II

106TH CONGRESS

1ST SESSION S. 161

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 SENATE OF THE UNITED STATES

JANUARY 19, 1999

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

referred to the Committee on Energy and Natural Resources

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’’.

6 SEC. 2. FINDINGS AND PURPOSES.

7 (a) FINDINGS.—Congress finds that—
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1 (1) the use of fixed allocations of joint multi2 purpose project costs and the failure to provide for

3 the recovery of actual interest costs and depreciation

4 have resulted in—

5 (A) substantial failures to recover costs

6 properly recoverable through power rates by the

7 Federal Power Marketing Administrations and

8 the Tennessee Valley Authority; and

9 (B) the imposition of unreasonable burdens

10 on the taxpaying public;

11 (2) existing underallocations and underrecovery

12 of costs have led to inefficiencies in the marketing

13 of Federally generated electric power and to environ14 mental damage; and

15 (3) with the emergence of open access to power

16 transmission and competitive bulk power markets,

17 market prices will provide the lowest reasonable

18 rates consistent with—

19 (A) sound business principles;

20 (B) maximum recovery of costs properly

21 allocated to power production; and

22 (C) encouraging the most widespread use

23 of power marketed by the Federal Power Mar24 keting Administrations and the Tennessee Val25 ley Authority.
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1 (b) PURPOSES.—The purposes of this Act are to pro2 vide for—

3 (1) full cost recovery rates for power sold by

4 the Federal Power Marketing Administrations and

5 the Tennessee Valley Authority; and

6 (2) a transition to market-based rates for the

7 power.

8 SEC. 3. SALE OR DISPOSITION OF FEDERAL POWER BY FED9 ERAL POWER MARKETING ADMINISTRATIONS

10 AND THE TENNESSEE VALLEY AUTHORITY.

11 (a) ACCOUNTING.—Notwithstanding any other provi12 sion of law, as soon as practicable after the date of enact13 ment of this Act, the Secretary of Energy, in consultation

14 with the Federal Energy Regulatory Commission, shall de15 velop and implement procedures to ensure that the Fed16 eral Power Marketing Administrations and the Tennessee

17 Valley Authority use the same accounting principles and

18 requirements (including the accounting principles and re19 quirements with respect to the accrual of actual interest

20 costs during construction and pending repayment for any

21 project and recognition of depreciation expenses) as are

22 applied by the Commission to the electric operations of

23 public utilities.

24 (b) DEVELOPMENT AND SUBMISSION OF RATES TO

25 THE COMMISSION.—
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1 (1) IN GENERAL.—Notwithstanding any other

2 provision of law, not later than 1 year after the date

3 of enactment of this Act and periodically thereafter

4 but not less frequently than once every 5 years, each

5 Federal Power Marketing Administration and the

6 Tennessee Valley Authority shall submit to the Fed7 eral Energy Regulatory Commission a description of

8 proposed rates for the sale or disposition of Federal

9 power that will ensure the recovery of all costs in10 curred by the Federal Power Marketing Administra11 tion or the Tennessee Valley Authority, respectively,

12 for the generation and marketing of the Federal

13 power.

14 (2) COSTS TO BE RECOVERED.—The costs to be

15 recovered under paragraph (1)—

16 (A) shall include all fish and wildlife ex17 penditures required under treaty and legal obli18 gations associated with the construction and op19 eration of the facilities from which the Federal

20 power is generated and sold; and

21 (B) shall not include any cost of transmit22 ting the Federal power.

23 (c) COMMISSION REVIEW, APPROVAL, OR MODIFICA24 TION.—
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1 (1) IN GENERAL.—The Federal Energy Regu2 latory Commission shall review and either approve or

3 modify rates for the sale or disposition of Federal

4 power submitted to the Commission by each Federal

5 Power Marketing Administration and the Tennessee

6 Valley Authority under this section, in a manner

7 that ensures that the rates will recover all costs de8 scribed in subsection (b)(2).

