[Congressional Record Volume 143, Number 139 (Wednesday, October 8, 1997)]
[Senate]
[Pages S10648-S10660]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  CIVIL SERVICE RETIREMENT SYSTEM ANNUITIES CLARIFICATION LEGISLATION

  Mr. ROBB. Mr. President, I rise today to introduce legislation to 
correct a wrong that has been done to an unknown number of Federal 
retirees in computing their annuities.
  Through a letter from Mr. L. David Jones, I was informed that the 
1986 Civil Service amendments contained in the Consolidated Omnibus 
Budget Reconciliation Act were being misapplied to penalize career 
Federal civil servants who had some part-time service at the end of 
their careers. Mr. Jones, and I'm sure many others, was encouraged to 
transition to retirement by working part-time for several years rather 
than just retiring after a 30-year career. Imagine Mr. Jones' surprise 
when he calculated his annuity after 30 years of full-time service and 
five years of part-time service and realized that he would have been 
better off if he had just retired after 30 years.
  At first I believed this problem was simply a matter of the Office of 
Personnel Management misunderstanding the intent of Congress and that 
the situation could be corrected through administrative action. The 
Office of Personnel Management, however, has firmly stated that they 
are carrying out the letter of the law, and any change to the current 
annuity calculation will require congressional action.
  That is why I am here today. Mr. Jones, and any others who are in a 
similar situation, deserve to have an annuity that accurately reflects 
their many years of service. This bill will allow those retirees to 
have their annuities recalculated to ensure that they are not penalized 
for not retiring outright. Realize also, however, that this bill does 
not authorize back payments for any lost annuity--the legislation 
simply tries to put things right for future payments to retirees 
affected by this previous error and to ensure that no future retirees 
are similarly penalized.
  We must also look ahead and realize that any policy which discourages 
part-time service in these situations threatens to lead to a ``brain 
drain'' as baby boomers begin to retire. Many agencies have already 
expressed concern about their graying workforce and the difficulties 
they will face as these experienced workers retire. One option often 
mentioned is to encourage part-time service, so that the experience 
remains and allows for a transition of responsibilities to younger 
workers. As it stands now, a civil servant would be ill-advised to 
agree to that part-time transition to retirement.
  For both of these reasons, I encourage all of my colleagues to 
support this legislation, and I will work with my colleagues on the 
Governmental Affairs Committee to see that this bill is considered as 
quickly as possible.
                                 ______
                                 
      By Mr. GRAHAM:
  S. 1273. A bill to amend title 10, United States Code, to expand the 
National Mail Order Pharmacy Program of the Department of Defense to 
include covered beneficiaries under the military health care system who 
are also entitled to Medicare; to the Committee on Armed Services.


     the national mail order pharmacy program expansion act of 1997

  Mr. GRAHAM. Mr. President, today, I stand before you to highlight an 
injustice which has been done to the men and women who have served this 
country with selfless dedication. They have devoted themselves to the 
mission of protecting our country while promoting peace and democracy 
around the world. For this contribution to our country, we reward their 
performance with a retirement package which includes health care. 
Unfortunately, through a series of independent laws, we have created a 
disjointed health care benefits package which treats retirees 
differently depending on their age and where they happen to live.
  I am introducing a bill to correct this disjointed health care 
policy. There is clearly a double standard affecting our veterans. 
Under the current provisions of the law, military retirees are eligible 
to receive health care under the CHAMPUS program until they become 65 
years old. After that time, their health care is provided by Medicare. 
Under the CHAMPUS program, retirees have access to a program known as 
the mail-order pharmacy program which allows military members and 
retirees to obtain prescription drugs through the mail. Retirees over 
the age of 65 years old cannot be supported through the CHAMPUS program 
under current legislative restrictions. Medicare has no such pharmacy 
benefit. This means that once retirees become 65 years old, they lose 
the benefit and convenience of a mail-order pharmacy program. This 
comes at a time in their lives when they are more likely to need 
prescription drugs.
  I commend the Department of Defense on their initiative to develop 
the mail-order pharmacy program. This new program was established to 
provide better service to the military community and to enable them to 
maximize that level of service within their decreasing available 
resources.
  Military retirees and their dependents are eligible to receive free 
medical care from military installations on a space available basis. 
However, as the military continues to downsize their medical corps, 
``space available'' is becoming more and more elusive for retirees. 
Pharmacy services are likewise available to retirees at military 
installations on a space available basis. For those retirees who were 
receiving their medical care, including prescription services, from a 
military installation which was closed by Base Realignment and Closure 
[BRAC] decisions, we have made an exception to the law which allows 
these retirees to participate in the mail-order pharmacy program. We 
have created a conglomeration of rules

[[Page S10649]]

which apply to military retirees depending on their personal 
circumstances.
  My proposal is very simple. All military retirees, including their 
dependents, should have access to the same health care benefits. We 
should not differentiate between medical benefits based only on a 
retiree's age or where a retiree happens to live. All retirees should 
be allowed to use the mail-order pharmacy program.
  The General Accounting Office estimates that this proposal will cost 
approximately $229 million. While I remain committed to reducing the 
budget deficit and maintaining a balanced budget, I feel that the 
current legislation has created an inequity in the retirement benefits 
provided to our military personnel which must be corrected. It is the 
right thing to do.
  This Nation owes a debt of gratitude to our military retirees. They 
have endured many hardships during their careers, including separation 
from their families for extended periods of time and frequent moves to 
all corners of the globe. They have also risked their lives in the name 
of freedom and democracy.
  Military retirees have given tirelessly of themselves throughout 
their careers, and this proposal is an opportunity to correct an unjust 
situation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1273

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

     SECTION 1. INCLUSION OF MEDICARE-ELIGIBLE COVERED 
                   BENEFICIARIES IN DEPARTMENT OF DEFENSE NATIONAL 
                   MAIL ORDER PHARMACY PROGRAM.

       Section 1086 of title 10, United States Code, is amended by 
     adding at the end the following new subsection:
       ``(i) Notwithstanding subsection (d)(1), the Secretary of 
     Defense shall ensure that any program to make prescription 
     pharmaceuticals available by mail to covered beneficiaries 
     does not exclude covered beneficiaries who are entitled to 
     hospital insurance benefits under part A of title XVIII of 
     the Social Security Act (42 U.S.C. 1395c et seq.) Such 
     covered beneficiaries shall be eligible to receive 
     pharmaceuticals available under the mail order program on the 
     same terms and conditions as other covered beneficiaries 
     included in the program.''.
                                 ______
                                 
      By Mr. CAMPBELL:
  S. 1274. A bill to amend the Internal Revenue Code of 1986 to 
prohibit the Internal Revenue Service from using the threat of audit to 
compel agreement with the Tip Reporting Alternative Commitment or the 
Tip Rate Determination.


       the citizens voluntary compliance partnership act of 1997

  Mr. CAMPBELL. Mr. President, last week the Senate passed the Treasury 
and general Government appropriations bill for fiscal year 1998. 
Included in the final conference report to that bill was language 
regarding the Tip Reporting Alternative Commitment Program [TRAC].
  TRAC is a voluntary agreement entered into by the Internal Revenue 
Service and restaurant employers across the country. Under TRAC, 
employers agree to better educate their employees on tip reporting and 
also to monitor the tips received by employees. Developed just a few 
short years ago, TRAC is seen as a way to combat the instances of 
underreporting and nonreporting of tips.
  However, it has come to the attention of many in Congress that the 
IRS may be using the threat of an audit to compel restaurant owners to 
enter into this agreement. While the IRS does have the authority to 
perform audits, I do not feel it is appropriate for this agency to be 
utilizing this right as a means of intimidation.
  The report language pertaining to TRAC, which I ask unanimous consent 
be printed in the Record, states that the IRS ``should ensure 
compliance with tip reporting by stressing its customer service role 
while working with restaurant owners.'' The legislation I am 
introducing today would simply put some teeth into this report 
language.
  All my bill does is prohibit the IRS from using the threat of making 
an examination or issuing a summons to compel a restaurant owner to 
enter into TRAC. It does not limit the IRS' authority to perform such 
functions. It simply prohibits the agency from using these tools as a 
means of forcing compliance.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1274

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

     SECTION 1. FINDINGS.

       Congress finds that--
       (1) the Tip Reporting Alternative Commitment Agreement and 
     the tip Rate Determination Agreement are voluntary agreements 
     developed by the Internal Revenue Service and the restaurant 
     industry as a means of improving the reporting of tip income;
       (2) there have been reports that the Internal Revenue 
     Service may be compelling members of the restaurant industry 
     to accept such voluntary agreement by using the possibility 
     of audit to intimidate; and
       (3) the Internal Revenue Service has the authority to 
     perform audits to assure taxpayer compliance with the 
     internal revenue laws.

     SEC. 2. PROHIBITION ON USING THE THREAT OF AUDIT TO COMPEL 
                   AGREEMENT WITH THE TIP REPORTING ALTERNATIVE 
                   COMMITMENT.

       Section 7602 of the Internal Revenue Code of 1986 (relating 
     to examination of books and witnesses) is amended by adding 
     at the end the following new subsection:
       ``(d) No Threat of Summons or Examinations to Compel 
     Agreement With Tip Reporting Alternative Commitment or the 
     Tip Rate Determination Agreement.--The Secretary shall not 
     use the threat of making an examination or issuing a summons 
     under subsection (1) to compel a taxpayer to agree to or sign 
     the Tip Reporting Alternative Commitment Agreement (TRAC) or 
     the Tip Rate Determination Agreement (TRDA).''
                                                                    ____


              Tip Reporting Alternative Commitment Program

       The conferees agree with the House position that the IRS 
     should work with taxpayers to ensure compliance with the Tip 
     Reporting Alternative Commitment Agreement (TRAC). In too 
     many instances, restaurant owners perceive that the IRS may 
     be overzealous in their pursuit of voluntary agreement with 
     TRAC by intimating that the business will be audited if there 
     is no agreement. The conferees agree that IRS should ensure 
     compliance with tip reporting by stressing its customer 
     service role while working with the restaurant owners.
                                 ______
                                 
      By Mr. MURKOWSKI (for himself and Mr. Akaka):
  S. 1275. A bill to implement further the Act (Public Law 94-241) 
approving the Covenant to Establish a Commonwealth of the Northern 
Mariana Islands in Political Union with the United States of America, 
and for other purposes; to the Committee on Energy and Natural 
Resources.


       the northern mariana islands convenant implementation act

  Mr. MURKOWSKI. Mr. President, I send to the desk, for appropriate 
reference, legislation on behalf of myself and Senator Akaka that the 
administration has provided me in response to my request for a drafting 
service. This legislation represents the language that the 
administration believes will implement its recommendations contained in 
the most recent report on the Federal-CNMI Initiative on Labor, 
Immigration, and Law Enforcement in the Commonwealth of the Northern 
Mariana Islands.
  In 1994, Congress directed this Initiative in Public Law 103-332 and 
provided $7 million for fiscal years 1995 and 1996 with an additional 
$3 million for fiscal year 1997. In testimony before the Committee on 
Energy and Natural Resources, the administration committed to provide 
an annual report on the progress of the Initiative.
  Partially in response to concerns that had been raised about 
conditions in the Commonwealth, Senator Akaka and I visited Saipan in 
February of last year. In addition to extensive briefings and meetings 
with Commonwealth officials, we also met with Federal agency personnel 
and the U.S. attorney. We also visited a garment factory and talked 
with some Bangladesh workers who had not been paid and who were living 
in appalling conditions. We were assured that corrective action would 
be taken. I want to note that my concerns were not exclusively with the 
Commonwealth government, but also went to the willingness of the 
administration to commit the needed resources to address the problems 
that we saw. I specifically asked the Attorney General for the 
appointment of a full-time U.S.

[[Page S10650]]

attorney for the Northern Marianas rather than having the U.S. attorney 
for Guam also serve the Northern Marianas. The Attorney General 
responded that there wasn't enough work to justify a U.S. attorney.
  On June 26 of last year, I chaired a hearing that examined what 
progress had been made. In addition to the administration, the acting 
Attorney General of the Commonwealth appeared and requested that the 
committee delay any action until the Commonwealth could complete a 
study on minimum wage and assured me that the study would be completed 
by January. I agreed to the delay. My intention was to revisit this 
issue in the April-May period after the administration had transmitted 
its annual report. While the CNMI study was not finally transmitted 
until April, the Administration did not transmit its annual report, 
which was due in April, until July. On May 30, 1997, the President 
wrote the Governor of the Northern Marianas that he was concerned over 
activities in the Commonwealth and had concluded that Federal 
immigration, naturalization, and minimum wage laws should apply. That 
letter provoked a flurry of statements, letters, articles, stories, and 
legislation, most of which generated more heat than light.
  It quickly became clear that unless there was some definition as to 
exactly what the problem was and what solution was being proposed, 
little would happen other than a series of bewildering and increasingly 
hostile statements. The atmosphere also made the possibility of a 
useful oversight hearing increasingly remote. I must say that I have 
not been particularly impressed by either the advocates of Federal 
legislation or the opponents. One side responds to concerns over 
workers living in barracks, abuse of domestics, prostitution, and other 
problems by suggesting that the answer is to raise the minimum wage. 
The response to allegations of abuse of workers, especially women, is 
not to propose raising the minimum wage. Paying a person more does not 
justify abuse. The other side of the argument seems to me to also miss 
the point. The last time we heard a justification that economic 
advances would be jeopardized if workers were treated properly was 
shortly before Appomattox. Whatever economic benefits some may have 
realized, that does not justify worker abuse, indentured servants, or 
the conditions that I saw those Bangladesh workers living in.

