I

106TH CONGRESS

1ST SESSION H. R. 1486

To provide for a transition to market-based rates for power sold by the

Federal Power Marketing Administrations and the Tennessee Valley Authority, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 20, 1999

Mr. FRANKS of New Jersey (for himself and Mr. MEEHAN) introduced the following bill; which was referred to the Committee on Resources, and in

addition to the Committees on Transportation and Infrastructure, and

Commerce, for a period to be subsequently determined by the Speaker,

in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To provide for a transition to market-based rates for power

sold by the Federal Power Marketing Administrations

and the Tennessee Valley Authority, 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 ‘‘Power Marketing Ad5 ministration Reform Act of 1999’’.
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1 SEC. 2. CONGRESSIONAL FINDINGS.

2 The Congress finds that:

3 (1) The use of fixed allocations of joint multi4 purpose project costs and the failure to provide for

5 the recovery of actual interest costs and depreciation

6 have resulted in substantial failures to recover costs

7 properly recoverable through power rates by the

8 Federal Power Marketing Administrations and the

9 Tennessee Valley Authority and have resulted in the

10 imposition of unreasonable burdens on the taxpaying

11 public.

12 (2) Existing under allocations and under recov13 ery of costs have led to inefficiencies in the mar14 keting of Federally generated electric power and to

15 environmental damage.

16 (3) With the emergence of open access to power

17 transmission and competitive bulk power markets,

18 market prices will provide the lowest reasonable

19 rates consistent with sound business principles, con20 sistent with maximum recovery of costs properly al21 located to power production and consistent with en22 couraging the most widespread use of power mar23 keted by Federal Power Marketing Administrations

24 and the Tennessee Valley Authority.
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1 SEC. 3. PURPOSE.

2 The purpose of this Act is to provide for full cost

3 recovery rates for power sold by Federal Power Marketing

4 Administrations and the Tennessee Valley Authority and

5 a transition to market-based rates for such power.

6 SEC. 4. MODIFICATION OF EXISTING POWER MARKETING

7 ADMINISTRATIONS.

8 (a) ACCOUNTING.—Notwithstanding any other provi9 sion of law, the Secretary of Energy shall, in consultation

10 with the Federal Energy Regulatory Commission, imme11 diately upon enactment of this Act develop and implement

12 procedures to ensure that the Federal Power Marketing

13 Administrations utilize the same accounting principles and

14 requirements, including those with respect to the accrual

15 of actual interest costs during construction and pending

16 repayment for any project and recognition of depreciation

17 expenses, as are applied by the Commission to the electric

18 operations of public utilities.

19 (b) DEVELOPMENT AND SUBMITTAL OF RATES TO

20 THE COMMISSION.—Notwithstanding any other provision

21 of law, each Federal Power Marketing Administration and

22 the Tennessee Valley Authority shall, not later than 1 year

23 after enactment of this Act (and periodically thereafter

24 but not less frequently than once each 5 years), submit

25 to the Federal Energy Regulatory Commission rates for

26 the sale or disposition of Federal energy that will ensure
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1 the recovery of all costs incurred by such Federal Power

2 Marketing Administration or the Tennessee Valley Au3 thority for the generation and marketing of such Federal

4 energy. Such costs shall include all fish and wildlife ex5 penditures required under existing treaty and legal obliga6 tions associated with the construction and operation of the

7 facilities from which the federally marketed power is gen8 erated and sold. Such costs shall not include any cost of

9 transmitting such Federal energy.

10 (c) COMMISSION REVIEW, APPROVAL OR MODIFICA11 TION.—The Federal Energy Regulatory Commission shall

12 review and either approve of or modify rates for the sale

13 or disposition of Federal energy submitted to the Commis14 sion by each Federal Power Marketing Administration and

15 the Tennessee Valley Authority under this section, to en16 sure that such rates will recover all costs of generating

17 and marketing such Federal energy (including all fish and

18 wildlife costs associated with such Federal energy as re19 quired under existing treaty and legal obligations, but not

20 including any cost of transmitting such Federal energy).