9 (2) BASIS FOR REVIEW.—The review by the

10 Commission under paragraph (1) shall be based on

11 the record of proceedings before the Federal Power

12 Marketing Administration or the Tennessee Valley

13 Authority, except that the Commission shall afford

14 all affected persons an opportunity for an additional

15 hearing in accordance with the procedures estab16 lished for ratemaking by the Commission under the

17 Federal Power Act (16 U.S.C. 791a et seq.).

18 (d) APPLICATION OF RATES.—

19 (1) IN GENERAL.—Beginning on the date of ap20 proval or modification by the Commission of rates

21 under this section, each Federal Power Marketing

22 Administration and the Tennessee Valley Authority

23 shall apply the rates, as approved or modified by the

24 Commission, to each existing contract for the sale or

25 disposition of Federal power by the Federal Power
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1 Marketing Administration or the Tennessee Valley

2 Authority to the maximum extent permitted by the

3 contract.

4 (2) APPLICABILITY.—This section shall cease to

5 apply to a Federal Power Marketing Administration

6 or the Tennessee Valley Authority as of the date of

7 termination of all commitments under any contract

8 for the sale or disposition of Federal power that

9 were in existence as of the date of enactment of this

10 Act.

11 (e) ACCOUNTING PRINCIPLES AND REQUIRE12 MENTS.—In developing or reviewing the rates required by

13 this section, the Federal Power Marketing Administra14 tions, the Tennessee Valley Authority, and the Commis15 sion shall rely on the accounting principles and require16 ments developed under subsection (a).

17 (f) INTERIM RATES.—Until market pricing for the

18 sale or disposition of Federal power by a Federal Power

19 Marketing Administration or the Tennessee Valley Au20 thority is fully implemented, the full cost recovery rates

21 required by this section shall apply to—

22 (1) a new contract entered into after the date

23 of enactment of this Act for the sale of power by a

24 Federal Power Marketing Administrator or the Ten25 nessee Valley Authority; and
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1 (2) a renewal after the date of enactment of

2 this Act of an existing contract for the sale of power

3 by a Federal Power Marketing Administration or the

4 Tennessee Valley Authority.

5 (g) TRANSITION TO MARKET-BASED RATES.—

6 (1) IN GENERAL.—If the transition to full cost

7 recovery rates would result in rates that exceed mar8 ket rates, the Secretary of Energy may approve

9 rates for power sold by Federal Power Marketing

10 Administrations at market rates, and the Tennessee

11 Valley Authority may approve rates for power sold

12 by the Tennessee Valley Authority at market rates,

13 if—

14 (A) operation and maintenance costs are

15 recovered, including all fish and wildlife costs

16 required under existing treaty and legal obliga17 tions;

18 (B) the contribution toward recovery of in19 vestment pertaining to power production is

20 maximized; and

21 (C) purchasers of power under existing

22 contracts consent to the remarketing by the

23 Federal Power Marketing Administration or the

24 Tennessee Valley Authority of the power
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1 through competitive bidding not later than 3

2 years after the approval of the rates.

3 (2) COMPETITIVE BIDDING.—Competitive bid4 ding shall be used to remarket power that is subject

5 to, but not sold in accordance with, paragraph (1).

6 (h) MARKET-BASED PRICING.—

7 (1) IN GENERAL.—Not later than 2 years after

8 the date of enactment of this Act, the Secretary of

9 Energy shall develop and implement procedures to

10 ensure that all power sold by Federal Power Market11 ing Administrations and the Tennessee Valley Au12 thority is sold at prices that reflect demand and sup13 ply conditions within the relevant bulk power supply

14 market.

