I
105TH CONGRESS
1ST SESSION
H. R. 1960
To modernize the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Fair Packaging and Labeling Act, and the Public Utility
Regulatory Policies Act of 1978 to promote competition in the electric
power industry, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 19, 1997
Mr. MARKEY introduced the following bill; which was referred to the
Committee on Commerce
A BILL
To modernize the Public Utility Holding Company Act of
1935, the Federal Power Act, the Fair Packaging and
Labeling Act, and the Public Utility Regulatory Policies
Act of 1978 to promote competition in the electric power
industry, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Electric Power Com-
petition and Consumer Choice Act of 1997’’.
SEC. 2. FINDINGS.
The Congress finds that equitable rates for electric
consumers and increased efficiency in the use of tech-
nology and resources for the generation of electric power
require—
(1) increased reliance on competition and mar-
ket forces rather than traditional rate-of-return reg-
ulation of utility monopolies to generate the most ef-
ficient, low cost, and reliable electricity for rate-
payers;
(2) access to transmission and distribution fa-
cilities for all suppliers and marketers of electricity
with pricing and terms and conditions on a com-
parable basis with those who own or control such fa-
cilities;
(3) a program to promote fuel diversity and
conservation and environmental protection through
the encouragement of renewable technologies and
other environmentally benign generation resources;
(4) State action to assure that electric utilities
may seek to recover only those legitimate, verifiable,
and nonmitigatable stranded costs for which there
would have been a reasonable expectation of recov-
ery, but for the implementation of retail competition;
(5) appropriate Federal and State regulation of
electric utilities to promote development of a com-
petitive electric generation market and protect con-
sumers against excessive charges by electric utility
companies who exercise continued monopoly control
over electric power transmission and distribution;
and
(6) reform of certain Federal and State utility
regulatory laws and regulations, to promote competi-
tion and to prevent anticompetitive behavior by enti-
ties with market power, to avoid excessive concentra-
tions of market power, and to prohibit other activi-
ties which would undermine a competitive power
market.
TITLE I—STANDARDS OF
COMPETITION
Subtitle A—Application of PUHCA
and PURPA
SEC. 101. PUHCA NOT APPLICABLE IN COMPETITIVE MAR-
KETS.
The Public Utility Holding Company Act of 1935 (15
U.S.C. 79 and following) is amended by redesignating sec-
tions 34 and 35 as sections 35 and 36 respectively and
by inserting the following new section after section 33:
‘‘SEC. 34. UTILITIES WITH CERTIFICATION OF COMPETI-
TION.
‘‘(a) APPLICATION OF ACT TO COMPANIES WITH
CERTIFICATION.—With respect to a holding company sys-
tem, the preceding provisions of this Act shall not, except
as provided in subsection (b), apply to—
‘‘(1) any company in the system, or
‘‘(2) any affiliate of such a company,
if each such company and affiliate that is an electric utility
company has received a certification of compliance with
standards and requirements of competition under subtitle
F of title I of the Public Utility Regulatory Policies Act
of 1978 from all State regulatory authorities which have
ratemaking authority over the electric utility company.
‘‘(b) WITHDRAWAL.—If the certification referred to
in subsection (a) is withdrawn, unless the certification is
reissued within 6 months after the date of the withdrawal,
effective at the expiration of such 6-month period, the pre-
ceding provisions of this Act shall apply to each person
referred to in paragraphs (1) and (2) of subsection (a).’’.
SEC. 102. PURPA NOT APPLICABLE IN COMPETITIVE MAR-
KETS.
(a) APPLICATION OF PURPA.—Title II of the Public
Utility Regulatory Policies Act of 1978 is amended by
adding the following new sections at the end thereof:
‘‘SEC. 214. UTILITIES WITH CERTIFICATION OF COMPETI-
TION.
‘‘(a) CERTAIN REQUIREMENTS OF SECTION 210 SUS-
PENDED.—The provisions of section 210 (requiring elec-
tric utilities to offer to purchase electric energy from quali-
fying cogeneration facilities and qualifying small power
production facilities) shall not apply to any contracts en-
tered into by that electric utility during any period for
which a certification of competition from a State regu-
latory authority in accordance with subtitle F of title I
is in effect for any electric utility.
