II

104TH CONGRESS

2D SESSION S. 1526

To provide for retail competition among electric energy suppliers, to provide

for recovery of stranded costs attributable to an open access electricity

market, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 25, 1996

Mr. JOHNSTON introduced the following bill; which was read twice and

referred to the Committee on Energy and Natural Resources

A BILL

To provide for retail competition among electric energy suppliers, to provide for recovery of stranded costs attributable to an open access electricity market, and for other

purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Electricity Competition

5 Act of 1996’’.

6 SEC. 2. DEFINITIONS.

7 For purposes of this Act:
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1 (1) The term ‘‘affiliate’’ means, with respect to

2 a person, any other person that controls, is con3 trolled by, or is under common control with such

4 person.

5 (2) The term ‘‘Commission’’ means the Federal

6 Energy Regulatory Commission.

7 (3) The term ‘‘electric consumer’’ has the

8 meaning given the term in section 3(5) of the Public

9 Utility Regulatory Policies Act of 1978 (16 U.S.C.

10 2602(5)).

11 (4) The term ‘‘electric utility’’ has the meaning

12 given the term in section 3(4) of the Public Utility

13 Regulatory Policies Act of 1978 (16 U.S.C.

14 2602(4)).

15 (5) The term ‘‘Federal agency’’ has the mean16 ing given the term in section 3(7) of the Public Util17 ity Regulatory Policies Act of 1978 (16 U.S.C.

18 2602(7)).

19 (6) The term ‘‘new contract electricity’’ means

20 electric energy or capacity which is sought to be pro21 duced from a party other than the purchaser for a

22 period exceeding 60 days.

23 (7) The term ‘‘new generating source’’ means

24 electric generating capacity requirements, planned to

25 be acquired by construction, which cannot be met
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1 from existing resources or entitlements, and which

2 may be met through procurement of electric capac3 ity.

4 (8) The term ‘‘new renewable electric genera5 tion’’ means electric generation from solar, wind,

6 waste, biomass, hydroelectric or geothermal re7 sources constructed after the enactment of this Act.

8 (9) The term ‘‘nonregulated retail electric util9 ity’’ means any retail electric utility other than a

10 State regulated retail electric utility.

11 (10) The term ‘‘person’’ has the meaning given

12 the term in section 3(4) of the Federal Power Act

13 (16 U.S.C. 796(4)).

14 (11) The term ‘‘qualifying cogeneration facil15 ity’’ has the meaning given the term in section

16 3(18)(B) of the Federal Power Act (16 U.S.C.

17 796(18)(B)).

18 (12) The term ‘‘qualifying cogenerator’’ has the

19 meaning given the term in section 3(18)(C) of the

20 Federal Power Act (16 U.S.C. 796(17)(D)).

21 (13) The term ‘‘qualifying small power pro22 ducer’’ has the meaning given the term in section

23 3(17)(D) of the Federal Power Act (16 U.S.C.

24 796(17)(D)).
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1 (14) The term ‘‘qualifying small power produc2 tion facility’’ has the meaning given the term in sec3 tion 3(17)(C) of the Federal Power Act (16 U.S.C.

4 796(17)(D)).

5 (15) The term ‘‘retail electric utility’’ means

6 any person, State agency, or Federal agency which

7 makes retail sales of electric energy to the public or

8 distributes such energy to the public.

9 (16) The term ‘‘State’’ means a State admitted

10 to the Union or the District of Columbia.

11 (17) The term ‘‘State agency’’ has the meaning

12 given the term in section 3(16) of the Public Utility

13 Regulatory Policies Act of 1978 (16 U.S.C.

14 2602(16)).

15 (18) The term ‘‘State regulated retail electric

16 utility’’ means any retail electric utility with respect

17 to which a State regulatory authority has rate18 making authority.

