[Congressional Record Volume 144, Number 125 (Friday, September 18, 1998)]
[Senate]
[Pages S10591-S10594]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GLENN:
  S. 2499. A bill to provide for a transition to market-based rates for 
power sold by the Federal Power Marketing Administrations and the 
Tennessee Valley Authority, and for other purposes; to the Committee on 
Energy and Natural Resources.


               Power Marketing Administrations Reform Act

 Mr. GLENN. Mr. President, today, I introduce the Power 
Marketing Administration Reform Act, a bill that will require the Power 
Marketing Administrations, or PMAs, to sell power at market rates. The 
Tennessee Valley Authority, or TVA, will also be included in the bill's 
requirements. My bill is a companion to H.R. 3518, introduced by 
Representatives Bob Franks (R-NJ) and Marty Meehan (D-MA) in the House.
  PMAs have failed to recover their operating costs for too long. My 
colleagues in the Senate are well aware of my activities to rectify 
this discrepancy that has brought about a fiscal shortfall and 
significant environmental damage. I have been joined by many in this 
Chamber in requesting reports from the Government Accounting Office, 
the Congressional Budget Office, and the Inspector General of the U.S. 
Department of Energy, the federal department that oversees the 
operation of the PMAs. All of the reports on the

[[Page S10592]]

PMAs and the TVA have indicated severe financial problems.
  According to the Congressional Budget Office, in a report released in 
March, 1997, selling PMA electricity at market rates rather than at the 
currently subsidized rates will raise approximately $200 million per 
year, money that will be returned to the U.S. Treasury. Later in 1997, 
CBO concluded that eliminating this costly subsidy would complement 
steps already taken by Congress to deregulate energy markets and to 
reduce government interference in market operations.
  When the PMAs were established during Franklin Roosevelt's 
administration, they served a useful and necessary purpose. Jobs were 
created for a nation that was struggling out of a horrible depression. 
Areas that could not afford the cost of purchasing power lines and 
generators for their residents were provided electricity at below 
market rates. At that time, below market sales were a good idea that 
allowed many more Americans than could afford electricity to enjoy its 
benefits. CBO concludes that over the past sixty years, many of the 
concerns that brought about the federal government's role in supplying 
power have diminished greatly. Nearly 60% of federal sales go to just 
four states: Tennessee, Alabama, Washington, and Oregon. In fact, 
nonfederal dams produced an average of 20% more electricity per unit of 
capacity than did dams supplying the PMAs.
  According to a General Accounting Office report entitled, ``Federal 
Electricity Activities,'' released in October, 1997, in fiscal 1996, 
Bonneville, the three other PMAs, and the Rural Utilities Service cost 
the American taxpayer $2.5 billion. In the four year period from 1992 
to 1996, the government's net costs were $8.6 billion. In March, 1998, 
the GAO released an additional study entitled, ``Federal Power: Options 
for Selected Power Marketing Administrations' Role in a Changing 
Electricity Industry.'' Among the conclusions in this report were that 
for that same four year period from 1992-1996, the federal government 
incurred a net cost of $1.5 billion from its involvement in the 
electricity-related activities of Southeastern, Southwestern, and 
Western. Up to $1.4 billion of nearly $7.2 billion of the federal 
investment in assets derived from these activities is at some risk of 
nonrecovery.
  As for fairness in lending, the GAO found that the interest paid by 
the PMAs on their outstanding debt (3.5%) is often substantially below 
the rate that the U.S. Treasury incurred while providing funding to the 
PMAs (9%), resulting in a shortfall on interest alone of 5.5%. And 
rates charged by these PMAs were 40% or more below market rates.
  Mr. President, it is important to note that my bill does not close 
the PMAs or the TVA. Rather, it helps them to transition to a market-
based operation whereby the vast majority of consumers who do not 
benefit from PMA below-cost power sales will no longer be penalized so 
that a few large power companies can purchase cheap, bulk power. My 
bill will provide for full cost recovery rates for power sold by the 
PMAs and the TVA. To accomplish this goal, PMA and TVA rates will be 
recalculated and resubmitted to the Federal Energy Regulatory 
Commission (FERC) for approval.
  In addition, the bill requires that PMA and TVA transmission 
facilities are subject to open-access regulation by the FERC, and that 
regulation will be strengthened by authorizing FERC to revise such 
rates. Cooperatives and public power entities will be given the right 
of first refusal of PMA and TVA power at market prices. Revenue accrued 
from the revisal of these rates will go first to the U.S. Treasury to 
cover all costs. The residual amount will then be disbursed by formula 
to the Treasury to mitigate damage to fish and wildlife and other 
environmental damage attributed to the operation of PMAs and the TVA, 
and to support renewable electricity generating resources.
  Mr. President, these figures speak for themselves. In an era where 
the Congress has taken great strides toward eliminating the 
government's involvement in private industry, the PMAs are a white 
elephant. Sixty years after its inception, public power is less 
expensive, more accessible, and more widely available than ever before. 
There is no reason for the government to continue this wasteful subsidy 
to the fiscal detriment of the American people and the U.S. Treasury. I 
urge my colleagues to join me and my colleagues, Senators Moynihan and 
Reed of Rhode Island, in supporting this bill.
  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. 2499