‘‘(b) PROTECTION OF EXISTING CONTRACTUAL COM-
MITMENTS.—Subsection (a) shall not affect any contract
or other power purchase arrangement between a qualifying
cogeneration facility or qualifying small power production
facilities and an electric utility entered into during any
period for which a certification referred to in subsection
(a) is not in effect for such electric utility.
‘‘(c) TERMS.—For purposes of this section the terms
‘qualifying cogeneration facility’ and ‘qualifying small
power production facility’ shall have the meaning provided
for such terms by section 3(17) of the Federal Power
Act.’’.
(b) CERTIFICATION OF COMPETITION.—Title I of the
Public Utility Regulatory Policies Act of 1978 is amended
by adding the following new subtitle at the end thereof:
‘‘(2) COMPETITION FOR NEW GENERATING CA-
PACITY.—The opportunity to build, own, and oper-
ate new generating capacity in the State in which
such person sells or distributes electric energy is
open to competition.
‘‘(3) ABSENCE OF COMPETITIVE ADVANTAGE.—
Such person does not gain any undue advantage
over other competitors whether by virtue of owner-
ship of a monopoly distribution franchise or its sta-
tus as a regulated buyer and seller of electricity in
a designated service territory or otherwise.
‘‘(4) OPEN
ACCESS
TARIFFS
FOR
DISTRIBU-
TION.—(A) Except as provided in subparagraph (B),
tariffs are in effect for transmission of electric en-
ergy through all local distribution facilities owned or
controlled by such person and subject to State juris-
diction and such tariffs provide for rates for electric
energy transmission that are comparable to the elec-
tric energy transmission rates for energy sold by
such person.
‘‘(B) If the person owning or controlling such
local distribution facilities does not sell electric en-
ergy transmitted through such facilities, such tariffs
must be approved by the State regulatory authority
as just, reasonable, and not discriminatory or unduly
preferential.
‘‘(5) ACCESS TO FACILITIES.—If such person
owns, operates, or controls local distribution facili-
ties, such person permits reasonable and nondiscrim-
inatory access to such facilities at the locations at
which retail electric service is provided and at such
other locations as may be necessary to enable other
person to provide retail electric energy services, in-
cluding retail electric metering and billing services,
and related information and communications serv-
ices, on a competitive basis.
‘‘(b) PUBLIC BENEFIT CERTIFICATION REQUIRE-
MENTS.—A person selling electric energy, or distributing
electric energy, or both, meets the public benefit certifi-
cation requirements if:
‘‘(1) ENERGY
EFFICIENCY
AND
RENEWABLE
ENERGY.—All suppliers of energy services to electric
consumers to whom such person provides retail elec-
tric energy services in the State have both the incen-
tive and opportunity to provide energy efficiency and
renewable energy resources.
‘‘(2) CHARGES.—(A) Except as provided in sub-
paragraph (B), the State has imposed nonbypassable
charges on use of, or access to, the electric energy
services or facilities of such person that are subject
to the jurisdiction of the State. Such charges shall
be adequate to ensure sustained and equitable allo-
cation of costs associated with low-income services
and other investments, including those in renewable
energy resources and energy efficiency, that deliver
system wide benefits in the form of equity among,
or reduced life-cycle costs of service to, electric con-
sumers served by such services or facilities. Such
charges shall include temporary charges necessary to
cover the costs of electric utility workforce transition
and retraining made necessary by reason of the re-
structuring of the utility.
‘‘(B) In lieu of charges to ensure renewable en-
ergy resources and energy efficiency, the State may
establish minimum portfolio standards that ensure
maintenance or improvement of current levels of reli-
ance on renewable energy resources and energy effi-
ciency.
