II

106TH CONGRESS

2D SESSION S. 2570

To provide for the fair and equitable treatment of the Tennessee Valley

Authority and its ratepayers in the event of restructuring of the electric

utility industry.

IN THE SENATE OF THE UNITED STATES

MAY 16, 2000

Mr. FRIST (for himself, Mr. THOMPSON, and Mr. COCHRAN) introduced the

following bill; which was read twice and referred to the Committee on Environment and Public Works

A BILL

To provide for the fair and equitable treatment of the Tennessee Valley Authority and its ratepayers in the event

of restructuring of the electric utility industry.

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

3 SECTION 1. DEFINITIONS.

4 In this Act:

5 (1) COMMISSION.—The term ‘‘Commission’’

6 means the Federal Energy Regulatory Commission.

7 (2) DISTRIBUTOR.—The term ‘‘distributor’’

8 means a cooperative organization, municipal, or

9 other publicly owned electric power system that, on
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1 December 31, 1997, purchased all or substantially

2 all of its wholesale power requirements from the

3 Tennessee Valley Authority under a long-term power

4 sales agreement.

5 (3) DISTRIBUTOR SERVICE AREA.—The term

6 ‘‘distributor service area’’ means a geographic area

7 within which a distributor is authorized by State law

8 to sell electric power to retail electric consumers on

9 the date of enactment of this Act.

10 (4) ELECTRIC UTILITY.—The term ‘‘electric

11 utility’’ has the meaning given the term in section

12 3 of the Federal Power Act (16 U.S.C. 796).

13 (5) EXCESS ELECTRIC POWER.—The term ‘‘ex14 cess electric power’’ means the amount of the elec15 tric power and capacity that—

16 (A) is available to the Tennessee Valley

17 Authority; and

18 (B) exceeds the Tennessee Valley

19 Authority’s power supply obligations to dis20 tributors and any Tennessee Valley Authority

21 retail electric consumers (or predecessors in in22 terest) that had a contract for the purchase of

23 electric power from the Tennessee Valley Au24 thority on the date of enactment of this Act.
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1 (6) PUBLIC UTILITY.—The term ‘‘public util2 ity’’ has the meaning given the term in section 201

3 of the Federal Power Act (16 U.S.C. 824).

4 (7) RETAIL ELECTRIC CONSUMER.—The term

5 ‘‘retail electric consumer’’ has the meaning given the

6 term in section 3 of the Federal Power Act (16

7 U.S.C. 796).

8 (8) TENNESSEE VALLEY REGION.—The term

9 ‘‘Tennessee Valley Region’’ means the geographic

10 area in which the Tennessee Valley Authority or its

11 distributors were the primary source of electric

12 power on December 31, 1997.

13 SEC. 2. WHOLESALE COMPETITION IN THE TENNESSEE

14 VALLEY REGION.

15 (a) AMENDMENTS TO THE FEDERAL POWER ACT.—

16 (1) WHEELING ORDERS.—Section 212(f) of the

17 Federal Power Act (16 U.S.C. 824k(f)) is repealed.

18 (2) TRANSMISSION.—Section 212(j) of the Fed19 eral Power Act (16 U.S.C. 824k(j)) is repealed.

20 (b) AMENDMENTS TO THE TENNESSEE VALLEY AU21 THORITY ACT.—

22 (1) SALE OR DELIVERY OF ELECTRIC POWER.—

23 The third sentence of the first undesignated para24 graph of section 15d(a) of the Tennessee Valley Au-
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1 thority Act of 1933 (16 U.S.C. 831n–4(a)) is re2 pealed.

3 (2) ADDITIONAL AMENDMENTS.—The second

4 and third undesignated paragraphs of section 15d(a)

5 of the Tennessee Valley Authority Act of 1933 (16

6 U.S.C. 831n–4(a)) are repealed.

7 SEC. 3. TENNESSEE VALLEY AUTHORITY POWER SALES.

8 (a) LIMIT ON RETAIL SALES BY TENNESSEE VALLEY

9 AUTHORITY.—Notwithstanding sections 10, 11, and 12 of

10 the Tennessee Valley Authority Act (16 U.S.C. 831i, 831j,

11 831k), the Tennessee Valley Authority may sell electric

12 power at retail only to—

13 (1) a retail electric consumer (or predecessor in

14 interest) that had a contract for the purchase of

15 electric power from the Tennessee Valley Authority

16 on the date of enactment of this Act; or

17 (2) a retail electric consumer that consumes the

18 electric power within a distributor service area, if the

19 applicable regulatory authority (other than the Ten20 nessee Valley Authority) permits any other power

21 supplier to sell electric power to the retail electric

22 consumer.