15 (2) BID AND AUCTION PROCEDURES.—The Sec16 retary of Energy shall establish by regulation bid

17 and auction procedures to implement market-based

18 pricing for power sold under any power sales con19 tract entered into by a Federal Power Marketing

20 Administration or the Tennessee Valley Authority

21 after the date that is 2 years after the date of enact22 ment of this Act, including power that is under con23 tract but that is declined by the party entitled to

24 purchase the power and remarketed after that date.
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1 (i) USE OF REVENUE COLLECTED THROUGH MAR2 KET-BASED PRICING.—

3 (1) IN GENERAL.—Revenue collected through

4 market-based pricing shall be disposed of as follows:

5 (A) REVENUE FOR OPERATIONS, FISH AND

6 WILDLIFE, AND PROJECT COSTS.—Revenue

7 shall be remitted to the Secretary of the Treas8 ury to cover—

9 (i) all power-related operations and

10 maintenance expenses;

11 (ii) all fish and wildlife costs required

12 under existing treaty and legal obligations;

13 and

14 (iii) the project investment cost per15 taining to power production.

16 (B) REMAINING REVENUE.—Revenue that

17 remains after remission to the Secretary of the

18 Treasury under subparagraph (A) shall be dis19 posed of as follows:

20 (i) FEDERAL BUDGET DEFICIT.—50

21 percent of the revenue shall be remitted to

22 the Secretary of the Treasury for the pur23 pose of reducing the Federal budget defi24 cit.
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1 (ii) FUND FOR ENVIRONMENTAL MITI2 GATION AND RESTORATION.—35 percent of

3 the revenue shall be deposited in the fund

4 established under paragraph (2)(A).

5 (iii) FUND FOR RENEWABLE RE6 SOURCES.—15 percent of the revenue shall

7 be deposited in the fund established under

8 paragraph (3)(A).

9 (2) FUND FOR ENVIRONMENTAL MITIGATION

10 AND RESTORATION.—

11 (A) ESTABLISHMENT.—

12 (i) IN GENERAL.—There is established

13 in the Treasury of the United States a

14 fund to be known as the ‘‘Fund for Envi15 ronmental Mitigation and Restoration’’

16 (referred to in this paragraph as the

17 ‘‘Fund’’), consisting of funds allocated

18 under paragraph (1)(B)(ii).

19 (ii) ADMINISTRATION.—The Fund

20 shall be administered by a Board of Direc21 tors consisting of the Secretary of the Inte22 rior, the Secretary of Energy, and the Ad23 ministrator of the Environmental Protec24 tion Agency, or their designees.
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1 (B) USE.—Amounts in the Fund shall be

2 available for making expenditures—

3 (i) to carry out project-specific plans

4 to mitigate damage to, and restore the

5 health of, fish, wildlife, and other environ6 mental resources that is attributable to the

7 construction and operation of the facilities

8 from which power is generated and sold;

9 and

10 (ii) to cover all costs incurred in es11 tablishing and administering the Fund.

12 (C) PROJECT-SPECIFIC PLANS.—

13 (i) IN GENERAL.—The Board of Di14 rectors of the Fund shall develop a project15 specific plan described in subparagraph

16 (B)(i) for each project that is used to gen17 erate power marketed by the Federal

18 Power Marketing Administration or the

19 Tennessee Valley Authority.

20 (ii) USE OF EXISTING DATA, INFOR21 MATION, AND PLANS.—In developing plans

22 under clause (i), the Board, to the maxi23 mum extent practicable, shall rely on exist24 ing data, information, and mitigation and

25 restoration plans developed by—
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1 (I) the Commissioner of the Bu2 reau of Reclamation;

3 (II) the Director of the United

4 States Fish and Wildlife Service;

5 (III) the Administrator of the

6 Environmental Protection Agency;

7 and

8 (IV) the heads of other Federal,

9 State, and tribal agencies.

10 (D) MAXIMUM AMOUNT.—

11 (i) IN GENERAL.—The Fund shall

12 maintain a balance of not more than

13 $200,000,000 in excess of the amount that

14 the Board of Directors of the Fund deter15 mines is necessary to cover the costs of

16 project-specific plans required under this

17 paragraph.

18 (ii) SURPLUS REVENUE FOR DEFICIT

19 REDUCTION.—Revenue that would be de20 posited in the Fund but for the absence of

21 such project-specific plans shall be used by

22 the Secretary of the Treasury for purposes

23 of reducing the Federal budget deficit.