‘‘(3) RECOVERY OF STRANDED COSTS; PRICE
INCREASES.—Any rules or orders applicable to retail
competition among electric-service suppliers protect
customers from price discrimination or undue price
increases and ensure that if a State approved any
recovery of such person’s net legitimate, verifiable,
nonmitigatable stranded costs for which there would
have been a reasonable expectation of recovery, but
for the implementation of retail competition, no cus-
tomer class can avoid paying its equitable share of
such costs.
‘‘(4) CONTINUED
OPERATION
OF
ASSETS.—
Under applicable State laws and regulations, any re-
covery of such stranded costs associated with exist-
ing generation assets is not contingent on continued
operation of the generation assets for which recovery
is approved.
‘‘(5) RELIABILITY
AND
CONSUMER
PROTEC-
TION.—State laws and regulations require all per-
sons seeking to provide retail electric service, or to
purchase electric energy for consumption by two or
more electric consumers, to have met minimum
qualifications to protect the public safety and wel-
fare and ensure the continued reliability of the dis-
tribution system.
‘‘(6) AGGREGATION OF PURCHASES.—(A) State
laws and regulations provide retail electric customers
of the person a reasonable opportunity to aggregate
their electric energy purchases for the purpose of
achieving lower rates.
‘‘(B) Such person does not maintain any rule or
contractual or operational practice that precludes
the aggregation of such purchases.
‘‘(7) NET
METERING
FOR
RENEWABLE
EN-
ERGY.—Such person offers to purchase all electric
energy generated at the retail service location by re-
tail electric consumers served by such person if such
consumers generate electric energy through the use
of generation equipment using renewable energy re-
sources that meets all applicable safety and power
quality standards approved by the Commission, and
the price for such purchases is based on net energy
metering using either dual or single metering and
using rates identical in all respects to the standard
retail rates applicable to retail sales of electric en-
ergy to retail electric customers in the same area
served by such persons.
‘‘SEC. 153. COMPARABILITY IN RETAIL ELECTRIC SERVICE.
‘‘(a) FEDERAL COMPARABILITY REQUIREMENT.—It
shall be unlawful for any person or State or local govern-
mental agency that has a designated retail electric energy
service territory under State law to provide retail electric
service, directly or through an affiliate, to any person not
within such service territory if such service is not available
on a competitive basis to all retail electric energy cus-
tomers within such service territory. Except for sales to
persons receiving retail electric service from the Tennessee
Valley Authority before the enactment of this Act, it shall
be unlawful for the Tennessee Valley Authority to provide
retail electric service to any person not within the area
referred to in the third sentence of section 15d(a) of the
Tennessee Valley Authority Act of 1933 (16 U.S.C. 831n–
4) if such service is not available on a competitive basis
to all retail electric energy customers within such area.
Except for sales to persons receiving retail electric service
from a Federal Power Marketing Authority before the en-
actment of this Act, it shall be unlawful for any Federal
Power Marketing Authority to provide retail electric serv-
ice to any person not within the designated power market-
ing area of such agency if such service is not available
on a competitive basis to all retail electric energy cus-
tomers within such area.
‘‘(b) ENFORCEMENT.—Any person may commence a
civil action in the appropriate United States district court
on his or her own behalf against any person or State or
local government agency or the Tennessee Valley Author-
ity or the Secretary of Energy for violation of subsection
(a). In an action brought under this subsection, the court
shall award to any substantially prevailing plaintiff the
costs of litigation including reasonable attorney fees, un-
less the court finds such award to be inappropriate under
the circumstances.
‘‘SEC. 154. DEFINITION.
‘‘As used in this subpart, the term ‘renewable energy’
means solar heat, solar light, wind, geothermal energy,
and biomass, except for heat from the burning of munici-
pal solid waste.’’.
(c) CONSIDERATION AND DETERMINATION REGARD-
ING RETAIL COMPETITION STANDARDS.—(1) Section 111
(d) of the Public Utility Regulatory Policies Act of 1978
is amended by adding the following new paragraph at the
end thereof:
‘‘(11) RETAIL
COMPETITION
STANDARDS.—
Each electric utility shall meet—
‘‘(A) either the Federal retail competition
standard set forth in section 152(a) or the Fed-
eral divestiture standard set forth in section
152(b);
‘‘(B) the public benefit certification re-
quirements of section 152(c); and
‘‘(C) such other requirements as the Com-
mission shall prescribe consistent with the pub-
lic interest and the purposes of subtitle F.’’.
