[Congressional Record Volume 149, Number 34 (Tuesday, March 4, 2003)]
[Senate]
[Pages S3088-S3101]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. ALEXANDER (for himself, Mr. Reid, Mr. Gregg, Mr. Santorum,
Mr. Nickles, Mr. Inhofe, Mr. Stevens, Mr. Enzi, Mr. Coleman,
Mr. Frist, Mr. Dodd, and Mr. Cornyn):
S. 504. A bill to establish academics for teachers and students of
American history and civics and a national alliance of teachers of
American history and civics, and for other purposes; to the Committee
on Health, Education, Labor, and Pensions.
Mr. ALEXANDER. Mr. President, I ask unanimous consent that the bill
be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 504
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 ``American History and Civics
Education Act of 2003''.
SEC. 2. DEFINITIONS.
In this Act:
(1) American history and civics.--The term ``American
history and civics'' means the key events, key persons, key
ideas, and key documents that shaped the institutions and
democratic heritage of the United States.
(2) Chairperson.--The term ``Chairperson'' means the
Chairperson of the National Endowment for the Humanities.
(3) Institution of higher education.--The term
``institution of higher education'' has the meaning given the
term in section 101(a) of the Higher Education Act of 1965
(20 U.S.C. 1001(a)).
(4) Key documents.--The term ``key documents'' means the
documents that established or explained the foundational
principles of democracy in the United States, including the
United States Constitution and the amendments to the
Constitution (particularly the Bill of Rights), the
Declaration of Independence, the Federalist Papers, and the
Emancipation Proclamation.
(5) Key events.--The term ``key events'' means the critical
turning points in the history of the United States (including
the American Revolution, the Civil War, the world wars of the
twentieth century, the civil rights movement, and the major
court decisions and legislation) that contributed to
extending the promise of democracy in American life.
(6) Key ideas.--The term ``key ideas'' means the ideas that
shaped the democratic institutions and heritage of the United
States, including the notion of equal justice under the law,
freedom, individualism, human rights, and a belief in
progress.
(7) Key persons.--The term ``key persons'' means the men
and women who led the United States as founding fathers,
elected officials, scientists, inventors, pioneers, advocates
of equal rights, entrepreneurs, and artists.
(8) Nonprofit educational institution.--The term
``nonprofit educational institution''--
(A) means--
(i) an institution of higher education; or
(ii) a nonprofit educational research center; and
(B) includes a consortium of entities described in
subparagraph (A).
(9) State.--The term ``State'' means each of the 50 States
and the District of Columbia.
SEC. 3. PRESIDENTIAL ACADEMIES FOR TEACHING OF AMERICAN
HISTORY AND CIVICS.
(a) Establishment.--From amounts appropriated under
subsection (j), the Chairperson shall award grants, on a
competitive basis, to nonprofit educational institutions to
establish Presidential Academies for Teaching of American
History and Civics (in this section referred to as
``Academies'') that shall offer workshops for teachers of
American history and civics--
(1) to learn how better to teach the subjects of American
history and civics; and
(2) to strengthen such teachers' knowledge of such
subjects.
(b) Application.--
(1) In general.--A nonprofit educational institution that
desires to receive a grant under this section shall submit an
application to the Chairperson at such time, in such manner,
and containing such information as the Chairperson may
require.
(2) Contents.--An application submitted under paragraph (1)
shall--
(A) include the criteria the nonprofit educational
institution intends to use to determine which teachers will
be selected to attend workshops offered by the Academy;
(B) identify the individual the nonprofit educational
institution intends to appoint to be the primary professor at
the Academy; and
(C) include a description of the curriculum to be used at
workshops offered by the Academy.
(c) Number of Grants.--Except as provided in subsection
(e)(2)(B), the Chairperson shall award not more than 12
grants to different nonprofit educational institutions under
this section.
(d) Distribution.--In awarding grants under this section,
the Chairperson shall ensure that such grants are equitably
distributed among the geographical regions of the United
States.
(e) Grant Terms.--
(1) In general.--Grants awarded under this section shall be
for a term of 2 years.
(2) Grants after first two years.--Upon completion of the
first 2-year grant term, the Chairperson shall--
(A) renew a grant awarded under this section to a nonprofit
educational institution for one more term of 2 years; or
(B) award a new grant to a nonprofit educational
institution having an application approved under this section
for a term of 2 years, notwithstanding the 12 grant award
maximum under subsection (c).
(f) Use of Funds.--
(1) Workshops.--
(A) In general.--A nonprofit educational institution that
receives a grant under this section shall establish an
Academy that shall offer a workshop during the summer, or
during another appropriate time, for kindergarten through
grade 12 teachers of American history and civics--
(i) to learn how better to teach the subjects of American
history and civics; and
(ii) to strengthen such teachers' knowledge of such
subjects.
(B) Duration of workshop.--A workshop offered pursuant to
this section shall be approximately 2 weeks in duration.
(2) Academy staff.--
(A) Primary professor.--Each Academy shall be headed by a
primary professor identified in the application submitted
under subsection (b) who shall--
(i) be accomplished in the field of American history and
civics; and
(ii) design the curriculum for and lead the workshop.
(B) Core teachers.--Each primary professor shall appoint an
appropriate number of core teachers. At the direction of the
primary professor, the core teachers shall teach and train
the workshop attendees.
(3) Selection of teachers.--
(A) In general.--
(i) Number of teachers.--Each year, each Academy shall
select approximately 300 kindergarten through grade 12
teachers of American history and civics to attend the
workshop offered by the Academy.
(ii) Flexibility in number of teachers.--An Academy may
select more than or fewer than 300 teachers depending on the
population in the region where the Academy is located.
(B) Teachers from same region.--In selecting teachers to
attend a workshop, an Academy shall select primarily teachers
who teach in schools located in the region where the Academy
is located.
(C) Teachers from public and private schools.--An Academy
may select teachers from public schools and private schools
to attend the workshop offered by the Academy.
(g) Costs.--
(1) In general.--Except as provided in paragraph (2), a
teacher who attends a workshop offered pursuant to this
section shall not incur costs associated with attending the
workshop, including costs for meals, lodging, and materials
while attending the workshop.
(2) Travel costs.--A teacher who attends a workshop offered
pursuant to this section shall use non-Federal funds to pay
for such teacher's costs of transit to and from the Academy.
(h) Evaluation.--Not later than 90 days after completion of
all of the workshops assisted in the third year grants are
awarded under this section, the Chairperson shall conduct an
evaluation to--
(1) determine the overall success of the grant program
authorized under this section; and
(2) highlight the best grantees' practices in order to
become models for future grantees.
[[Page S3089]]
(i) Non-Federal Funds.--A nonprofit educational institution
receiving Federal assistance under this section may
contribute non-Federal funds toward the costs of operating
the Academy.
(j) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $7,000,000 for
each of fiscal years 2004 through 2007.
SEC. 4. CONGRESSIONAL ACADEMIES FOR STUDENTS OF AMERICAN
HISTORY AND CIVICS.
(a) Establishment.--From amounts appropriated under
subsection (j), the Chairperson shall award grants, on a
competitive basis, to nonprofit educational institutions to
establish Congressional Academies for Students of American
History and Civics (in this section referred to as
``Academies'') that shall offer workshops for outstanding
students of American history and civics to broaden and deepen
such students' understanding of American history and civics.
(b) Application.--
(1) In general.--A nonprofit educational institution that
desires to receive a grant under this section shall submit an
application to the Chairperson at such time, in such manner,
and containing such information as the Chairperson may
require.
(2) Contents.--An application submitted under paragraph (1)
shall--
(A) include the criteria the nonprofit educational
institution intends to use to determine which students will
be selected to attend workshops offered by the Academy;
(B) identify the individual the nonprofit educational
institution intends to appoint to be the primary professor at
the Academy; and
(C) include a description of the curriculum to be used at
workshops offered by the Academy.
(c) Number of Grants.--Except as provided in subsection
(e)(2)(B), the Chairperson shall award not more than 12
grants to different nonprofit educational institutions under
this section.
(d) Distribution.--In awarding grants under this section,
the Chairperson shall ensure that such grants are equitably
distributed among the geographical regions of the United
States.