19 (19) The term ‘‘State regulatory authority’’

20 means any State agency which has ratemaking au21 thority with respect to the rates of any retail electric

22 utility (other than such State agency), and in the

23 case of a retail electric utility with respect to which

24 the Tennessee Valley Authority has ratemaking au-
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1 thority, such term means the Tennessee Valley Au2 thority.

3 (20) The term ‘‘unbundled local distribution

4 services’’ means local distribution services which are

5 offered by the seller of such services without the re6 quirement that the purchaser of such local distribu7 tion services also purchase electric energy as a con8 dition of the purchase of such local distribution

9 services.

10 SEC. 3. PURPA REFORM.

11 (a) DEFINITION.—For purposes of this section the

12 term ‘‘facility’’ means a facility for the generation of elec13 tric energy or an addition to or expansion of the generat14 ing capacity of such a facility.

15 (b) FACILITIES.—Section 210 of the Public Utility

16 Regulatory Policies Act of 1978 (16 U.S.C. 824a–3) shall

17 not apply to any facility which begins commercial oper18 ation after the effective date of this Act, except a facility

19 for which a power purchase contract entered into under

20 such section was in effect on the effective date of this Act.

21 (c) CONTRACTS.—After the effective date of this Act,

22 no electric utility shall be required to enter into a new

23 contract or obligation to purchase or sell electric energy

24 pursuant to section 210 of the Public Utility Regulatory

25 Policies Act of 1978.
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1 (d) SAVINGS CLAUSE.—Notwithstanding subsections

2 (b) and (c), nothing in this Act shall be construed:

3 (1) As granting authority to the Commission, a

4 State regulatory authority, electric utility, or electric

5 consumer, to reopen, force the renegotiation of, or

6 interfere with the enforcement of power purchase

7 contracts or arrangements in effect on the effective

8 date of this Act between a qualifying small power

9 producer and any electric utility or electric

10 consumer, or any qualifying cogenerator and any

11 electric utility or electric consumer.

12 (2) To affect the rights and remedies of any

13 party with respect to such a power purchase con14 tract or arrangement, or any requirement in effect

15 on the effective date of this Act to purchase or to

16 sell electric energy from or to a qualifying small

17 power production facility or qualifying cogeneration

18 facility.

19 SEC. 4. COMPETITIVE ELECTRICITY PROCEEDINGS.

20 (a) STATE REGULATORY AUTHORITIES.—

21 (1) COMPETITIVE OPTIONS.—Not later than six

22 months after the date of enactment of this Act, each

23 State regulatory authority not exempted from this

24 section by section 7 shall initiate proceedings appli-
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1 cable to all State regulated retail electric utilities in

2 the State to examine and consider—

3 (A) requirements which establish competi4 tive electricity procurement markets that meet

5 the minimum requirements of section 5 of this

6 Act;

7 (B) a retail access plan which requires all

8 State regulated retail electric utilities in the

9 State to provide nondiscriminatory and

10 unbundled local distribution services to all elec11 tric consumers of such State regulated retail

12 electric utilities, in order that such electric con13 sumers may choose among competing electric

14 energy suppliers by January 1, 2002; and

15 (C) an alternative plan which meets the

16 minimum requirements of section 6.

17 (2) CRITERIA.—In selecting among competitive

18 options under paragraph (1), each State regulatory

19 authority not exempted from this section by section

20 7 shall determine which option best serves the public

21 interest, considering reliability, terms of service, and

22 price.

23 (3) DECISION AND IMPLEMENTATION.—Not

24 later than 18 months after the date of enactment of
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1 this Act, each State regulatory authority not ex2 empted from this section by section 7 shall—

3 (A) select a competitive option provided for

4 in paragraph (1) based on the proceedings re5 quired under this subsection; and

6 (B) render a decision by rule or order

7 adopting such competitive option; and

8 (C) begin implementation of such competi9 tive option not later than 60 days after render10 ing such a decision.