(2) Section 112(b) of such Act is amended by insert-
ing after ‘‘of section 111(d)’’ in paragraphs (1) and (2)
the following ‘‘or after the enactment of the Electric
Power Competition and Consumer Choice Act of 1997 in
the case of the standards under paragraph (11) of section
111(d)’’.
(3) Section 112(c) of such Act is amended by insert-
ing ‘‘(or after the enactment of the Electric Power Com-
petition and Consumer Choice Act of 1997 in the case of
the standards under paragraph (11) of section 111(d))’’
after ‘‘enactment of this Act’’.
(4) Section 124 of such Act is amended as follows:
(A) In the first and second sentences after
‘‘For purposes of’’ insert ‘‘any provision of’’.
(B) In the first and second sentences, strike out
‘‘enactment of this Act’’ and insert ‘‘enactment of
such provision’’.
SEC. 103. ADDITIONAL PROVISIONS APPLICABLE TO ELEC-
TRIC UTILITIES AND HOLDING COMPANIES.
(a) FERC RULES TO PREVENT UNFAIR COMPETI-
TIVE ADVANTAGES.—(1) Part II of the Federal Power Act
(16 U.S.C. 824 and following) is amended by adding the
following section after section 214:
‘‘SEC. 215. PREVENTION OF COMPETITIVE ADVANTAGE.
‘‘Within 12 months after the enactment of this sec-
tion, the President or his designee shall prescribe rules
to assure that persons generating or providing electric en-
ergy for sale or for ultimate consumption cannot obtain
any competitive advantage by reason of the ownership,
control, use, or purchase of electric energy from facilities
that are not subject to enforceable emission limitations for
sulfur dioxide, oxides of nitrogen, and carbon dioxide that
are as stringent as performance requirements for new elec-
tric generating facilities under the Clean Air Act. Such
rule shall assure that total national or regional emissions
of such pollutants are brought to levels which the Adminis-
trator of the Environmental Protection Agency certifies
are sufficient to protect human health and the environ-
ment. Such standard may provide for trading of emission
allowances as a compliance option.’’.
(2) Section 201 of such Act is amended as follows:
(A) By striking ‘‘and 212’’ in subsection (b)(2)
and inserting ‘‘212, and 215’’.
(B) By striking ‘‘or 211’’ in subsection (b)(2)
and inserting ‘‘, 211, or 215’’.
(C) By striking ‘‘or 212’’ in subsection (e) and
inserting ‘‘212, or 115’’.
(b) STATE AND FEDERAL RATEMAKING AND OTHER
REGULATORY AUTHORITIES.—(1) After the date of enact-
ment of this Act, no provision of Federal law shall be con-
strued to preempt otherwise applicable State authority to
review the prudence of any wholesale or retail cost in-
curred by an electric utility, or to determine the recovery
of costs for the sale or delivery of electric energy and relat-
ed services to a retail customer regardless of the facilities
used for such sales or delivery. The preceding sentence
shall not apply to any wholesale or retail cost incurred by
an electric utility the recovery of which in wholesale rates
has been approved by the Federal Energy Regulatory
Commission before the enactment of this Act.
(2) After the date of enactment of this Act, no Fed-
eral statute or rule shall be construed to affect the author-
ity of the Federal Energy Regulatory Commission under
the Federal Power Act to approve or disapprove the inclu-
sion of existing contract or transaction costs of an affiliate
or associate company (including costs approved under sec-
tion 13(b) of the Public Utility Holding Company Act) in
rates or charges imposed by an electric utility if such rates
or charges are subject to the jurisdiction of the Commis-
sion.