24 (3) FUND FOR RENEWABLE RESOURCES.—

25 (A) ESTABLISHMENT.—
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1 (i) IN GENERAL.—There is established

2 in the Treasury of the United States a

3 fund to be known as the ‘‘Fund for Renew4 able Resources’’ (referred to in this para5 graph as the ‘‘Fund’’), consisting of funds

6 allocated under paragraph (1)(B)(iii).

7 (ii) ADMINISTRATION.—The Fund

8 shall be administered by the Secretary of

9 Energy.

10 (B) USE.—Amounts in the Fund shall be

11 available for making expenditures—

12 (i) to pay the incremental cost (above

13 the expected market cost of power) of non14 hydroelectric renewable resources in the re15 gion in which power is marketed by a Fed16 eral Power Marketing Administration; and

17 (ii) to cover all costs incurred in es18 tablishing and administering the Fund.

19 (C) ADMINISTRATION.—Amounts in the

20 Fund shall be expended only—

21 (i) in accordance with a plan devel22 oped by the Secretary of Energy that is de23 signed to foster the development of non24 hydroelectric renewable resources that

25 show substantial long-term promise but
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1 that are currently too expensive to attract

2 private capital sufficient to develop or as3 certain their potential; and

4 (ii) on recipients chosen through com5 petitive bidding.

6 (D) MAXIMUM AMOUNT.—

7 (i) IN GENERAL.—The Fund shall

8 maintain a balance of not more than

9 $50,000,000 in excess of the amount that

10 the Secretary of Energy determines is nec11 essary to carry out the plan developed

12 under subparagraph (C)(i).

13 (ii) SURPLUS REVENUE FOR DEFICIT

14 REDUCTION.—Revenue that would be de15 posited in the Fund but for the absence of

16 the plan shall be used by the Secretary of

17 the Treasury for purposes of reducing the

18 Federal budget deficit.

19 (j) PREFERENCE.—

20 (1) IN GENERAL.—In making allocations or re21 allocations of power under this section, a Federal

22 Power Marketing Administration and the Tennessee

23 Valley Authority shall provide a preference for public

24 bodies and cooperatives by providing a right of first

25 refusal to purchase the power at market prices.
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1 (2) USE.—

2 (A) IN GENERAL.—Power purchased under

3 paragraph (1)—

4 (i) shall be consumed by the pref5 erence customer or resold for consumption

6 by the constituent end-users of the pref7 erence customer; and

8 (ii) may not be resold to other persons

9 or entities.

10 (B) TRANSMISSION ACCESS.—In accord11 ance with regulations of the Federal Energy

12 Regulatory Commission, a preference customer

13 shall have transmission access to power pur14 chased under paragraph (1).

15 (3) COMPETITIVE BIDDING.—If a public body

16 or cooperative does not purchase power under para17 graph (1), the power shall be allocated to the next

18 highest bidder.

19 (k) REFORMS.—The Secretary of Energy shall re20 quire each Federal Power Marketing Administration to

21 implement—

22 (1) program management reforms that require

23 the Federal Power Marketing Administration to as24 sign personnel and incur expenses only for author25 ized power marketing, reclamation, and flood control
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1 activities and not for ancillary activities (including

2 consulting or operating services for other entities);

3 and

4 (2) annual reporting requirements that clearly

5 disclose to the public, the activities of the Federal

6 Power Marketing Administration (including the full

7 cost of the power projects and power marketing pro8 grams).

9 (l) CONTRACT RENEWAL.—Effective beginning on

10 the date of enactment of this Act, a Federal Power Mar11 keting Administration shall not enter into or renew any

12 power marketing contract for a term that exceeds 5 years.

