[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2499 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 2499

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 purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 18, 1998

   Mr. Glenn introduced the following bill; which was read twice and 
       referred to the Committee on Energy and Natural Resources

_______________________________________________________________________

                                 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 purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Power Marketing Administration 
Reform Act of 1998''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds that--
            (1) the use of fixed allocations of joint multipurpose 
        project costs and the failure to provide for the recovery of 
        actual interest costs and depreciation have resulted in--
                    (A) substantial failures to recover costs properly 
                recoverable through power rates by the Federal Power 
                Marketing Administrations and the Tennessee Valley 
                Authority; and
                    (B) the imposition of unreasonable burdens on the 
                taxpaying public;
            (2) existing underallocations and underrecovery of costs 
        have led to inefficiencies in the marketing of Federally 
        generated electric power and to environmental damage; and
            (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--
                    (A) sound business principles;
                    (B) maximum recovery of costs properly allocated to 
                power production; and
                    (C) encouraging the most widespread use of power 
                marketed by the Federal Power Marketing Administrations 
                and the Tennessee Valley Authority.
    (b) Purposes.--The purposes of this Act are to provide for--
            (1) full cost recovery rates for power sold by the Federal 
        Power Marketing Administrations and the Tennessee Valley 
        Authority; and
            (2) a transition to market-based rates for the power.

SEC. 3. SALE OR DISPOSITION OF FEDERAL POWER BY FEDERAL POWER MARKETING 
              ADMINISTRATIONS AND THE TENNESSEE VALLEY AUTHORITY.