(e) Grant Terms.--
(1) In general.--Grants awarded under this section shall be
for a term of 2 years.
(2) Grants after first two years.--Upon completion of the
first 2-year grant term, the Chairperson shall--
(A) renew a grant awarded under this section to a nonprofit
educational institution for one more term of 2 years; or
(B) award a new grant to a nonprofit educational
institution having an application approved under this section
for a term of 2 years, notwithstanding the 12 grant award
maximum under subsection (c).
(f) Use of Funds.--
(1) Workshops.--
(A) In general.--A nonprofit educational institution that
receives a grant under this section shall establish an
Academy that shall offer a workshop during the summer, or
during another appropriate time, for outstanding students of
American history and civics to broaden and deepen such
students' understanding of American history and civics.
(B) Duration of workshop.--A workshop offered pursuant to
this section shall be approximately 4 weeks in duration.
(2) Academy staff.--
(A) Primary professor.--Each Academy shall be headed by a
primary professor identified in the application submitted
under subsection (b) who shall--
(i) be accomplished in the field of American history and
civics; and
(ii) design the curriculum for and lead the workshop.
(B) Core teachers.--Each primary professor shall appoint an
appropriate number of core teachers. At the direction of the
primary professor, the core teachers shall teach the workshop
attendees.
(3) Selection of students.--
(A) In general.--
(i) Number of students.--Each year, each Academy shall
select approximately 300 eligible students to attend the
workshop offered by the Academy.
(ii) Flexibility in number of students.--An Academy may
select more than or fewer than 300 eligible students
depending on the population in the region where the Academy
is located.
(B) Eligible students.--A student shall be eligible to
attend a workshop offered by an Academy if the student--
(i) is recommended by the student's secondary school
principal (or other head of such student's secondary school)
to attend the workshop; and
(ii) will be a junior or senior in a public or private
secondary school in the academic year following attendance at
the workshop.
(C) Students from same region.--In selecting students to
attend a workshop, an Academy shall select primarily students
who attend secondary schools located in the region where the
Academy is located.
(g) Costs.--
(1) In general.--Except as provided in paragraph (2), a
student who attends a workshop offered pursuant to this
section shall not incur costs associated with attending the
workshop, including costs for meals, lodging, and materials
while attending the workshop.
(2) Travel costs.--A student who attends a workshop offered
pursuant to this section shall use non-Federal funds to pay
for such student's costs of transit to and from the Academy.
(h) Evaluation.--Not later than 90 days after completion of
all of the workshops assisted in the third year grants are
awarded under this section, the Chairperson shall conduct an
evaluation to--
(1) determine the overall success of the grant program
authorized under this section; and
(2) highlight the best grantees' practices in order to
become models for future grantees.
(i) Non-Federal Funds.--A nonprofit educational institution
receiving Federal assistance under this section may
contribute non-Federal funds toward the costs of operating
the Academy.
(j) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $14,000,000 for
each of fiscal years 2004 through 2007.
SEC. 5. NATIONAL ALLIANCE OF TEACHERS OF AMERICAN HISTORY AND
CIVICS.
(a) Establishment.--
(1) In general.--From amounts appropriated under subsection
(e), the Chairperson shall award a grant to an organization
for the creation of a national alliance of elementary school
and secondary school teachers of American history and civics.
(2) Purpose.--The purpose of the national alliance is--
(A) to facilitate the sharing of ideas among teachers of
American history and civics; and
(B) to encourage best practices in the teaching of American
history and civics.
(b) Application.--An organization that desires to receive a
grant under this section shall submit an application to the
Chairperson at such time, in such manner, and containing such
information as the Chairperson may require.
(c) Grant Term.--A grant awarded under this section shall
be for a term of 2 years and may be renewed after the initial
term expires.
(d) Use of Funds.--An organization that receives a grant
under this section may use the grant funds for any of the
following:
(1) Creation of a website on the Internet to facilitate
discussion of new ideas on improving American history and
civics education.
(2) Creation of in-State chapters of the national alliance,
to which individual teachers of American history and civics
may belong, that sponsors American history and civics
activities for such teachers in the State.
(3) Seminars, lectures, or other events focused on American
history and civics, which may be sponsored in cooperation
with, or through grants awarded to, libraries, States'
humanities councils, or other appropriate entities.
(e) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section $4,000,000 for
each of fiscal years 2004 through 2007.
______
By Mr. HATCH (for himself, Mr. Rockefeller, Mr. Jeffords, Ms.
Snowe, Mr. Lieberman, Mr. Smith, Mr. Kerry, Mr. Ensign, Mrs.
Clinton, Mr. Crapo, Mr. Dorgan, Ms. Collins, and Mr. Chafee):
S. 505. A bill to amend the Internal Revenue Code of 1986 to
encourage and accelerate the nationwide production, retail sale, and
consumer use of new motor vehicles that are powered by fuel cell
technology, hybrid technology, battery electric technology, alternative
fuels, or other advanced motor vehicle technologies, and for other
purposes; to the Committee on Finance.
Mr. HATCH. Madam President, I rise today to introduce the CLEAR ACT,
which is short for the Clean Efficient Automobiles Resulting from
Advanced Car Technologies Act of 2003.
Joining me in this effort are Senators John Rockefeller and Jim
Jeffords, who have been my partners in this legislation and its earlier
versions since the 106th Congress. We are also being joined by an
impressive and bipartisan lineup of original cosponsors, which includes
Senators Olympia Snowe, John Kerry, Gordon Smith, Joe Lieberman, John
Ensign, Hillary Clinton, Mike Crapo, Byron Dorgan, Susan Collins, and
Lincoln Chafee.
I believe the CLEAR ACT is the most comprehensive and effective plan
we have seen in this country to accelerate the transformation of the
automotive marketplace toward the widespread use of fuel cell vehicles.
And it does so without any new Federal mandates. Instead, it offers
powerful market incentives to promote the combination of advances we
must have in technology, in infrastructure, and in alternative fuels if
our goal of bringing fuel cell vehicles to the mass market is to become
a reality.
As many of my colleagues know, fuel cell vehicles are the most
promising long-term automotive technology, offering breakthrough fuel
economy of up to three times today's levels with zero emissions. For a
variety of reasons, the commercial production of fuel cell vehicles is
a number of years away. Many things need to change in the automotive
marketplace before
[[Page S3090]]
widespread use of these vehicles of the future becomes a reality. With
the CLEAR ACT, we can achieve this goal much faster, while in the
meantime we can reap the benefits of cleaner air and a reduced
dependency on foreign oil.
Bridging the gap between today's conventional vehicles and the day
when all of us will be driving fuel cell vehicles are alternative fuel
and advanced technology vehicles, such as hybrid electrics. These
vehicles are available today, but not yet widely accepted in the
marketplace.
Currently, consumers face three basic obstacles to accepting the use
of these alternative fueled and advanced technology vehicles. These
obstacles are the higher cost of these vehicles as compared with their
conventional counterparts, the cost of the alternative fuel, and the
lack of an adequate infrastructure of alternative fueling stations. Mr.
President, the CLEAR ACT would lower all three of these barriers.
First, we provide a tax credit of 50 cents per gasoline-gallon
equivalent for the purchase of alternative fuel at retail. This would
bring the price of these cleaner fuels much closer in line with
conventional automotive fuels. And, to give customers better access to
alternative fuel, we extend an existing deduction for the capital costs
of installing alternative fueling stations. We also provide a 50-
percent credit for the installation costs of retail and residential
refueling stations.
Finally, we offer CLEAR ACT credits to consumers who purchase
alternative fuel and advanced technology vehicles. These credits would
lower the price gap between these cleaner and more efficient vehicles
and conventionally fueled vehicles of the same type. To make certain
that the tax benefit we provide translates into a corresponding benefit
to the environment, we split the vehicle tax credit into two. The
amount the consumer receives in a CLEAR ACT credit would depend, first,
on the level of technology used in the vehicle and, second, on the fuel
efficiency and emissions reduction of the vehicle. In this way, we are
confident that the CLEAR ACT will create the greatest social benefit
possible for every tax dollar.