13 (m) RESTRICTIONS.—Except for the Bonneville

14 Power Administration, each Federal Power Marketing Ad15 ministration shall be subject to the restrictions on the con16 struction of transmission and additional facilities that are

17 established under section 5 of the Act entitled ‘‘An Act

18 authorizing the construction of certain public works on

19 rivers and harbors for flood control, and for other pur20 poses’’, approved December 22, 1944 (commonly known

21 as the ‘‘Flood Control Act of 1944’’) (58 Stat. 890)).
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1 SEC. 4. TRANSMISSION SERVICE PROVIDED BY FEDERAL

2 POWER MARKETING ADMINISTRATIONS AND

3 TENNESSEE VALLEY AUTHORITY.

4 (a) IN GENERAL.—Subject to subsection (b), a Fed5 eral Power Marketing Administration and the Tennessee

6 Valley Authority shall provide transmission service on an

7 open access basis, and at just and reasonable rates ap8 proved or established by the Federal Energy Regulatory

9 Commission under part II of the Federal Power Act (16

10 U.S.C. 824 et seq.), in the same manner as the service

11 is provided under Commission rules by any public utility

12 subject to the jurisdiction of the Commission under that

13 part.

14 (b) EXPANSION OF CAPABILITIES OR TRANS15 MISSIONS.—Subsection (a) does not require a Federal

16 Power Marketing Administration or the Tennessee Valley

17 Authority to expand a transmission or interconnection ca18 pability or transmission.

19 SEC. 5. INTERIM REGULATION OF POWER RATE SCHED20 ULES OF FEDERAL POWER MARKETING AD21 MINISTRATIONS.

22 (a) IN GENERAL.—During the date beginning on the

23 date of enactment of this Act and ending on the date on

24 which market-based pricing is implemented under section

25 3 (as determined by the Federal Energy Regulatory Com26 mission), the Commission may review and approve, reject,
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1 or revise power rate schedules recommended for approval

2 by the Secretary of Energy, and existing rate schedules,

3 for power sales by a Federal Power Marketing Administra4 tion.

5 (b) BASIS FOR APPROVAL.—In evaluating rates

6 under subsection (a), the Federal Energy Regulatory

7 Commission, in accordance with section 3, shall—

8 (1) base any approval of the rates on the pro9 tection of the public interest; and

10 (2) undertake to protect the interest of the tax11 paying public and consumers.

12 (c) COMMISSION ACTIONS.—As the Federal Energy

13 Regulatory Commission determines is necessary to protect

14 the public interest in accordance with section 3 until a

15 full transition is made to market-based rates for power

16 sold by Federal Power Marketing Administrations, the

17 Federal Energy Regulatory Commission may—

18 (1) review the factual basis for determinations

19 made by the Secretary of Energy;

20 (2) revise or modify those findings as appro21 priate;

22 (3) revise proposed or effective rate schedules;

23 or

24 (4) remand the rate schedules to the Secretary

25 of Energy.
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1 (d) REVIEW.—An affected party (including a tax2 payer, bidder, preference customer, or affected competitor)

3 may seek a rehearing and judicial review of a final decision

4 of the Federal Energy Regulatory Commission under this

5 section in accordance with section 313 of the Federal

6 Power Act (16 U.S.C. 825l).

7 (e) PROCEDURES.—The Federal Energy Regulatory

8 Commission shall by regulation establish procedures to

9 carry out this section.

10 SEC. 6. CONFORMING AMENDMENTS.

11 (a) TRANSFERS FROM THE DEPARTMENT OF THE IN12 TERIOR.—Section 302(a)(3) of the Department of Energy

13 Organization Act (42 U.S.C. 7152(a)(3)) is amended by

14 striking the last sentence.

15 (b) USE OF FUNDS TO STUDY NONCOST-BASED

16 METHODS OF PRICING HYDROELECTRIC POWER.—Sec17 tion 505 of the Energy and Water Development Appro18 priations Act, 1993 (42 U.S.C. 7152 note; 106 Stat.

19 1343) is repealed.

20 SEC. 7. APPLICABILITY.

21 Except as provided in section 3(l), this Act shall

22 apply to a power sales contract entered into by a Federal

23 Power Marketing Administration or the Tennessee Valley

24 Authority after July 23, 1997.

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