23 (b) CONSTRUCTION OF RETAIL ELECTRIC SERVICE

24 FACILITIES.—No person shall construct or modify a facil25 ity in the service area of a distributor for the purpose of
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1 serving a retail electric consumer within the distributor

2 service area without the consent of the distributor, except

3 when the electric consumer is already being served by such

4 a person.

5 (c) WHOLESALE POWER SALES.—

6 (1) EXISTING SALES.—Nothing in this title

7 shall modify or alter the existing obligations of the

8 Tennessee Valley Authority under the first sentence

9 of section 10 of the Tennessee Valley Authority Act

10 (16 U.S.C. 831i) to sell power to a distributor, pro11 vided that this paragraph shall not apply to access

12 to power being supplied to another entity under an

13 existing contract with a term of 1 year or longer by

14 a distributor that—

15 (A) has made a prior election under sec16 tion 5(b); and

17 (B) requests to increase its power pur18 chases from the Tennessee Valley Authority.

19 (2) SALES OF EXCESS ELECTRIC POWER.—

20 (A) IN GENERAL.—Notwithstanding sec21 tions 10, 11, and 12, or any other provision of

22 the Tennessee Valley Authority Act of 1933 (16

23 U.S.C. 831i, 831j, 831k), the sale of electric

24 power at wholesale by the Tennessee Valley Au-
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1 thority for use outside the Tennessee Valley Re2 gion shall be limited to excess electric power.

3 (B) NO EXCESS ELECTRIC POWER.—The

4 Tennessee Valley Authority shall not offer ex5 cess electric power under a firm power agree6 ment with a term of 3 or more years to any

7 new wholesale customer at rates, terms, and

8 conditions more favorable than those offered to

9 any distributor for comparable electric power,

10 taking into account such factors as the amount

11 of electric power sold, the firmness of such

12 power, and the length of the contract term, un13 less the distributor or distributors that are pur14 chasing electric power under equivalent firm

15 power contracts agree to the sale to the new

16 customer.

17 (C) NO EFFECT ON EXCHANGE POWER AR18 RANGEMENTS.—Nothing in this subsection pre19 cludes the Tennessee Valley Authority from

20 making exchange power arrangements with

21 other electric utilities when economically fea22 sible.

23 (d) APPLICATION OF TENNESSEE VALLEY AUTHOR24 ITY ACT TO SALES OUTSIDE TENNESSEE VALLEY RE25 GION.—The third proviso of section 10 of the Tennessee
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1 Valley Authority Act of 1933 (16 U.S.C. 831i) and the

2 second and third provisos of section 12 of the Tennessee

3 Valley Authority Act of 1933 (16 U.S.C. 831k) shall not

4 apply to any sale of excess electric power by the Tennessee

5 Valley Authority for use outside the Tennessee Valley Re6 gion.

7 SEC. 4. TENNESSEE VALLEY AUTHORITY ELECTRIC GEN8 ERATION FACILITIES.

9 Section 15d(a) of the Tennessee Valley Authority Act

10 of 1933 (16 U.S.C. 831n–4(a)) is amended—

11 (1) in the second sentence, by inserting before

12 the period at the end the following: ‘‘, if the Cor13 poration determines that the construction, acquisi14 tion, enlargement, improvement, or replacement of

15 any plant or facility used or to be used for the gen16 eration of electric power is necessary to supply the

17 demands of distributors and retail electric consumers

18 of the Corporation’’; and

19 (2) by inserting after the second sentence the

20 following: ‘‘Commencing on the date of enactment of

21 this sentence, the Tennessee Valley Authority shall

22 provide to distributors and their duly authorized rep23 resentatives, on a confidential basis, detailed infor24 mation on its projections and plans regarding the

25 potential acquisition of new electric generating facili-
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1 ties, and, not less than 45 days before a decision by