11 (b) NONREGULATED RETAIL ELECTRIC UTILI12 TIES.—

13 (1) COMPETITIVE OPTIONS.—Not later than six

14 months after the date of enactment of this Act, each

15 nonregulated retail electric utility not exempted from

16 this section by section 7 shall examine and consider,

17 or where applicable, initiate proceedings to examine

18 and consider—

19 (A) procedures for the acquisition of new

20 contract electricity and new generating sources

21 by such nonregulated retail electric utility which

22 meet the minimum requirements of section 5;

23 (B) a retail access plan which provides

24 nondiscriminatory and unbundled local distribu25 tion services to all electric consumers of such
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1 nonregulated retail electric utility, in order that

2 such electric consumers may choose among

3 competing electric energy suppliers by January

4 1, 2002; and

5 (C) an alternative plan which meets the

6 minimum requirements of section 6.

7 (2) CRITERIA.—In selecting a competitive op8 tion under paragraph (1), each nonregulated retail

9 electric utility not exempted from this section by sec10 tion 7 shall determine which option best serves the

11 public interest, considering reliability, terms of serv12 ice, and price.

13 (3) DECISION AND IMPLEMENTATION.—Not

14 later than 18 months after the date of enactment of

15 this Act each nonregulated retail electric utility not

16 exempted from this section by section 7 shall—

17 (A) select a competitive option provided for

18 in paragraph (1) based on the examination and

19 consideration required under this subsection;

20 (B) provide public notice of such selection;

21 and

22 (C) begin implementation of such competi23 tive option not later than 60 days after provid24 ing such notice.
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1 SEC. 5. PROCUREMENT MARKETS.

2 (a) APPLICABILITY.—

3 (1) Requirements or procedures to be estab4 lished by a State regulatory authority or

5 nonregulated retail electric utility pursuant to this

6 section may apply to all or part of the new contract

7 electricity and new generating sources to be pro8 cured by State regulated retail electric utilities with9 in the State or, in the case of a nonregulated retail

10 electric utility, to all or part of the new contract

11 electricity and new generating sources to be pro12 cured by such nonregulated retail electric utility.

13 (2) If a State regulatory authority or

14 nonregulated retail electric utility establishes re15 quirements or procedures pursuant to this section

16 that apply to only a part of the new contract elec17 tricity and new electric generating capacity to be

18 procured by State regulated retail electric utilities

19 within the State or, in the case of a nonregulated re20 tail electric utility, to only a part of the new contract

21 electricity and new generating sources to be pro22 cured by such nonregulated retail electric utility,

23 such State regulatory authority or nonregulated re24 tail electric utility must ensure that any other meth25 od of procuring new contract electricity and new
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1 generating sources meets the requirements for an al2 ternative plan pursuant to section 6.

3 (b) MINIMUM REQUIREMENTS.—Requirements or

4 procedures to be established by a State regulatory author5 ity or nonregulated retail electric utility pursuant to this

6 section shall, at a minimum—

7 (1) apply to all or part of the new contract elec8 tricity or new generating sources to be procured by

9 the State regulated retail electric utilities within the

10 State after the effective date of requirements adopt11 ed pursuant to section 4(a)(1)(A), or in the case of

12 a nonregulated retail electric utility, to all or part of

13 the new contract electricity or new generating

14 sources to be procured by such nonregulated retail

15 electric utility after the effective date of procedures

16 adopted pursuant to section 4(b)(1)(A);

17 (2) provide for public notice, by electronic bul18 letin board, electronic trading system, or otherwise,

19 of the purchaser’s offer to acquire new contract elec20 tricity or new generating sources;

21 (3) provide an appropriate and reasonable time

22 for interested suppliers to respond to the notice of

23 the purchaser’s offer to acquire, by electronic bul24 letin board, electronic trading system, or otherwise,
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1 considering the size and complexity of the offer to

2 acquire;

3 (4) provide that no source or supplier of new

4 contract electricity and new generating sources is ex5 cluded from competing to supply such new contract

6 electricity or new generating source;

7 (5) provide that the purchaser is not excluded

8 from supplying new electric generating capacity to

9 itself, and that any affiliate of the purchaser is not

10 excluded from supplying new contract electricity or

11 new electric generating capacity to the purchaser;

12 (6) provide selection of the lowest cost supplier

13 that otherwise meets the terms and conditions of the

14 offer, consistent with reliability; and

15 (7) permit the purchaser to rescind or modify

16 the offer at any time prior to the execution of a con17 tract to supply electric energy.