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

     SECTION 1. SHORT TITLE.

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

     SEC. 2. FINDINGS AND PURPOSES.

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

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

       (a) Accounting.--Notwithstanding any other provision of 
     law, as soon as practicable after the date of enactment of 
     this Act, the Secretary of Energy, in consultation with the 
     Federal Energy Regulatory Commission, shall develop and 
     implement procedures to ensure that the Federal Power 
     Marketing Administrations and the Tennessee Valley Authority 
     use the same accounting principles and requirements 
     (including the accounting principles and requirements with 
     respect to the accrual of actual interest costs during 
     construction and pending repayment for any project and 
     recognition of depreciation expenses) as are applied by the 
     Commission to the electric operations of public utilities.
       (b) Development and Submission of Rates to the 
     Commission.--
       (1) In general.--Notwithstanding any other provision of 
     law, not later than 1 year after the date of enactment of 
     this Act and periodically thereafter but not less frequently 
     than once every 5 years, each Federal Power Marketing 
     Administration and the Tennessee Valley Authority shall 
     submit to the Federal Energy Regulatory Commission a 
     description of proposed rates for the sale or disposition of 
     Federal power that will ensure the recovery of all costs 
     incurred by the Federal Power Marketing Administration or the 
     Tennessee Valley Authority, respectively, for the generation 
     and marketing of the Federal power.
       (2) Costs to be recovered.--The costs to be recovered under 
     paragraph (1)--
       (A) shall include all fish and wildlife expenditures 
     required under treaty and legal obligations associated with 
     the construction and operation of the facilities from which 
     the Federal power is generated and sold; and
       (B) shall not include any cost of transmitting the Federal 
     power.
       (c) Commission Review, Approval, or Modification.--
       (1) In general.--The Federal Energy Regulatory Commission 
     shall review and either approve or modify rates for the sale 
     or disposition of Federal power submitted to the Commission 
     by each Federal Power Marketing Administration and the 
     Tennessee Valley Authority under this section, in a manner 
     that ensures that the rates will recover all costs described 
     in subsection (b)(2).
       (2) Basis for review.--The review by the Commission under 
     paragraph (1) shall be based on the record of proceedings 
     before the Federal Power Marketing Administration or the 
     Tennessee Valley Authority, except that the Commission shall 
     afford all affected persons an opportunity for an additional 
     hearing in accordance with the procedures established for 
     ratemaking by the Commission under the Federal Power Act (16 
     U.S.C. 791a et seq.).
       (d) Application of Rates.--
       (1) In general.--Beginning on the date of approval or 
     modification by the Commission of rates under this section, 
     each Federal

[[Page S10593]]