2 the Tennessee Valley Authority to make such an ac3 quisition, shall provide distributors an opportunity to

4 comment on the acquisition. Notwithstanding any

5 other provision of law, confidential information de6 scribed in the preceding sentence shall not be dis7 closed by a distributor to a source other than the

8 Tennessee Valley Authority, except (1) in response

9 to process validly issued by any court or govern10 mental agency having jurisdiction over the dis11 tributor; (2) to any officer, agent, employee, or duly

12 authorized representative of a distributor who agrees

13 to the same confidentiality and non-disclosure obli14 gation applicable to distributor; (3) in any judicial or

15 administrative proceeding initiated by distributor

16 contesting action by the Tennessee Valley Authority

17 to cause the construction of new electric generation

18 facilities; or (4) on or after a date that is at least

19 3 years after the commercial operating date of the

20 electric generating facilities.’’.

21 SEC. 5. RENEGOTIATION OF POWER CONTRACTS.

22 (a) RENEGOTIATION.—The Tennessee Valley Author23 ity and the distributors shall make good faith efforts to

24 renegotiate their power contracts in effect on and after

25 the date of enactment of this Act.
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1 (b) DISTRIBUTOR CONTRACT TERMINATION OR RE2 DUCTION RIGHT.—If a distributor and the Tennessee Val3 ley Authority are unable by negotiation to arrive at a mu4 tually acceptable replacement contract to govern their

5 post-enactment relationship, the Tennessee Valley Author6 ity shall allow the distributor to give notice 1 time each

7 calendar year, within the 60-day period beginning on the

8 date of enactment of this Act or on any anniversary of

9 that date, of the distributor’s decision to (1) terminate the

10 contract to purchase wholesale electric energy from the

11 Tennessee Valley Authority that was in effect on the date

12 of enactment of this Act, to take effect on the date that

13 is 3 years after the date on which notice is given under

14 this subsection; or (2) reduce the quantity of wholesale

15 power requirements under the contract to purchase whole16 sale electric energy from the Tennessee Valley Authority

17 that was in effect on the date of enactment of this Act

18 by up to 10 percent of its requirements, to take effect on

19 the date that is 2 years after the date on which notice

20 is given under this subsection, or more than 10 percent

21 of its requirements, to take effect on the date that is 3

22 years after the date on which notice is given under this

23 subsection, and to negotiate with the Tennessee Valley Au24 thority to amend the contract that was in effect on the
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1 date of enactment to reflect a partial requirements rela2 tionship.

3 (c) PARTIAL REQUIREMENTS NOTICE.—As part of a

4 notice under subsection (b), a distributor shall identify—

5 (1) the annual quantity of electric energy that

6 the distributor will acquire from a source other than

7 the Tennessee Valley Authority as the result of an

8 election by the distributor; and

9 (2) the times of the day and year that specified

10 amounts of the energy will be received by the dis11 tributor.

12 (d) NONDISCRIMINATION.—The Tennessee Valley

13 Authority shall not unduly discriminate against any dis14 tributor as the result of—

15 (1) the exercise of notice under paragraph (1)

16 or (2) of subsection (b) by the distributor; or

17 (2) the status of the distributor as a partial re18 quirements customer.

19 SEC. 6. REGULATION OF TENNESSEE VALLEY AUTHORITY

20 TRANSMISSION SYSTEM.

21 Notwithstanding sections 201(b)(1) and 201(f) of the

22 Federal Power Act (16 U.S.C. 824(b)(1), 824(f)), sections

23 202(h), 205, 206, 208, 210 through 213, 301 through

24 304, 306, 307 (except the last sentence of 307(c)), 308,

25 309, 313, and 317 of that Act (16 U.S.C. 824a(h), 824d,
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1 824e, 824g, 824i–824l, 825–825c, 825e, 825f, 825g,

2 825h, 825l, 825p) apply to the transmission and local dis3 tribution of electric power by the Tennessee Valley Au4 thority to the same extent and in the same manner as

5 the provisions apply to the transmission of electric power

6 in interstate commerce by a public utility otherwise sub7 ject to the jurisdiction of the Commission under part II

8 of that Act (16 U.S.C. 824 et seq.).

