[Congressional Record Volume 145, Number 29 (Wednesday, February 24, 1999)]
[Senate]
[Page S1961]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     ELECTRIC UTILITY RESTRUCTURING

 Mr. KERREY. Mr. President, last year, Senator Gorton and I 
introduced a bill that addressed a growing problem faced by local 
governments in the new era of state electric utility restructuring. 
That bill had the bipartisan co-sponsorship of almost a dozen Senators.
  On February 6, we reintroduced this legislation as the Bond Fairness 
and Protection Act. This bill will ensure Nebraskans continue to 
benefit from the publicly-owned power they currently receive. Nebraska 
has 154 not-for-profit community-based public power systems. It is the 
only state which relies entirely on public power for electricity. This 
system has served my state well as Nebraskans enjoy some of the lowest 
rates in the nation.
  Approximately 18 states have already moved toward permitting new 
competition in the electric industry. However, the federal tax rules 
governing municipal bond financing did not anticipate the new era of 
electric utility restructuring when they were crafted more than a 
decade ago. If Congress does not act, public power systems that open 
their transmission lines to privately owned utilities can jeopardize 
the status of their outstanding tax-exempt bonds. The legislation my 
colleagues and I introduced is an equitable solution to the problem.
  Under this legislation, local governments determine how their future 
municipal power debt will be treated. According to the US Department of 
Energy, my own state had over $2.2 billion in outstanding municipal 
power bond debt in 1996. Our bill protects local governments that 
issued public power bond debt in the past, yet gives them the 
flexibility to issue new, but fully taxable debt if they choose to 
build any new power generation facilities in the future.
  Specifically, our legislation provides them with an option: they may 
either choose to operate under current, so called ``private use'' rules 
in our tax code. Or if they prefer, they can choose to make a one-time 
irrevocable election that will allow them to build new power generation 
facilities if they want, but only using fully taxable bonds instead of 
tax-exempt financing.
  It is important we recognize and respect local governments may face 
unique situations in public power financing issues as the electricity 
market changes, and we give them reasonable and fair choices.
  Congress may or may not choose to move forward this year on the 
larger and more complex issues involved in restructuring the 
electricity marketplace. But I feel we must act to solve this special 
problem this year. Our local governments should not face unfair 
retroactive bond taxation triggered by old federal tax rules in 
conflict with the new state-mandated laws or regulations.
  This legislation weighs the interests of local governments, 
bondholders, consumers, and public and private utilities. It will 
enable Nebraska public power systems to make decisions in the best 
interests of their consumers and protect the reliable, affordable 
electric service that Nebraska currently enjoys.

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