I
105TH CONGRESS
2D SESSION
H. R. 3518
To provide for a transition to market-based rates for power sold by the
Federal Power Marketing Administrations and the Tennessee Valley Au-
thority, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 19, 1998
Mr. FRANKS of New Jersey (for himself, Mr. MEEHAN, and Mr. FOLEY) intro-
duced the following bill; which was referred to the Committee on Re-
sources, and in addition to the Committees on Transportation and Infra-
structure, and Commerce, for a period to be subsequently determined by
the Speaker, in each case for consideration of such provisions as fall with-
in 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 pur-
poses.
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 ‘‘Power Marketing Ad-
ministration Reform Act of 1998’’.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress finds that:
(1) The use of fixed allocations of joint multi-
purpose project costs and the failure to provide for
the recovery of actual interest costs and depreciation
have resulted in substantial failures to recover costs
properly recoverable through power rates by the
Federal Power Marketing Administrations and the
Tennessee Valley Authority and have resulted in the
imposition of unreasonable burdens on the taxpaying
public.
(2) Existing under allocations and under recov-
ery of costs have led to inefficiencies in the market-
ing of Federally generated electric power and to en-
vironmental damage.
(3) With the emergence of open access to power
transmission and competitive bulk power markets,
market prices will provide the lowest reasonable
rates consistent with sound business principles, con-
sistent with maximum recovery of costs properly al-
located to power production and consistent with en-
couraging the most widespread use of power mar-
keted by Federal Power Marketing Administrations
and the Tennessee Valley Authority.
SEC. 3. PURPOSE.
The purpose of this Act is to provide for full cost
recovery rates for power sold by Federal Power Marketing
Administrations and the Tennessee Valley Authority and
a transition to market-based rates for such power.
SEC. 4. MODIFICATION OF EXISTING POWER MARKETING
ADMINISTRATIONS.
(a) ACCOUNTING.—Notwithstanding any other provi-
sion of law, the Secretary of Energy shall, in consultation
with the Federal Energy Regulatory Commission, imme-
diately upon enactment of this Act develop and implement
procedures to ensure that the Federal Power Marketing
Administrations utilize the same accounting principles and
requirements, including those with respect to the accrual
of actual interest costs during construction and pending
repayment for any project and recognition of depreciation
expenses, as are applied by the Commission to the electric
operations of public utilities.
(b) DEVELOPMENT AND SUBMITTAL OF RATES TO
THE COMMISSION.—Notwithstanding any other provision
of law, each Federal Power Marketing Administration and
the Tennessee Valley Authority shall, not later than 1 year
after enactment of this Act (and periodically thereafter
but not less frequently than once each 5 years), submit
to the Federal Energy Regulatory Commission rates for
the sale or disposition of Federal energy that will ensure
the recovery of all costs incurred by such Federal Power
Marketing Administration or the Tennessee Valley Au-
thority for the generation and marketing of such Federal
energy. Such costs shall include all fish and wildlife ex-
penditures required under existing treaty and legal obliga-
tions associated with the construction and operation of the
facilities from which the federally marketed power is gen-
erated and sold. Such costs shall not include any cost of
transmitting such Federal energy.
(c) COMMISSION REVIEW, APPROVAL OR MODIFICA-
TION.—The Federal Energy Regulatory Commission shall
review and either approve of or modify rates for the sale
or disposition of Federal energy submitted to the Commis-
sion by each Federal Power Marketing Administration and
the Tennessee Valley Authority under this section, to en-
sure that such rates will recover all costs of generating
and marketing such Federal energy (including all fish and
wildlife costs associated with such Federal energy as re-
quired under existing treaty and legal obligations, but not
including any cost of transmitting such Federal energy).
Such review by the Commission shall be based on the
record of proceedings before the Federal Power Marketing
Administration or the Tennessee Valley Authority, except
that all persons shall be afforded an opportunity by the
Commission for an additional hearing in accordance with
the procedures established for ratemaking by the Commis-
sion pursuant to the Federal Power Act.
(d) APPLICATION OF RATES.—Immediately upon ap-
proval or modification by the Commission of rates under
this section for the sale or disposition of Federal energy
by a Federal Power Marketing Administration or the Ten-
nessee Valley Authority, the Federal Power Marketing Ad-
ministration shall apply such rates, as approved or modi-
fied by the Commission, to each existing contract for the
sale or disposition of Federal energy by such Federal
Power Marketing Administration or the Tennessee Valley
Authority to the maximum extent permitted by such con-
tract. This section shall not apply to any Federal Power
Marketing Administration or the Tennessee Valley Au-
thority if and at such time as it no longer has any out-
standing commitments under any contract for the sale or
disposition of Federal energy that were in existence as of
the date of enactment of this Act.