     Power Marketing Administration and the Tennessee Valley 
     Authority shall apply the rates, as approved or modified by 
     the Commission, to each existing contract for the sale or 
     disposition of Federal power by the Federal Power Marketing 
     Administration or the Tennessee Valley Authority to the 
     maximum extent permitted by the contract.
       (2) Applicability.--This section shall cease to apply to a 
     Federal Power Marketing Administration or the Tennessee 
     Valley Authority as of the date of termination of all 
     commitments under any contract for the sale or disposition of 
     Federal power that were in existence as of the date of 
     enactment of this Act.
       (e) Accounting Principles and Requirements.--In developing 
     or reviewing the rates required by this section, the Federal 
     Power Marketing Administrations, the Tennessee Valley 
     Authority, and the Commission shall rely on the accounting 
     principles and requirements developed under subsection (a).
       (f) Interim Rates.--Until market pricing for the sale or 
     disposition of Federal power by a Federal Power Marketing 
     Administration or the Tennessee Valley Authority is fully 
     implemented, the full cost recovery rates required by this 
     section shall apply to--
       (1) a new contract entered into after the date of enactment 
     of this Act for the sale of power by a Federal Power 
     Marketing Administrator or the Tennessee Valley Authority; 
     and
       (2) a renewal after the date of enactment of this Act of an 
     existing contract for the sale of power by a Federal Power 
     Marketing Administration or the Tennessee Valley Authority.
       (g) Transition to Market-Based Rates.--
       (1) In general.--If the transition to full cost recovery 
     rates would result in rates that exceed market rates, the 
     Secretary of Energy may approve rates for power sold by 
     Federal Power Marketing Administrations at market rates, and 
     the Tennessee Valley Authority may approve rates for power 
     sold by the Tennessee Valley Authority at market rates, if--
       (A) operation and maintenance costs are recovered, 
     including all fish and wildlife costs required under existing 
     treaty and legal obligations;
       (B) the contribution toward recovery of investment 
     pertaining to power production is maximized; and
       (C) purchasers of power under existing contracts consent to 
     the remarketing by the Federal Power Marketing Administration 
     or the Tennessee Valley Authority of the power through 
     competitive bidding not later than 3 years after the approval 
     of the rates.
       (2) Competitive bidding.--Competitive bidding shall be used 
     to remarket power that is subject to, but not sold in 
     accordance with, paragraph (1).
       (h) Market-Based Pricing.--
       (1) In general.--Not later than 2 years after the date of 
     enactment of this Act, the Secretary of Energy shall develop 
     and implement procedures to ensure that all power sold by 
     Federal Power Marketing Administrations and the Tennessee 
     Valley Authority is sold at prices that reflect demand and 
     supply conditions within the relevant bulk power supply 
     market.
       (2) Bid and auction procedures.--The Secretary of Energy 
     shall establish by regulation bid and auction procedures to 
     implement market-based pricing for power sold under any power 
     sales contract entered into by a Federal Power Marketing 
     Administration or the Tennessee Valley Authority after the 
     date that is 2 years after the date of enactment of this Act, 
     including power that is under contract but that is declined 
     by the party entitled to purchase the power and remarketed 
     after that date.
       (i) Use of Revenue Collected Through Market-Based 
     Pricing.--
       (1) In general.--Revenue collected through market-based 
     pricing shall be disposed of as follows:
       (A) Revenue for operations, fish and wildlife, and project 
     costs.--Revenue shall be remitted to the Secretary of the 
     Treasury to cover--
       (i) all power-related operations and maintenance expenses;
       (ii) all fish and wildlife costs required under existing 
     treaty and legal obligations; and
       (iii) the project investment cost pertaining to power 
     production.
       (B) Remaining revenue.--Revenue that remains after 
     remission to the Secretary of the Treasury under subparagraph 
     (A) shall be disposed of as follows:
       (i) Federal budget deficit.--50 percent of the revenue 
     shall be remitted to the Secretary of the Treasury for the 
     purpose of reducing the Federal budget deficit.
       (ii) Fund for environmental mitigation and restoration.--35 
     percent of the revenue shall be deposited in the fund 
     established under paragraph (2)(A).
       (iii) Fund for renewable resources.--15 percent of the 
     revenue shall be deposited in the fund established under 
     paragraph (3)(A).
       (2) Fund for environmental mitigation and restoration.--
       (A) Establishment.--
       (i) In general.--There is established in the Treasury of 
     the United States a fund to be known as the ``Fund for 
     Environmental Mitigation and Restoration'' (referred to in 
     this paragraph as the ``Fund''), consisting of funds 
     allocated under paragraph (1)(B)(ii).
       (ii) Administration.--The Fund shall be administered by a 
     Board of Directors consisting of the Secretary of the 
     Interior, the Secretary of Energy, and the Administrator of 
     the Environmental Protection Agency, or their designees.
       (B) Use.--Amounts in the Fund shall be available for making 
     expenditures--
       (i) to carry out project-specific plans to mitigate damage 
     to, and restore the health of, fish, wildlife, and other 
     environmental resources that is attributable to the 
     construction and operation of the facilities from which power 
     is generated and sold; and
       (ii) to cover all costs incurred in establishing and 
     administering the Fund.
       (C) Project-specific plans.--
       (i) In general.--The Board of Directors of the Fund shall 
     develop a project-specific plan described in subparagraph 
     (B)(i) for each project that is used to generate power 
     marketed by the Federal Power Marketing Administration or the 
     Tennessee Valley Authority.
       (ii) Use of existing data, information, and plans.--In 
     developing plans under clause (i), the Board, to the maximum 
     extent practicable, shall rely on existing data, information, 
     and mitigation and restoration plans developed by--

       (I) the Commissioner of the Bureau of Reclamation;
       (II) the Director of the United States Fish and Wildlife 
     Service;
       (III) the Administrator of the Environmental Protection 
     Agency; and
       (IV) the heads of other Federal, State, and tribal 
     agencies.