  There are certain issues that I believe need a full hearing and 
careful review. The minimum wage study that the Commonwealth 
commissioned noted at one point that the Marianas has used its control 
over immigration and minimum wage to import foreign workers who would 
be paid more than they would receive in their home countries, but less 
than the Federal minimum wage. These workers would produce garments 
that would be subject to quotas if produced in their home country, but 
which could be imported duty free into the mainland United States since 
the Marianas is outside the customs territory of the U.S. but subject 
to preferential treatment under General Note 3(a) of the Tariff 
Schedules. That is an issue that the Congress should review.
  When we considered the Covenant for the Marianas, we were sensitive 
to the fact that the Marianas had been under the minimum wage 
provisions of the Trust Territory and that immediate introduction of 
the Federal minimum wage might have an adverse effect on a developing 
economy that was still heavily dependent on annual Federal grants for 
basic Government services. We also recognized the concern expressed by 
the negotiators for the Northern Marianas that their small population 
could be overrun easily by migration. In response, we permitted the 
Marianas to control the timing of minimum wage and to exercise control 
over immigration. We also provided restraints on land alienation to 
protect the population. We did not consider that entrepreneurs would 
discover a loophole that would allow a lower minimum wage and 
immigration to create a non-indigenous industry that is Marianas in 
name only. Congress should examine whether this is a situation that 
should be permitted under the tariff schedules.
  There are also legitimate questions concerning minimum wage and 
immigration. We should now have sufficient experience to assess whether 
the Marianas is capable of providing the pre-clearance for any persons 
who attempt to enter the Marianas. The United States routinely does 
this in foreign countries as part of our visa process. The situation 
that I saw with the Bangladesh workers should never have happened. 
Reports of other workers who arrive only to find no jobs should also 
never happen. There should be no unemployment among the guest workers. 
These are legitimate immigration related issues. They do not 
necessarily lead to a Federal takeover, but they are legitimate issues 
and it serves no purpose to distort history and pretend that the 
current situation was the goal of the Covenant negotiators.
  Minimum wage is also a fairly straightforward issue. It does not 
appear that any U.S. citizens in the Northern Marianas are paid less 
than the current Federal minimum wage. Is there a justification and a 
need to pay foreign workers less and to what extent does the ability to 
import skilled foreign labor at less than Federal minimum wages 
contribute to the unemployment rate in the Marianas? Is there a reason 
to pay less than the minimum wage to attract skilled positions? There 
are issues that should be reviewed in a hearing.
  Given the furor that followed the President's letter, I decided to 
ask the administration to provide me with a drafting service of the 
language that would implement whatever the recommendations were in 
their report. The report was finally submitted in July, and I received 
the drafting service on October 6, 1997. On July 16, 1997, I wrote the 
Governor of the Commonwealth to inform him that I had made the request 
and the schedule that I intended to follow. I want to reiterate my 
statement. I am committed to holding hearings on this legislation. I am 
not wedded to any particular provision in the legislation, but I am not 
happy with the situation in the Commonwealth. I ask unanimous consent 
that a copy of my letter be printed in the Record as well as a copy of 
the transmittal letter from the administration, the text of the 
legislation, and a section-by-section analysis.
  Mr. President, I appreciate that elections are only a few weeks away 
in the Marianas. I do not think that hearings prior to the elections 
would be particularly productive. Our committee has tried to be 
nonpartisan in our approach to our responsibilities for the territories 
and we have tried to avoid local politics. Given the seriousness of 
these issues, I think they should be raised after the elections. I want 
to make it clear, however, that whatever the results of the elections 
in the Marianas, the Energy and Natural Resources Committee intends to 
proceed impartially and expeditiously.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1275

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

     SECTION 1. SHORT TITLE AND REFERENCE.

       This Act may be cited as the ``Northern Mariana Islands 
     Covenant Implementation Act''. Public Law 94-241 (90 Stat. 
     263, 48 U.S.C. 1801), which approved the Covenant to 
     Establish a Commonwealth of the Northern Mariana Islands in 
     Political Union with the United States of America, as 
     amended, hereinafter is referred to as the ``Covenant Act''.

     SEC. 2. IMMIGRATION REFORM FOR THE NORTHERN MARIANA ISLANDS.

       (a) Covenant Act Amendments.--The Covenant Act is amended 
     to add the following new section 6 after section 5:

     ``SEC. 6. TRANSITION PROGRAM FOR IMMIGRATION.

       ``Pursuant to section 503 of the Covenant to Establish a 
     Commonwealth of the Northern Mariana Islands in Political 
     Union with the United States of America (approved in Public 
     Law 94-241, 90 Stat. 263)--
       ``(a) Application of the Immigration and Nationality Act 
     and Establishment of a Transition Program.--Effective on the 
     first day of the first full month commencing one year after 
     the date of enactment of this section, the provisions of the 
     Immigration and Nationality Act, as amended, shall apply to 
     the Commonwealth of the Northern Mariana Islands, with a 
     transition period not to exceed ten years thereafter, during 
     which the Attorney General, in consultation with the 
     Secretaries of State, Labor, and Interior, shall establish, 
     administer, and enforce a transition program for immigration 
     to the Commonwealth of the Northern Mariana Islands (the 
     ``transition program''). The transition program established 
     pursuant to this section shall provide for the issuance of 
     nonimmigrant temporary alien worker visas

[[Page S10651]]

     pursuant to subsection (b), and, under the circumstances set 
     forth in subsection (c), for family-sponsored and employment-
     based immigrant visas. The transition program shall be 
     implemented pursuant to regulations to be promulgated as 
     appropriate by each agency having responsibilities under the 
     transition program.
       ``(b) Temporary Alien Workers.--The transition program 
     shall conform to the following requirements with respect to 
     temporary alien workers who would otherwise not be eligible 
     for nonimmigrant classification under the Immigration and 
     Nationality Act, as amended:
       ``(1) Aliens admitted under this subsection shall be 
     treated as aliens seeking classification as nonimmigrants 
     under section 101(a)(15) of the Immigration and Nationality 
     Act, as amended, including the right to apply, if otherwise 
     eligible, for a change of nonimmigrant status under section 
     248 of the Immigration and Nationality Act, as amended, or 
     adjustment of status, if eligible therefor, under subsection 
     (c) of this section and section 245 of the Immigration and 
     Nationality Act, as amended.
       ``(2)(A) The Secretary of Labor shall establish, 
     administer, and enforce a system for allocating and 
     determining the number, terms, and conditions of permits to 
     be issued to prospective employers for each temporary alien 
     worker who would not otherwise be eligible for admission 
     under the Immigration and Nationality Act, as amended. This 
     system shall provide for a reduction in the allocation of 
     permits for such workers on an annual basis, over a period 
     not to exceed ten years. In no event shall a permit be 
     valid beyond the expiration of the transition period. This 
     system may be based on any reasonable method and criteria 
     determined by the Secretary of Labor to promote the 
     maximum use of, and to prevent adverse effects on wages 
     and working conditions of, United States labor and 
     lawfully admissible freely associated state citizen labor.
       ``(B) The Secretary of Labor is authorized to establish and 
     collect appropriate user fees for the purpose of this 
     section. Amounts collected pursuant to this section shall be 
     deposited to a special fund of the Treasury. Such amounts 
     shall be available, to the extent and in the amounts as 
     provided in advance in appropriations acts, for the purposes 
     of administering this section. Such amounts are authorized to 
     be appropriated to remain available until expended.
       ``(3) The Attorney General shall set the conditions for 
     admission of nonimmigrant temporary alien workers under the 
     transition program, and the Secretary of State shall 
     authorize the issuance of nonimmigrant visas for aliens to 
     engage in employment only as authorized in this subsection: 
     Provided, That such visas shall not be valid for admission to 
     the United States, as defined in section 101(a)(38) of the 
     Immigration and Nationality Act, as amended, except the 
     Northern Mariana Islands. An alien admitted to the Northern 
     Mariana Islands on the basis of such a nonimmigrant visa 
     shall be permitted to engage in employment only as authorized 
     pursuant to the transition program. No alien shall be granted 
     nonimmigrant classification or a visa under this subsection 
     unless the permit requirements established under paragraph 
     (2) of this subsection have been met.
       ``(4) An alien admitted as a nonimmigrant pursuant to this 
     subsection shall be permitted to transfer between employers 
     in the Northern Mariana Islands during the period of such 
     alien's authorized stay therein, provided that such transfer 
     is authorized by the Attorney General in accordance with 
     criteria established by the Attorney General and the 
     Secretary of Labor.
       ``(c) Immigrants.--With the exception of immediate 
     relatives, as defined in section 201(b)(2) of the Immigration 
     and Nationality Act, as amended, and except as provided in 
     paragraph (1) and (2) of this subsection, no alien shall be 
     granted initial admission as a lawful permanent resident of 
     the United States at a port-of-entry in the Northern Mariana 
     Islands, or at a port-of-entry in Guam for the purpose of 
     immigrating to the Northern Mariana Islands.
       ``(1) Family-Sponsored Immigrant Visas.--The Attorney 
     General, based on a joint recommendation of the Governor and 
     Legislature of the Commonwealth of the Northern Mariana 
     Islands, and in consultation with appropriate federal 
     agencies, may establish a specific number of additional 
     initial admissions as a family-sponsored immigrant at a port-
     of-entry in the Northern Mariana Islands, or at a port-of-
     entry in Guam for the purpose of immigrating to the Northern 
     Mariana Islands, pursuant to section 202 and 203(a) of the 
     Immigration and Nationality Act, as amended, during the 
     following fiscal year.
       ``(2) Employment-Based Immigrant Visas.--
       ``(A) If the Secretary of Labor, upon receipt of a joint 
     recommendation of the Governor and Legislature of the 
     Commonwealth of the Northern Mariana Islands, finds that 
     exceptional circumstances exist with respect to the inability 
     of employers in the Northern Mariana Islands to obtain 
     sufficient work-authorized labor, the Attorney General may 
     establish a specific number of employment-based immigrant 
     visas to be made available during the following fiscal year 
     under section 203(b) of the Immigration and Nationality Act, 
     as amended.
       ``(B) Upon notification by the Attorney General that a 
     number has been established pursuant to subparagraph (A) of 
     this paragraph, the Secretary of State may allocate up to 
     that number of visas without regard to the numerical 
     limitations set forth in sections 202 and 203(b)(3)(B) of the 
     Immigration and Nationality Act, as amended. Visa numbers 
     allocated under this subparagraph shall be allocated first 
     from the number of visas available under section 203(b)(3) of 
     the Immigration and Nationality Act, as amended, or, if such 
     visa numbers are not available, from the number of visas 
     available under section 203(b)(5) of such Act.
       ``(C) Persons granted employment-based immigrant visas 
     under the transition program may be admitted initially at a 
     port-of-entry in the Northern Mariana Islands, or at a port-
     of-entry in Guam for the purpose of immigrating to the 
     Northern Mariana Islands, as lawful permanent residents of 
     the United States.
       ``(D) Any immigrant visa issued pursuant to this paragraph 
     shall be valid only for application for initial admission to 
     the Northern Mariana Islands. The admission of any alien 
     pursuant to such an immigrant visa shall be an admission for 
     lawful permanent residence and employment only in the 
     Northern Mariana Islands during the first five years after 
     such admission. Such admission shall not authorize permanent 
     residence or employment in any other part of the United 
     States during such five-year period. An alien admitted for 
     permanent residence pursuant to this paragraph shall be 
     issued appropriate documentation identifying the person as 
     having been admitted pursuant to the terms and conditions of 
     this transition program, and shall be required to comply with 
     a system for the registration and reporting of aliens 
     admitted for permanent residence under the transition 
     program, to be established by the Attorney General, by 
     regulation, consistent with the Attorney General's authority 
     under Chapter 7 of Title II of the Immigration and 
     Nationality Act, as amended.
       ``(E) Nothing in this paragraph shall preclude an alien who 
     has obtained lawful permanent resident status pursuant to 
     this paragraph from applying, if otherwise eligible under 
     this section and under the Immigration and Nationality Act, 
     as amended, for an immigrant visa or admission as a lawful 
     permanent resident under the Immigration and Nationality Act, 
     as amended.
       ``(F) Any alien admitted under this subsection, who 
     violates the provisions of this paragraph, or who is found 
     removable or inadmissible under section 237(a), or paragraphs 
     (1), (2), (3), (4)(A), (4)(B), (6), (7), (8), or (9) of 
     section 212(a), shall be removed from the United States 
     pursuant to sections 239, 240, and 241 of the Immigration and 
     Nationality Act, as amended.
       ``(G) The Attorney General may establish by regulation a 
     procedure by which an alien who has obtained lawful permanent 
     resident status pursuant to this paragraph may apply for a 
     waiver of the limitations on the terms and conditions of such 
     status. The Attorney General may grant the application for 
     waiver, in the discretion of the Attorney General, if: (1) 
     the alien is not in removal proceedings, (2) the alien has 
     been a person of good moral character for the preceding five 
     years, (3) the alien has not violated the terms and 
     conditions of the alien's permanent resident status, and (4) 
     the alien would suffer exceptional and extremely unusual 
     hardship were such terms and conditions not waived.
       ``(H) The limitations on the terms and conditions of an 
     alien's permanent residence set forth in this paragraph shall 
     expire at the end of five years after the alien's admission 
     to the Northern Mariana Islands as a permanent resident and 
     the alien is thereafter fully subject to the provisions of 
     the Immigration and Nationality Act, as amended. Following 
     the expiration of such limitations, the permanent resident 
     alien may engage in any lawful activity, including 
     employment, anywhere in the United States. Such an alien, if 
     otherwise eligible for naturalization, may count the five-
     year period in the Northern Mariana Islands towards time in 
     the United States for purposes of meeting the residence 
     requirements of Title III of the Immigration and Nationality 
     Act, as amended.
       ``(d) Investor Visas.--The following requirements shall 
     apply to aliens who have been admitted to the Northern 
     Mariana Islands in long-term investor status under the 
     immigration laws of the Commonwealth of the Northern Mariana 
     Islands on or before the effective date of this Act and who 
     have continuously maintained residence in the Northern 
     Mariana Islands pursuant to such status:
       ``(1) Such aliens may apply to the Attorney General or a 
     consular officer for classification as a nonimmigrant under 
     the transition program. Any nonimmigrant status granted as a 
     result of such application shall terminate not later than 
     December 31, 2008.
       ``(2) During the six-month period beginning January 1, 
     2008, and ending June 30, 2008, any alien granted 
     nonimmigrant status pursuant to paragraph (1) of this 
     subsection shall be permitted to apply to the Attorney 
     General for status as a lawful permanent resident of the 
     United States effective on or after January 1, 2009, and 
     may be granted such status if otherwise admissible. Upon 
     granting permanent residence to any such alien, the 
     Attorney General shall advise the Secretary of State who 
     shall reduce by one number, during the fiscal year in 
     which the grant of status becomes effective, the total 
     number of immigrant visas available to natives of the 
     country of the alien's chargeability under section 202(b) 
     of the Immigration and Nationality Act, as amended.