21 Such review by the Commission shall be based on the

22 record of proceedings before the Federal Power Marketing

23 Administration or the Tennessee Valley Authority, except

24 that all persons shall be afforded an opportunity by the

25 Commission for an additional hearing in accordance with
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1 the procedures established for ratemaking by the Commis2 sion pursuant to the Federal Power Act.

3 (d) APPLICATION OF RATES.—Immediately upon ap4 proval or modification by the Commission of rates under

5 this section for the sale or disposition of Federal energy

6 by a Federal Power Marketing Administration or the Ten7 nessee Valley Authority, the Federal Power Marketing Ad8 ministration shall apply such rates, as approved or modi9 fied by the Commission, to each existing contract for the

10 sale or disposition of Federal energy by such Federal

11 Power Marketing Administration or the Tennessee Valley

12 Authority to the maximum extent permitted by such con13 tract. This section shall not apply to any Federal Power

14 Marketing Administration or the Tennessee Valley Au15 thority if and at such time as it no longer has any out16 standing commitments under any contract for the sale or

17 disposition of Federal energy that were in existence as of

18 the date of enactment of this Act.

19 (e) ACCOUNTING PRINCIPLES AND REQUIRE20 MENTS.—In developing or reviewing the rates required by

21 this section, the Federal Power Marketing Administra22 tions, the Tennessee Valley Authority, and the Commis23 sion shall rely upon the accounting principles and require24 ments developed pursuant to subsection (a).
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1 (f) INTERIM RATES.—Until market pricing for such

2 power sales is fully implemented, such full cost recovery

3 rates shall be implemented for all new contracts for power

4 sales by the Federal Power Marketing Administrator and

5 the Tennessee Valley Authority entered into after the en6 actment of this Act and for renewals after the enactment

7 of this Act for existing contracts for power sales by Fed8 eral Power Marketing Administrations and the Tennessee

9 Valley Authority.

10 (g) TRANSITION TO MARKET-BASED RATES.—If the

11 transition to full cost recovery rates would result in rates

12 that exceed market rates, the Secretary of Energy is au13 thorized to price power sold by Federal Power Marketing

14 Administrations at market rates, and the Tennessee Val15 ley Authority is authorized to price power sold by the Ten16 nessee Valley Authority at market rates, if—

17 (1) operation and maintenance costs are recov18 ered, including all fish and wildlife costs required

19 under existing treaty and legal obligations;

20 (2) the contribution toward recovery of invest21 ment pertaining to power production is maximized;

22 and

23 (3) purchasers of power under existing con24 tracts consent to the remarketing by the relevant

25 Federal Power Marketing Administration or the
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1 Tennessee Valley Authority of such power not later

2 than 3 years thereafter through competitive bidding.

3 Competitive bidding shall be utilized to remarket power

4 that is not accepted by existing customers under this sec5 tion.

6 (h) MARKET-BASED PRICING.—Within 2 years after

7 the enactment of this Act, the Secretary of Energy shall

8 develop and implement procedures to assure that all power

9 sold by Federal Power Marketing Administrations and the

10 Tennessee Valley Authority is sold at prices set by demand

11 and supply within the relevant bulk power supply market.

12 The Secretary of Energy shall establish through notice

13 and comment rulemaking bid and auction procedures to

14 implement market-based pricing for power sold pursuant

15 to any power sales contract entered into by a Federal

16 Power Marketing Administration or the Tennessee Valley

17 Authority after the date 2 years after the enactment of

18 this Act, including power that is under contract but which

19 is declined by the party entitled to purchase such power

20 and remarketed after such date.

21 (i) USE OF REVENUES COLLECTED THROUGH MAR22 KET-BASED PRICING.—

23 (1) IN GENERAL.—Revenues collected through

24 market-based pricing shall be disposed of as follows:
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1 (A) Revenues shall be remitted to the Sec2 retary of the Treasury, first, to cover all power3 related operations and maintenance expenses,

4 all fish and wildlife costs required under exist5 ing treaty and legal obligations, and the project

6 investment cost pertaining to power production.

7 (B) Such revenues as shall remain after re8 mission to the Secretary of the Treasury pursu9 ant to subparagraph (A) shall be divided as fol10 lows:

11 (i) 50 percent of such revenues shall

12 be remitted to the Secretary of the Treas13 ury for the purpose of reducing the Fed14 eral budget deficit.