18 SEC. 6. ALTERNATIVE PLANS.

19 (a) STATE REGULATORY AUTHORITIES.—

20 (1) Any alternative plan adopted by a State

21 regulatory authority must ensure that any State reg22 ulated retail electric utility within the State may not

23 unduly discriminate in favor of its own sources of

24 generation supply, or in favor of its affiliate’s

25 sources of generation supply, or engage in other
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1 forms of self dealing that could result in above mar2 ket prices to consumers; and

3 (2) Notwithstanding section 10, any alternative

4 plan adopted by a State regulatory authority shall

5 ensure that any above market costs of new renew6 able electric generation are allocated on a non7 discriminatory basis to all electric consumers of all

8 State regulated retail electric utilities within the

9 State, in order that no such electric consumer or

10 class of such electric consumers is required, without

11 its express consent, to subsidize the costs of such

12 new renewable electric generation to the advantage

13 of any other such electric consumer or class of such

14 electric consumers.

15 (b) NONREGULATED RETAIL ELECTRIC UTILI16 TIES.—Any alternative plan adopted by a nonregulated re17 tail electric utility must ensure that such nonregulated re18 tail electric utility does not unduly discriminate in favor

19 of its own sources of generation supply, or engage in other

20 forms of self dealing that could result in above market

21 prices to consumers.

22 SEC. 7. EXEMPTIONS.

23 (a) STATE REGULATORY AUTHORITIES.—A State

24 regulatory authority shall be exempt from the require-
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1 ments of section 4(a) if such State regulatory, as of the

2 date of enactment of this Act—

3 (1) has adopted requirements which establish

4 competitive electricity procurement markets that

5 meet the minimum requirements of section 5 of this

6 Act; or

7 (2) has adopted a retail access plan which re8 quires all State regulated retail electric utilities in

9 the State to provide nondiscriminatory and

10 unbundled local distribution services to all electric

11 consumers of such regulated retail electric utilities,

12 in order that such electric consumers may choose

13 among competing electric energy suppliers by Janu14 ary 1, 2004.

15 (b) NONREGULATED RETAIL ELECTRIC UTILI16 TIES.—A nonregulated retail electric utility shall be ex17 empt from the requirements of section 4(b) if such

18 nonregulated retail electric utility, as of the date of enact19 ment of this Act—

20 (1) has adopted procedures for its acquisition of

21 new contract electricity and new generating sources

22 which meet the minimum requirements of section 5;

23 or

24 (2) has adopted a retail access plan which pro25 vides nondiscriminatory and unbundled local dis-
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1 tribution services to all electric consumers of such

2 nonregulated retail electric utility, in order that such

3 electric consumers may choose among competing

4 electric energy suppliers by January 1, 2004.

5 (c) CERTIFICATION.—If a State regulatory authority

6 or nonregulated retail electric utility intends to attain ex7 empt status under this section, it shall certify its intention

8 by public notice no later than six months after the enact9 ment of this Act. Such notice shall specify the grounds

10 upon which the exemption is asserted. The notice shall

11 constitute a final decision of the State regulatory authority

12 or nonregulated retail electric utility for purposes of sec13 tion 9.

14 (d) VOLUNTARY RETAIL ACCESS.—Any State regu15 lated retail electric utility shall be exempt from any re16 quirement imposed under sections 4, 5, or 6(a)(1) if such

17 State regulated retail electric utility has filed a tariff for

18 nondiscriminatory and unbundled local distribution serv19 ices, approved by its State regulatory authority, which

20 provides such local distribution services to all electric con21 sumers of such State regulated retail electric utility, in

22 order that such electric consumers may choose among

23 competing electric energy suppliers.
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1 SEC. 8. MANDATORY RETAIL ACCESS.