[[Page S10652]]

       ``(e) Persons Lawfully Admitted Under the Commonwealth of 
     the Northern Mariana Islands Immigration Law.--Subject to 
     subsection (d) of this section, persons who would have been 
     lawfully present in the Northern Mariana Islands pursuant to 
     the immigration laws of the Commonwealth of the Northern 
     Mariana Islands on the effective date of this subsection, 
     shall be permitted to remain in the Northern Mariana Islands 
     for the completion of the period of admission under such 
     laws, or for two years, whichever is less.
       ``(f) Travel Restrictions for Certain Applicants for 
     Asylum.--Any alien admitted to the Northern Mariana Islands 
     pursuant to the immigrant laws of the Commonwealth of the 
     Northern Mariana Islands or pursuant to subsections (b) or 
     (c) of this section who files an application seeking asylum 
     in the United States shall be required, pursuant to 
     regulations established by the Attorney General, to remain in 
     the Northern Mariana Islands, during the period of time the 
     application is being adjudicated or during any appeals filed 
     subsequent to such adjudication. An applicant for asylum who, 
     during the time his application is being adjudicated or 
     during any appeals filed subsequent to such adjudication, 
     leaves the Northern Mariana Islands of his own will without 
     prior authorization by the Attorney General thereby abandons 
     the application.
       ``(g) Effect on Other Laws.--Effective on the first day of 
     the first full month commencing one year after the date of 
     enactment of this section, the provisions of this section and 
     the Immigration and Nationality Act, as amended, shall 
     supersede and replace all laws, provisions, or programs of 
     the Commonwealth of the Northern Mariana Islands relating to 
     the admission of aliens and the removal of aliens from the 
     Northern Mariana Islands.
       ``(h) Accrual of Time.--No time of `unlawful presence' in 
     the Northern Mariana Islands shall accrue for purposes of the 
     ground of inadmissibility in section 212(a)(9)(B) prior to 
     the date of enactment of this subsection.''.
       (b) Conforming Amendments.--(1) Effective on the first day 
     of the first full month commencing one year after the date of 
     enactment of this section, section 101(a) of the Immigration 
     and Nationality Act, as amended, is amended as follows:
       (A) in paragraph (36), by deleting ``and the Virgin Islands 
     of the United States.'' and substituting ``the Virgin Islands 
     of the United States, and the Northern Mariana Islands.'', 
     and;
       (B) in paragraph (38), by deleting ``and the Virgin Islands 
     of the United States'' and substituting ``the Virgin Islands 
     of the United States, and the Northern Mariana Islands.''.
       (2) Effective on the first day of the first full month 
     commencing on date of enactment of this section, subsection 
     (l) of section 212 of the Immigration and Nationality Act, as 
     amended, is amended, as follows:
       (A) in paragraph (1)--
       (i) strike the words ``stay on Guam'', and insert the words 
     ``stay on Guam and the Northern Mariana Islands'',
       (ii) after the word ``exceed'' insert the words ``a total 
     of'', and,
       (iii) strike the words ``after consultation with the 
     Governor of Guam,'' and insert the words ``after respective 
     consultation with the Governor of Guam or the Governor of the 
     Commonwealth of the Northern Mariana Islands,'';
       (B) in subparagraph (A) of paragraph (1), strike the words 
     ``on Guam'', and insert the words ``on Guam or the Northern 
     Mariana Islands, respectively,'';
       (C) in subparagraph (A) of paragraph (2), strike the words 
     ``into Guam'', and insert the words ``into Guam or the 
     Northern Mariana Islands, respectively,'';
       (D) in paragraph (3), strike the words ``Government of 
     Guam'' and insert the words ``Government of Guam or the 
     Government of the Commonwealth of the Northern Mariana 
     Islands''.
       (c) Technical Assistance Program.--The Secretaries of 
     Interior and Labor, in consultation with the Commonwealth of 
     the Northern Mariana Islands, shall develop a program of 
     technical assistance, including recruitment and training, to 
     aid employers in securing employees from among United States 
     labor or lawfully admissible freely associated state citizen 
     labor.
       (d) Department of Justice and Department of Labor 
     Operations.--The Attorney General and the Department of Labor 
     are authorized to establish and maintain Immigration and 
     Naturalization Service, Executive Office of Immigration 
     Review, and Department of Labor operations in the Northern 
     Mariana Islands for the purpose of performing their 
     responsibilities under the Immigration and Naturalization 
     Act, as amended, and under the transition program. To the 
     extent practicable and consistent with the satisfactory 
     performance of their assigned responsibilities under 
     applicable law, the Departments of Justice and Labor shall 
     recruit and hire from among qualified applicants resident in 
     the Northern Mariana Islands for staffing such operations.
       (e) Report to the Congress.--The President shall report to 
     the Senate Committee on Energy and Natural Resources, and the 
     House Committee on Resources, within six months after the 
     fifth anniversary of the enactment of this Act, evaluating 
     the overall effect of the transition program and the 
     Immigration and Naturalization Act on the Northern Mariana 
     Islands, and at other times as the President deems 
     appropriate.
       (f) Limitation on Number of Temporary Workers Prior to 
     Application of the Immigration and Naturalization Act and 
     Establishment of the Transition Program.--During the period 
     between enactment of this section and the effective date of 
     the transition program, the government of the Commonwealth of 
     the Northern Mariana Islands shall not permit an increase in 
     the total number of temporary alien workers who were present 
     in the Northern Mariana Islands on the date of enactment of 
     this section.
       (g) Appropriations.--There are authorized to be 
     appropriated such sums as may be necessary to carry out the 
     purposes of this section and of the Immigration and 
     Naturalization Act, as amended, with respect to the Northern 
     Mariana Islands.

     SEC. 3. MINIMUM WAGE.

       The Covenant Act is amended to add the following new 
     section 7 after section 6:

     ``SEC. 7. MINIMUM WAGE.

       ``Pursuant to section 503 of the Covenant to Establish a 
     Commonwealth of the Northern Mariana Islands in Political 
     Union with the United States of America (approved in Public 
     Law 94-241, 90 Stat. 263)--
       ``(a) Effective thirty days after enactment of this Act, 
     the minimum wage provisions of section 6 of the Fair Labor 
     Standards Act of June 25, 1938 (52 Stat. 1062), as amended, 
     shall apply to the Commonwealth of the Northern Mariana 
     Islands, except--
       ``(1) the minimum wage rate applicable to the Commonwealth 
     of the Northern Mariana Islands shall be $3.35 per hour; and
       ``(2) effective January 1, 1999, and every January 1 
     thereafter, the minimum wage rate applicable to the 
     Commonwealth of the Northern Mariana Islands shall be raised 
     by thirty cents per hour or the amount necessary to raise the 
     applicable minimum wage rate to the wage rate set forth in 
     section 6(a)(1) of the Fair Labor Standards Act, whichever is 
     less.
       ``(b) Once the minimum wage rate applicable to the 
     Commonwealth of the Northern Mariana Islands is equal to the 
     wage rate set forth in section 6(a)(1) of the Fair Labor 
     Standards Act, the minimum wage rate applicable to the 
     Commonwealth of the Northern Mariana Islands shall thereafter 
     be the wage set forth in section 6(a)(1) of the Fair Labor 
     Standards Act.''.

     SEC. 4. LABELING REQUIREMENTS FOR TEXTILE AND APPAREL 
                   PRODUCTS.

       The Covenant Act is amended to add the following new 
     section 8 after section 7:

     ``SEC. 8. LABELING OF TEXTILE AND APPAREL PRODUCTS.

       ``(a) No textile or apparel product that is produced in the 
     Northern Mariana Islands shall have a stamp, tag, label, or 
     other means of identification or substitute thereof on or 
     affixed to the product stating `Made in USA' or otherwise 
     stating or implying that the product was produced in the 
     United States unless the product is produced in a factory 
     certified by the United States Department of Labor, in 
     accordance with regulations issued by the Secretary of 
     Labor, to use full-time employee equivalents of labor in 
     the required percentage of qualified hours.
       ``(b) A textile or apparel product that does not meet the 
     requirements of subsection (a), or where the certification by 
     the United States Department of Labor is based on false or 
     incomplete information provided to the United States 
     Department of Labor, shall be deemed to be misbranded for the 
     purposes of the Textile Fiber Products Identification Act 
     (Public Law 85-897, 72 Stat. 1717).
       ``(c) In this section:
       ``(1) Freely associated state.--The term `freely associated 
     state' means the Republic of Palau, the Republic of the 
     Marshall Islands, or the Federated States of Micronesia.
       ``(2) Qualified hours.--The term `qualified hours' means 
     the hours of labor performed by a person who is a citizen, 
     national, or other protected individual as defined in section 
     274B(a)(3) of the Immigration and Nationality Act, as amended 
     (without regard to application for naturalization), or who is 
     a citizen of a freely associated state (as long as section 
     141 in the respective Compacts of Free Association with the 
     Republic of the Marshall Islands, the Federated States of 
     Micronesia or the Republic of Palau (Public Law 99-239 or 
     Public Law 99-658) or equivalent provisions are in effect).
       ``(3) Required percentage.--The term `required percentage' 
     means--
       ``(A) 20 percent, for the period beginning January 1, 1998, 
     through December 31, 1998;
       ``(B) 35 percent, for the period beginning January 1, 1999, 
     through December 31, 1999; and
       ``(C) 50 percent, for the period beginning January 1, 2000, 
     and thereafter.''.

     SEC. 5 TARIFFS.

       General Note 3(a)(iv) of the Harmonized Tariff Schedules of 
     the United States is amended to add at the end the following:
       ``(E) No textile or apparel product that is produced in the 
     Northern Mariana Islands shall be admitted duty-free into the 
     customs territory of the United States as the product of an 
     insular possession, unless the product is produced in a 
     factory certified by the United States Department of Labor, 
     in accordance with regulations issued by the Secretary of 
     Labor, to use full-time employee equivalents of labor in the 
     required percentage of qualified hours. In this subparagraph:
       ``(i) Freely associated state.--The term `freely associated 
     state' means the Republic of Palau, the Republic of the 
     Marshall Islands, or the Federated States of Micronesia.