15 (ii) 35 percent of such revenues shall

16 be deposited in the fund established under

17 paragraph (2)(A) for the purpose of help18 ing cover the costs of mitigating the dam19 age to, and restoring the health of, fish,

20 wildlife, and other environmental resources

21 that is attributable to the construction and

22 operation of the facilities from which power

23 is generated and sold.

24 (iii) 15 percent of such revenues shall

25 be deposited in the fund established under
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1 paragraph (3)(A) for the purpose of help2 ing cover the costs of the incremental cost

3 (above the expected market cost of elec4 tricity) of nonhydroelectric renewable re5 sources in the region in which power is

6 marketed by the applicable power mar7 keting administration.

8 (2) FUND REGARDING ENVIRONMENTAL MITI9 GATION.—

10 (A) There is hereby established a fund to

11 hold and expend the revenues allocated for envi12 ronmental mitigation and restoration pursuant

13 to paragraph (1)(B)(ii). The fund shall be es14 tablished within the Department of Interior and

15 shall be governed by a Board of Directors con16 sisting of the Secretary of the Interior, the Sec17 retary of Energy, and the Administrator of the

18 Environmental Protection Agency or their des19 ignees. Other than expenditure of revenues to

20 cover the costs of establishing and managing

21 the fund, all revenues may be spent only pursu22 ant to project-specific plans to mitigate damage

23 to, and restore the health of, the environment.

24 (B) At no time may the fund established

25 under subparagraph (A) hold more than
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1 $200,000,000 that is not necessary to cover the

2 costs of 1 or more project-specific mitigation

3 plans. Revenues that would otherwise be depos4 ited in the fund but for the absence of 1 or

5 more project-specific plans for environmental

6 mitigation shall be remitted to the Secretary of

7 the Treasury for purposes of Federal budget

8 deficit reduction.

9 (C) The Board of Directors of the fund es10 tablished under subparagraph (A) shall develop

11 project-specific mitigation plans for each project

12 used to generate power marketed by the power

13 marketing administrations or the Tennessee

14 Valley Authority. In developing such plans, the

15 Board is directed, where feasible, to rely on

16 data, information, and mitigation and restora17 tion plans already developed by the United

18 States Bureau of Reclamation, the United

19 States Fish and Wildlife Service, the Environ20 mental Protection Agency, and other Federal,

21 State, and tribal agencies.

22 (3) FUND REGARDING RENEWABLE RE23 SOURCES.—

24 (A) There is hereby established a fund to

25 hold and expend the revenues allocated for re-
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1 newable resources pursuant to paragraph

2 (1)(B)(iii). The fund shall be established within

3 the Department of Energy. Revenues in the

4 fund may be expended to pay for the incre5 mental costs of nonhydroelectric renewable re6 sources in the States in which the applicable

7 power marketing administration markets power.

8 Other than expenditure of revenues to cover the

9 costs of establishing and managing the fund, all

10 revenues may be spent only—

11 (i) pursuant to a plan developed by

12 the Secretary of Energy designed to foster

13 the development of nonhydroelectric renew14 able resources that show substantial long15 term promise but which are presently too

16 expensive to attract private capital suffi17 cient to develop or ascertain their poten18 tial; and

19 (ii) on recipients chosen by a process

20 of competitive bidding.

21 (B) At no time may the fund established

22 under subparagraph (A) hold more than

23 $50,000,000 that is not necessary to meet the

24 plan developed pursuant to such subparagraph.

25 Revenues that would otherwise be deposited in
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1 this fund but for the absence of such a plan

2 shall be remitted to the Secretary of the Treas3 ury for purposes of Federal budget deficit re4 duction.

5 (j) PREFERENCE.—Public bodies and cooperatives

6 shall be given a preference to future power allocations or

7 reallocations of Federal power through a right of first re8 fusal at market prices. Power obtained through preference

9 rights shall be consumed by the preference customer or

10 resold for consumption by the constituent end-users of the

11 preference customer and may not be resold to other enti12 ties. As regulated by the Federal Energy Regulatory Com13 mission, preference recipients shall have transmission ac14 cess to this purchased power. If a public body or coopera15 tive does not take allocation, the next highest bidder takes

16 the allocation.