(e) 
ACCOUNTING
PRINCIPLES
AND
REQUIRE-
MENTS.—In developing or reviewing the rates required by
this section, the Federal Power Marketing Administra-
tions, the Tennessee Valley Authority, and the Commis-
sion shall rely upon the accounting principles and require-
ments developed pursuant to subsection (a).
(f) INTERIM RATES.—Until market pricing for such
power sales is fully implemented, such full cost recovery
rates shall be implemented for all new contracts for power
sales by the Federal Power Marketing Administrator and
the Tennessee Valley Authority entered into after the en-
actment of this Act and for renewals after the enactment
of this Act for existing contracts for power sales by Fed-
eral Power Marketing Administrations and the Tennessee
Valley Authority.
(g) TRANSITION TO MARKET-BASED RATES.—If the
transition to full cost recovery rates would result in rates
that exceed market rates, the Secretary of Energy is au-
thorized to price power sold by Federal Power Marketing
Administrations at market rates, and the Tennessee Val-
ley Authority is authorized to price power sold by the Ten-
nessee Valley Authority at market rates, if—
(1) operation and maintenance costs are recov-
ered, including all fish and wildlife costs required
under existing treaty and legal obligations;
(2) the contribution toward recovery of invest-
ment pertaining to power production is maximized;
and
(3) purchasers of power under existing con-
tracts consent to the remarketing by the relevant
Federal Power Marketing Administration or the
paragraph (3)(A) for the purpose of help-
ing cover the costs of the incremental cost
(above the expected market cost of elec-
tricity) of nonhydroelectric renewable re-
sources in the region in which power is
marketed by the applicable power market-
ing administration.
(2) FUND REGARDING ENVIRONMENTAL MITI-
GATION.—
(A) There is hereby established a fund to
hold and expend the revenues allocated for envi-
ronmental mitigation and restoration pursuant
to paragraph (1)(B)(ii). The fund shall be es-
tablished within the Department of Interior and
shall be governed by a Board of Directors con-
sisting of the Secretary of the Interior, the Sec-
retary of Energy, and the Administrator of the
Environmental Protection Agency or their des-
ignees. Other than expenditure of revenues to
cover the costs of establishing and managing
the fund, all revenues may be spent only pursu-
ant to project-specific plans to mitigate damage
to, and restore the health of, the environment.
(B) At no time may the fund established
under subparagraph (A) hold more than
$200,000,000 that is not necessary to cover the
costs of 1 or more project-specific mitigation
plans. Revenues that would otherwise be depos-
ited in the fund but for the absence of 1 or
more project-specific plans for environmental
mitigation shall be remitted to the Secretary of
the Treasury for purposes of Federal budget
deficit reduction.
(C) The Board of Directors of the fund es-
tablished under subparagraph (A) shall develop
project-specific mitigation plans for each project
used to generate power marketed by the power
marketing administrations or the Tennessee
Valley Authority. In developing such plans, the
Board is directed, where feasible, to rely on
data, information, and mitigation and restora-
tion plans already developed by the United
States Bureau of Reclamation, the United
States Fish and Wildlife Service, the Environ-
mental Protection Agency, and other Federal,
State, and tribal agencies.
(3) 
FUND
REGARDING
RENEWABLE
RE-
SOURCES.—
(A) There is hereby established a fund to
hold and expend the revenues allocated for re-
newable resources 
pursuant 
to 
paragraph
(1)(B)(iii). The fund shall be established within
the Department of Energy. Revenues in the
fund may be expended to pay for the incremen-
tal costs of nonhydroelectric renewable re-
sources in the States in which the applicable
power marketing administration markets power.
Other than expenditure of revenues to cover the
costs of establishing and managing the fund, all
revenues may be spent only—
(i) pursuant to a plan developed by
the Secretary of Energy designed to foster
the development of nonhydroelectric renew-
able resources that show substantial long-
term promise but which are presently too
expensive to attract private capital suffi-
cient to develop or ascertain their poten-
tial; and
(ii) on recipients chosen by a process
of competitive bidding.