[[Page S10653]]

       ``(ii) Qualified hours.--The term `qualified hours' means 
     the hours of labor performed by a person who is a citizen, 
     national, or other protected individual as defined in section 
     274B(a)(3) of the Immigration and Nationality Act, as amended 
     (without regard to application for naturalization), or who is 
     a citizen of a freely associated state (as long as section 
     141 in the respective Compacts of Free Association with the 
     Republic of the Marshall Islands, the Federated Stats of 
     Micronesia or the Republic of Palau (Public Law 99-239 or 
     Public Law 99-658) or equivalent provisions are in effect).
       ``(iii) Required percentage--The term `required percentage; 
     means--
       ``(A) 20 percent, for the period beginning January 1, 1998, 
     through December 31, 1998;
       ``(B) 35 percent, for the period beginning January 1, 1999, 
     through December 31, 1999; and
       ``(C) 50 percent, for the period beginning January 1, 2000, 
     and thereafter.''.
                                                                    ____


                      Section-by-Section Analysis

       Section 1 would provide that this Act may be cited as the 
     ``Northern Mariana Islands Covenant Implementation Act.'' It 
     further would provide that Public Law 94-241 (90 Stat. 263, 
     48 U.S.C. 1801) which approved the Covenant to Establish a 
     Commonwealth of the Northern Mariana Islands in Political 
     Union with the United States of America would be referred in 
     the Act as the ``Covenant Act.''
       Section 2, entitled ``Immigration Reform for the Northern 
     Mariana Islands'' contains a subsection (a) that would amend 
     the Covenant Act by adding a new section 6 at the end of the 
     Covenant Act with the following preamble and subsections:
       Preamble: the immigration provisions in the new section 6 
     of the Covenant Act would be enacted pursuant to section 503 
     of the Covenant to Establish a Commonwealth of the Northern 
     Mariana Islands in Political Union with the United States of 
     America (approved in Public Law 94-241, 90 Stat. 263), which 
     provides that the Congress may enact immigration legislation 
     regarding the Northern Mariana Islands after the termination 
     of the Trusteeship Agreement with respect to the Northern 
     Mariana Islands, which occurred on November 3, 1986. (Section 
     1 of Proclamation No. 5564, dated November 3, 1986. 51 F.R. 
     40399).
       Section 6, subsection (a) would provide that, effective on 
     the first day of the first full month commencing one year 
     after the enactment date of section 6, the Immigration and 
     Nationality Act, as amended (the ``INA''), would apply in 
     full to the Commonwealth of the Northern Mariana Islands 
     (CNMI). At the same time, a transition program would become 
     effective for the orderly phasing out of the CNMI's current 
     temporary alien worker program. The Attorney General, in 
     consultation with the Secretaries of State, Labor, and 
     Interior, will be charged with establishing, administering, 
     and enforcing this transition program. To implement this 
     program, each agency having responsibilities under the 
     program will be required to promulgate appropriate 
     regulations. The details of this program are set forth in the 
     subsections below.
       Section 6, subsection (b) would set forth the requirements 
     under the transition program for the admission of temporary 
     alien workers who would not otherwise be eligible for 
     nonimmigrant classification under the INA.
       Paragraph (1) would provide that aliens who are admitted 
     under the transition program, like most nonimmigrants 
     admitted under the INA, will have the right to apply, if they 
     are otherwise eligible, for a change of status to a 
     nonimmigrant classification under the INA, or, if otherwise 
     eligible, for adjustment of status to lawful permanent 
     residence of the United States.
       Paragraph (2)(A) would set out the responsibilities of the 
     United States Department of Labor under the transition 
     program. The Secretary of Labor would be charged with 
     establishing, administering, and enforcing a reasonable 
     system for the annual allocation of permits to be issued to 
     prospective employers of temporary alien workers who would 
     not be eligible for admission under the INA. This system 
     would provide for a reduction in the allocation of permits 
     for such workers on an annual basis, over a maximum period of 
     ten years, with no such permit to be valid beyond the 
     expiration of the transition period. The system would be 
     designed to promote the maximum use of, and to prevent 
     adverse effects on, United States labor and lawfully 
     admissible freely associated state citizen labor. In carrying 
     out its responsibilities under the subsection, the Department 
     of Labor would be authorized to collect appropriate user 
     fees. Paragraph (2)(B) would authorize the Secretary of Labor 
     to establish and collect appropriate user fees for the 
     purposes of this section.
       Paragraph (3) would assign the Attorney General the 
     responsibility of setting the conditions for admission of 
     temporary alien workers under the transition program. In 
     addition, this subsection would assign to the Secretary of 
     State the responsibility for the issuance of nonimmigrant 
     visas, which would not be valid for admission to other parts 
     of the United States, to such persons. Aliens admitted to the 
     NMI as temporary workers under this program would be 
     permitted to engage in employment only as authorized in this 
     subsection. Such temporary workers, therefore, would not 
     engage open market employment in the NMI, but would be 
     required to work for an employer approved by the Attorney 
     General and the Secretary of Labor in accordance with this 
     subsection.
       Paragraph (4) would provide for job transfer rights for 
     otherwise eligible temporary alien workers admitted under the 
     transition program pursuant to criteria established by the 
     Attorney General and the Secretary of Labor.
       Section 6, subsection (c), would provide that, with the 
     exception of certain close family relatives, and except as 
     provided in section (6)(c)(1) and (2) aliens seeking to 
     immigrate to the NMI under the INA would not be granted 
     initial admission as a lawful permanent resident of the 
     United States at a port-of-entry in the NMI, or at a port-of-
     entry in Guam for the purpose of immigration to the NMI.
       Paragraph (1) would provide that, notwithstanding section 
     6(c) above, the Attorney General, based on the recommendation 
     of the CNMI Government, and after consultation with 
     appropriate federal agencies, may allow a specific number of 
     additional initial admissions to the NMI (or through Guam to 
     the NMI) as a family-sponsored immigrant under the INA.
       Paragraph (2) would provide the Attorney General with the 
     authority to admit to the NMI, under exceptional 
     circumstances, a limited number of employment-based 
     immigrants, without regard to the normal numerical 
     limitations under the INA, during the transition program.
       Subparagraph (a) would provide that the Secretary of Labor, 
     upon receipt of a joint recommendation of the Governor and 
     Legislature of the CNMI, may find that exceptional 
     circumstances exist which preclude employers in the NMI 
     from obtaining sufficient work-authorized labor. If the 
     Secretary of Labor makes such a finding, the Attorney 
     General may establish a specific number of employment-
     based ``third preference'' immigrant visas to be made 
     available during the following fiscal year under the INA.
       Subparagraph (B) would permit the Secretary of State to 
     allocate up to the number of visas requested by the Attorney 
     General without regard to the normal per-country or ``other 
     worker'' employment-based third preference numerical 
     limitations and visa issuance. These visas would be allocated 
     first from unused employment-based third preference visa 
     numbers, and then, if necessary, from unused alien 
     entrepreneur visa numbers.
       Subparagraph (C) would allow persons granted employment-
     based immigrant visas under the transition program to be 
     admitted initially at a port-of-entry in the NMI (or through 
     a port-of-entry in Guam to the NMI).
       Subparagraph (D) would provide that any immigrant visa 
     issued pursuant to this paragraph shall be valid only for 
     application for initial admission to the NMI. Further, any 
     employment-based immigrant visas issued on the basis of the 
     above finding of ``exceptional circumstances'' would be valid 
     for admission for lawful permanent residence and employment 
     only in the NMI during the first five years after initial 
     admission. Such visas would not authorize permanent residence 
     or employment in any other part of the United States during 
     this five-year period. The subsection also would provide for 
     the issuance of appropriate documentation of such admission, 
     and, consistent with Chapter 7 of Title II of the INA, would 
     require an alien to register and report to the Attorney 
     General during the five-year period.
       Subparagraph (E) would provide that an alien who is subject 
     to the five-year limitation under section 6(c) may, if 
     otherwise eligible, apply for an immigrant visa or admission 
     as a lawful permanent resident under the INA.
       Subparagraph (F) would provide for the removal from the 
     United States of any alien subject to the five-year 
     limitation if the alien violates the provisions of section 
     6(c), or if the alien is found to be removable or 
     inadmissible under various provisions of the INA.
       Subparagraph (G) would allow certain aliens who have 
     obtained lawful permanent resident status under the 
     transition program to apply for a waiver of the terms and 
     conditions of their status in certain extraordinary 
     situations where the Attorney General finds that the alien 
     would suffer exceptional and extremely unusual hardship were 
     such conditions not waived. An example of such an 
     extraordinary circumstance would be where the alien is a 
     labor organizer and can demonstrate that, as a result of the 
     alien's lawful labor activities, he or she has been 
     ``blacklisted'' by local employers, and is therefore unable 
     to find employment in the Northern Mariana Islands. The 
     benefits of this provision would be unavailable to a person 
     who has violated the terms and conditions of his or her 
     permanent resident status, such as an alien who has engaged 
     in the unauthorized employment.
       Subparagrah (H) would provide that the limitations on the 
     terms and conditions of an alien's permanent residence 
     granted under section 6(c) shall expire at the end of five 
     years after the alien's admission to the NMI as a permanent 
     resident. Thereafter, such an alien would be fully subject to 
     the provisions of the INA, and may engage in any lawful 
     activity, including employment, anywhere in the United 
     States. In addition, such an alien, if otherwise eligible for 
     naturalization, may count the five-year period in the NMI 
     towards time in the United States for purposes of meeting the 
     residence requirements of Title III of the INA.

[[Page S10654]]

       Section 6, subsection (d), would permit, upon the meeting 
     certain requirements, that certain aliens who were admitted 
     to the NMI in long-term investor status under CNMI 
     immigration law on or before the effective date of this Act 
     to remain in the NMI after the effective date of the Act. In 
     order to enjoy the benefits of this subsection, such persons 
     would be required to have continuously maintained residence 
     in the NMI pursuant to such long-term investor status.
       Paragraph (1) would provide that such long-term investors 
     may apply to the Attorney General or a consular officer for 
     nonimmigrant classification, to terminate no later than 
     December 31, 2008, under the transition program.
       Paragraph (2) would provide that an alien granted 
     nonimmigrant status under this section may apply for 
     adjustment of status to lawful permanent resident of the 
     United States during the six-month period beginning January 
     1, 2008, and ending June 30, 2008. If otherwise admissible, 
     such an alien would be granted permanent resident status 
     effective on or after January 1, 2009. Each such adjustment 
     of status would be subject to the total per-country numerical 
     limitations on immigrant visa issuance, and therefore would 
     count against the total number of immigrant visas available 
     to natives of the country of the alien's chargeability.
       Section 6, subsection (e) would permit persons who would 
     have been lawfully present in the NMI pursuant to local 
     immigration law as of the effective date of this subsection 
     to remain in the NMI for the completion of their period of 
     admission under such local law, as long as such period does 
     not extend beyond two years after such effective date.
       Section 6, subsection (f) would impose travel restrictions 
     on asylum aliens admitted to the NMI pursuant to the laws of 
     the CNMI or as temporary workers or employment-based 
     immigrants under the transition program who apply for 
     asylum. Such persons will be required to remain the NMI 
     during the period of time the application is pending or 
     during any appeal period thereafter. An applicant for 
     asylum who during such period leaves the CNMI on his own 
     will without the prior permission of the Attorney General 
     thereby abandons the application.
       Section 6, subsection (g) would provide that, effective on 
     the first day of the first full month commencing one year 
     after the enactment date of this section, this section and 
     the INA would supersede all laws, provisions, or programs of 
     the CNMI Government relating to the admission of aliens to 
     and the removal of aliens from the NMI.
       Section 6, subsection (h) would provide that no time of 
     ``unlawful presence'' in the NMI would accrue for purposes of 
     the ground of inadmissibility in section 212(a)(9)(B) prior 
     to the date of enactment of section 6.
       Section 2, subsection (b) would provide for three 
     ``Conforming Amendments.''
       Paragraph (1)(A) would amend section 101(a)(36) of the INA, 
     which defines the term ``state'' for purposes of the INA, to 
     include the Northern Mariana Islands. This amendment would 
     become effective on the first day of the first full month 
     commencing one year after enactment date of section 2 of the 
     Northern Mariana Islands Covenant Implementation Act.
       Paragraph (1)(B) would amend section 101(a)(38) of the INA, 
     which defines the term ``United States'' for purposes of the 
     INA, to include the Northern Mariana Islands. This amendment 
     would become effective on the first day of the first full 
     month commencing one year after the enactment date of section 
     2 of the Northern Mariana Islands Covenant Implementation 
     Act.
       Paragraph (2) would amend section 212(l) of the INA to 
     extend the Guam Visa Waiver Program to the CNMI.
       Section 2, subsection (c) would obligate the Secretaries of 
     Interior and Labor, in consultation with CNMI, to develop a 
     technical assistance program to aid NMI employers in 
     recruiting, training, and securing employees from among 
     United States labor or lawfully admissible freely associated 
     state citizen labor.
       Section 2, subsection (d) would authorize the Attorney 
     General to establish and maintain Immigration and 
     Naturalization Service and Executive Office of Immigration 
     Review operations, and the Secretary of Labor to establish 
     and maintain operations in the NMI in order to perform their 
     respective responsibilities under the INA and the transition 
     program. Subsection (d) further provides for local 
     recruitment and hiring, where appropriate, by the Departments 
     of Justice and Labor.
       Section 2, subsection (c) would provide that the President 
     report to the Senate Committee on Energy and Natural 
     Resources, and the House Committee on Resources, evaluating 
     the overall effect of the transition program and the INA on 
     the CNMI.
       Section 2, subsection (f) would provide that the CNMI may 
     not increase the total number of temporary alien workers who 
     may be present in the NMI during the one year period after 
     enactment of this section and before the effective date of 
     the transition program from the number present on the date of 
     enactment.
       Section 2, subsection (g) would authorize the appropriation 
     of such sums as may be necessary to carry out the purposes of 
     this section and the INA with respect to the CNMI.
       Section 3 would add a new section 7 to the Covenant Act 
     that would, beginning thirty days after enactment, raise the 
     minimum wage in the Commonwealth of the Northern Mariana 
     Islands from the current CNMI rate of $3.05 per hour to the 
     Federal minimum wage rate (currently $5.15 per hour), in 30-
     cent annual increments. This provision would be similar to 
     the minimum wage increase law enacted by the CNMI 
     legislature, but later repealed.
       Section 4 would add a new section 8 to the Covenant Act 
     that would require that textile and apparel products produced 
     in the Northern Mariana Islands, which bear a ``Made in USA'' 
     or similar label, be produced in a factory certified by the 
     United States Department of Labor to use United States labor 
     (including citizens, nationals, lawful permanent residents, 
     refugees, or asylees) or freely associated state citizen 
     labor in the following qualified hours of full-time employee 
     equivalents--20 percent for the year beginning January 1, 
     1998, 35 percent for the year beginning January 1, 1999, and 
     50 percent beginning January 1, 2000, and thereafter. A 
     textile or apparel product bearing a ``Made in USA'' label 
     that is not produced in a certified factory would be deemed 
     to be misbranded for the purposes of the Textile Fiber 
     Products Identification Act, and sanctions would apply. 
     Additionally, a product would be misbranded if certification 
     by the United States Department of Labor were based on false 
     or incomplete information provided to the Department of 
     Labor.
       Section 5 would amend General Note 3(a)(iv) of the 
     Harmonized Tariff Schedules of the United States to prohibit 
     a textile or apparel product produced in the Commonwealth of 
     the Northern Mariana Islands from being admitted duty-free 
     into the customs territory of the United States as a product 
     of an insular possession unless the product is produced in a 
     factory certified by the United States Department of Labor to 
     use United States labor (including citizens, nationals, 
     lawful permanent residents, refugees, or asylees) or freely 
     associated state citizen labor in the following qualified 
     hours of full-time employee equivalents--20 percent for the 
     year beginning January 1, 1998, 35 percent for the year 
     beginning January 1, 1999, and 50 percent beginning January 
     1, 2000, and thereafter.
                                                                    ____

