[Congressional Record Volume 144, Number 67 (Friday, May 22, 1998)]
[Extensions of Remarks]
[Pages E943-E944]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               IRS REGULATIONS HARM ELECTRIC COMPETITION

                                 ______
                                 

                           HON. PHIL ENGLISH

                            of pennsylvania

                    in the house of representatives

                         Thursday, May 21, 1998

  Mr. ENGLISH of Pennsylvania. Mr. Speaker, I rise today to express my 
concern with new IRS regulations that undermine competition in the 
evolving electricity market. The regulations, which became effective in 
February of this year, greatly expand the role of government-owned 
utilities as provider in the electricity marketplace. These regulations 
harm competition and reduce federal, state and local tax revenues.
  In response to these new regulations, I am introducing legislation 
today to help remedy this situation. I am joined in this effort by my 
colleagues, Rep. William Jefferson and Rep. Phil Crane, both 
distinguished Members of the House Ways and Means Committee.
  This legislation would stipulate that government-owned utilities that 
choose to sell beyond their service territory will be denied the use of 
tax-exempt debt and their general income tax exemption to support their 
electricity sales. In an era of evolving competition, there is no place 
for such government subsidies which not only harm the federal treasury 
but displace state and local tax revenues as well.
  To deal with the dilemma that has arisen with respect to this issue, 
I want to clarify what my legislation will do as well as what it will 
not do. First, the legislation deals only with government-owned 
utilities that are selling excess electric generation outside of their 
service area. To put that in context, there are approximately 2,200 
utilities in this nation that are owned by state or local governments. 
My bill will impact less than 30 of these government-owned utilities, 
those with excess generation capacity who chose to sell to persons 
other than their historic customers.
  My legislation will help level the playing field between government-
owned electric utilities and all other electricity suppliers in the new 
competitive marketplace. The legislation, however, will not affect the 
vast majority of government-owned utilities. As I mentioned earlier, 
less than 30 large, aggressive utilities that want to sell electric 
generation outside of their service territory will be affected.
  My bill will not affect federally-owned utilities such as the 
Bonneville Power Administration nor rural electric cooperatives. Most 
importantly, it will not affect the vast majority of bonds issued by 
local municipalities which serve legitimate governmental purposes (such 
as police, fire, hospitals and other services) which benefit persons 
who reside in the service territory.
  If a government-owned utility wants to compete in the open 
electricity marketplace, then they must give up their use of tax-exempt 
bonds and give up their income tax exemptions on sales outside of their 
historic service territory. Mr. Speaker, let me note that my bill will 
in no way affect the ability of a municipality to annex new service 
territory and engage in growth consistent with state rules and 
regulations. And finally, let me state that my bill will in no way 
affect existing tax-exempt bonds or current bond holders.

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