenues shall be 
                        deposited in the fund established under 
                        paragraph (2)(A) for the purpose of helping 
                        cover the costs of mitigating the damage to, 
                        and restoring the health of, fish, wildlife, 
                        and other environmental resources that is 
                        attributable to the construction and operation 
                        of the facilities from which power is generated 
                        and sold.
                            (iii) 15 percent of such revenues shall be 
                        deposited in the fund established under 
                        paragraph (3)(A) for the purpose of helping 
                        cover the costs of the incremental cost (above 
                        the expected market cost of electricity) of 
                        nonhydroelectric renewable resources in the 
                        region in which power is marketed by the 
                        applicable power marketing administration.
            (2) Fund regarding environmental mitigation.--
                    (A) There is hereby established a fund to hold and 
                expend the revenues allocated for environmental 
                mitigation and restoration pursuant to paragraph 
                (1)(B)(ii). The fund shall be established within the 
                Department of Interior and shall be governed by a Board 
                of Directors consisting of the Secretary of the 
                Interior, the Secretary of Energy, and the 
                Administrator of the Environmental Protection Agency or 
                their designees. Other than expenditure of revenues to 
                cover the costs of establishing and managing the fund, 
                all revenues may be spent only pursuant to project-
                specific plans to mitigate damage to, and restore the 
                health of, the environment.
                    (B) At no time may the fund established under 
                subparagraph (A) hold more than $200,000,000 that is 
                not necessary to cover the costs of 1 or more project-
                specific mitigation plans. Revenues that would 
                otherwise be deposited in the fund but for the absence 
                of 1 or more project-specific plans for environmental 
                mitigation shall be remitted to the Secretary of the 
                Treasury for purposes of Federal budget deficit 
                reduction.
                    (C) The Board of Directors of the fund established 
                under subparagraph (A) shall develop project-specific 
                mitigation plans for each project used to generate 
                power marketed by the power marketing administrations 
                or the Tennessee Valley Authority. In developing such 
                plans, the Board is directed, where feasible, to rely 
                on data, information, and mitigation and restoration 
                plans already developed by the United States Bureau of 
                Reclamation, the United States Fish and Wildlife 
                Service, the Environmental Protection Agency, and other 
                Federal, State, and tribal agencies.
            (3) Fund regarding renewable resources.--
                    (A) There is hereby established a fund to hold and 
                expend the revenues allocated for renewable resources 
                pursuant to paragraph (1)(B)(iii). The fund shall be 
                established within the Department of Energy. Revenues 
                in the fund may be expended to pay for the incremental 
costs of nonhydroelectric renewable resources in the States in which 
the applicable power marketing administration markets power. Other than 
expenditure of revenues to cover the costs of establishing and managing 
the fund, all revenues may be spent only--
                            (i) pursuant to a plan developed by the 
                        Secretary of Energy designed to foster the 
                        development of nonhydroelectric renewable 
                        resources that show substantial long-term 
                        promise but which are presently too expensive 
                        to attract private capital sufficient to 
                        develop or ascertain their potential; and
                            (ii) on recipients chosen by a process of 
                        competitive bidding.
                    (B) At no time may the fund established under 
                subparagraph (A) hold more than $50,000,000 that is not 
                necessary to meet the plan developed pursuant to such 
                subparagraph. Revenues that would otherwise be 
                deposited in this fund but for the absence of such a 
                plan shall be remitted to the Secretary of the Treasury 
                for purposes of Federal budget deficit reduction.
    (j) Preference.--Public bodies and cooperatives shall be given a 
preference to future power allocations or reallocations of Federal 
power through a right of first refusal at market prices. Power obtained 
through preference rights shall be consumed by the preference customer 
or resold for consumption by the constituent end-users of the 
preference customer and may not be resold to other entities. As 
regulated by the Federal Energy Regulatory Commission, preference 
recipients shall have transmission access to this purchased power. If a 
public body or cooperative does not take allocation, the next highest 
bidder takes the allocation.
    (k) Reforms.--The Secretary of Energy shall require each Federal 
Power Marketing Administration to implement--
            (1) program management in order to assign personnel and 
        incur expenses for authorized power marketing, reclamation, and 
        flood control activities only, and not diversification into 
        ancillary activities including consulting or operating services 
        for other entities; and
            (2) annual reporting plainly disclosing to the American 
        public, the activities of the Power Marketing Administration 
        including, but not limited to, the full cost of such power 
        projects and power marketing programs.
    (l) Contract Renewal.--After the enactment of this Act, no Federal 
Power Marketing Administration may enter into or renew any power 
marketing contract for a term that exceeds 5 years.
    (m) Restrictions.--Excepting only the Bonneville Power 
Administration, each Federal Power Marketing Administration shall be 
subject to the restrictions on the construction of transmission and 
additional facilities established by section 5 of the Flood Control Act 
of 1944.