       (D) Maximum amount.--
       (i) In general.--The Fund shall maintain a balance of not 
     more than $200,000,000 in excess of the amount that the Board 
     of Directors of the Fund determines is necessary to cover the 
     costs of project-specific plans required under this 
     paragraph.
       (ii) Surplus revenue for deficit reduction.--Revenue that 
     would be deposited in the Fund but for the absence of such 
     project-specific plans shall be used by the Secretary of the 
     Treasury for purposes of reducing the Federal budget deficit.
       (3) Fund for renewable resources.--
       (A) Establishment.--
       (i) In general.--There is established in the Treasury of 
     the United States a fund to be known as the ``Fund for 
     Renewable Resources'' (referred to in this paragraph as the 
     ``Fund''), consisting of funds allocated under paragraph 
     (1)(B)(iii).
       (ii) Administration.--The Fund shall be administered by the 
     Secretary of Energy.
       (B) Use.--Amounts in the Fund shall be available for making 
     expenditures--
       (i) to pay the incremental cost (above the expected market 
     cost of power) of nonhydroelectric renewable resources in the 
     region in which power is marketed by a Federal Power 
     Marketing Administration; and
       (ii) to cover all costs incurred in establishing and 
     administering the Fund.
       (C) Administration.--Amounts in the Fund shall be expended 
     only--
       (i) in accordance with a plan developed by the Secretary of 
     Energy that is designed to foster the development of 
     nonhydroelectric renewable resources that show substantial 
     long-term promise but that are currently too expensive to 
     attract private capital sufficient to develop or ascertain 
     their potential; and
       (ii) on recipients chosen through competitive bidding.
       (D) Maximum amount.--
       (i) In general.--The Fund shall maintain a balance of not 
     more than $50,000,000 in excess of the amount that the 
     Secretary of Energy determines is necessary to carry out the 
     plan developed under subparagraph (C)(i).
       (ii) Surplus revenue for deficit reduction.--Revenue that 
     would be deposited in the Fund but for the absence of the 
     plan shall be used by the Secretary of the Treasury for 
     purposes of reducing the Federal budget deficit.
       (j) Preference.--
       (1) In general.--In making allocations or reallocations of 
     power under this section, a Federal Power Marketing 
     Administration and the Tennessee Valley Authority shall 
     provide a preference for public bodies and cooperatives by 
     providing a right of first refusal to purchase the power at 
     market prices.
       (2) Use.--
       (A) In general.--Power purchased under paragraph (1)--
       (i) shall be consumed by the preference customer or resold 
     for consumption by the constituent end-users of the 
     preference customer; and
       (ii) may not be resold to other persons or entities.
       (B) Transmission access.--In accordance with regulations of 
     the Federal Energy Regulatory Commission, a preference 
     customer shall have transmission access to power purchased 
     under paragraph (1).
       (3) Competitive bidding.--If a public body or cooperative 
     does not purchase power under paragraph (1), the power shall 
     be allocated to the next highest bidder.
       (k) Reforms.--The Secretary of Energy shall require each 
     Federal Power Marketing Administration to implement--
       (1) program management reforms that require the Federal 
     Power Marketing Administration to assign personnel and incur 
     expenses only for authorized power marketing, reclamation, 
     and flood control activities and not for ancillary activities 
     (including consulting or operating services for other 
     entities); and

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       (2) annual reporting requirements that clearly disclose to 
     the public, the activities of the Federal Power Marketing 
     Administration (including the full cost of the power projects 
     and power marketing programs).
       (l) Contract Renewal.--Effective beginning on the date of 
     enactment of this Act, a Federal Power Marketing 
     Administration shall not enter into or renew any power 
     marketing contract for a term that exceeds 5 years.
       (m) Restrictions.--Except for the Bonneville Power 
     Administration, each Federal Power Marketing Administration 
     shall be subject to the restrictions on the construction of 
     transmission and additional facilities that are established 
     under section 5 of the Act entitled ``An Act authorizing the 
     construction of certain public works on rivers and harbors 
     for flood control, and for other purposes'', approved 
     December 22, 1944 (commonly known as the ``Flood Control Act 
     of 1944'') (58 Stat. 890)).

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

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

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

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

     SEC. 6. CONFORMING AMENDMENTS.

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

     SEC. 7. APPLICABILITY.

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