(3) After the date of enactment of this Act, no provi-
sion of Federal law shall be construed to preempt any
State authority to—
(A) impose nonbypassable charges on use of, or
access to, the electric energy services or facilities of
any person that are subject to the jurisdiction of the
State to ensure sustained and equitable allocation of
costs associated with low-income services and other
investments, including those in fuel diversity and en-
ergy efficiency, that deliver system wide benefits in
the form of equity among, or reduced life-cycle costs
of service to, electric consumers served by such serv-
ices or facilities; and
(B) impose minimum portfolio standards that
ensure maintenance or improvement of current levels
of reliance on renewable energy resources.
Charges referred to in subparagraph (A) include tem-
porary charges to cover the costs of electric utility
workforce transition and retraining made necessary by
reason of the restructuring of the utility.
(4) Section 309 of the Federal Power Act is amended
by inserting after the second sentence thereof the follow-
ing: ‘‘The Commission shall have the power to establish
safety and power quality standards for purposes of section
152(b)(7) of the Public Utility Regulatory Policies Act of
1978 (relating to net metering for renewable energy).’’.
(c) ENERGY SERVICE COMPANY DIVERSIFICATION.—
Section 9 of the Public Utility Holding Company Act of
1935 is amended by adding the following new subsection
after subsection (c):
‘‘(d) The Commission may not use the authority of
subsection (c)(3) or any other authority of this Act to ex-
empt from prior Commission approval under subsection
(a)(1) and section 10 the acquisition by a registered hold-
ing company, or by any subsidiary company thereof, di-
rectly or indirectly, of any securities, utility assets, or any
other interest in any energy-related company (as defined
by the Commission by rule). After the date of the enact-
ment of this subsection, any provision of any rule of the
Commission that is inconsistent with this subsection shall
cease to apply.’’.
(d) INVESTMENTS
IN FOREIGN UTILITY COMPA-
NIES.—Section 9 of the Public Utility Holding Company
Act of 1935 is amended by adding the following new sub-
section after subsection (d):
‘‘(e) The Commission may not permit a registered
holding company to invest or maintain investments in for-
eign utility operations in excess of 50 percent of consoli-
dated retained earnings (as defined by the Commission in
part 250.53 of title 17 of the Code of Federal Regulations
as in effect on April 30, 1997) unless a certification under
section 151 of the Public Utility Regulatory Policies Act
of 1978 is in effect for such registered holding company.’’.
Subtitle B—Mergers, Acquisition,
Market Concentration, Affiliate
relationships 
and 
Diversifica-
tion
SEC. 111. MERGERS AND ACQUISITIONS.
(a) PROHIBITION.—A person may not acquire any in-
terest in a public utility company that results in ownership
of a substantial interest and effective control of such com-
pany unless—
(1) the Commission makes the findings set
forth in subsection (b); and
(2) such person has transmitted to the Commis-
sion the certifications set forth in subsection (c).
(b) REQUIRED COMMISSION FINDINGS.—The find-
ings referred to in subsection (a)(1) are as follows:
(1) The acquisition described in subsection (a)
will not create or maintain a situation inconsistent
with effective competition in any market in which
competition would benefit consumers.
(2) Such acquisition will result in substantial
cost reductions in the provision of electric energy (in
the case of a person acquiring a substantial interest
in an electric utility company) or natural gas (in the
case of a person acquiring a substantial interest in
a gas utility company) that are greater than could
be achieved without the acquisition.
(3) The acquisition will be entered into on an
arm’s-length basis.
(c) PUBLIC UTILITY CERTIFICATION.—The certifi-
cations referred to in subsection (a)(2) are as follows:
(1) A certification by the person acquiring the
substantial interest, where the merger involves an
acquisition premium, that such person will not seek
to recover such premium, either directly or indirectly
(such as by failing to reduce rates by an amount
equal to the full amount by which costs have been
reduced as a result of the merger), in rates charged
for any service for which there is not effective com-
petition, to the extent such premium exceeds the
amount which the Commission has determined to be
just and reasonable.
(2) A certification that each State commission
with jurisdiction over the public utility company has
certified that it has (A) the authority and resources
to prevent the acquisition from having an adverse ef-
fect on the rates charged to any retail customer of
the public utility (or affiliate), and (B) the authority
to prevent the acquisition from taking place.