9 SEC. 7. REGULATION OF TENNESSEE VALLEY AUTHORITY

10 DISTRIBUTORS.

11 (a) ELECTION TO REPEAL TENNESSEE VALLEY AU12 THORITY REGULATION OF DISTRIBUTORS.—On the elec13 tion of a distributor, the third proviso of section 10 of

14 the Tennessee Valley Authority Act of 1933 (16 U.S.C.

15 831i) and the second and third provisos of section 12 of

16 the Tennessee Valley Authority Act of 1933 (16 U.S.C.

17 831k) shall not apply to a wholesale sale of electric power

18 by the Tennessee Valley Authority in the Tennessee Valley

19 Region after the date of enactment of this Act, and the

20 Tennessee Valley Authority shall not be authorized to reg21 ulate, by means of a rule, contract provision, resale rate

22 schedule, contract termination right, or any other method,

23 any rate, term, or condition that is—

24 (1) imposed on the resale of the electric power

25 by the distributor; or
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1 (2) for the use of a local distribution facility.

2 (b) AUTHORITY OF GOVERNING BODIES OF DIS3 TRIBUTORS.—

4 (1) IN GENERAL.—Any regulatory authority ex5 ercised by the Tennessee Valley Authority over any

6 distributor making an election under subsection (a)

7 shall be exercised by the governing body of the dis8 tributor in accordance with the laws of the State in

9 which the distributor is organized.

10 (2) NO ELECTION.—If a distributor does not

11 make an election under subsection (a), the third pro12 viso of section 10 of the Tennessee Valley Authority

13 Act of 1933 (16 U.S.C. 831i) and the second and

14 third provisos of section 12 of the Tennessee Valley

15 Authority Act of 1933 (16 U.S.C. 831k) shall con16 tinue to apply for the duration of any wholesale

17 power contract between the Tennessee Valley Au18 thority and the distributor, in accordance with the

19 terms of the contract.

20 (c) USE OF FUNDS.—In any contract between the

21 Tennessee Valley Authority and a distributor for the pur22 chase of at least 70 percent of the distributor’s require23 ments for the sale of electric power, the Tennessee Valley

24 Authority shall include such terms and conditions as may

25 be reasonably necessary to ensure that the financial bene-
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1 fits of a distributor’s electric system operations are allo2 cated to the distributor’s retail electric consumers.

3 (d) REMOVAL OF PURPA RATEMAKING AUTHOR4 ITY.—Section 3(17) of the Public Utility Regulatory Poli5 cies Act of 1978 (16 U.S.C. 2602(17)) is amended by

6 striking ‘‘, and in the case of an electric utility with re7 spect to which the Tennessee Valley Authority has rate8 making authority, such term means the Tennessee Valley

9 Authority’’.

10 SEC. 8. STRANDED COST RECOVERY.

11 (a) COMMISSION JURISDICTION.—

12 (1) RECOVERY OF COSTS.—

13 (A) IN GENERAL.—Subject to subpara14 graph (B), notwithstanding the absence of 1 or

15 more provisions addressing wholesale stranded

16 cost recovery in a power sales agreement be17 tween the Tennessee Valley Authority and a

18 distributor that is executed after the date of en19 actment of this Act, the Tennessee Valley Au20 thority may recover any wholesale stranded

21 costs that may arise from the exercise of rights

22 by a distributor under section 5, to the extent

23 authorized by the Commission based on applica24 tion of the rules and principles that the Com25 mission applies to wholesale stranded cost re-
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1 covery by other electric utilities within its juris2 diction.

3 (B) NO RECOVERY OF COSTS RELATED TO

4 LOSS OF SALES REVENUES.—In any recovery

5 under subparagraph (A), the Tennessee Valley

6 Authority shall not be authorized to recover

7 from any distributor any wholesale stranded

8 costs related to loss of sales revenues by the

9 Tennessee Valley Authority, or its expectation

10 of continuing to sell electric energy, for any pe11 riod after September 30, 2007.

12 (2) NO EFFECT ON CLAIM.—The exercise of

13 rights by a distributor under section 5 shall not af14 fect any claim by the Tennessee Valley Authority

15 that the Tennessee Valley Authority may have for

16 the recovery of stranded costs before October 1,

17 2007.