The transportation sector in the U.S. accounts for nearly two-thirds
of all oil consumption, and we are 97-percent dependent on petroleum
for our transportation needs. Is it any wonder that 50 percent of our
urban smog is caused by mobile sources? If we want to clean our air and
address our Nation's energy dependency, we must focus on the
transportation sector. And we must focus first on those technologies
and alternative fuels that are already available and abundant
domestically. The CLEAR ACT is the shortest path to achieving these
goals.
Air pollution and energy independence are issues of critical concern
in my home State of Utah. According to a study by Utah's Division of
Air Quality, on-road vehicles in Utah account for 22 percent of
particulate matter. This particulate matter can be harmful to citizens
who suffer from chronic respiratory or heart disease, influenza, or
asthma. Automobiles also contribute significantly to hydrocarbon and
nitrogen oxide emissions in my State. These two pollutants react in
sunlight to form ozone, which in turn reduces lung function in humans
and hurts our resistance to colds and asthma. In addition, vehicles
account for as much as 87 percent of carbon monoxide emissions. Carbon
monoxide can be harmful to persons with heart, respiratory, or
circulatory ailments.
While Utah has made important strides in improving air quality, it is
a fact that each year more vehicular miles are driven in our State. It
is clear that if we are to have cleaner air, we must encourage the use
of alternative fuels and technologies to reduce vehicle emissions.
Another key aim of the CLEAR ACT is greater energy independence.
Whether during the energy crisis in the 1970s, during the Persian Gulf
war, or during our current energy challenge, every American has felt
the sting of our dependence on foreign oil. And I might add that our
dependency on foreign oil has steadily increased to the point where we
now depend on foreign sources for about 60 percent of our oil. When
enacted, the CLEAR ACT will play a key role in helping our Nation
improve its energy security by increasing the diversity of our fuel
options and decreasing our dependency on gasoline.
Our Nation's energy strategy will not be complete without an
incentive to increase the use of alternative fuels and advanced car
technologies. In the future we will not use gasoline-fueled vehicles to
the same extent we do today. The technology is here today to help
transform us to the benefits of the future much sooner. We just need to
find a way to lower those barriers to widespread consumer acceptance,
which will in turn put the power of mass production to work to lower
the incremental cost of this technology. In short, our legislation
would bring the benefits of cleaner air and energy independence to our
citizens sooner.
I am very proud to offer this groundbreaking and bipartisan
legislation. It represents the input and hard work of a very powerful
and effective coalition the CLEAR ACT Coalition. This coalition
includes the Union of Concerned Scientists, Ford Motor Company, the
Natural Resource Defense Council, Toyota, Environmental Defense, Honda,
the Alliance to Save Energy, the Natural Gas Vehicle Coalition, the
Propane Vehicle Council, the Methanol Institute, and others. The CLEAR
ACT reflects the untiring effort and expertise of the members of this
coalition, and for this we owe them our gratitude.
I urge my colleagues in the Senate to join me, the CLEAR ACT's
cosponsors, and this coalition in this forward-looking approach to
cleaner air and increased energy independence.
I ask unanimous consent that a summary of the CLEAR ACT be inserted
in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Summary of the CLEAR ACT of 2003 (Clean Efficient Automobiles Resulting
From Advanced Car Technologies)
Overview
The primary purpose of this bill is to enhance national
energy security and promote cleaner air by reducing the
consumption of petroleum and advancing alternative fuels.
Transportation accounts for nearly \2/3\ of all oil
consumption and is almost 97 percent dependent on petroleum.
This legislation will set the stage for a consumer-based
and technology-led transformation of the transportation
marketplace. All major vehicle manufacturers are introducing
new technology and alternative fuel vehicles into the
marketplace. These new technologies reduce petroleum
consumption and improve air quality as a result of
breakthrough improvements in fuel economy or from the use of
non-petroleum alternative fuels. Accelerated acceptance by
consumers of these new technologies is needed to increase
production volumes and make them cost competitive with
conventional vehicles.
Providing tax incentives for a limited time to consumers
will help offset the higher costs associated with new
technology and alternative fuel vehicles. As the vehicles
gain consumer acceptance and production volumes increase, the
cost differential between these and conventional vehicles
will be reduced or eliminated.
Key Components of the CLEAR ACT
Tax incentives for new technology and alternative fuel
vehicles under this legislation go directly to the consumer.
These incentives are based both on technology and
performance.
Fuel Cell Vehicles. Fuel cell vehicles are the most
promising long-term technology offering breakthrough fuel
economy of up to 3 times today's levels with zero emissions.
The CLEAR ACT offers a $4,000 base credit ($8,000 for fuel
cell vehicles placed in service before 2009) along with an
additional credit of up to $4,000 depending on fuel economy
performance. These credits are available for ten years.
Hybrid Electric Vehicles. Electronics that integrate
electric drive with an internal combustion engine offer near-
term improvements in fuel economy. The CLEAR ACT offers a
credit of up to $1,000 for the amount of electric drive power
along with an additional credit of up to $3,000 depending
upon fuel economy performance. These credits are available
for 6 years.
Dedicated Alternative Fuel Vehicles. Vehicles solely
capable of running on alternative fuels promote energy
diversity and significant emissions reductions. Natural gas,
LPG, and LNG are the most commonly used fuels for
dedicated alternative fuel vehicles. The CLEAR ACT
provides a base credit of up to $2,500 with an additional
$1,500 credit for vehicles certified to ``Super Ultra Low
Emission'' (SULEV) standards. ``Flex-fuel'' vehicles are
not eligible since they can operate on either gasoline or
E85 (ethanol) and are available in the market without any
incremental cost.
Battery Electric Vehicles. Vehicles that utilize stored
energy from ``plug-in'' rechargeable batteries offer zero
emissions and are not dependent upon petroleum-based
[[Page S3091]]
fuels. The CLEAR ACT offers a base credit of $4,000 and an
incremental credit of $2,000 for vehicles with extended range
or payload capabilities.
Medium and Heavy Duty Vehicles. Medium and heavy duty
applications of the same vehicle technologies utilized for
passenger vehicles offer similar benefits related to energy
efficiency, diversity, and emission reductions. The CLEAR ACT
offers credits for individual weight categories and amounts
vary with the largest vehicles over 26,000 pounds (e.g.,
large metro busses) receiving up to $40,000 for fuel cell or
battery electric, $32,000 for alternative fuel, or $24,000
for hybrid applications.
Alternative Fuel Incentives. Alternative fuels such as
natural gas, LNG, LPG, hydrogen, B100 (biomass) and methanol
are primarily used in alternative fueled vehicles and fuel
cell vehicles. To encourage the installation of distribution
points to support these applications, a credit of up to 50
cents for every gallon of gas equivalent is provided to the
retail distributor,. This credit is available for 6 years.
Alternative Fuel Infrastructure. Complimentary to the
credit for the fuel itself, the CLEAR ACT extends the
existing $100,000 tax deduction for 10 years and also
provides a 50 percent credit for actual costs of up to
$30,000 for the installation of alternative fuel sites
available to the public.
broad coalition support
A broad and diverse group that includes representatives
from the environmental community, automobile manufacturers,
and alternative fuel groups support the CLEAR ACT.
Environmental coalition support comes from the Union of
Concerned Scientists, Natural Resources Defense Council,
Environmental Defense, and the American Council for an Energy
Efficient Economy. Ford Motor Company, Honda, and Toyota are
among the key automotive industry supporters. Industry
coalitions include the Natural Gas Vehicle Coalition, the
Propane Vehicle Council, the American Methanol Institute, and
the Electric Drive Transportation Association.
______
By Mr. DURBIN (for himself, Mrs. Clinton, Mr. Kennedy, and Mr.
Schumer):
S. 506. A bill to amend the Richard B. Russell National School Lunch
Act to ensure the safety of meals served under the school lunch program
and the school breakfast program; to the Committee on Agriculture,
Nutrition, and Forestry.
Mr. DURBIN. Madam President, today I am introducing legislation that
would dramatically improve the safety of food served in our Nation's
schools. This bill, known as the Safe School Food Act, would fill gaps
in the inspection, testing, procurement and preparation of food served
to our schoolchildren, and provide school officials with the necessary
tools and information to help them prevent food-borne illness among our
most vulnerable population.