The Commission shall promulgate regulations concerning
the form of certification required by this subsection.
(d) CONDITIONS.—Simultaneously with making the
findings under subsection (b), the Commission shall estab-
lish terms and conditions applicable to transactions be-
tween a public utility company and the person acquiring
a substantial interest in such company under subsection
(a) necessary to ensure the continuing validity of all find-
ings made under subsection (b) and certifications made
under subsection (c).
(e) DEFINITIONS.—For purposes of this section:
(1) The term ‘‘acquire’’ means acquire, merge
with, or be a recipient of a merger.
(2) The term ‘‘substantial interest in a public
utility’’ means any interest, whether in voting stock,
nonvoting stock, securities, partnership share, or any
evidence of indebtedness, where the value of the in-
terest equals 10 percent or more of the book value
of the public utility.
(f) CONFORMING AMENDMENT.—Section 203(b) of
the Federal Power Act is amended by adding the following
at the end thereof: ‘‘Any order of the Commission under
this section shall require compliance with section 111 of
the Electric Power Competition and Consumer Choice Act
of 1977 in any case in which such section 111 is applica-
ble.’’.
SEC. 112. MARKET CONCENTRATION AND AFFILIATE RELA-
TIONSHIPS.
(a) IN GENERAL.—A public utility company, or any
affiliate thereof, may not use its ownership or control of
any resource to create or maintain a situation inconsistent
with effective competition in the purchase and sale of elec-
tric energy or natural gas in any market in which such
company (or affiliate) has a designated service territory
for the retail distribution of electric energy or natural gas.
(b) AUTHORIZED ACTIONS.—Whenever the Commis-
sion finds a violation of subsection (a), it may order a pub-
lic utility company, or any affiliate thereof, to take any
or all of the following actions:
(1) Sell or otherwise transfer assets to a non-
affiliated company on an arm’s-length basis.
(2) Sell or otherwise transfer assets to an affili-
ated company, on an arm’s-length basis.
(3) Conduct business activities involving the re-
source concerned on an arm’s-length basis (except in
such emergency circumstances as the Commission
may authorize by rule).
(4) Share access to assets on a nondiscrim-
inatory basis at rates which are just and reasonable,
and not unduly discriminatory or preferential.
SEC. 113. DIVERSIFICATION.
(a) IN GENERAL.—The Commission shall establish
regulations which ensure each of the following with respect
to diversification by any public utility company, or affiliate
thereof:
(1) The diversification shall have no adverse im-
pact on electric or natural gas customers of such
company.
(2) There shall be an arm’s-length relationship
between—
(A) the transmission service activities, dis-
tribution service activities, and retail sales ac-
tivities of the public utility company or affiliate;
and
(B) any other business activities of the
public utility company or any affiliate thereof.
The Commission may, by rule, provide for an exemp-
tion from the arm’s-length relationship requirements
of this paragraph for emergency circumstances.
(3) The Commission and each State commission
having authority over retail sales of electric energy
or natural gas by such company have such access to
books and records of the public utility company and
all affiliates thereof as is necessary to ensure that
the foregoing conditions are met and continue to be
met.
The Commission shall not permit any diversification re-
ferred to in this subsection unless each State commission
that has ratemaking authority over such company or any
affiliate thereof has certified to the Commission that it
has the authority and resources to prevent such diver-
sification from having an adverse effect on retail cus-
tomers of such public utility company or any affiliate
thereof.
(b) CONTRACTS WITH AFFILIATES.—No contract en-
tered into after the date of the enactment of this Act be-
tween any public utility company and an affiliate having
a total value of $1,000,000 or more, shall be valid unless
each State commission having authority over retail sales
of electric energy or natural gas by such company or affili-
ate has found that—
(1) such contract will have no adverse effect on
consumers; and
(2) such State commission has the authority
and resources to prevent any such adverse effect.
(c) COSTS AND REVENUES.—No Federal law shall be
interpreted to prevent a State commission or the Commis-