           U.S. Senate, Committee on Energy and Natural Resources,
                                    Washington, DC, July 16, 1997.
     Hon. Froilan C. Tenorio,
     Governor of the Northern Mariana Islands, Saipan, MP.
       Dear Governor Tenorio: I am writing to you concerning the 
     continuing reports of conditions in the Commonwealth of the 
     Northern Mariana Islands and the various measures that have 
     been suggested to address those problems. In February of last 
     year, I had the opportunity to visit the Commonwealth with 
     Senator Akaka. While our visit was brief, we did see 
     conditions that simply should not be allowed to exist in any 
     area under the sovereignty of the United States. In meetings 
     with your staff, we were assured that your Administration was 
     committed to prompt and effective law enforcement, and that 
     we needed to give the joint Federal-CNMI initiative time to 
     work.
       On June 26 of last year, the Committee conducted a hearing 
     that in part focused on oversight of the situation in the 
     Northern Marianas. I stated that unless the Commonwealth took 
     action to remedy the problems that existed, federal action 
     was all but inevitable. While I support local authority, that 
     authority must be responsibly exercised. At that hearing, 
     your representative asked that the Committee delay any action 
     until the Commonwealth could complete a report on minimum 
     wage and that the report would be available in January of 
     this year. I agreed. Although the report was not available 
     until April, that delay did not appear to be a major problem 
     since the Department of the Interior was due to submit its 
     report on the Federal-CNMI Initiative on Labor, Immigration, 
     and Law Enforcement in April.
       Although the Administration's report has still not been 
     submitted, on May 30, 1997 the President wrote you that he 
     had concluded that federal immigration, naturalization, and 
     minimum wage laws should now be applied to the Commonwealth. 
     To date, although the Administration has not transmitted 
     legislation to implement the President's conclusion, 
     legislation extending those laws has been introduced in the 
     House and I am aware of several Members of the Senate who are 
     also considering similar measures.
       I intend to schedule a hearing to consider what 
     legislation, if any, should be enacted shortly after the 
     Administration submits its report, which I understand is now 
     under final review by the Office of Management and Budget. I 
     have asked the Secretary of the Interior to draft legislation 
     to implement the final recommendations of the report. I 
     intend to introduce that draft in order to focus the 
     testimony at the hearing. In addition to the measures that 
     have been discussed, I also want the hearing to consider 
     whether changes should be made in the application of Headnote 
     3(A) and what needs to be done to strengthen enforcement of 
     federal and local laws.
       Given the delay in transmittal of the Administration's 
     report, I do not expect that we will be able to schedule a 
     hearing prior to September. I want to be certain that you 
     have had sufficient time to review the Administration's 
     report and any legislation, but I also want to conduct the 
     hearing so that there is sufficient time to consider whatever 
     legislative measures appear warranted during this session of 
     the Congress.
           Sincerely,
                                               Frank H. Murkoswki,
                                                         Chairman.

[[Page S10655]]

     
                                                                    ____
         U.S. Department of the Interior, Office of the Secretary,
                                  Washington, DC, October 6, 1997.
     Hon. Frank H. Murkowski,
     Chairman, Committee on Energy and Natural Resources, U.S. 
         Senate, Washington, DC.
       Dear Mr. Chairman: This is in response to your letter of 
     July 16, 1997, requesting a drafting service that would 
     implement the Administration's recommendations for the 
     Commonwealth of the Northern Mariana Islands (CNMI) contained 
     in the Administration's July 1997 report on the Federal-CNMI 
     Initiative on Labor, Immigration, and Law Enforcement. 
     Pursuant to your request, I have enclosed a legislative 
     proposal that addresses the recommendations in the 
     Administration's report. The Administration strongly supports 
     the enactment of this proposal.
       While we are firm in our commitment to the proposals 
     outlined in the recommendations, the Administration is, 
     however, willing to consider amendments. A Federal policy 
     framework is needed to respond to the use of CNMI as a 
     platform for circumvention of United States' garment duties 
     and quotas, the CNMI's ineffective immigration control, and 
     the unhealthy and unsustainable dependence on temporary low-
     paid foreign workers in the islands.
       President Clinton, in his May 30, 1997 letter to CNMI 
     Governor Froilan Tenorio, stated that his Administration 
     would consult with the Governor and other representatives of 
     the Commonwealth regarding the application of laws to the 
     CNMI. Following through on the President's commitment, the 
     Departments of Labor, Justice (INS), State, Commerce, and 
     Interior sent senior representatives to the CNMI in August to 
     discuss legislative implementation of the recommendations 
     contained in the report. While the Governor did not meet with 
     this Federal delegation, it was able to convey to many local 
     government and business leaders the long-standing concerns of 
     the Federal government regarding the CNMI's garment and 
     foreign labor policies, discuss details of the 
     Administration's recommendations for addressing these 
     problems, and hear local concerns regarding the 
     recommendations. The information gained on the trip was 
     carefully considered. In closing, let me note that the 
     Administration looks forward to working with you and the CNMI 
     to enact legislation that will reconcile Federal 
     responsibilities with the CNMI's needs.
       The Office of Management and Budget advises that there is 
     no objection to the presentation of this proposal to 
     Congress, and that its enactment would be in accord with the 
     Administration's program.
           Sincerely,

                                             Allen P. Stayman,

                                                         Director,
                                        Office of Insular Affairs.

  Mr AKAKA. Mr. President, I am pleased to join Senator Murkowski in 
introducing the Commonwealth of the Northern Mariana Islands Covenant 
Implementation Act, legislation to curb trade, immigration, wage, and 
apparel labeling abuses in the CNMI.
  On July 31, 1997, I introduced S. 1100, the CNMI Reform Act, S. 1100 
extends the Immigration and Nationality Act to the Commonwealth, limits 
use of the ``Made in USA'' label, and applies the U.S. minimum wage to 
the CNMI. The measure we are introducing today is similar to S. 1100, 
but also imposes duties on CNMI garments unless garment companies 
employ a sufficient number of U.S. employees and establishes a 
comprehensive regime for CNMI immigration and naturalization.
  This is a bipartisan bill, drafted by the Clinton administration at 
the request of the Republican chairman of the Senate Energy Committee. 
It contains more comprehensive reforms than the measure I introduced 
earlier this year. Under the Murkowski-Akaka bill, the CNMI garment 
industry will face severe restrictions because of continued abuses.
  After a thorough analysis, the Commerce Department recently concluded 
that the Commonwealth is an ``outpost for Chinese apparel production.'' 
The Commerce Department found that apparel manufacturers from the 
People's Republic of China have transplanted their operations to the 
CNMI, employing bonded and indentured Chinese leaders to sew Chinese 
fabric into garments labeled ``Made in USA.'' By using the Commonwealth 
as an apparel manufacturing base, Chinese manufacturers avoid tariffs 
and escape United States quotas on finished goods.
  Despite promises of the American dream if they work in the CNMI, 
laborers must sign contracts with the People's Republic of China that 
waive rights guaranteed to U.S. workers, forbid participation in 
religious and political activities while in the United States, prohibit 
workers from marrying, and subject employees to penalties in the PRC. 
Working conditions in the CNMI garment industry hardly justify granting 
``Made in USA'' status and preferential duties to CNMI garments.
  A recent investigative report by King World Productions-``Inside 
Edition'' is evidence of the abuses which garment workers suffer. 
``Inside Edition'' used hidden cameras to expose the overcrowded and 
squalid buildings workers are forced to live in. Employees described 
being confined to barracks ringed by barbed wire and being treated more 
like prisoners than employees.


                          immigration concerns

  I am sure many Senators will find it hard to believe that the 
Immigration and Nationality Act does not apply to all territories in 
the United States. As surprising as it may be, the CNMI is exempt from 
U.S. immigration law and maintains its own policy on immigration.
  After 20 years, CNMI immigration policy is a proven failure. In 1980, 
the Commonwealth's population was 16,780. Of these, 12 percent were 
alien residents. Today, CNMI's has a population of 59,000, more than 
half of whom are aliens.
  Rather than preventing an influx of immigrants, the CNMI has 
established an aggressive policy of recruiting low-wage, foreign guest 
workers to operate an ever-expanding garment and tourism industry. 
According to the CNMI representative in Washington, local immigration 
policy has ``no limit. It is wide open, unrestricted.''
  The U.S. Immigration and Naturalization Service reports that CNMI 
authorities have no reliable records of aliens who have entered the 
CNMI, how long they remain, and when, if ever, they depart. Ninety-one 
percent of the private sector work force are alien guest workers, and 
these workers have overwhelmed the CNMI to the point where the 
unemployment rate among U.S. citizens living in the Commonwealth is 14 
percent. There is no justification for an immigration policy that 
admits foreign workers in such overwhelming numbers that it leads to 
double-digit unemployment.
  Given these circumstances, the application of U.S. immigration law to 
the CNMI is long overdue.


                         ``made in usa'' abuse

  The evidence that garments sewn in the CNMI directly and unfairly 
compete with U.S. apparel manufacturers is very strong. According to 
the Commerce Department, 85 percent of CNMI apparel is classified as 
import sensitive. This classification means that CNMI garments compete 
with segments of the U.S. apparel industry that are experiencing 
significant decline due to heavy import penetration.
  Apparel manufacturers in the CNMI enjoy benefits that far exceed 
those enjoyed by foreign or domestic manufacturers. CNMI garment 
factories are not subject to the U.S. minimum wage and pay no duty on 
fabrics they import. Furthermore, quotas do not apply to either fabric 
imported into the Commonwealth, or to finished garments cut and sewn in 
the CNMI using foreign labor. Yet these products are labeled ``Made in 
the USA'' and compete unfairly with apparel employment elsewhere in the 
United States.


