I
104TH CONGRESS
2D SESSION
H. R. 3878
To privatize the Federal Power Marketing Administrations and certain facili-
ties of the Tennessee Valley Authority and, in the interim, to provide
for a transition to market-based rates for such power, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 23, 1996
Mr. FRANKS of New Jersey (for himself, Mr. MEEHAN, Mr. ZIMMER, Mr.
MARTINI, Mr. FRELINGHUYSEN, Mr. SAXTON, Mr. FOLEY, Mr. KLUG,
Mr. KENNEDY of Massachusetts, and Mr. BARRETT of Wisconsin) 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 privatize the Federal Power Marketing Administrations
and certain facilities of the Tennessee Valley Authority
and, in the interim, to provide for a transition to market-
based rates for such power, 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 ‘‘Power Marketing Ad-
ministration Privatization and Reform Act of 1996’’.
SEC. 2. PURPOSE.
The purpose of this Act is to—
(1) dispose of, through a competitive bidding
procedure, all Federally-owned generation and trans-
mission facilities used to generate and transmit
power sold by the Federal Power Marketing Admin-
istrations and thereafter terminate the Federal
Power Marketing Administrations,
(2) to dispose of, through a competitive bidding
procedure, all the hydroelectric generation facilities
of the Tennessee Valley Authority, and
(3) 
in 
the 
interim 
period 
before 
full
privitazation of the Federally-owned generation and
transmission facilities used to generate and transmit
power sold by the Federal Power Marketing Admin-
istrations, to provide for full cost recovery rates for
power sold by Federal Power Marketing Administra-
tions and a transition to market-based rates for such
power.
TITLE I—FULL COST RECOVERY
AND MARKET RATES
SEC. 101. CONGRESSIONAL FINDINGS.
(a) EXISTING UNDER-ALLOCATIONS
AND UNDER-
RECOVERY OF COSTS OF POWER MARKETING.—The Con-
gress finds that 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 re-
sulted in substantial failures to recover costs properly re-
coverable through power rates by the Federal Power Mar-
keting Administrations and have resulted in the imposition
of unreasonable burdens on the taxpaying public.
(b) 
MARKET
PRICING
PROPERLY
ALLOCATES
COSTS.—The Congress further finds that, with the emer-
gence of open access to power transmission and competi-
tive bulk power markets, market prices will provide the
lowest reasonable rates consistent with sound business
principles, consistent with maximum recovery of costs
properly allocated to power production and consistent with
encouraging the most widespread use of power marketed
by Federal Power Marketing Administrations.
SEC. 102. MODIFICATION OF EXISTING POWER MARKETING
ADMINISTRATIONS.
(a) FULL COST RECOVERY RATES.—The Secretary
of Energy shall develop and implement interim and final
rates for power sales by Federal Power Marketing Admin-
istrations designed to recover all power related operations
and maintenance expenses and the project investment cost
pertaining to power production, such project power pro-
duction investment to include all powerhouse, water con-
duit, dams and appurtenant works and structures, all stor-
age, diverting, or forebay reservoirs connected therewith,
the interconnected transmission system and switchyards,
all miscellaneous structures used and useful in connection
with power production and all water rights, rights-of-way,
ditches, dams, reservoirs, lands, or interests in land there-
of which are necessary or appropriate to the project power
production capability, the cost of which is to be deter-
mined according to generally accepted accounting prin-
ciples, including the accrual of actual interest costs during
construction and pending repayment. The Secretary of
Energy may reallocate project investment previously allo-
cated as joint costs to other functions in order to imple-
ment full power production cost recovery and full cost re-
covery rate schedules. 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 for
existing contracts for power sales by Federal Power Mar-
keting Administrations.
(b) 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 if—
(1) operation and maintenance costs are recov-
ered;
(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 of such
power not later than 3 years thereafter through
competitive bidding. Competitive bidding shall be
utilized to remarket power that is not accepted by
existing customers under this section.
(c) MARKET-BASED PRICING.—The Secretary of
Energy shall develop and implement procedures to assure
that all power sold by Federal Power Marketing Adminis-
trations is sold at prices set by demand and supply within
the relevant bulk power supply market. The Secretary of
Energy shall establish through notice and comment rule-
making bid and auction procedures to implement market-
based pricing for power marketing, including power that
is under contract but which is declined by the party enti-
tled to purchase such power and remarketed and power
sold pursuant to any power sales contract entered into by
a Federal Power Marketing Administration after the en-
actment of this Act.
(d) ACCOUNTING.—Federal Power Marketing Admin-
istrations shall utilize generally accepted accounting prin-
ciples, including the accrual of actual interest costs during
construction and pending repayment for any project and
recognition of depreciation expenses as well as generally
accepted accounting principles concerning cost recovery by
electic utilities. The Secretary of Energy may reallocate
project investment previously allocated as joint costs to
other functions in order to implement full power produc-
tion cost recovery and full cost recovery rate schedules,
and in order to disclose the full costs associated with Fed-
eral power production and marketing.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) SUNSET.—The provisions of this section shall
cease to apply to a Federal Power Marketing Administra-
tion immediately following the sale under title II of all
electric power generation and transmission facilities used
to generate or transmit power sold by such Administra-
tion.
SEC. 103. FEDERAL ENERGY REGULATORY COMMISSION
JURISDICTION OVER TRANSMISSION SERV-
ICE PROVIDED BY POWER MARKETING AD-
MINISTRATIONS AND TVA.
Transmission service provided by Federal Power
Marketing Administrations or the Tennessee Valley Au-
thority 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 manner 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 sentence shall not require any
Federal Power Marketing Administration to expand trans-
mission or interconnection capabilities or transmissions in
the absence of other authority of law.
SEC. 104. IMPLEMENTATION BY THE FEDERAL ENERGY
REGULATORY 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. The
Federal Energy Regulatory Commission may review the
factual basis for determinations made by the Secretary of
Energy and may revise or modify those findings as appro-
priate and may revise proposed or effective rate schedules
or remand the rate schedules to the Secretary of Energy
as the Federal Energy Regulatory Commission determines
is necessary to protect the public interest until a full tran-
sition 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 rulemaking pur-
suant to section 553(c) of title 5, United States Code. Any
affected party, including a taxpayer, bidder, preference
customer, or affected competitor may seek a rehearing and
judicial review of a final decision of the Federal Energy
Regulatory Commission pursuant to section 313 of the
Federal Power Act (16 U.S.C. 8251).
SEC. 105. AMENDMENT OF DEPARTMENT OF ENERGY ORGA-
NIZATION ACT.
The last sentence of section 302(a)(3) of the Depart-
ment of Energy Organization Act is repealed.