2 (a) EFFECTIVE DATE.—Beginning on January 1,

3 2010, no retail electric utility shall prohibit any electric

4 consumer from purchasing nondiscriminatory and

5 unbundled local distribution service or otherwise prohibit

6 such electric consumers from choosing among competing

7 electric energy suppliers.

8 (b) ENFORCEMENT.—If a State, State regulatory au9 thority, or retail electric utility fails to comply with the

10 requirements of this section, any aggrieved person may

11 bring an action against such person or persons to enforce

12 the requirements of this section in the appropriate Federal

13 district court, which court may grant appropriate relief.

14 SEC. 9. REVIEW AND ENFORCEMENT.

15 (a) STATE AUTHORITY.—Notwithstanding any other

16 provision of this section, neither the Commission nor any

17 court of the United States shall have jurisdiction to review

18 the selection by a State regulatory authority or a

19 nonregulated electric utility of a competitive option that

20 meets the requirements of sections 4(a)(1)(B), 4(b)(1)(B),

21 5, and 6. Appeal from such a decision may be taken in

22 accordance with applicable State law.

23 (b) COMMISSION REVIEW.—(1) Any person aggrieved

24 by—
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1 (A) a final order of a State regulatory authority

2 or a nonregulated retail electric utility under section

3 4 or 7, or

4 (B) the failure of a State regulatory authority

5 or nonregulated retail electric utility to initiate a

6 proceeding or render a final decision in accordance

7 with section 4 or 7

8 may petition the Commission to enforce the requirements

9 of sections 4(a)(1)(B), 4(b)(1)(B), 5, and 6.

10 (2) In any proceeding under this section, the Com11 mission may—

12 (A) determine—

13 (i) whether the requirements or plan

14 adopted by a State regulatory authority or

15 nonregulated retail electric utility under sec16 tions 4(a)(1)(B), 4(b)(1)(B), 5, and 6 complies

17 with the requirements of this Act, or

18 (ii) whether any action taken by the State

19 regulatory authority or nonregulatory retail

20 electric utility to implement the requirements or

21 plan complies with the requirements of this Act;

22 and

23 (B) grant appropriate relief.
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1 (c) REHEARING AND APPEAL.—Section 313 of the

2 Federal Power Act shall apply to orders of the Commis3 sion issued pursuant to this section.

4 SEC. 10. RENEWABLE ELECTRIC GENERATION.

5 Except as provided in subsection 6(a)(2), nothing in

6 this Act shall be construed to prohibit—

7 (1) a State from encouraging the production of

8 renewable electric generation under applicable State

9 law; or

10 (2) the voluntary purchase of renewable electric

11 generation by any electric utility or electric

12 consumer.

13 SEC. 11. AMENDMENTS TO FEDERAL POWER ACT.

14 (a) TRANSMISSION ACCESS.—Section 212(h) of the

15 Federal Power Act (16 U.S.C. 824k(h)) is amended by

16 striking the following: ‘‘Nothing in this subsection shall

17 affect any authority of any State or local government

18 under State law concerning the transmission of electric en19 ergy directly to an ultimate consumer.’’, and inserting in

20 lieu thereof: ‘‘Notwithstanding the other provisions of this

21 subsection, the Commission may order, or condition orders

22 upon, the transmission of electric energy to an ultimate

23 consumer if the delivery of such electric energy would be

24 accomplished through the provision of unbundled local dis25 tribution services under sections 4(a)(1)(B), 4(b)(1)(B),
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1 7(a)(2), or 7(d) of the Electricity Competition Act of

2 1996.’’.

