I
104TH CONGRESS
2D SESSION
H. R. 3782
To modernize the Public Utility Holding Company Act, the Federal Power
Act, and the Public Utility Regulatory Policies Act of 1978 to promote
competition in the electric power industry.
IN THE HOUSE OF REPRESENTATIVES
JULY 11, 1996
Mr. MARKEY introduced the following bill; which was referred to the
Committee on Commerce
A BILL
To modernize the Public Utility Holding Company Act, the
Federal Power Act, and the Public Utility Regulatory
Policies Act of 1978 to promote competition in the elec-
tric power industry.
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 1996’’.
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) the ability of electric utilities to seek to re-
cover legitimate, verifiable, and nonmitigatable
stranded costs for which there is a reasonable expec-
tation of recovery;
(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 Federal and State electric utility
regulatory laws and regulations, to promote competi-
tion and to prevent anticompetitive behavior by enti-
ties with market power.
SEC. 3. PUHCA NOT APPLICABLE IN COMPETITIVE MAR-
KETS.
(a) APPLICATION OF PUHCA.—The Public Utility
Holding Company Act of 1935 (15 U.S.C. 79 et seq.) shall
not apply to any electric utility company and any holding
company of such electric utility company if such electric
utility company and each subsidiary, associate, and affili-
ate of such electric utility company or of such holding
company has received, in accordance with subtitle F of
title I of the Public Utility Regulatory Policies Act of
1978, a Certification of Competition from each State regu-
latory authority which has ratemaking authority over such
company, subsidiary, associate, or affiliate, as the case
may be. The terms used in this subsection have the same
meaning as when used in the Public Utility Holding Com-
pany Act of 1935.
(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:
‘‘Subtitle F—Standards of
Competition for Electric Utilities
‘‘SEC. 151. CERTIFICATION OF COMPETITION BY STATE
REGULATORY AUTHORITIES.
‘‘(a) VOLUNTARY STATE CERTIFICATION.—A State
regulatory authority may elect to issue a State certifi-
cation of compliance with standards and requirements of
competition under this subtitle to a State regulated elec-
tric utility for which it has ratemaking authority. Such
election shall be voluntary. Nothing in this subtitle pro-
hibits any State regulatory authority from determining
that it is not appropriate to issue or deny any such certifi-
cation in the case of any electric utility for which the State
regulatory authority has ratemaking authority. Nothing in
this subtitle prohibits or limits any State regulatory au-
thority from implementing any other process regarding
competition for electric utilities subject to the jurisdiction
of such State regulatory authority.
‘‘(b) CRITERIA FOR CERTIFICATION.—After notice
and opportunity for hearing, the Commission shall estab-
lish, by rule, in accordance with standards of competition
set forth in section 152 criteria for the certification by
a State regulatory authority that a State regulated electric
utility for which it has ratemaking authority has met—
‘‘(1) the minimum certification requirements of
section 153,
‘‘(2) either—
‘‘(A) the Federal retail competition stand-
ard set forth in section 152(a), or
‘‘(B) the Federal divestiture standard set
forth in section 152(b); and
‘‘(3) such other requirements as the Commis-
sion shall prescribe consistent with the public inter-
est and the purposes of this subtitle.
‘‘SEC. 152. FEDERAL STANDARDS OF COMPETITION.
‘‘(a) RETAIL COMPETITION STANDARD.—(1) A State
regulated electric utility meets the retail competition
standard if the State regulatory authority which has rate-
making authority over such utility determines, in accord-
ance with criteria established by the Commission under
section 151(b), and after notice and opportunity for hear-
ing, that—
‘‘(A) the utility permits competition in retail
sales of electric energy to all consumers within its
service territory;
‘‘(B) the opportunity to build, own, and operate
all new generating capacity is open to competition by
all sources, and
‘‘(C) the electric utility does not gain any ad-
vantage over other competitors by virtue of its status
as a regulated buyer and seller of electricity in its
service territory.
‘‘(2) Certification under paragraph (1) of this sub-
section shall be withdrawn if the State regulatory author-
ity finds that—
‘‘(A) an electric utility affiliate is competing un-
fairly by using assets, goods, or services obtained
from the electric utility at a price below the market
value; or
‘‘(B) the electric utility or its affiliate has dis-
criminatory access to any asset, service, or informa-
tion which would be helpful to a competitor where
the access is attributable to the electric utility’s sta-
tus as a regulated integrated monopoly or the asset
or information is an essential facility that is not eco-
nomically duplicable by a competitor.