    (a) Accounting.--Notwithstanding any other provision of law, as 
soon as practicable after the date of enactment of this Act, the 
Secretary of Energy, in consultation with the Federal Energy Regulatory 
Commission, shall develop and implement procedures to ensure that the 
Federal Power Marketing Administrations and the Tennessee Valley 
Authority use the same accounting principles and requirements 
(including the accounting principles and requirements 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 Submission of Rates to the Commission.--
            (1) In general.--Notwithstanding any other provision of 
        law, not later than 1 year after the date of enactment of this 
        Act and periodically thereafter but not less frequently than 
        once every 5 years, each Federal Power Marketing Administration 
        and the Tennessee Valley Authority shall submit to the Federal 
        Energy Regulatory Commission a description of proposed rates 
        for the sale or disposition of Federal power that will ensure 
        the recovery of all costs incurred by the Federal Power 
        Marketing Administration or the Tennessee Valley Authority, 
        respectively, for the generation and marketing of the Federal 
        power.
            (2) Costs to be recovered.--The costs to be recovered under 
        paragraph (1)--
                    (A) shall include all fish and wildlife 
                expenditures required under treaty and legal 
                obligations associated with the construction and 
                operation of the facilities from which the Federal 
                power is generated and sold; and
                    (B) shall not include any cost of transmitting the 
                Federal power.
    (c) Commission Review, Approval, or Modification.--
            (1) In general.--The Federal Energy Regulatory Commission 
        shall review and either approve or modify rates for the sale or 
        disposition of Federal power submitted to the Commission by 
        each Federal Power Marketing Administration and the Tennessee 
        Valley Authority under this section, in a manner that ensures 
        that the rates will recover all costs described in subsection 
        (b)(2).
            (2) Basis for review.--The review by the Commission under 
        paragraph (1) shall be based on the record of proceedings 
        before the Federal Power Marketing Administration or the 
        Tennessee Valley Authority, except that the Commission shall 
        afford all affected persons an opportunity for an additional 
        hearing in accordance with the procedures established for 
        ratemaking by the Commission under the Federal Power Act (16 
        U.S.C. 791a et seq.).
    (d) Application of Rates.--
            (1) In general.--Beginning on the date of approval or 
        modification by the Commission of rates under this section, 
        each Federal Power Marketing Administration and the Tennessee 
        Valley Authority shall apply the rates, as approved or modified 
        by the Commission, to each existing contract for the sale or 
        disposition of Federal power by the Federal Power Marketing 
        Administration or the Tennessee Valley Authority to the maximum 
        extent permitted by the contract.
            (2) Applicability.--This section shall cease to apply to a 
        Federal Power Marketing Administration or the Tennessee Valley 
        Authority as of the date of termination of all commitments 
        under any contract for the sale or disposition of Federal power 
        that were in existence as of the date of enactment of this Act.
    (e) Accounting Principles and Requirements.--In developing or 
reviewing the rates required by this section, the Federal Power 
Marketing Administrations, the Tennessee Valley Authority, and the 
Commission shall rely on the accounting principles and requirements 
developed under subsection (a).
    (f) Interim Rates.--Until market pricing for the sale or 
disposition of Federal power by a Federal Power Marketing 
Administration or the Tennessee Valley Authority is fully implemented, 
the full cost recovery rates required by this section shall apply to--
            (1) a new contract entered into after the date of enactment 
        of this Act for the sale of power by a Federal Power Marketing 
        Administrator or the Tennessee Valley Authority; and
            (2) a renewal after the date of enactment of this Act of an 
        existing contract for the sale of power by a Federal Power 
        Marketing Administration or the Tennessee Valley Authority.
    (g) Transition to Market-Based Rates.--
            (1) In general.--If the transition to full cost recovery 
        rates would result in rates that exceed market rates, the 
        Secretary of Energy may approve rates for power sold by Federal 
        Power Marketing Administrations at market rates, and the 
        Tennessee Valley Authority may approve rates for power sold by 
        the Tennessee Valley Authority at market rates, if--
                    (A) operation and maintenance costs are recovered, 
                including all fish and wildlife costs required under 
                existing treaty and legal obligations;
                    (B) the contribution toward recovery of investment 
                pertaining to power production is maximized; and
                    (C) purchasers of power under existing contracts 
                consent to the remarketing by the Federal Power 
                Marketing Administration or the Tennessee Valley 
                Authority of the power through competitive bidding not 
                later than 3 years after the approval of the rates.
            (2) Competitive bidding.--Competitive bidding shall be used 
        to remarket power that is subject to, but not sold in 
        accordance with, paragraph (1).
    (h) Market-Based Pricing.--
            (1) In general.--Not later than 2 years after the date of 
        enactment of this Act, the Secretary of Energy shall develop 
        and implement procedures to ensure that all power sold by 
        Federal Power Marketing Administrations and the Tennessee 
        Valley Authority is sold at prices that reflect demand and 
        supply conditions within the relevant bulk power supply market.
            (2) Bid and auction procedures.--The Secretary of Energy 
        shall establish by regulation bid and auction procedures to 
        implement market-based pricing for power sold under any power 
        sales contract entered into by a Federal Power Marketing 
        Administration or the Tennessee Valley Authority after the date 
        that is 2 years after the date of enactment of this Act, 
        including power that is under contract but that is declined by 
        the party entitled to purchase the power and remarketed after 
        that date.
    (i) Use of Revenue Collected Through Market-Based Pricing.--
            (1) In general.--Revenue collected through market-based 
        pricing shall be disposed of as follows:
                    (A) Revenue for operations, fish and wildlife, and 
                project costs.--Revenue shall be remitted to the 
                Secretary of the Treasury to cover--
                            (i) all power-related operations and 
                        maintenance expenses;
                            (ii) all fish and wildlife costs required 
                        under existing treaty and legal obligations; 
                        and
                            (iii) the project investment cost 
                        pertaining to power production.
                    (B) Remaining revenue.--Revenue that remains after 
                remission to the Secretary of the Treasury under 
                subparagraph (A) shall be disposed of as follows:
                            (i) Federal budget deficit.--50 percent of 
                        the revenue shall be remitted to the Secretary 
                        of the Treasury for the purpose of reducing the 
                        Federal budget deficit.
                            (ii) Fund for environmental mitigation and 
                        restoration.--35 percent of the revenue shall 
                        be deposited in the fund established under 
                        paragraph (2)(A).
                            (iii) Fund for renewable resources.--15 
                        percent of the revenue shall be deposited in 
                        the fund established under paragraph (3)(A).
            (2) Fund for environmental mitigation and restoration.--
                    (A) Establishment.--
                            (i) In general.--There is established in 