3 (b) RETAIL ACCESS AND STRANDED COSTS—The

4 Federal Power Act is amended further by adding the fol5 lowing new sections after section 214.

6 ‘‘SEC. 215. STATE AUTHORITY TO ORDER RETAIL ACCESS.

7 ‘‘Nothing in this Act shall preclude a State regulatory

8 authority, acting under authority of State law, from re9 quiring an electric utility to provide local distribution serv10 ice to any electric consumer.

11 ‘‘SEC. 216. AUTHORITY TO PROVIDE FOR STRANDED COSTS.

12 ‘‘(a) DEFINITIONS.—For purposes of this section—

13 ‘‘(1) the term ‘utility’ shall include any public

14 utility, transmitting utility or electric utility;

15 ‘‘(2) the term ‘stranded cost’ shall be defined

16 by the Commission, and shall include any legitimate,

17 prudently incurred and verifiable cost previously in18 curred by a utility in order to provide service to an

19 electric consumer, which cost:

20 ‘‘(A) is not being, and except as provided

21 in this section would not otherwise be, recov22 ered in rates; and

23 ‘‘(B) the utility has made reasonable at24 tempts to mitigate.
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1 ‘‘(b) AUTHORITY.—Notwithstanding any other provi2 sion of law, in determining or fixing rates, charges, terms

3 and conditions under sections 205 and 206 of this part,

4 the Commission shall provide for the recovery of all

5 stranded costs incurred by any utility transmitting or dis6 tributing electric energy not sold by such utility or any

7 of its affiliates (which electric energy is sold to a customer

8 and serves load of such customer previously served in

9 whole or in part by such utility), including costs incurred

10 to serve such customer not fully recovered at the time such

11 distribution or transmission service is undertaken.

12 ‘‘(c) UNBUNDLED LOCAL DISTRIBUTION.—In acting

13 pursuant to subsection (b) when determining or fixing

14 rates subject to its jurisdiction, the Commission shall per15 mit the recovery of all stranded costs to the extent a State

16 or State regulatory authority requiring the provision of

17 unbundled local distribution service has not permitted the

18 recovery of all such costs in rates or lacks the authority

19 under State law to permit such recovery.

20 ‘‘(d) LIMITATION.—The Commission shall have au21 thority to determine or fix rates or charges under sections

22 205 and 206 for the provision of unbundled local distribu23 tion service by a utility solely as necessary to permit the

24 recovery of stranded costs in accordance with this section.
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1 ‘‘SEC. 217. RECIPROCITY.

2 ‘‘No retail electric utility or any affiliate of such util3 ity may sell electric energy to or for the benefit of an ulti4 mate consumer if the delivery of such electric energy will

5 be accomplished through the provision of unbundled local

6 distribution service by another utility, unless such retail

7 electric utility is itself providing unbundled local distribu8 tion service under sections 4(a)(1)(B), 4(b)(1)(B),

9 7(a)(2), 7(b)(2) or 7(d) of the Electricity Competition Act

10 of 1996.’’.

11 SEC. 12. NUCLEAR DECOMMISSIONING COSTS.

12 To ensure safety with regard to the public health and

13 safe decommissioning of nuclear generating units, the

14 Commission, and all State regulatory authorities, shall au15 thorize and ensure the recovery in rates subject to their

16 respective jurisdictions, of all costs associated with Fed17 eral and State requirements for the decommissioning of

18 such nuclear generating units.

19 SEC. 13. AMENDMENTS TO BANKRUPTCY REFORM ACT.

20 Section 503(b) of the Bankruptcy Reform Act of

21 1978, 11 U.S.C. 503(b), is amended by adding at the end

22 the following new paragraph:

23 ‘‘(7) costs incurred in complying with Nuclear

24 Regulatory Commission regulations or orders gov25 erning the decontamination and decommissioning of

26 nuclear power reactors licensed under section 103 or
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1 104b. of the Atomic Energy Act of 1954, 42 U.S.C.

2 2133 and 2134(b), regardless of whether such costs

3 are reduced to a fixed amount.’’.

Æ