‘‘(b) DIVESTITURE STANDARD.—A State regulated
electric utility that is an integrated electric utility that
owns or controls a monopoly distribution franchise, mo-
nopoly transmission facilities, or both, meets the divesti-
ture standard of competition if the State regulatory au-
thority which has ratemaking authority over such utility
determines, in accordance with criteria established by the
Commission under section 151(b), and after notice and
opportunity for hearing, that the utility has—
‘‘(1) divested itself of all existing generation fa-
cilities and is prohibited under State law from di-
rectly or indirectly acquiring ownership or control of
any generation facilities for so long as it owns or
controls a monopoly distribution franchise or trans-
mission facilities, and
‘‘(2) in the case of a utility that owns or con-
trols transmission facilities, adopted open access
transmission tariffs that have been approved as just,
reasonable, and not unduly preferential.
‘‘SEC. 153. MINIMUM CERTIFICATION REQUIREMENTS.
‘‘A State regulatory authority may not issue a certifi-
cation of competition under this subtitle to any electric
utility unless the authority has made each of the following
determinations:
‘‘(1) A determination that all suppliers of en-
ergy services to the utility or to electricity consumers
in the service territory of the utility have both the
incentive and opportunity to provide energy-effi-
ciency and renewable energy resources that are less
costly on a life-cycle basis than displaced generation.
‘‘(2) 
A 
determination 
that 
nonbypassable
charges on use of, or access to, the local distribution
services or facilities of the utility are in effect and
adequate to ensure sustained and equitable alloca-
tion of costs associated with low-income services and
other investments, including those in fuel diversity
and energy efficiency, that deliver system wide bene-
fits in the form of equity among, or reduced life-
cycle costs of service to, electricity consumers in the
service territory of the utility: Provided, That the
fuel diversity objective may also be met by minimum
portfolio standards that ensure maintenance or im-
provement of current levels of reliance on renewable
energy resources.
‘‘(3) A determination that any systems of retail
competition among electric-service suppliers are
structured to protect customers from price discrimi-
nation or undue price increases and to ensure that
no customer class can avoid its equitable share of
the 
electric 
utility’s 
legitimate, 
verifiable,
nonmitigatable stranded costs for which there is a
reasonable expectation of recovery.
‘‘(4) A determination that under applicable
State laws and regulations, any recovery of stranded
costs associated with existing generation assets, is
not contingent on continued operation of the genera-
tion assets for which recovery is approved.’’.
(c) CONSIDERATION AND DETERMINATION REGARD-
ING RETAIL COMPETITION STANDARDS.—(1) Section 111
(d) of such Act is amended by adding the following new
paragraph at the end thereof:
‘‘(11) RETAIL
COMPETITION
STANDARDS.—
Each electric utility shall meet
‘‘(A) the minimum certification require-
ments of section 153,
‘‘(B) either—
‘‘(i) the Federal retail competition
standard set forth in section 152(a), or
‘‘(ii) the Federal divestiture standard
set forth in section 152(b); and
‘‘(C) such other requirements as the
Commission shall prescribe consistent with
the public 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 1996 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 1996 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’’.
(d) TRANSITIONAL PROVISIONS.—(1) Upon passage
of this Act, no provision of law shall be construed to pre-
empt otherwise applicable State authority to review the
prudence of any wholesale or retail cost incurred by a util-
ity.
(2) Upon passage of this Act, no Federal statute shall
be construed to preempt the authority of the Commission
to examine existing affiliate contracts or transactions.
(3) Nothing in this Act shall be construed to preempt,
void, or nullify any existing settlement in part or whole
between any currently registered or exempt utility holding
company and any State authority or third party.
(e) EXISTING AGREEMENTS.—This Act shall have no
effect on any agreement in existence on the date of enact-
ment of this Act where such agreement is in settlement
of a proceeding arising under the Public Utility Holding
Company Act.
SEC. 4. MERGERS AND ACQUISITIONS.
Section 203 of the Federal Power Act is amended by
inserting ‘‘and any applicable requirements of subsection
(c)’’ before ‘‘, it shall approve the same’’ and by adding
the following at the end thereof:
‘‘(c) MERGERS AND ACQUISITIONS.—No person shall
acquire an interest in a public utility that results in effec-
tive control or ownership of such utility unless there is
an arms-length relationship between all parties to such ac-
quisition and—
‘‘(1) the Commission first makes the findings
set forth in subsection (d); and
‘‘(2) such person has transmitted to the Com-
mission the certifications set forth in subsection (e).
‘‘(d) REQUIRED COMMISSION FINDINGS.—The acqui-
sition described in subsection (c)—
‘‘(1) shall not create or maintain a situation in-
consistent with effective competition in any market
in which competition would benefit consumers; and
‘‘(2) shall result in substantial cost reductions
in the provision of electric service, which cost reduc-
tions cannot be achieved at lower cost without the
acquisition.