                              labor abuse

  The 1976 covenant exempts the CNMI from the Federal minimum wage. 
This exemption was granted with the understanding that as its economy 
grew and prospered, the CNMI would raise its minimum wage to the 
Federal level. Foreign workers typically enter the CNMI under 1-year 
work permits and are paid a minimum wage of $3.05.
  According to the July 1997 report by the Department of the Interior, 
the lower minimum wage, combined with unlimited access to foreign 
labor, creates an incentive for employers to hire foreign labor for all 
jobs, including skilled and entry level jobs at or near the minimum 
wage. Employment statistics clearly supports the Interior Department's 
analysis.
  The minimum wage is sometimes a lightning-rod for Republicans. 
However, in a labor market where there is an unlimited supply of guest 
workers, the low CNMI minimum wage means that low-wage alien laborers 
are displacing U.S. workers. Any policy that favors foreign workers 
over the interests of employed and unemployed U.S. citizens is 
indefensible.


                     human rights and sexual abuse

  The Commonwealth's immigration policy results in serious problems in 
other areas. The Justice Department

[[Page S10656]]

has documented numerous cases of women and girls being recruited from 
the Philippines, China, and other Asian countries expressly for 
criminal sexual activity. These abuses are a direct consequence the 
Commonwealth's unrestricted immigration policy.
  Typically, these women are told they will work in the CNMI as 
waitresses, but are forced into nude dancing and prostitution upon 
their arrival. The Justice Department described this situation as the 
``systematic trafficking of women and minors for prostitution,'' which 
may also involve illegal smuggling, organized crime, immigration 
document fraud, and pornography. Cases of sexual servitude have also 
been identified.
  The U.S. Justice Department also found cases of female guest workers 
and aliens living in the CNMI being forced into prostitution through 
intimidation or threats of physical harm. In some instances, women who 
resist are kidnapped, raped, and tortured.
  I thank Senator Murkowski, the chairman of the Senate Energy and 
Natural Resources Committee, for his efforts to reform these abuses in 
the CNMI. I look toward to working with him on moving this bill through 
our committee so that it can be considered on the Senate floor.
                                 ______
                                 
      By Mr. BINGAMAN:
  S. 1276. A bill to amend the Federal Power Act, to facilitate the 
transition to more competitive and efficient electric power markets, 
and for other purposes; to the Committee on Energy and Natural 
Resources.


                the federal power act amendments of 1997

  Mr. BINGAMAN. Madam President, I rise today to introduce the Federal 
Power Act Amendments of 1997. This bill streamlines the Federal 
regulation of electric power and helps reduce costs for all factories, 
businesses, and homeowners. The changes in Federal regulation in this 
bill will also yield savings for consumers by providing new 
opportunities for competition in the wholesale market for electric 
power.
  This bill improves the way the Federal Government regulates electric 
power to achieve three important goals. First, it will facilitate the 
ongoing transition to more competitive and efficient markets. Second, 
it will assure the continued reliability of the transmission system 
that carries the power in interstate commerce. And third, it will 
remove Federal regulatory ambiguities and barriers for those States 
that elect to give customers a choice in selecting their energy 
provider. Very importantly, my bill leaves for the States the issues 
that are best dealt with at that level and provides for Federal 
authority only over issues raising a clear national interest.
  In the last 9 months the Energy and Natural Resources Committee has 
conducted seven workshops that helped bring forward many of the complex 
electric power issues facing State and Federal regulators. The debate 
today remains centered on whether or not the Federal Government should 
require the utilities in every State to implement competition at the 
retail level. There are, however, other important issues that underlie 
this central debate. These include the possible repeal of the Public 
Utilities Regulatory Policy Act, known as PURPA; changes in the Public 
Utility Holding Company Act, known to everyone here as PUHCA; and the 
treatment of past investments in powerplants that may no longer be 
economical, so called stranded costs, to name just a few.
  Our electric power industry has a strong regional and local character 
with over 3,000 individual utilities, including investor-owned, 
municipal, Federal, and rural cooperatives. Several comprehensive bills 
have now been introduced in the House and Senate that promise to 
deregulate the Nation's electric power industry. Meanwhile, a number of 
individual States are moving forward with retail competition.
  However, in list of the vast difference in the circumstance of 3,000 
individual utility companies, it is going to be difficult to develop a 
consensus on comprehensive Federal legislation. If comprehensive 
electricity legislation does not move forward, I believe Congress must 
still address a number of important issues that can only be dealt with 
at the Federal level. I'd like to take a moment to explain what these 
issues are and how my bill differs from proposals that require retail 
competition for all electric utility customers.
  Madam President, our electric power industry is made up of three main 
components: Powerplants that generate the power, high-voltage 
transmission lines that carry the power over long distances, and the 
local distribution systems that bring the power into our homes and 
businesses. Most of the other bills would require States to deregulate 
their utilities and implement retail competition. Still, for all the 
talk about deregulation, I hope everyone realizes they are talking 
about deregulating, only the first piece: The powerplants that use 
coal, natural gas, or other sources to generate the energy on which we 
all depend. The other two components of the industry, the transmission 
and local distribution systems, will remain regulated monopolies.

  My bill takes a very different approach. It is not a restructuring 
bill. It will not overturn the established division between State and 
Federal regulation, and it does not require States to implement retail 
competition by a date certain. Rather, my bill forges new ground in the 
debate by focusing on the middle piece of the electric utility 
industry: The interstate transmission grid that is the critical link 
between generators and consumers. The transmission system clearly 
involves interstate commerce with a distinct national interest that can 
only be addressed at the Federal level.
  Let me explain why it is important that we streamline the Federal 
regulation of interstate transmission and how that can save consumers 
money. The Nation's transmission system serves, if you will, like an 
interstate highway for electric power. We all know what can happen when 
the highway on-ramps or off-ramps are closed or when bottlenecks or 
breakdowns occur. The same is true of the electric transmission system. 
The smooth flow of electric power depends on having sufficient 
transmission capacity and on the system operating reliably and without 
disruptions. Problems in the electricity transmission system, like 
problems on interstate highways, can impede commerce. If some 
businesses are denied access, or if different highways operate under 
different rules, competition will suffer.
  Madam President, I believe an efficient and reliable electric 
transmission system will be one of the most important factors in the 
development of robust regional and national markets for electric power. 
Over the last 100 years we have developed a complex grid of 
transmission lines owned by private, government, and cooperative 
utilities. With the Energy Policy Act of 1992, Congress took the first 
steps toward providing fair and open access to portions of the 
transmission system. Today, Federal and State regulators are continuing 
to push for increased competition. These dramatic changes in regulation 
are placing new demands on the transmission system. We are asking it to 
function increasingly like the interstate highways. However, the system 
we have was never planned to function in this more competitive 
environment.
  Today we have a transmission system with many constraints and 
bottlenecks, with no uniform system of regulation, with some portions 
of the system closed to users, and without any assurance that all users 
of the system will follow the same rules. Clearly, we can't hope to 
realize the full benefits of competition if buyers and sellers of power 
can't deal equally in an open and fair market. Without fair 
competition, the cost of power is higher than it should be. My bill 
will help correct this situation.
  Currently, the regulation of power sales over the Nation's electric 
power grid is split between various State and Federal jurisdictions. 
The Federal Energy Regulatory Commission has authority over pricing of 
transmission service. The States have authority to license and site new 
transmission facilities. A growing portion of power transmission 
and sales is taking place on a regional and even a national scale. We 
are increasingly dependent on long-distance power transmission; 
sometimes from as far away as 1,000 miles. In the West, every single 
State from New Mexico to Montana and from California to Washington is 
electrically interconnected. All of the Eastern States except parts of 
Texas are similarly interconnected. My bill seeks to

[[Page S10657]]

maintain a careful balance of State and national interests that assures 
the Nation's transmission system operates efficiently, all players are 
treated equitably, and reliability is maintained.

  Madam President, I'd like now to describe briefly some of the key 
provisions in the bill.


                     Federal and State Jurisdiction

  One of the important goals of this bill is to resolve ambiguities in 
Federal and State jurisdiction that have arisen since 1992 with the 
implementation of open transmission access. First, this bill removes 
once and for all any ambiguity over whether States, indeed, have the 
authority to implement retail competition. In addition, we used to have 
a clear line between Federal and State jurisdiction. However, now that 
some States are electing to implement retail competition, the bright 
line is increasingly blurred. If we don't clarify these ambiguities we 
could well find ourselves swamped with litigation that frustrates State 
and Federal efforts to expand competition.


                          Transmission Access

  Another provision in the bill requires all transmission systems to be 
operated under the same regulatory policies. Under current law, FERC's 
jurisdiction is primarily limited to transmission systems owned by 
investor-owned utilities. Only these utilities are required to provide 
open access to anyone who requests it. The goal is to bring all 
transmission systems, including those owned by Federal entities, 
municipalities, and rural electric co-ops, under the same system of 
regulation. My bill also extends fair and open access to transmission 
lines that cross the borders with Mexico and Canada. A uniform 
regulatory environment will promote the use of the transmission grid 
for fair and equitable competition.


                     Rural and Low-Income Consumers

  Will all customers be able to benefit from competition? I have heard 
this concern expressed often. My bill makes sure the States that choose 
to implement retail competition do not forget about low-income and 
retired citizens on fixed incomes, or about rural consumers who might 
otherwise be left out because they are not as profitable to serve as 
urban consumers.


                              Reciprocity

  A provision of this bill deals with the situation where one State 
elects competition and a neighboring State does not. Utilities in the 
State without competition could cross the State line and steal 
customers without fear of losing their own customers. My bill would 
prevent this practice by allowing a State to protect its own utilities 
from unfair competition. It also encourages utilities to open up their 
systems voluntarily so they can participate in the growing competition.


                              Reliability

  Finally, to assure fair and open competition on the Nation's 
interstate transmission system, the bill gives the Federal Energy 
Regulatory Commission authority in several new areas. First, to enhance 
system reliability, we provide the commission with regulatory authority 
to back up the existing voluntary system with rules and regulations 
that have the weight of Federal enforcement. The existing system under 
the National Electric Reliability Council has worked effectively. 
However, competition is bringing many new players to the interstate 
transmission grid, and effective enforcement of rules and standards 
requires there by some teeth in the system.


                          transmission siting

  The bill provides a Federal role, in partnership with States, to 
assure that transmission lines that cross State boundaries are upgraded 
and expanded when needed. Any siting decision would be subject to all 
applicable State and Federal legislation, including the Environmental 
Protection Act. The interstate transmission system is one of the keys 
to maintaining system reliability and additional capacity will 
stimulate competition by allowing new players into the market.


                      independent system operators

  My bill also provides new authority to the Federal Energy Regulatory 
Commission to assure the transmission system is managed and operated in 
an open and fair way that does not discriminate against any users. With 
this new authority, the commission may require the formation of 
independent operators for regional transmission systems. Having an 
independent system operator provides greater efficiency in transmission 
pricing, makes sure there is fair and open access for all users, and 
that the owners of the transmission system do not use it to their own 
advantage. In some cases, these independent systems are already 
developing voluntary or under state mandates.
  Madam President, I'd like to say a few words about an issue known as 
``stranded costs.'' Stranded costs are investments in powerplants made 
under past regulatory practices that may no longer be economic in the 
new competitive environment. Stranded costs are of critical concern to 
utility investors and to rural electric cooperatives. As I hope I have 
made clear, my bill focuses on the regulation and use of the interstate 
transmission system, a national issue that does not compel retail 
competition or the resulting stranded costs. I believe the States are 
the proper forum to deal with retail competition and to resolve thorny 
issues like stranded costs that are not national in nature. We in 
Congress are monitoring how the States are handling stranded costs from 
retail competition. If in the future it appears that States are not 
equitably addressing stranded costs, then I believe Congress should 
take a very serious look at the subject.
  In putting forward the proposals in this bill I have listened to a 
number of suggestions and evaluated a variety of concepts. Not all of 
the ideas could be incorporated into the framework of a single bill, 
even though many of the approaches clearly have merit. As the debate on 
electricity regulation moves forward, I expect to refine and expand on 
the proposals I am putting forward today.
  In summary, Madam President, this bill will reduce costs for 
consumers by encouraging the development of robust competition in the 
interstate market for electric power. We do this by streamlining 
Federal regulation of the interstate transmission system and by 
assuring that all transmissions owners and users play by the same 
rules. In addition, the bill will remove Federal regulatory barriers 
for those states that allow consumers to choose their source of 
electric power. I hope all Senators will consider the important 
proposals in this bill.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1276

       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 ``Federal Power Act Amendments 
     of 1997''.

     SEC. 2. CLARIFICATION OF JURISDICTION.