Each day, more than 27 million children eat meals provided through
the National School Lunch Act. Despite increased attention in recent
years to the safety of food provided to schoolchildren, there is
evidence of serious problems with our school lunch system--between 1990
and 2000, there were nearly 100 reported outbreaks of food-borne
illness in our schools affecting thousands of children, with several
outbreaks resulting in significant health consequences. Since food-
borne illness is preventable, these statistics indicate we are not
doing enough to protect our children's health when they consume food
served at our schools.
Currently, 17 percent of the food served in schools is donated by the
Federal Government and undergoes stringent U.S. Department of
Agriculture food-safety standards for inspections and pathogen testing.
Suppliers' food safety records also are reviewed before they are
granted contracts to provide food to the USDA donated commodity
program. However, the remaining 83 percent of food consumed at schools
is purchased locally and is not subject to these more stringent USDA
donated commodity standards. State education officials also do not have
access to the safety records of food suppliers to make the same
informed decisions as their counterparts at the Federal level.
If a tainted product enters the food supply, it is often difficult
for local education officials to quickly determine if they have that
food in their schools' kitchens due to a complex web of food
manufacturers, distributors, and brokers who deal with schools. A food
producer's tainted food may be repackaged by a distributor, leaving a
school unaware it is serving the product. And many Americans may be
surprised to discover that our Federal food agencies do not even have
the authority to mandate the recall of contaminated food in schools.
Such recalls are currently voluntary.
The Safe School Food Act would address these gaps in our School Lunch
Program and provide schools with the tools and information on how to
more safely purchase and prepare food served to our children.
Improving Inspections: This legislation will ensure stringent
inspection and pathogen testing for USDA meat, poultry, seafood, eggs,
and produce donated to the School Lunch Program, and gives the USDA
Secretary the authority to require similar pathogen testing as
necessary for foods purchased directly by the schools. Cafeterias also
would be inspected more frequently, inspection exemptions would be
eliminated, and those inspection reports would be made available to the
public.
Purchasing Safe Food: By incorporating USDA food safety guidelines in
their procurement contracts to the maximum extent possible, schools
will have the tools to help ensure the safety of the food they serve.
And by providing State education officials with food-safety histories
of the companies they purchase from, schools can make more informed
decisions in the purchasing process.
Planning and Serving Safe Meals: The USDA will provide training and
assistance to schools in the preparation of required plans to address
the food-safety risks of meals they prepare.
Providing Notice and Recalling Unsafe Food: Each State will have an
up-to-date list of the vendors and suppliers who provide food to their
schools to enable easier tracking of food that may be tainted. If a
food product that has been distributed to schools is found to be
unsafe, the USDA Secretary will have the authority to require a
mandatory recall of the product if voluntary efforts are unsuccessful.
Designated food safety coordinators in each State will assist with
recalls, as well as safety training and information-sharing issues.
Mr. President, I urge my colleagues to join me in this effort to
improve the safety of the food served in our schools. The health of our
schoolchildren is at stake.
I ask unanimous consent that a copy of the legislation be printed in
the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 506
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 ``Safe School Food Act of
2003''.
SEC. 2. FINDINGS.
Congress finds that--
(1) the national school lunch program under the Richard B.
Russell National School Lunch Act (42 U.S.C. 1751 et seq.) is
a federally-assisted meal program that--
(A) operates in more than 97,000 public and nonprofit
private schools; and
(B) provides nutritionally balanced, low-cost or free
lunches to more than 27,000,000 children each school day;
(2) children are among the populations most vulnerable to
foodborne illness, which sickens an estimated 76,000,000
individuals in the United States each year;
(3) nearly 100 reported outbreaks of foodborne illnesses
occurred in schools between 1990 and 2000;
(4) Department of Agriculture procurement policies and
procedures--
(A) help ensure the safety of foods donated to schools,
which comprise about 17 percent of the school lunch supply;
but
(B) do not apply to the remaining 83 percent of food served
under the national school lunch program, which is purchased
locally by schools;
(5) it is essential to maintain public confidence in--
(A) the safety of the food supply in the schools of the
United States; and
(B) the ability of the Federal Government and State
governments to exercise adequate oversight of foods served in
the schools of the United States; and
(6) public confidence can best be maintained by--
(A) improving Department of Agriculture procurement and
testing standards, and extending the standards, to the
maximum extent practicable, to foods purchased by schools;
(B) preparing and implementing plans to prevent identified
food safety risks in the preparation of school meals; and
(C) improving food safety training, information sharing,
and coordination between the Federal Government and States.
[[Page S3092]]
SEC. 3. IMPROVEMENTS TO THE SAFETY OF SCHOOL LUNCHES.
Section 9 of the Richard B. Russell National School Lunch
Act (42 U.S.C. 1758) is amended--
(1) in subsection (h)--
(A) in paragraph (1)--
(i) by striking ``Except as provided in paragraph (2), a''
and inserting ``A'';
(ii) by striking ``shall, at least once'' and inserting the
following: ``shall--
``(A) at least twice'';
(iii) by striking the period at the end and inserting a
semicolon; and
(iv) by adding at the end the following:
``(B) post the report on the most recent inspection in a
publicly visible location; and
``(C) make the report available to the public on
request.'';
(B) by striking paragraph (2) and inserting the following:
``(2) State and local government inspections.--Nothing in
paragraph (1) prevents any State or local government from
adopting or enforcing any requirement for more frequent food
safety inspections of schools.''; and
(C) by adding at the end the following:
``(3) Audits and reports by states.--Each State shall
annually audit and submit to the Secretary a report on the
food safety inspections of schools conducted under paragraphs
(1) and (2).
``(4) Audit by the secretary.--The Secretary shall annually
audit State reports of food safety inspections of schools
submitted under paragraph (3).''; and
(2) by adding at the end the following:
``(k) Procurement of Safe Foods.--
``(1) Action by school food authorities.--Subject to
paragraph (3), the Secretary shall require that a school food
authority incorporate into the procurement contracts of the
school food authority, to the maximum extent practicable,
provisions to help ensure the safety of foods purchased by
schools for a program under this Act or the school breakfast
program under section 4 of the Child Nutrition Act of 1966
(42 U.S.C. 1773).
``(2) Rulemaking by the secretary.--Not later than May 1,
2004, the Secretary shall promulgate final regulations to
implement paragraph (1) that require--
``(A) each vendor that provides food products to be served
by a school that participates in the school lunch program
under this Act or the school breakfast program under section
4 of the Child Nutrition Act of 1966 (42 U.S.C. 1773) to
supply to the Secretary the name and contact information for
each school food supplier of the vendor; and
``(B) as appropriate, pathogen testing during production of
foods described in that paragraph.
``(3) Guidance.--The Secretary shall provide guidance to
school food authorities on ensuring the safety of food
purchases not subject to the regulations promulgated under
paragraph (2).
``(l) Food Safety Planning.--
``(1) In general.--Each school that participates in the
school lunch program under this Act or the school breakfast
program under section 4 of the Child Nutrition Act of 1966
(42 U.S.C. 1773) shall monthly prepare a plan that assesses--
``(A) the food safety risks inherent in the preparation and
serving of meals; and
``(B) the appropriate methods to prevent or eliminate the
identified food safety risks.
``(2) Training and technical assistance.--
``(A) In general.--The Secretary shall provide training and
technical assistance to State educational agencies to assist
in preparation of the food safety plans required by paragraph
(1).
``(B) Use of food service management institute.--In
carrying out subparagraph (A), the Secretary shall use, to
the maximum extent practicable, a food service management
institute established under section 21(a)(2).
``(m) Authority To Recall Food Products Served In School
Meals.--
``(1) Definitions.--In this subsection:
``(A) Class i recall.--The term `Class I recall', with
respect to a food product, means a recall that involves a
health hazard situation where there is a reasonable
probability that the use of, or exposure to, the food product
will cause serious, adverse health consequences or death.
``(B) Food product.--The term `food product' means a
commodity donated to, or a food product purchased by, a
school for a program under this Act or the school breakfast
program under section 4 of the Child Nutrition Act of 1966
(42 U.S.C. 1773).