SEC. 5. FEDERAL ENERGY REGULATORY COMMISSION JURISDICTION OVER 
              TRANSMISSION SERVICE PROVIDED BY POWER MARKETING 
              ADMINISTRATIONS AND TENNESSEE VALLEY AUTHORITY.

    Transmission service provided by Federal Power Marketing 
Administrations shall be provided on an open access basis and at just 
and reasonable rates approved or established by the Federal Energy 
Regulatory Commission under part II of the Federal Power Act in the 
same manner as such service is provided pursuant to Commission rules by 
any public utility subject to the jurisdiction of the Commission under 
such Part II. The preceding sentence shall not require any Federal 
Power Marketing Administration to expand transmission or 
interconnection capabilities or transmissions in the absence of other 
authority of law.

SEC. 6. IMPLEMENTATION BY THE FEDERAL ENERGY REGULATORY COMMISSION.

    Pending the implementation of market-based pricing, the Federal 
Energy Regulatory Commission shall have authority to review and 
approve, reject, or revise power rate schedules recommended for 
approval by the Secretary of Energy, and existing rate schedules, for 
power sales by the Federal Power Marketing Administrations. The Federal 
Energy Regulatory Commission shall base its approval of final rates 
upon the protection of the public interest and shall undertake to 
protect the interest of the taxpaying public as well as the interests 
of consumers in accordance with section 4. The Federal Energy 
Regulatory Commission may review the factual basis for determinations 
made by the Secretary of Energy and may revise or modify those findings 
as appropriate and may revise proposed or effective rate schedules or 
remand the rate schedules to the Secretary of Energy as the Federal 
Energy Regulatory Commission determines is necessary to protect the 
public interest in accordance with section 4 until a full transition is 
made to market-based rates for power sold by Federal Power Marketing 
Administrations. The Federal Energy Regulatory Commission is authorized 
to proceed pursuant to informal notice and comment rulemaking pursuant 
to section 553(c) of title 5, United States Code. Any affected party, 
including a taxpayer, bidder, preference customer, or affected 
competitor may seek a rehearing and judicial review of a final decision 
of the Federal Energy Regulatory Commission pursuant to section 313 of 
the Federal Power Act (16 U.S.C. 8251).

SEC. 7. REPEALS.

    The following provisions are repealed:
            (1) The last sentence of section 302(a)(3) of the 
        Department of Energy Organization Act.
            (2) Section 505 of Public Law 102-377.

SEC. 8. EFFECTIVE DATE.

    Except as otherwise specifically provided in this Act, the 
provisions of this Act and the amendments made by this Act shall take 
effect with respect to power sales contracts entered into by a Federal 
Power Marketing Administration or the Tennessee Valley Authority after 
July 23, 1997.

Summary: Power Marketing Administration Reform Act of 1998 - Requires the Secretary of Energy to develop and implement procedures to ensure that the Federal Power Marketing Administrations (FPMAs) utilize the same accounting principles and requirements as the Federal Energy Regulatory Commission (FERC) applies to the electric operations of public utilities. Requires each FPMA and the Tennessee Valley Authority (TVA) to submit periodically for FERC review rates for the sale or disposition of Federal energy that will ensure recovery of all their costs in generating and marketing such energy. Prescribes rate mechanism and pricing guidelines. Establishes a fund within the Department of the Interior to: (1) mitigate damage to environmental resources attributable to power generation and sales facilities. And (2) restore the health of such resources, including fish and wildlife. Mandates project-specific mitigation plans for each power generation project. Establishes a fund within the Department of Energy for renewable resources. Prescribes expenditure guidelines. Mandates that public bodies and cooperatives be given a preference for future power allocations or reallocations of Federal power through a right of first refusal at market prices. Instructs the Secretary of Energy to require each FPMA to: (1) assign personnel and incur expenses solely for authorized power marketing, reclamation, and flood control activities, and not for diversification into ancillary activities. And (2) make annual public disclosures of its activities, including the full costs of power projects and marketing. Precludes an FPMA from entering into or renewing any power marketing contract for a term exceeding five years. Requires provision of FPMA transmission services on an open access basis, and at FERC-approved rates in the same manner as provided by any public utility under FERC jurisdiction. Grants FERC rate-making approval authority until a full transition is made to market-based rates, for: (1) rate schedules recommended by the Secretary of Energy. And (2) rate schedules for FPMA power sales. Amends: (1) the Department of Energy Organization Act to reflect the changes made by this Act. And (2) specified Federal law to repeal the prohibition against the use of appropriated funds for purposes relating to the possibility of changing from an at cost to a market rate or any other noncost-based method for pricing Federal hydroelectric power.