       (a) Declaration of Policy.--Section 201(a) of the Federal 
     Power Act (16 U.S.C. 824(a)) is amended by--
       (1) inserting after ``transmission of electric energy in 
     interstate commerce'' the following: ``, including the 
     unbundled transmission of electric energy sold at retail,''; 
     and
       (2) striking ``such Federal regulation, however, to extend 
     only to those matters which are not subject to regulation by 
     the States.'' and inserting the following: ``such Federal 
     regulation shall not extend, however, to the bundled retail 
     sale of electric energy or to unbundled local distribution 
     service, which are subject to regulation by the States.''.
       (b) Application of Part.--Section 201(b) of the Federal 
     Power Act (16 U.S.C. 824(b)(1)) is amended by--
       (1) inserting after ``the transmission of electric energy 
     in interstate commerce'' the following: ``, including the 
     unbundled transmission of electric energy sold at retail,''; 
     and
       (2) adding at the end the following:
       ``(3) The Commission, after consulting with the appropriate 
     State regulatory authorities, shall determine, by rule or 
     order, which facilities used for the transmission and 
     delivery of electric energy are used for transmission in 
     interstate commerce subject to the jurisdiction of the 
     Commission under this Part, and which are used for local 
     distribution subject to State jurisdiction.''.
       (c) Definition of Interstate Commerce.--Section 201(c) of 
     the Federal Power Act (16 U.S.C. 824(c)) is amended by 
     inserting after ``outside thereof'' the following: 
     ``(including consumption in a foreign country)''.
       (d) Definitions of Types of Sales.--Section 201(d) of the 
     Federal Power Act (16 U.S.C. 824(d)) is amended by--
       (1) inserting ``(1) after the subsection designation;
       (2) adding at the end the following:
       ``(2) The term ``bundled retail sale of electric energy'' 
     means the sale of electric energy to an ultimate consumer in 
     which the generation and transmission service are not sold 
     separately.

[[Page S10658]]

       ``(3) The term ``unbundled local distribution service'' 
     means the delivery of electric energy to an ultimate consumer 
     if--
       ``(A) the electric energy and the service of delivering it 
     are sold separately, and
       ``(B) the delivery uses facilities for local distribution 
     as determined by the Commission under subsection (b)(3).
       ``(4) The term ``unbundled transmission of electric energy 
     sold at retail'' means the transmission of electric energy to 
     an ultimate consumer if--
       ``(A) the electric energy and the service of transmitting 
     it are sold separately, and
       ``(B) the transmission uses facilities for transmission in 
     interstate commerce as determined by the Commission under 
     subsection (b)(3).''.
       (e) Definitions of Public Utility.--Section 201 of the 
     Federal Power Act (16 U.S.C. 824) is amended by striking 
     subsection (e) and inserting the following:
       ``(e) The term ``public utility'' when used in this Part or 
     in the Part next following means--
       ``(1) any person who owns or operates facilities subject to 
     the jurisdiction of the Commission under this Part (other 
     than facilities subject to such jurisdiction solely by reason 
     of section 210, 211, or 212); or
       ``(2) any electric utility or Federal power marketing 
     agency not otherwise subject to the jurisdiction of the 
     Commission under this Part, including--
       ``(A) the Tennessee Valley Authority,
       ``(B) a Federal power marketing agency,
       ``(C) a State or any political subdivision of a State, or 
     any agency, authority, or instrumentality of a State or 
     political subdivision,
       ``(D) a corporation or association that has ever received a 
     loan for the purpose of providing electric service from the 
     Administrator of the Rural Electrification Administration or 
     the Rural Utilities Service under the Rural Electrification 
     Act of 1936; or
       ``(E) any corporation or association which is wholly owned, 
     directly or indirectly, by any one or more of the foregoing.

     but only with respect to determining, fixing, and otherwise 
     regulating the rates, terms, and conditions for the 
     transmission of electric energy under this Part (including 
     sections 217, 218, and 219).''.
       (f) Application of Part to Government Utilities.--Section 
     201(f) of the Federal Power Act (16 U.S.C. 824(f)) is amended 
     by striking ``No provision'' and inserting ``Except as 
     provided in subsection (e)(2) and section 3(23), no 
     provision''.
       (g) Definition of Transmitting Utility.--Section 3 of the 
     Federal Power Act (16 U.S.C. 796) is amended by striking 
     paragraph (23) and inserting the following:
       ``(23) Transmitting Utility.--The term ``transmitting 
     utility'' means any electric utility, qualifying cogeneration 
     facility, qualifying small power production facility, Federal 
     power marketing agency, or any public utility, as defined in 
     section 201(e)(2), that owns or operates electric power 
     transmission facilities which are used for the sale of 
     electric energy.''.

     SEC. 3. FEDERAL WHEELING AUTHORITY.

       (a) Commission Authority To Order Retail Wheeling.--
       (1) Section 211(a) of the Federal Power Act (16 U.S.C. 
     824k(a)) is amended by striking ``for resale''.
       (2) Section 212(a) of the Federal Power Act (16 U.S.C. 
     824k(a) is amended by striking ``wholesale transmission 
     services'' each place it appears and inserting ``transmission 
     services''.
       (3) Section 212(g) of the Federal Power Act (16 U.S.C. 
     824k(g)) is repealed.
       (b) Limitation on Commission Authority To Order Retail 
     Wheeling.--Section 212 of the Federal Power Act (16 U.S.C. 
     824k) is further amended by striking subsection (h) and 
     inserting the following:
       ``(h) Limitation on Commission Authority To Order Retail 
     Wheeling.--No rule or order issued under this Act shall 
     require or be conditioned upon the transmission of electric 
     energy:
       ``(1) directly to an ultimate consumer in connection with a 
     sale of electric energy to the consumer unless the seller of 
     such energy is permitted or required under applicable State 
     law to make such sale to such consumer, or
       ``(2) to, or for the benefit of, an electric utility if 
     such electric energy would be sold by such utility directly 
     to an ultimate consumer, unless the utility is permitted or 
     required under applicable State law to sell electric energy 
     to such ultimate consumer.''.
       (c) Conforming Amendment.--Section 3 of the Federal Power 
     Act (16 U.S.C. 796) is amended by striking paragraph (24) and 
     inserting the following:
       ``(24) Transmission services.--The term ``transmission 
     services'' means the transmission of electric energy in 
     interstate commerce.''.

     SEC. 4. STATE AUTHORITY TO ORDER RETAIL ACCESS.

       Part II of the Federal Power Act is further amended by 
     adding at the end the following:

     ``SEC. 215. STATE AUTHORITY TO ORDER RETAIL ACCESS.

       ``(a) State Authority.--Neither silence on the part of 
     Congress nor any Act of Congress shall be construed to 
     preclude a State or State commission, acting under authority 
     of state law, from requiring an electric utility subject to 
     its jurisdiction to provide unbundled local distribution 
     service to any electric consumer within such State.
       ``(b) Nondiscriminatory Service.--If a State or State 
     commission permits or requires an electric utility subject to 
     its jurisdiction to provide unbundled local distribution 
     service to any electric consumer within such State, the 
     electric utility shall provide such service on a not unduly 
     discriminatory basis. Any law, regulation, or order of a 
     State or State commission that results in unbundled local 
     distribution service that is unjust, unreasonable, unduly 
     discriminatory, or preferential is hereby preempted.
       ``(c) Reciprocity.--Notwithstanding subsection (b), a State 
     or State commission may bar an electric utility from selling 
     electric energy to an ultimate consumer using local 
     distribution facilities in such State if such utility or any 
     of its affiliates owns or controls local distribution 
     facilities and is not itself providing unbundled local 
     distribution service.
       ``(d) State Charges.--Nothing in this Act shall prohibit a 
     State or State regulatory authority from assessing a 
     nondiscriminatory charge on unbundled local distribution 
     service within the State, the retail sale of electric energy 
     within the State, or the generation of electric energy for 
     consumption by the generator within the State.''.

     SEC. 5. UNIVERSAL AND AFFORDABLE SERVICE.

       Part II of the Federal Power Act is further amended by 
     adding at the end the following:

     ``SEC. 216. UNIVERSAL AND AFFORDABLE SERVICE.

       ``(a) Sense of the Congress.--It is the sense of the 
     Congress that--
       ``(1) every consumer of electric energy should have access 
     to electric energy at reasonable and affordable rates, and
       ``(2) the Commission and the States should ensure that 
     competition in the electric energy business does not result 
     in the loss of service to rural, residential, or low-income 
     consumers.
       ``(b) Consideration and Reports.--Any State or State 
     commission that requires an electric utility subject to its 
     jurisdiction to provide unbundled local distribution service 
     shall--
       ``(1) consider adopting measures to--
       ``(A) ensure that every consumer of electric energy within 
     such State shall have access to electric energy at reasonable 
     and affordable rates, and
       ``(B) prevent the loss of service to rural, residential, or 
     low-income consumers; and
       ``(2) report to the Commission on any measures adopted 
     under paragraph (1).''.

     SEC. 6. NATIONAL ELECTRIC RELIABILITY STANDARDS.

       Part II of the Federal Power Act is further amended by 
     adding at the end the following:

     ``SEC. 217. NATIONAL ELECTRIC RELIABILITY STANDARDS.

       ``(a) Reliability Standards.--The Commission shall 
     establish and enforce national electric reliability standards 
     to ensure the reliability of the electric transmission 
     system.
       ``(b) Designation of National and Regional Councils.--
       ``(1) For purposes of establishing and enforcing national 
     electric reliability standards under subsection (a), the 
     Commission may designate an appropriate number of regional 
     electric reliability councils composed of electric utilities 
     or transmitting utilities, and one national electric 
     reliability council composed of designated regional electric 
     reliability councils, whose mission is to promote the 
     reliability of electric transmission system.
       ``(2) The Commission shall not designate a regional 
     electric reliability council unless the Commission determines 
     that the council--
       ``(A) permits open access to membership from all entities 
     engaged in the business of selling, generating, transmitting, 
     or delivering electric energy within its region;
       ``(B) provides fair representation of its members in the 
     selection of its directors and the management of its affairs, 
     and
       ``(C) adopts and enforces appropriate standards of 
     operation designed to promote the reliability of electric 
     transmission system.
       ``(c) Incorporation of Council Standards.--The Commission 
     may incorporate, in whole or in part, the standards of 
     operation adopted by the regional and national electric 
     reliability councils in the national electric reliability 
     standards adopted by the Commission under subsection (a).
       ``(d) Enforcement.--The Commission may, by rule or order, 
     require any public utility or transmitting utility to comply 
     with any standard adopted by the Commission under this 
     section.

     SEC. 7. SITING NEW INTERSTATE TRANSMISSION FACILITIES.

       Part II of the Federal Power Act is further amended by 
     adding at the end the following:

     ``SEC. 218. SITING NEW INTERSTATE TRANSMISSION FACILITIES.

       ``(a) Commission Authority.--Whenever the Commission, after 
     notice and opportunity for hearing, finds such action 
     necessary or desirable in the public interest, it may order a 
     transmitting utility to enlarge, extend, or improve its 
     facilities for the interstate transmission of electric 
     energy.
       ``(b) Procedure.--The Commission may commence a proceeding 
     for the issuance of an order under subsection (a) upon the 
     application of an electric utility, transmitting utility, or 
     state regulatory authority, or upon its own motion.
       ``(c) Compliance With Other Laws.--Commission action under 
     this section shall be subject to the National Environmental 
     Policy Act of 1969 (42 U.S.C. 4321 et seq.) and all other 
     applicable state and federal laws.
       ``(d) Use of Joint Boards.--Before issuing an order under 
     subsection (a), the Commission shall refer the matter to 
     joint board appointed under section 209(a) for advice and

[[Page S10659]]

     recommendations on the need for, design of, and location of 
     the proposed enlargement, extension, or improvement. The 
     Commission shall consider the advice and recommendations of 
     the Board before ordering such enlargement, extension, or 
     improvement.
       ``(e) Limitation on Authority.--The Commission shall have 
     no authority to compel a transmitting utility to extend or 
     improve its transmission facilities if such enlargement, 
     extension, or improvement would unreasonably impair the 
     ability of the transmitting utility to render adequate 
     service to its customers.''.

     SEC. 8. REGIONAL INDEPENDENT SYSTEM OPERATORS.

       Part II of the Federal Power Act is further amended by 
     adding at the end the following:

     ``SEC. 219. REGIONAL INDEPENDENT SYSTEM OPERATORS.

       ``(a) Regional Transmission Systems.--Whenever the 
     Commission finds such action necessary or desirable in the 
     public interest to ensure the fair and non-discriminatory 
     access to transmission services within a region, the 
     Commission may order the formation of a regional transmission 
     system and may order any transmitting utility operating 
     within such region to participate in the regional 
     transmission system.
       ``(b) Oversight Board.--The Commission shall appoint a 
     regional oversight board to oversee the operation of the 
     regional transmission system. Such oversight board shall be 
     composed of a fair representation of all of the transmitting 
     utilities participating in the regional transmission system, 
     electric utilities and consumers served by the system, and 
     State regulatory authorities within the region. The regional 
     oversight board shall ensure that the independent system 
     operator formulates policies, operates the system, and 
     resolves disputes in a fair and non-discriminatory manner.
       ``(c) Independent System Operator.--The regional oversight 
     board shall appoint an independent system operator to operate 
     the regional transmission system. No independent system 
     operator shall--
       ``(1) own generating facilities or sell electric energy, or
       ``(2) be subject to the control of, or have a financial 
     interest in, any electric utility or transmitting utility 
     within the region served by the independent system operator.
       ``(d) Commission Rules.--The Commission shall establish 
     rules necessary to implement this section.''.