``(2) Voluntary actions.--If the Secretary finds that there
is a reasonable probability that human consumption of a food
product that was, or may have been, distributed to schools
would present a threat to public health, the Secretary shall
provide each appropriate person (as identified by the
Secretary) that prepared, processed, distributed, or
otherwise handled the food product with an opportunity--
``(A) to recall and collect the food product;
``(B) to provide to the Secretary a list of individuals to
whom the food product was sold or distributed; and
``(C) in consultation with the Secretary, to provide timely
notification of the finding of the Secretary to the State
food safety coordinator designated under section 12(q) of
each State in which the food product was, or may have been,
distributed, which notification shall include sufficient
information to identify the affected food product.
``(3) Mandatory actions.--
``(A) Order.--If any appropriate person identified by the
Secretary under paragraph (2) does not carry out the actions
described in that paragraph within the time period and in the
manner required by the Secretary, the Secretary shall, by
order, require, as the Secretary determines to be necessary,
the person--
``(i)(I) to cease immediately distribution of the food
product to schools; and
``(II) to promptly recall and collect the food product;
``(ii) to provide immediately to the Secretary a list of
individuals to whom the food product was sold or distributed;
and
``(iii) to make immediately the notification described in
paragraph (2)(C).
``(B) Informal hearing.--The order shall provide the person
subject to the order with an opportunity for an informal
hearing, to be held not later than 10 days after the date of
issuance of the order, on the actions required by the order.
``(C) Vacating of order.--If, after providing an
opportunity for a hearing under subparagraph (B), the
Secretary determines that inadequate grounds exist to support
the actions required by the order, the Secretary shall vacate
the order.
``(4) Coordination with secretary of health and human
services.--In the case of an activity under paragraph (2) or
(3) carried out with respect to a food product regulated
under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301
et seq.), the Secretary shall coordinate with the Secretary
of Health and Human Services to ensure that the activity is
carried out.
``(5) Notification to schools and vendors.--
``(A) Provision of vendor contact information to state
educational agency.--Not later than August 1, 2004, and as
appropriate thereafter, a school that participates in the
school lunch program under this Act or the school breakfast
program under section 4 of the Child Nutrition Act of 1966
(42 U.S.C. 1773) shall provide to the appropriate State
educational agency current contact information for each
vendor, and each school food supplier of the vendor, that
will provide food products to be served by the school.
``(B) Notification by state educational agencies.--
``(i) In general.--A State educational agency that receives
notification under paragraph (2)(C) or (3)(A)(iii) with
respect to a food product shall, within 24 hours after
receipt of the notification, notify each vendor and each
school to which the food product was, or may have been,
distributed.
``(ii) Contents of notification.--The notification shall
include--
``(I) the finding of the Secretary under paragraph (2); and
``(II) sufficient information to identify the affected food
product.
``(C) Action by vendors on receipt of notification.--Each
vendor that receives notification under paragraph (2)(C),
paragraph (3)(A)(iii), or subparagraph (B) shall--
``(i) immediately cease distribution of the food product;
and
``(ii) isolate the affected product to avoid accidental
distribution.
``(D) Action by schools on receipt of notification.--Each
school that receives notification under paragraph (2)(C),
paragraph (3)(A)(iii)), or subparagraph (B) shall--
``(i) immediately cease serving the food product; and
``(ii) isolate the affected product to avoid accidental
use.
``(6) Notification to the public.--
``(A) In general.--If a State educational agency finds that
a food product subject to a Class I recall has been consumed
under a program operated by a school under this Act or the
school breakfast program under section 4 of the Child
Nutrition Act of 1966 (42 U.S.C. 1773), the State educational
agency shall provide public notification in accordance with
subparagraph (B).
``(B) Contents of notification.--The notification shall
include--
``(i) the finding of the Secretary under paragraph (2); and
``(ii) sufficient information to identify the recalled food
product and the date when and location where the recalled
food product was served.
``(7) Enforcement.--
``(A) In general.--A violation of this subsection may be
prosecuted, as applicable--
``(i) by the Secretary under--
``(I) section 12 of the Poultry Products Inspection Act (21
U.S.C. 461);
``(II) section 406 of the Federal Meat Inspection Act (21
U.S.C. 676); or
``(III) section 12 of the Egg Products Inspection Act (21
U.S.C. 1041); or
``(ii) by the Secretary of Health and Human Services under
section 303 of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 333).
``(B) No effect on state prosecutions.--Nothing in this
paragraph prevents a State from prosecuting any violation of
State law.
``(n) Information Sharing on Food Safety Law Compliance.--
``(1) In general.--The Secretary, in consultation with the
Secretary of Health and Human Services, shall establish an
advisory committee (referred to in this subsection as the
`Committee') to assist in establishing an information-sharing
database, or implementing another method, to provide each
State food safety coordinator designated under section 12(q)
and other appropriate persons with up-to-date information
regarding food safety concerns relating to food
manufacturing, processing, and packing facilities that
produce any food purchased or acquired for a program under
this Act or the
[[Page S3093]]
school breakfast program under section 4 of the Child
Nutrition Act of 1966 (42 U.S.C. 1773), including recalls by
and enforcement actions against the facilities.
``(2) Composition.--The Committee shall include
representatives of--
``(A) school food authorities;
``(B) State educational agencies;
``(C) State agricultural agencies;
``(D) consumer groups;
``(E) State public health officials; and
``(F) food manufacturing, processing, and packing
facilities.
``(3) Compensation.--
``(A) In general.--Subject to subparagraph (B), a member of
the Committee shall not receive any compensation for the
service of the member on the Committee.
``(B) Travel expenses.--A member of the Committee shall be
allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized for employees of agencies
under subchapter I of chapter 57 of title 5, United States
Code, while away from the home or regular place of business
of the member in the performance of services for the
Committee.
``(4) Technical assistance.--The Secretary shall provide
for the availability to each State food safety coordinator of
training and technical assistance on use of any database or
method described in paragraph (1).
``(5) Report.--Not later than May 31, 2004, the Committee
shall submit to the Committee on Education and the Workforce
of the House of Representatives and the Committee on
Agriculture, Nutrition, and Forestry of the Senate a report
describing actions taken to carry out this subsection.
``(6) Funding.--Section 715 of the Agriculture, Rural
Development, Food and Drug Administration, and Related
Agencies Appropriations Act, 2003 (Public Law 108-7), and any
successor section, shall not apply to expenses of the
Committee.''.
SEC. 4. DESIGNATION OF STATE FOOD SAFETY COORDINATORS.
Section 12 of the Richard B. Russell National School Lunch
Act (42 U.S.C. 1760) is amended by adding at the end the
following:
``(q) Designation of State Food Safety Coordinators.--Each
State educational agency shall designate an individual to
serve as the State food safety coordinator to ensure within
the State the safety of food served under a program under
this Act or the school breakfast program under section 4 of
the Child Nutrition Act of 1966 (42 U.S.C. 1773).''.
SEC. 5. PROCEDURES AND ACTIONS TO ENSURE THE SAFETY OF
DONATED COMMODITIES.