                        the Treasury of the United States a fund to be 
                        known as the ``Fund for Environmental 
                        Mitigation and Restoration'' (referred to in 
                        this paragraph as the ``Fund''), consisting of 
                        funds allocated under paragraph (1)(B)(ii).
                            (ii) Administration.--The Fund shall be 
                        administered by a Board of Directors consisting 
                        of the Secretary of the Interior, the Secretary 
                        of Energy, and the Administrator of the 
                        Environmental Protection Agency, or their 
                        designees.
                    (B) Use.--Amounts in the Fund shall be available 
                for making expenditures--
                            (i) to carry out project-specific plans to 
                        mitigate damage to, and restore the health of, 
                        fish, wildlife, and other environmental 
                        resources that is attributable to the 
                        construction and operation of the facilities 
                        from which power is generated and sold; and
                            (ii) to cover all costs incurred in 
                        establishing and administering the Fund.
                    (C) Project-specific plans.--
                            (i) In general.--The Board of Directors of 
                        the Fund shall develop a project-specific plan 
                        described in subparagraph (B)(i) for each 
                        project that is used to generate power marketed 
                        by the Federal Power Marketing Administration 
                        or the Tennessee Valley Authority.
                            (ii) Use of existing data, information, and 
                        plans.--In developing plans under clause (i), 
                        the Board, to the maximum extent practicable, 
                        shall rely on existing data, information, and 
                        mitigation and restoration plans developed by--
                                    (I) the Commissioner of the Bureau 
                                of Reclamation;
                                    (II) the Director of the United 
                                States Fish and Wildlife Service;
                                    (III) the Administrator of the 
                                Environmental Protection Agency; and
                                    (IV) the heads of other Federal, 
                                State, and tribal agencies.
                    (D) Maximum amount.--
                            (i) In general.--The Fund shall maintain a 
                        balance of not more than $200,000,000 in excess 
                        of the amount that the Board of Directors of 
                        the Fund determines is necessary to cover the 
                        costs of project-specific plans required under 
                        this paragraph.
                            (ii) Surplus revenue for deficit 
                        reduction.--Revenue that would be deposited in 
                        the Fund but for the absence of such project-
                        specific plans shall be used by the Secretary 
                        of the Treasury for purposes of reducing the 
                        Federal budget deficit.
            (3) Fund for renewable resources.--
                    (A) Establishment.--
                            (i) In general.--There is established in 
                        the Treasury of the United States a fund to be 
                        known as the ``Fund for Renewable Resources'' 
                        (referred to in this paragraph as the 
                        ``Fund''), consisting of funds allocated under 
                        paragraph (1)(B)(iii).
                            (ii) Administration.--The Fund shall be 
                        administered by the Secretary of Energy.
                    (B) Use.--Amounts in the Fund shall be available 
                for making expenditures--
                            (i) to pay the incremental cost (above the 
                        expected market cost of power) of 
                        nonhydroelectric renewable resources in the 
                        region in which power is marketed by a Federal 
                        Power Marketing Administration; and
                            (ii) to cover all costs incurred in 
                        establishing and administering the Fund.
                    (C) Administration.--Amounts in the Fund shall be 
                expended only--
                            (i) in accordance with a plan developed by 
                        the Secretary of Energy that is designed to 
                        foster the development of nonhydroelectric 
                        renewable resources that show substantial long-
                        term promise but that are currently too 
                        expensive to attract private capital sufficient 
                        to develop or ascertain their potential; and
                            (ii) on recipients chosen through 
                        competitive bidding.
                    (D) Maximum amount.--
                            (i) In general.--The Fund shall maintain a 
                        balance of not more than $50,000,000 in excess 
                        of the amount that the Secretary of Energy 
                        determines is necessary to carry out the plan 
                        developed under subparagraph (C)(i).
                            (ii) Surplus revenue for deficit 
                        reduction.--Revenue that would be deposited in 
                        the Fund but for the absence of the plan shall 
                        be used by the Secretary of the Treasury for 
                        purposes of reducing the Federal budget 
                        deficit.
    (j) Preference.--
            (1) In general.--In making allocations or reallocations of 
        power under this section, a Federal Power Marketing 
        Administration and the Tennessee Valley Authority shall provide 
        a preference for public bodies and cooperatives by providing a 
        right of first refusal to purchase the power at market prices.
            (2) Use.--
                    (A) In general.--Power purchased under paragraph 
                (1)--
                            (i) shall be consumed by the preference 
                        customer or resold for consumption by the 
                        constituent end-users of the preference 
                        customer; and
                            (ii) may not be resold to other persons or 
                        entities.
                    (B) Transmission access.--In accordance with 
                regulations of the Federal Energy Regulatory 
                Commission, a preference customer shall have 
                transmission access to power purchased under paragraph 
                (1).
            (3) Competitive bidding.--If a public body or cooperative 
        does not purchase power under paragraph (1), the power shall be 
        allocated to the next highest bidder.
    (k) Reforms.--The Secretary of Energy shall require each Federal 
Power Marketing Administration to implement--
            (1) program management reforms that require the Federal 
        Power Marketing Administration to assign personnel and incur 
        expenses only for authorized power marketing, reclamation, and 
        flood control activities and not for ancillary activities 
        (including consulting or operating services for other 
        entities); and
            (2) annual reporting requirements that clearly disclose to 
        the public, the activities of the Federal Power Marketing 
        Administration (including the full cost of the power projects 
        and power marketing programs).
    (l) Contract Renewal.--Effective beginning on the date of enactment 
of this Act, a Federal Power Marketing Administration shall not enter 
into or renew any power marketing contract for a term that exceeds 5 
years.
    (m) Restrictions.--Except for the Bonneville Power Administration, 
each Federal Power Marketing Administration shall be subject to the 
restrictions on the construction of transmission and additional 
facilities that are established under section 5 of the Act entitled 
``An Act authorizing the construction of certain public works on rivers 
and harbors for flood control, and for other purposes'', approved 
December 22, 1944 (commonly known as the ``Flood Control Act of 1944'') 
(58 Stat. 890)).

