[Congressional Record Volume 140, Number 82 (Friday, June 24, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 24, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
INTRODUCTION OF A BILL TO RESTORE FEDERAL ENERGY REGULATORY COMMISSION 
                              JURISDICTION

                                 ______


                           HON. RICK BOUCHER

                              of virginia

                    in the house of representatives

                         Friday, June 24, 1994

  Mr. BOUCHER. Mr. Speaker, today I am pleased to be joined by Mr. 
Dingell, Mr. Sharp, and Mr. Markey in introducing legislation that will 
restore a measure of protection for utility ratepayers served by the 
operating subsidiaries of multistate public utility holding companies 
known as registered holding companies.
  The 1992 Federal appeals court ruling in Ohio Power Co. versus FERC 
removed the authority of the Federal Energy Regulatory Commission 
[FERC] to review the costs of goods and services that are supplied as 
part of a registered holding company interaffiliate contract. The court 
held that the Securities and Exchange Commission [SEC] has sole 
authority to regulate such transactions.
  The SEC does not have the expertise or the resources to protect 
consumers from potential abuses of the interaffiliate relationship. 
Therefore, the effect of this ruling is to allow the affiliates of a 
registered holding company to purchase goods and services from each 
other with little review of whether the costs associated with these 
transactions are reasonable, prudent, or comparable to the cost of 
similar goods and services from unaffiliated suppliers.
  Prior to the Ohio Power decision, the FERC had authority to review, 
and did review, the costs of goods and services, including fuel, 
supplied as part of a registered holding company interaffiliate 
transaction. The decision placed these costs, which make up a 
significant portion of the electric rates ultimately charged to the 
consumers of some companies, outside of FERC's purview. As a result, 
affiliates of registered holding companies are now in a position to 
overcapitalize and goldplate functions that are performed for their 
sister companies and thereby enjoy an increased and uncontestable rate 
of return as these costs are passed on to ratepayers. This regime 
represents a major assault on FERC's ratemaking responsibilities and a 
threat to all customers of these companies. It must be corrected.
  The legislation that I am introducing today makes the necessary 
correction by restoring the essential regulatory tools necessary to 
protect adequately utility consumers. My bill effectively reverses the 
Ohio Power decision. Section 318 of the Federal Power Act is amended to 
provide FERC with jurisdiction to disallow recovery in rates of any 
costs incurred through an interaffiliate transaction that it determines 
are not just and reasonable and are unduly discriminatory or 
preferential. The SEC retains its jurisdiction pursuant to the Public 
Utility Holding Company Act to review and approve interaffiliate 
transactions prior to consummation. The bill provides that there will 
be a rebuttable presumption in FERC rate cases that these costs, once 
approved by the SEC, are just, reasonable and not unduly discriminatory 
or preferential. Moreover, so as not to apply this legislation 
retroactively, the authority conferred on FERC will not apply to any 
cost incurred and recovered prior to the date of enactment.

  At the hearing convened to examine the policy issues presented by the 
Ohio Power decision, one registered holding company testified that the 
reversal of the decision would result in disparate treatment of the 
registered companies, whose interaffiliate fuel contracts would then be 
reviewed by the SEC at a cost standard as well as by the FERC at a 
market comparability standard, and the nonregistered companies who 
would be subject only to FERC review. Under this scenario, the 
registered companies could recover only the lower of cost or market 
price, whereas the nonregistered companies could recover market price, 
regardless of whether it was above or below their cost. In its 
testimony, the SEC indicated that it will issue a proposed rule 
designed to harmonize the SEA standard with that used by FERC. Given 
this testimony, I do not believe it is necessary to address the 
appropriate standard of review in legislation, and I look forward to an 
administrative resolution of this matter.
  It is, however, critical that we address the regulatory gap created 
by the Ohio Power decision. I urge my colleagues to join me in 
supporting this measure.

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