18 (b) DEBT.—

19 (1) IN GENERAL.—Stranded costs recovered by

20 the Tennessee Valley Authority under subsection (a)

21 shall be used to pay down the debt of the Tennessee

22 Valley Authority, to the extent determined by the

23 Tennessee Valley Authority to be consistent with

24 proper financial management.
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1 (2) GENERATION CAPACITY.—The Tennessee

2 Valley Authority shall not use any amount recovered

3 under paragraph (1) to pay for additions to the gen4 eration capacity of the Tennessee Valley Authority.

5 (c) UNBUNDLING.—

6 (1) IN GENERAL.—Any stranded cost recovery

7 charge to a customer authorized by the Commission

8 to be assessed by the Tennessee Valley Authority

9 shall be—

10 (A) unbundled from the otherwise applica11 ble rates and charges to the customer; and

12 (B) separately stated on the bill of the cus13 tomer.

14 (2) NO WHOLESALE STRANDED COST RECOV15 ERY.—The Tennessee Valley Authority shall not re16 cover wholesale stranded costs from any customer

17 through any rate, charge, or mechanism.

18 (d) REPORT.—Beginning in fiscal year 2001, as part

19 of the annual management report submitted by the Ten20 nessee Valley Authority to Congress, the Tennessee Valley

21 Authority shall include in the report—

22 (1) the status of the Tennessee Valley

23 Authority’s long-range financial plans and the

24 progress toward its goal of competitively priced elec25 tric power (including a general discussion of the
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1 Tennessee Valley Authority’s prospects on meeting

2 the objectives of the Ten Year Business Outlook

3 issued on July 22, 1997);

4 (2) any changes in assumptions since the pre5 vious report that may have a material effect on the

6 Tennessee Valley Authority’s long-range financial

7 plans;

8 (3) the source of funds used for any generation

9 and transmission capacity additions;

10 (4) the use or other disposition of amounts re11 covered by the Tennessee Valley Authority under the

12 Tennessee Valley Authority Act of 1933 (16 U.S.C.

13 831 et seq.) and this Act;

14 (5) the amount by which the Tennessee Valley

15 Authority’s publicly held debt was reduced; and

16 (6) the projected amount by which the Ten17 nessee Valley Authority’s publicly held debt will be

18 reduced.

19 SEC. 9. APPLICATION OF ANTITRUST LAW

20 (a) IN GENERAL.—

21 (1) DEFINITION OF ANTITRUST LAWS.—

22 (A) IN GENERAL.—Except as provided in

23 subparagraph (B), in this section, the term

24 ‘‘antitrust laws’’ has the meaning given the
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1 term in subsection (a) of the first section of the

2 Clayton Act (15 U.S.C. 12(a)).

3 (B) INCLUSION.—In this section, the term

4 ‘‘antitrust laws’’ includes section 5 of the Fed5 eral Trade Commission Act (15 U.S.C. 45), to

6 the extent that section 5 applies to unfair meth7 ods of competition.

8 (2) APPLICABILITY OF ANTITRUST LAW.—Ex9 cept as provided in subsection (b), the Tennessee

10 Valley Authority shall be subject to the antitrust

11 laws with respect to the operation of its electric

12 power and transmission systems.

13 (b) DAMAGES.—No damages, interest on damages,

14 costs, or attorneys’ fees may be recovered under section

15 4, 4A, or 4C of the Clayton Act (15 U.S.C. 15, 15a, 15c)

16 from the Tennessee Valley Authority.

17 (c) EFFECT ON OTHER RIGHTS.—Nothing in this

18 Act diminishes or impairs any privilege, immunity, or ex19 emption in effect on the day before the date of enactment

20 of this Act that would have been accorded any person by

21 virtue of the association of the person together in advo22 cating a cause or point of view to—

23 (1) the Tennessee Valley Authority; or

24 (2) any other agency or branch of Federal,

25 State or local government.
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1 SEC. 10. SAVINGS PROVISION.

2 Nothing in this Act shall affect section 15d(b) of the

3 Tennessee Valley Authority Act of 1933 (16 U.S.C. 831n–

4 4(b)), providing that bonds issued by the Tennessee Valley

5 Authority shall not be obligations of, nor shall payment

6 of the principal thereof or interest thereon be guaranteed

7 by, the United States.

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