Section 14 of the Richard B. Russell National School Lunch
Act (42 U.S.C. 1762a) is amended--
(1) in the first sentence of subsection (d)--
(A) in paragraph (4), by striking ``and'' at the end;
(B) in paragraph (5), by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(6) require, at a minimum, for any commodity that is used
under a program under this Act or the school breakfast
program under section 4 of the Child Nutrition Act of 1966
(42 U.S.C. 1773)--
``(A) daily inspection under the Agricultural Marketing Act
of 1946 (7 U.S.C. 1621 et seq.) of any donated commodity that
is covered by--
``(i) the Poultry Products Inspection Act (21 U.S.C. 451 et
seq.);
``(ii) the Federal Meat Inspection Act (21 U.S.C. 601 et
seq.); or
``(iii) the Egg Products Inspection Act (21 U.S.C. 1031 et
seq.);
``(B) daily inspection of any seafood commodity that is
covered by the inspection program carried out by the National
Marine Fisheries Service under the Agricultural Marketing Act
of 1946 (7 U.S.C. 1621 et seq.); and
``(C) quarterly, on-site audits under the Agricultural
Marketing Act of 1946 (7 U.S.C. 1621 et seq.) of each
establishment that produces a donated fresh or processed
fruit or vegetable.'';
(2) by redesignating subsection (g) as subsection (h); and
(3) by inserting after subsection (f) the following:
``(g) Actions To Ensure the Safety of Donated
Commodities.--With respect to commodities purchased by the
Secretary for a program under this Act or the school
breakfast program under section 4 of the Child Nutrition Act
of 1966 (42 U.S.C. 1773), the Secretary shall--
``(1) in the case of ground uncooked meat products--
``(A) collect samples at least 4 times per day during
production; and
``(B) conduct at least daily composite testing for
compliance with the microbiological limits established by the
Secretary on--
``(i) Escherichia coli (E. coli) O157:H7 in effect on
October 1, 2002; and
``(ii) Salmonella in effect on October 1, 2002, unless the
Secretary develops a more appropriate scientific and health-
based standard;
``(2)(A) collect and test samples at least 4 times per day
during production from food contact surfaces of ready-to-eat
meat and poultry product plants; and
``(B) if the result of a test under subparagraph (A) is
positive for Listeria spp., conduct product sampling for
compliance with the microbiological limit on Listeria
monocytogenes issued by the Secretary on May 23, 1989 (54
Fed. Reg. 22345); and
``(3) reject any lot of food products that fails to meet
the requirements of paragraph (1) or paragraph (2), as
applicable.''.
______
By Ms. SNOWE (for herself, Mrs. Feinstein, Mr. McCain, Mr. Kerry,
Mr. Smith, and Mr. Reid):
S. 507. A bill to amend the Internal Revenue Code of 1986 to provide
incentives to introduce new technologies to reduce energy consumption
in buildings; to the Committee on Finance.
Ms. SNOWE. Madam President, I rise today to introduce the EFFECT Act,
the Energy Efficiency through Certified Technologies Act, which has
bipartisan support as I am pleased to be joined by cosponsors Senator
Feinstein of California, Senator McCain of Arizona, Senator Kerry of
Massachusetts, Senator Gordon Smith of Oregon, and Senator Reid of
Nevada.
As a member of the Finance Committee, I strongly believe that we must
develop responsible tax credit incentive policies that will increase
the efficiencies of the homes we build and live in and the buildings in
which we work. We did an admirable job last year providing sound tax
incentives in the omnibus energy bill, and it is regrettable that bill
did not get out of conference and these incentives are not available
for our consumers to use. That is especially true as the storm clouds
gather in the Middle East and the price of oil, for instance, reaches
$40 a barrel.
This bill provides tax incentives for advanced levels of energy
efficiency and peak power saving technologies in the buildings in which
we live, work, and learn. Buildings consume some 35 percent of energy
nationwide and are responsible for the emissions of a comparable
percentage of pollution; importantly, they account for more than one-
half of the Nation's energy costs.
Incentives provided through the tax system are necessary to
complement existing energy efficiency policies at the Federal and State
levels. The issue is, incentive programs already being operated cannot
provide multiyear commitments of money. Such commitments are absolutely
vital in inducing industries to invest in these technologies. The 1-
year commitments that are offered by many current programs are
insufficient to promote dramatic new energy efficiency technologies
even when they are very cost effective.
Our goal in introducing the legislation is to accelerate the
commercial success of technologies that are already cost effective but
are currently impeded by market barriers. These barriers can be
overcome by financial incentives. Savings of up to 50 percent add up to
reductions in climate pollution emissions of 65 million metric tons of
carbon annually after 10 years, accompanied by consumer energy bill
reductions of $30 billion per year and the creation of almost 500,000
new jobs as well as stimulation in the growth of small businesses.
The bill provides for a 6-year--and, in some cases, 3-year--sunset
for the incentive. Incentives are provided for commercial buildings
both new and remodeled, including schools and other public buildings
and rental housing; for air-conditioning, heating, and water heating
equipment which can reduce peak power demand quickly; for new homes and
the retrofitting of existing homes; and for solar electricity.
The incentives provided for in this legislation are based on three
principles: One, independent third-party certification is required so
that energy savings are certified and the Government is getting real
energy savings for the tax money invested; two, the incentives are
workable, not bureaucratic, and are built on programs that have already
been shown to work with minimal bureaucratic intervention or effort;
and, three, the incentives sunset in order to provide a transition to a
market system that already promotes energy efficiency.
The incentives are performance-based so that the consumer and
producer have the motivation to reduce costs and to introduce new
technologies to achieve energy goals in more cost-effective ways than
existing technologies. The documentation required for certification has
value in the marketplace in allowing property markets to reflect
enhanced property values based on energy efficiency.
Many American homes, for instance, were built years before energy-
efficient technologies were developed. This is certainly true in an
older State such as
[[Page S3094]]
my home State of Maine and an incentive for a retrofit such as simply
putting in certifiable high-energy-efficient doors and windows, such a
low-emissivity glass, will save a great deal of energy loss because of
the huge amount of seepage that now occurs through the existing
windows.
This bill will also leverage cost-effective investments in saving
peak powers as well as energy--110,000 megawatts after 10 years. It is
one of the few public policies that can be enacted that can help avert
peak power shortages in the next 4 or 5 years. It will lower energy
costs for consumers and businesses and promote competition and
innovation.
The bottom line is, we have the opportunity to raise the bar for our
future domestic energy systems. Solutions exist in available
technologies, and most of all in the entrepreneurial spirit of the
American people. I look forward to working with the chairmen of the
Finance Committee, as I did last year, to mark up tax incentives that
reflect the provisions of this legislation, and with the Energy
Committee chairmen to further our Nation's energy efficiency goals that
will save on our energy usage--and this will be reflected in the energy
bills consumers must pay--and thus allow us to use less electricity,
and less oil and natural gas to produce that energy.
I am pleased to be joined by Senators representing States throughout
the country and urge others to seriously consider this legislation and
join us in working towards our goal for achieving greater energy
efficiency in the near future.
Mrs. FEINSTEIN. Madam President, I rise in support of the Efficient
Energy through Certified Technologies Act which I have cosponsored
along with Senator Olympia Snowe of Maine.
The EFFECT Act will provide tax incentives to encourage homeowners
and businesses to improve the energy efficiency of their buildings and
equipment. This legislation will stimulate the economy, cut energy
bills, reduce energy usage, and reduce pollution.
This bill was originally introduced in the 107th Congress to address
the Western energy crisis which, as we all know, created exorbitantly
high prices for power and rolling blackouts. This legislation
incorporates improvements based on last year's Senate energy tax bill.
While conditions in the West have improved because there are more
plants coming online and families and businesses have reduced their
energy usage, it is important to take steps to continue to increase our
energy efficiency and reduce energy consumption.
Simply put, there are only two things one can do when there is not
enough power to go around: increase supply or decrease demand.
Without a doubt, the quickest way to address future demand and supply
imbalances is to provide incentives to increase energy efficiency to
reduce demand.
This bill creates economic incentives for Americans to increase
energy efficiency by establishing the following tax deductions and tax
credits for commercial and residential properties using specific energy
efficient technologies:
A tax deduction of $2.25 per square foot for newly constructed or
remodeled commercial buildings, including schools and other public
buildings as well as rental housing, that achieve a 50-percent
reduction in total annual energy costs, compared to existing national
standards.
A $2,000 tax credit to builders of new homes that use 50 percent less
energy than a national model standard.
A performance-based tax credit of as much as $6,000 for installing
solar technology.
A tax credit of as much as $300 if businesses install a super-
efficient, new electric heat pump, a new central air-conditioner, or a
new gas or electric water heater.
A tax credit of as much as $500 if homeowners, tenants, or landlords
retrofit their homes to achieve a 30 percent or 50 percent reduction in
annual energy costs.
The benefits of increasing energy efficiency are immense.
First, increasing energy efficiency will cut heating, cooling, and
electricity costs. Homeowners and businesses spend over $250 billion
each year on heat, air-conditioning, and related energy costs for their
businesses and homes. If we can reduce energy costs by increasing
energy efficiency, money will be freed to fuel the economy in other
areas and create new jobs. Furthermore, increasing energy efficiency
will reduce the impact of future energy price spikes that harm families
and businesses. And the incentives will cause businesses to invest in
producing more efficient equipment and services beginning immediately
after the bill is enacted.