(B) At no time may the fund established
under subparagraph (A) hold more than
$50,000,000 that is not necessary to meet the
plan developed pursuant to such subparagraph.
Revenues that would otherwise be deposited in
this fund but for the absence of such a plan
shall be remitted to the Secretary of the Treas-
ury for purposes of Federal budget deficit re-
duction.
(j) PREFERENCE.—Public bodies and cooperatives
shall be given a preference to future power allocations or
reallocations of Federal power through a right of first re-
fusal at market prices. Power obtained through preference
rights shall be consumed by the preference customer or
resold for consumption by the constituent end-users of the
preference customer and may not be resold to other enti-
ties. As regulated by the Federal Energy Regulatory Com-
mission, preference recipients shall have transmission ac-
cess to this purchased power. If a public body or coopera-
tive does not take allocation, the next highest bidder takes
the allocation.
(k) REFORMS.—The Secretary of Energy shall re-
quire each Federal Power Marketing Administration to
implement—
(1) program management in order to assign
personnel and incur expenses for authorized power
marketing, reclamation, and flood control activities
only, and not diversification into ancillary activities
including consulting or operating services for other
entities; and
(2) annual reporting plainly disclosing to the
American public, the activities of the Power Market-
ing Administration including, but not limited to, the
full cost of such power projects and power marketing
programs.
(l) CONTRACT RENEWAL.—After the enactment of
this Act, no Federal Power Marketing Administration may
enter into or renew any power marketing contract for a
term that exceeds 5 years.
(m) RESTRICTIONS.—Excepting only the Bonneville
Power Administration, each Federal Power Marketing Ad-
ministration shall be subject to the restrictions on the con-
struction of transmission and additional facilities estab-
lished by section 5 of the Flood Control Act of 1944.
SEC. 5. FEDERAL ENERGY REGULATORY COMMISSION JU-
RISDICTION OVER TRANSMISSION SERVICE
PROVIDED BY POWER MARKETING ADMINIS-
TRATIONS AND TENNESSEE VALLEY AUTHOR-
ITY.
Transmission service provided by Federal Power
Marketing Administrations shall be provided on an open
access basis and at just and reasonable rates approved or
established by the Federal Energy Regulatory Commission
under part II of the Federal Power Act in the same man-
ner as such service is provided pursuant to Commission
rules by any public utility subject to the jurisdiction of
the Commission under such Part II. The preceding sen-
tence shall not require any Federal Power Marketing Ad-
ministration to expand transmission or interconnection ca-
pabilities or transmissions in the absence of other author-
ity of law.
SEC. 6. IMPLEMENTATION BY THE FEDERAL ENERGY REG-
ULATORY COMMISSION.
Pending the implementation of market-based pricing,
the Federal Energy Regulatory Commission shall have au-
thority to review and approve, reject, or revise power rate
schedules recommended for approval by the Secretary of
Energy, and existing rate schedules, for power sales by
the Federal Power Marketing Administrations. The Fed-
eral Energy Regulatory Commission shall base its ap-
proval of final rates upon the protection of the public in-
terest and shall undertake to protect the interest of the
taxpaying public as well as the interests of consumers in
accordance with section 4. The Federal Energy Regulatory
Commission may review the factual basis for determina-
tions made by the Secretary of Energy and may revise
or modify those findings as appropriate and may revise
proposed or effective rate schedules or remand the rate
schedules to the Secretary of Energy as the Federal En-
ergy Regulatory Commission determines is necessary to
protect the public interest in accordance with section 4
until a full transition is made to market-based rates for
power sold by Federal Power Marketing Administrations.
The Federal Energy Regulatory Commission is authorized
to proceed pursuant to informal notice and comment rule-
making pursuant to section 553(c) of title 5, United
States Code. Any affected party, including a taxpayer, bid-
der, preference customer, or affected competitor may seek
a rehearing and judicial review of a final decision of the
Federal Energy Regulatory Commission pursuant to sec-
tion 313 of the Federal Power Act (16 U.S.C. 8251).
SEC. 7. REPEALS.
The following provisions are repealed:
(1) The last sentence of section 302(a)(3) of
the Department of Energy Organization Act.
(2) Section 505 of Public Law 102–377.
SEC. 8. EFFECTIVE DATE.
Except as otherwise specifically provided in this Act,
the provisions of this Act and the amendments made by
this Act shall take effect with respect to power sales con-
tracts entered into by a Federal Power Marketing Admin-
istration or the Tennessee Valley Authority after July 23,
1997.
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