     SEC. 9. ENFORCEMENT.

       (a) General Penalties.--Section 316(c) of the Federal Power 
     Act (16 U.S.C. 825o(c)) is amended buy--
       (1) striking ``subsection'' and inserting ``section''; and
       (2) striking ``or 214'' and inserting: ``214, 217, 218, or 
     219''.
       (b) Civil Penalties.--Section 316A of the Federal Power Act 
     (16 U.S.C. 825o-1) is amended by striking ``or 214'' each 
     place it appears and inserting: ``214, 217, 218, or 219''.

     SEC. 10. AMENDMENT TO THE PUBLIC UTILITY REGULATORY POLICIES 
                   ACT.

       Section 10 of the Public Utility Regulatory Policies Act of 
     1978 (16 U.S.C. 824a-3) is amended by adding at the end the 
     following:
       ``(m) Protection of Existing Wholesale Power Purchase 
     Contracts.--No State or State regulatory authority may bar a 
     State regulated electric utility from recovering the cost of 
     electric energy the utility is required to purchase from a 
     qualifying cogeneration facility or qualifying small power 
     production facility under this section.''.
                                                                    ____


                The Federal Power Act Amendments of 1997

   (Federal Legislation Focused on Federal Regulation of Interstate 
                   Transmission and Wholesale Sales)


                       section-by-section summary

                         Section 1. Short Title

       This act may be cited as the ``Federal Power Act Amendments 
     of 1997.'' This bill does not mandate retail competition. The 
     purpose is to facilitate the transition to more competitive 
     and efficient markets for bulk power and to foster the 
     development of state-directed efforts to establish retail 
     competition.

       Section 2. Clarification of Federal and State Jurisdiction

       This section resolves ambiguities in federal and state 
     jurisdiction that have arisen with the implementation of 
     Title VII of the Energy Policy Act of 1992 and the ensuing 
     trend to state-implemented retail competition. Unless 
     clarified, these ambiguities could spawn protracted 
     litigation and frustrate federal and state efforts to expand 
     competition. This section also extends FERC's jurisdiction 
     over the remaining 22% of interstate transmission systems not 
     currently covered.
       (a)(1) Clarifies that transmission of electric energy in 
     interstate commerce, which is under FERC jurisdiction, 
     includes the unbundled transmission of electric energy sold 
     at retail. FERC has proceeded under the assumption it has 
     authority to order transmission necessary to implement state-
     ordered retail competition, and utilities have filed 
     transmission tariffs required to implement retail 
     competition. Paragraph (2) reinforces existing state 
     jurisdiction over the bundled retail sale of electric energy 
     and the unbundled local distribution of electric energy.
       (b) In Order No. 888, FERC took the position that the 
     transmission component of unbundled sales is subject to FERC 
     jurisdiction. Paragraph (1) establishes FERC's authority 
     under Part II of the Federal Power Act over the transmission 
     in interstate commerce of electric power as part of an 
     unbundled sale of energy sold at retail. Paragraph (2) 
     authorizes FERC, in consultation with state regulators, to 
     draw the line between interstate transmission, which is 
     subject to FERC authority, and local distribution, which is 
     subject to state jurisdiction. FERC's jurisdiction over 
     unbundled transmission necessitates a process for determining 
     where FERC jurisdiction ends and state jurisdiction over 
     unbundled distribution begins.
       (c) Extends FERC's jurisdiction over transmission of 
     electric energy in interstate commerce if the energy will be 
     consumed in a foreign country. The ambiguity in existing law 
     was raised in FERC's October 4, 1996, order on complaint in 
     Docket No. EL96-74-000.
       (d) Adds definitions to Part II for ``bundled retail sale 
     of electric energy,'' ``unbundled local distribution 
     service,'' and ``unbundled transmission of electric energy 
     sold at retail.''
       (e) Redefines ``public utility'' so as to extend FERC's 
     authority to regulate transmission services (and only 
     transmission) of non-jurisdictional utilities, including TVA, 
     Power Marketing agencies, municipal utilities, and rural 
     electric cooperatives. Currently, FERC's FPA jurisdiction is 
     limited primarily to investor-owned utilities. Non-
     jurisdictional utilities control a significant portion of the 
     nation's existing transmission capacity. The full benefits of 
     wholesale competition may not be realized unless all 
     transmitting utilities are subject to the same regulatory 
     policies.
       (f) Continues exemption of TVA, PMAs, municipal utilities 
     and rural electric cooperatives from FERC jurisdiction under 
     Part II, except with respect to regulation of transmission. 
     This section leaves intact the exemption from FERC 
     jurisdiction for any wholesale sales of power made by non-
     jurisdictional utilities.
       (g) Redefines ``transmitting utility'' to cover all 
     transmission systems, including any electric utility, 
     qualifying cogeneration facility, qualifying small power 
     production facility, federal power marketing agency, public 
     utility (as redefined by subsection (e)) that owns or 
     operates transmission facilities used for the sale of 
     electric energy.

          Section 3. Limitations on Federal Wheeling Authority

       Sections 211 and 212 of the FPA currently prohibit FERC 
     from ordering retail wheeling. This section clarifies FERC's 
     authority to order interstate transmission service for 
     wholesale sales and as part of a retail sale, but the latter 
     only if authorized by state law.
       (a) Clarifies FERC's authority to order transmission access 
     under sections 211 and 212 for transmission in interstate 
     commerce for both wholesale sales for resale and unbundled 
     transmission of electric energy sold at retail.
       (b) Limits FERC's authority to order unbundled transmission 
     of electric energy sold at retail under sections 211 and 212 
     only if such sales are permitted or required under applicable 
     state law.
       (c) Conforming amendment that broadens the definition of 
     transmission services to include both wholesale transmission 
     and unbundled transmission of electric energy sold at retail.

           Section 4. State Authority To Order Retail Access

       Adds a new section 215 at the end of Part II to clarify and 
     extend state authority over access to retail customers.
       New subsection (a) recognizes state authority to require an 
     electric utility to provide unbundled local distribution 
     service to any consumer. The Energy Policy Act of 1992 
     included in the FPA a savings clause at the end of subsection 
     212(h) that preserves whatever state authority may exist to 
     order retail wheeling; however, it does not affirm 
     conclusively that the states do in fact have such authority. 
     Because retail wheeling is in interstate commerce, it could 
     be argued states lack authority to order retail wheeling. 
     This subsection removes the statutory ambiguity.
       New subsection (b) requires states that authorize utilities 
     to provide unbundled local distribution service to assure the 
     utilities provide distribution service on a nondiscriminatory 
     basis. This subsection will help assure that local 
     distribution companies do not use state-regulated monopolies 
     to favor, for example, their un-regulated subsidiaries.
       New subsection (c) provides for retail reciprocity. States 
     may bar an electric utility from selling power at retail in 
     the state unless the utility is itself providing unbundled 
     local distribution service. Currently, a state may not 
     condition access to its retail markets without facing a 
     challenge as an unlawful burden on interstate commerce. This 
     subsection eliminates the inequity of out-of-state utilities 
     competing for retail customers in states with open access 
     without having to provide similar access to their own 
     customers. This provision may also create an incentive for 
     utilities to open their markets to retail competition.
       New subsection (d) assures state authority to impose a 
     nondiscriminatory charge on the unbundled local distribution 
     service, retail sale, or generation for consumption of 
     electric energy. Such a charge might be used to

[[Page S10660]]

     fund, for example, competitive transition costs, universal 
     and affordable service under section 216, demand side-
     management programs, etc.

              Section 5. Universal and Affordable Service

       Adds a new section 216 at the end of Part II that puts 
     Congress on record that every consumer should have access to 
     electric power at reasonable and affordable rates and that 
     FERC and the states should assure that competition does not 
     result in the loss of service to rural, residential, or low-
     income customers. Requires states that adopt retail 
     competition to consider adopting measures to assure universal 
     and affordable service and to report to FERC on the measures 
     adopted. Funds to cover the cost of such measures may be 
     assessed under new section 215(d).

           Section 6. National Electric Reliability Standards

       Adds a new section 217 at the end of Part II to establish 
     national electric reliability standards under FERC 
     jurisdiction. Competition is bringing many new players to the 
     interstate transmission grid. Such competition will place new 
     and conflicting requirements on NERC's existing voluntary 
     system, which lacks enforcement powers. There is a clear and 
     legitimate federal role in ensuring system reliability. This 
     section is consistent with the draft recommendations of the 
     Secretary of Energy Advisory Board Task Force on Electric-
     System Reliability.
       New subsection (a) authorizes FERC to establish and enforce 
     national electric reliability standards to ensure the 
     reliability of the electric transmission system.
       New subsection (b) authorizes FERC to designate an 
     appropriate number of regional reliability councils composed 
     of electric utilities and transmitting utilities, and one 
     national electric reliability council composed of the 
     regional councils. The mission of the councils is to promote 
     the reliability of the electric transmission system. FERC 
     shall not designate a regional council unless the commission 
     determines the council permits open access to membership from 
     all electric utilities (IOUs, NUGs, power marketers, 
     municipal utilities or TVA) and transmitting utilities in the 
     region, provides fair representation in the selection of its 
     directors and management, and adopts and enforces appropriate 
     standards of operation.
       New subsection (c) authorizes FERC to incorporate standards 
     of operation adopted by the councils into the standards 
     adopted under subsection (a).
       New subsection (d) authorizes FERC, by rule or order, to 
     require any public utility (electric utility plus the PMAs) 
     or any transmitting utility to comply with the standards.

        Section 7. Siting New Interstate Transmission Facilities

       Adds a new section 218 at the end of Part II to authorize 
     FERC to work with the states on siting new interstate 
     transmission facilities. An integrated and well planned 
     national transmission grid is a critical element in the 
     development of open and fair competition, maintaining system 
     reliability, reducing market power, and mitigating stranded 
     costs. This section does not preempt the states' exclusive 
     authority over siting of transmission lines.
       New subsection (a) gives FERC authority, after notice and 
     opportunity for hearing, to order a transmitting utility 
     to extend, enlarge or improve its facilities for the 
     interstate transmission of electric energy.
       New subsection (b) defines when FERC may commence a 
     proceeding under subsection (a).
       New subsection (c) requires FERC to comply with the 
     National Environmental Policy Act of 1969 and all other 
     applicable state and federal laws.
       New subsection (d) requires FERC to refer the matter to a 
     joint board appointed under subsection (a) of section 209 for 
     advice on the need for, design of, and location of the 
     proposed extension or improvement. The Commission shall 
     consider the advice and recommendations of the board before 
     ordering such extension or improvement.
       New subsection (e) limits FERC's authority to compel a 
     transmitting utility to extend or improve its interstate 
     transmission facilities if it would impair the utility's 
     ability to serve its existing customers.

            Section 8. Regional Independent System Operators

       Adds a new section 219 at the end of Part II to allow for 
     the establishment of regional independent system operators. 
     Formation of ISOs could be a valuable tool in limiting market 
     power and maintaining reliability. FERC in order 888 strongly 
     encouraged the formation of ISOs, but did not address the 
     issue of its authority to compel participation. This section 
     authorizes FERC to require participation in an ISO to assure 
     non-discriminatory access to the transmission grid for all 
     parties. ISOs could also play a role in siting of new 
     transmission lines under Section 7.
       New subsection (a) authorizes the commission to order the 
     formation of a regional independent transmission system and 
     to compel utilities in the region to participate. The FERC 
     may order the formation of an ISO if such action is necessary 
     or desirable in the public interest to ensure the fair and 
     non-discriminatory access to transmission services.
       New subsection (b) authorizes FERC to appoint a regional 
     oversight board to oversee the operation of the regional 
     transmission system. The board shall have fair representation 
     of all utilities, consumers, and state regulators in the 
     region.
       New subsection (c) authorizes the oversight board to 
     appoint an independent system operator to operate the 
     regional transmission system. The operator may not own 
     generating facilities, sell electric energy, or be subject to 
     the control, or have a financial interest in, any utility in 
     the region served by the independent system operator.
       New subsection (d) authorizes FERC to establish rules 
     necessary to implement this section.

                         Section 9. Enforcement

       (a) Extends the exemption from general penalties (section 
     316) to sections 217, 218, and 219.
       (b) Extends the enforcement provisions for violations and 
     civil penalties in section 316A to sections 217, 218, and 
     219.

                     Section 10. Amendment to PURPA

       Adds new subsection (m) at the end of section 210 of PURPA 
     to protect wholesale contracts entered into in accordance 
     with federal legislation. States may not bar a regulated 
     utility from recovering the cost of any PURPA contracts. Such 
     costs may be recovered, for example, through rates, charges 
     assessed under section 215(d), exit fees, etc.

                          ____________________