Second, increasing energy efficiency will reduce air pollution.
Energy generation to heat, cool, and light our homes and offices
produces 35 percent of the air pollution emitted nationwide. If we
increase efficiency, then less energy will be needed to power our
buildings, and consequently, we will be able to reduce emissions from
powerplants.
Third, increasing energy efficiency will help maintain the
reliability of our Nation's electricity supply. Since most of our peak
electricity demand comes from heating, cooling, or lighting needs,
increasing energy efficiency will lower the probability of blackouts or
brownouts.
In fact, with this legislation in place, peak electricity demand in
the summer would be reduced by tens of thousands of negawatts
nationwide after a decade--or the equivalent output produced by
hundreds of large powerplants.
This could result in over 10,000 MW of savings over the summer just
in our State and much more on the Western grid that California shares
with neighboring States.
Meanwhile, this legislation will also create a market for firms to
develop more energy-efficient products, such as air-conditioners, heat
pumps, lighting equipment, windows, insulation, water heaters, and
solar panels.
Just think how conditions could have improved in California during
the Western energy crisis if we had been able to reduce our energy
consumption instead of purchasing power at exorbitant rates from out-
of-State suppliers.
According to the Department of Energy, California is already one of
the most energy-efficient States in the Nation--ranking fourth in
overall energy efficiency and second in electricity efficiency.
Nevertheless, Californians responded to the crisis and further
increased their energy efficiency. This legislation will take energy
efficiency to the next level and create the opportunity for all
families and businesses nationwide to make energy efficient
improvements.
Instead of waiting for the next energy emergency to occur, we should
take steps now to reduce energy consumption across the board.
The bill introduced in the 107th Congress had the support of
California Governor Gray Davis, the California Energy Commission, the
Sacramento Municipal Utility District, the Natural Resources Defense
Council, Union of Concerned Scientists, the California Building
Industry Association, most California utilities and many other
organizations and businesses. We expect similar widespread support for
the bill we are reintroducing today.
This bill is an important step to help reduce demand. It provides
financial incentives to offset some of the costs of building new
energy-efficient buildings and homes, and improving existing structures
to make them more energy efficient.
I urge my colleagues to support this important legislation.
______
By Mrs. FEINSTEIN (for herself, Mr. Fitzgerald, Mr. Lugar, Mr.
Harkin, Ms. Cantwell, Mr. Wyden, and Mr. Leahy):
S. 509. A bill to modify the authority of the Federal Energy
Regulatory Commission to conduct investigations, to increase the
penalties for violations of the Federal Power Act and Natural Gas Act,
to authorize the Chairman of the Federal Energy Regulatory Commission
to contract for consultant services, and for other purposes; to the
Committee on Agriculture, Nutrition, and Forestry.
Mrs. FEINSTEIN. Madam President, yesterday the State of California
submitted a filing to the Federal Energy Regulatory Commission which
provides a wholesale indictment of energy companies and shows how a
number of energy firms engaged in deceptive trading practices to drive
up prices in the Western Energy Market. I have called on FERC to make
this evidence public
[[Page S3095]]
and I want to reiterate my request again.
I am also introducing a bill with Senators Fitzgerald, Harkin, Lugar,
Cantwell, Wyden, and Leahy to close a loophole which allows energy
trades to take place electronically, in private, with no transparency,
record, audit trail or any oversight to guard against fraud and
manipulation.
But before I reintroduce this bill, I want to reiterate the important
revelations that have been uncovered in the past year and detail what
we know about yesterday's filing at FERC.
Last week I came to the floor to update the Senate on recent evidence
of fraud and manipulation in the energy sector. Today I want to pick up
where I left off and introduce the Energy Market Oversight Act.
Mr. President, I draw my colleagues' attention to a filing made at
FERC. This ``Public Version'' is a 27-page summary of the filing with
confidential information removed, but it provides a detailed overview
of the fraud and manipulation carried out by energy companies during
the Western energy crisis.
In addition to testimony by expert witnesses, 348 exhibits,
transcripts of depositions, tapes of trader telephone conversations,
emails, and other data, the California parties submitted a 161-page
brief to FERC. The document I have inserted into the Record includes
the Table of Contents, the Introduction and Overview, and the
Conclusion of this 161-page document. To be clear, it is part, but not
all of the brief filed by the State of California.
Mr. President, the filing submitted by the State of California
yesterday shows that there was an extensive and coordinated attempt by
energy companies to engage in the following schemes to drive up prices
in the Western Energy Market:
1. Withholding of Power--driving up prices by creating
false shortages;
2. Bidding to Exercise Market Power--suppliers bid higher
after the California ISO declared emergencies, knowing the
State would need power and be willing to pay any price to get
it;
3. Scheduling of Bogus Load, aka ``Fat Boy'' or ``Inc-
ing''--suppliers submitted false load schedules to increase
prices;
4. Export-Import Games, aka ``Ricochet or ``Megawatt
Laundering''--suppliers exported power out of California and
imported it back into the State in an attempt to sell power
at inflated prices;
5. Congestion Games, aka ``Death Star''--suppliers created
false congestion and were then paid for relieving congestion
without moving any power;
6. Double-Selling--suppliers sold reserves, but then failed
to keep those reserves available for the ISO;
7. Selling of Non-Existent Ancillary Services, aka ``Get
Shorty''--suppliers sold resources that were either already
committed to other sales or incapable of being provided;
8. Sharing of Non-Public Generation Outage Information--the
largest suppliers in California shared information from a
company called Industrial Information Resources that provided
sellers detailed, non-public information on daily plant
outages;
9. Collusion Among Sellers--sellers were jointly
implementing or facilitating Enron-type trading strategies;
10. Manipulation of the Nitrous Oxide (NOX)
Emission Market--sellers manipulated the market for
NOX emissions in the South Coast Air Quality
Management District through a series of wash trades that
created the appearance of a dramatic price increase that may
have been fabricated. For example, Dynegy, together with AES
and others, entered into a series of trades of NOx
credits in July and August of 2000 by which Dynegy would sell
a large quality of credits and then simultaneously buy back a
smaller quantity of credits at a higher per credit price.
We can assume that the thousands of pages filed by the California
parties at FERC detail these examples of market abuse. At this point we
cannot know all of the instances because the specifics remain
confidential, but we have plenty to go on.
Yesterday I wrote another letter to FERC Chairman Pat Wood asking the
Commission to lift its ``Protective Order'' to make this information
public so that families and businesses harmed during the Western Energy
Crisis can know the extent of fraud and manipulation that occurred.
I believe the filing yesterday presents a key decision for FERC.
Clearly the Commission cannot ignore this mountain of new evidence
submitted--especially since it comes at a time when other disclosures
have been made to show pervasive fraud and manipulation in the Western
Energy Market.
Last month Jeffrey Richter, the former head of Enron's Short-Term
California energy trading desk, pled guilty to conspiracy to commit
fraud as part of Enron's well known schemes to manipulate Western
energy markets. Richter's plea follows that of head Enron trader Tim
Belden in the fall of 2002. Belden admitted that he schemed to defraud
California during the Western energy crisis and also plead guilty to
conspiracy to commit wire fraud.
The Enron plea came on the heels of FERC's release of transcripts
from Reliant Energy that reveal how their traders intentionally
withheld power from the California market in an attempt to increase
prices. This is one of the most egregious examples of manipulation and
it is clear and convincing evidence of coordinated schemes to defraud
consumers.
Let me read just one part of the transcript to demonstrate the greed
behind the market abuse by Reliant and its traders.
On June 20, 2000 two Reliant employees had the following conversation
that reveals the company withheld power from the California market to
drive prices up:
Reliant Operations Manager 1: ``I don't necessarily foresee
those units being run the remainder of this week. In fact you
will probably see, in fact I know, tomorrow we have all the
units at Coolwater off.'' (The Coolwater plant is a 526
Megawatt plant.)
Reliant Plant Operator 2: ``Really?''
Reliant Operations Manager 1: ``Potentially. Even number
four. More due to some market manipulation attempts on our
part. And so, on number four it probably wouldn't last long.