SEC. 4. TRANSMISSION SERVICE PROVIDED BY FEDERAL POWER MARKETING 
              ADMINISTRATIONS AND TENNESSEE VALLEY AUTHORITY.

    (a) In General.--Subject to subsection (b), a Federal Power 
Marketing Administration and the Tennessee Valley Authority shall 
provide transmission service 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 (16 U.S.C. 
824 et seq.), in the same manner as the service is provided under 
Commission rules by any public utility subject to the jurisdiction of 
the Commission under that part.
    (b) Expansion of Capabilities or Transmissions.--Subsection (a) 
does not require a Federal Power Marketing Administration or the 
Tennessee Valley Authority to expand a transmission or interconnection 
capability or transmission.

SEC. 5. INTERIM REGULATION OF POWER RATE SCHEDULES OF FEDERAL POWER 
              MARKETING ADMINISTRATIONS.

    (a) In General.--During the date beginning on the date of enactment 
of this Act and ending on the date on which market-based pricing is 
implemented under section 3 (as determined by the Federal Energy 
Regulatory Commission), the Commission may 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 a 
Federal Power Marketing Administration.
    (b) Basis for Approval.--In evaluating rates under subsection (a), 
the Federal Energy Regulatory Commission, in accordance with section 3, 
shall--
            (1) base any approval of the rates on the protection of the 
        public interest; and
            (2) undertake to protect the interest of the taxpaying 
        public and consumers.
    (c) Commission Actions.--As the Federal Energy Regulatory 
Commission determines is necessary to protect the public interest in 
accordance with section 3 until a full transition is made to market-
based rates for power sold by Federal Power Marketing Administrations, 
the Federal Energy Regulatory Commission may--
            (1) review the factual basis for determinations made by the 
        Secretary of Energy;
            (2) revise or modify those findings as appropriate;
            (3) revise proposed or effective rate schedules; or
            (4) remand the rate schedules to the Secretary of Energy.
    (d) Review.--An 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 under this section in accordance with section 313 of the 
Federal Power Act (16 U.S.C. 825l).
    (e) Procedures.--The Federal Energy Regulatory Commission shall by 
regulation establish procedures to carry out this section.

SEC. 6. CONFORMING AMENDMENTS.

    (a) Transfers from the Department of the Interior.--Section 
302(a)(3) of the Department of Energy Organization Act (42 U.S.C. 
7152(a)(3)) is amended by striking the last sentence.
    (b) Use of Funds to Study Noncost-Based Methods of Pricing 
Hydroelectric Power.--Section 505 of the Energy and Water Development 
Appropriations Act, 1993 (42 U.S.C. 7152 note; 106 Stat. 1343) is 
repealed.

SEC. 7. APPLICABILITY.

    Except as provided in section 3(l), this Act shall apply to a power 
sales contract entered into by a Federal Power Marketing Administration 
or the Tennessee Valley Authority after July 23, 1997.
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