17 (k) REFORMS.—The Secretary of Energy shall re18 quire each Federal Power Marketing Administration to

19 implement—

20 (1) program management in order to assign

21 personnel and incur expenses for authorized power

22 marketing, reclamation, and flood control activities

23 only, and not diversification into ancillary activities

24 including consulting or operating services for other

25 entities; and
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1 (2) annual reporting plainly disclosing to the

2 American public, the activities of the Power Mar3 keting Administration including, but not limited to,

4 the full cost of such power projects and power mar5 keting programs.

6 (l) CONTRACT RENEWAL.—After the enactment of

7 this Act, no Federal Power Marketing Administration may

8 enter into or renew any power marketing contract for a

9 term that exceeds 5 years.

10 (m) RESTRICTIONS.—Excepting only the Bonneville

11 Power Administration, each Federal Power Marketing Ad12 ministration shall be subject to the restrictions on the con13 struction of transmission and additional facilities estab14 lished by section 5 of the Flood Control Act of 1944.

15 SEC. 5. FEDERAL ENERGY REGULATORY COMMISSION JU16 RISDICTION OVER TRANSMISSION SERVICE

17 PROVIDED BY POWER MARKETING ADMINIS18 TRATIONS AND TENNESSEE VALLEY AUTHOR19 ITY.

20 Transmission service provided by Federal Power

21 Marketing Administrations shall be provided on an open

22 access basis and at just and reasonable rates approved or

23 established by the Federal Energy Regulatory Commission

24 under part II of the Federal Power Act in the same man25 ner as such service is provided pursuant to Commission
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1 rules by any public utility subject to the jurisdiction of

2 the Commission under such Part II. The preceding sen3 tence shall not require any Federal Power Marketing Ad4 ministration to expand transmission or interconnection ca5 pabilities or transmissions in the absence of other author6 ity of law.

7 SEC. 6. IMPLEMENTATION BY THE FEDERAL ENERGY REG8 ULATORY COMMISSION.

9 Pending the implementation of market-based pricing,

10 the Federal Energy Regulatory Commission shall have au11 thority to review and approve, reject, or revise power rate

12 schedules recommended for approval by the Secretary of

13 Energy, and existing rate schedules, for power sales by

14 the Federal Power Marketing Administrations. The Fed15 eral Energy Regulatory Commission shall base its ap16 proval of final rates upon the protection of the public in17 terest and shall undertake to protect the interest of the

18 taxpaying public as well as the interests of consumers in

19 accordance with section 4. The Federal Energy Regulatory

20 Commission may review the factual basis for determina21 tions made by the Secretary of Energy and may revise

22 or modify those findings as appropriate and may revise

23 proposed or effective rate schedules or remand the rate

24 schedules to the Secretary of Energy as the Federal En25 ergy Regulatory Commission determines is necessary to
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1 protect the public interest in accordance with section 4

2 until a full transition is made to market-based rates for

3 power sold by Federal Power Marketing Administrations.

4 The Federal Energy Regulatory Commission is authorized

5 to proceed pursuant to informal notice and comment rule6 making pursuant to section 553(c) of title 5, United

7 States Code. Any affected party, including a taxpayer, bid8 der, preference customer, or affected competitor may seek

9 a rehearing and judicial review of a final decision of the

10 Federal Energy Regulatory Commission pursuant to sec11 tion 313 of the Federal Power Act (16 U.S.C. 8251).

12 SEC. 7. REPEALS.

13 The following provisions are repealed:

14 (1) The last sentence of section 302(a)(3) of

15 the Department of Energy Organization Act.

16 (2) Section 505 of Public Law 102–377.

17 SEC. 8. EFFECTIVE DATE.

18 Except as otherwise specifically provided in this Act,

19 the provisions of this Act and the amendments made by

20 this Act shall take effect with respect to power sales con21 tracts entered into by a Federal Power Marketing Admin22 istration or the Tennessee Valley Authority after July 23,

23 1997.

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