It would probably be back on the next day, if not the day
after that. Trying to uh . . .''
Reliant Plant Operator 2: ``Trying to shorten supply, uh?
That way the price on demand goes up.''
Reliant Operations Manager 1: ``Well, we'll see.''
Reliant Plant Operator 2: ``I can understand. That's
cool.''
Reliant Operations Manager 1: ``We've got some term
positions that, you know, that would benefit.''
Six months after this incident, as the Senate Energy Committee was
attempting to get to the bottom of why energy prices were soaring in
the West, the President and CEO of Reliant testified before Congress
that the State of California ``has focused on an inaccurate perception
of market manipulation.''
Reliant's President and CEO went on to say, ``We are proud of our
contributions to keep generation running to try to meet the demand for
power in California. Reliant Energy's plant and technical staffs have
worked hard to maximize the performance of our generation.''
These transcripts prove otherwise and reveal the truth about market
manipulation in the energy sector.
Despite this clear and convincing evidence of fraud, on January 31 of
this year, the Federal Energy Regulatory Commission chose to only give
Reliant a slap on the wrist for this behavior. The company paid only
$13.8 million to sweep this criminal behavior under the rug and settle
with FERC.
Let me turn to some other recent examples that demonstrate how other
energy companies manipulated the Western Energy Market as Reliant did.
On December 11th, FERC finally released audio tapes that show how
traders at Williams conspired with AES Energy plant operators to keep
power offline and drive prices up.
The tapes depict how on April 27, 2000, Williams outage coordinator
Rhonda Morgan encouraged an AES operator at the company's Alamitos
plant to extend a plant outage because the California grid operator was
paying ``a premium'' for power at the time. The Williams employee
stated, ``that's one reason it wouldn't hurt Williams' feelings if the
outage ran long.''
Later that day, Eric Pendergraft, a high-ranking AES employee called
to confirm with Ms. Morgan that Williams wanted the plant to stay
offline by saying, ``you guys were saying that it might not be such a
bad thing if it took us a little while longer to do our work?'' ``I
don't want to do something underhanded,'' Ms. Morgan responded, ``but
if there is work you can continue to do . . .'' At this point Mr.
Pendergraft interrupted to cut off their suspicious conversation,
saying, ``I understand. You don't have to talk anymore.''
Clearly, this is evidence of a calculated intent to withhold power to
raise prices. I find it unconscionable.
[[Page S3096]]
Let's turn to some other examples.
On January 27, 2003, Michelle Marie Valencia, a 32-year-old former
senior energy trader for Dynegy was arrested on charges that she
reported fictitious natural gas transactions to an industry
publication.
On December 5, 2002, Todd Geiger, a former vice president on the
Canadian natural gas trading desk for El Paso Merchant Energy, was
charged with wire fraud and filing a false report after allegedly
telling a trade publication about the prices for 48 natural gas trades
that he never made in an effort to boost prices and company profit.
These indictments are just the latest examples of how energy firms
reported inaccurate prices to trade publications to drive energy prices
higher.
Industry publications claimed they could not be fooled by false
prices because deviant prices are rejected, but this claim was
predicated on the fact that everyone was reporting honestly--which we
now know they weren't doing.
CMS Energy, Williams, American Electric Power Company, and Dynegy
have each acknowledged that its employees gave inaccurate price data to
industry participants. On December 19th Dynegy agreed to pay a $5
million fine for its actions.
In September an Administrative Law Judge at FERC issued a landmark
ruling concluding that El Paso Corporation withheld natural gas from
California and recommended penalty proceedings against the company.
Since the El Paso Pipeline carries most of the natural gas to Southern
California, this ruling has tremendous implications. The FERC
Commissioners are expected to take up this case for a final judgement
soon.
These have been the latest revelations in a series of energy
disclosure bombshells that began on Monday, May 6th when the Federal
Energy Regulatory Commission posted a series of documents on their
website that revealed Enron manipulated the Western Energy Market by
engaging in a number of suspect trading strategies.
These memos revealed for the first time how Enron used schemes called
``Death Star,'' ``Get Shorty,'' ``Fat Boy,'' and ``Ricochet'' to fleece
families and businesses in the West.
The filing made yesterday to FERC shows how other companies did
engage in these Enron-type trading strategies. The brief submitted by
the State of California and others states that suppliers ``were jointly
implementing or facilitating Enron-type trading strategies.''
Let us turn to other types of fraudulent trades that many energy
firms have admitted to.
Dynegy, Duke Energy, El Paso, Reliant Resources Inc., CMS Energy
Corp., and Williams Cos. all admitted engaging in false ``round-trip ``
or ``wash trades.''
What is a ``round-trip'' trade, one might ask?
``Round-trip'' trades occur when one firm sells energy to another and
then the second firm simultaneously sells the same amount of energy
back to the first company at exactly the same price. No commodity ever
actually changes hands, but when done on an exchange, these
transactions send a price signal to the market and they artificially
boost revenue for the company.
How widespread are ``round-trip'' trades? Well, the Congressional
Research Service looked at trading patterns in the energy sector over
the last few years and reported, ``this pattern of trading suggests a
market environment in which a significant volume of fictitious trading
could have taken place.''
Yet, since most of the energy trading market is unregulated by the
government, we have only a slim idea of the illusions being perpetrated
in the energy sector.
Consider the following recent confessions from energy firms about
``round-trip'' trades:
Reliant admitted 10 percent of its trading revenues came
from ``round-trip'' trades. The announcement forced the
company's President and head of wholesale trading to both
step down.
CMS Energy announced 80 percent of its trades in 2001 were
``round-trip'' trades.
Remember, these trades are sham deals where nothing was exchanged,
yet the company booked revenues from the trades.
Duke Energy disclosed that 1.1 billion dollars-worth of
trades were ``round-trip'' since 1999--roughly two-thirds of
these were done on InterContinental Exchange, which means
that thousands of subscribes would have seen these false
price signals.
A lawyer for J.P. Morgan Chase admitted the bank engineered
a series of ``round-trip'' trades with Enron.
Dynegy and Williams have also admitted to this round-trip
trading.
And although these trades mostly occurred with electricity,
there is evidence to suggest that ``round-trip'' trades were
made in natural gas and even broadband.
By exchanging the same amount of a commodity at the same price, I
believe these companies have not engaged in meaningful transactions,
but deceptive practices to fool investors and possibly drive energy
prices up for consumers.
It is therefore imperative that the Department of Justice, FERC, the
SEC, the Commodities Futures Trading Commission and every other
oversight agency conduct an aggressive and vigorous investigation into
all of the energy companies who participated in Western Energy Market.
Beyond that I believe Congress must re-examine what tools the
government needs to keep a better watch over these volatile markets
that are little understood. In the absence of vigilant government
oversight of the energy sector, firms have the incentive to create the
appearance of a mature, liquid, and well-functioning market, but it is
unclear whether such a market exists.
The ``round-trip'' trades, the Enron memos, and the filing at FERC
raise questions about illusions in the energy market.
To this end, I believe it is critical for the Senate to act soon on
the legislation I offered last April to regulate online energy trading.
I am re-introducing this legislation to subject electronic exchanges
like Enron On-Line to the same oversight, reporting and capital
requirements as other commodity exchanges like the Chicago Mercantile
Exchange, the New York Mercantile Exchange and the Chicago Board of
Trade.
I am pleased Senator Fitzgerald, Senator Harkin, Senator Lugar,
Senator Cantwell, Senator Wyden, and Senator Leahy have again signed on
to this legislation. I am proud of the work we did in the 107th
Congress and I hope we can complete action on this bill soon.
Without this type of legislation, there is insufficient authority to
investigate and prevent fraud and price manipulation since parties
making the trade are not required to keep a record.
Right now, energy transactions are regulated by the Federal Energy
Regulatory Commission (FERC) when there is actual delivery.
For example, if I buy natural gas from you, and you deliver that
natural gas to me, FERC has the authority to ensure that this
transaction is transparent and reasonably priced.
However, many energy transactions no longer result in delivery. A
giant loophole has opened where there is no government oversight when
these transactions are done on internet exchanges.
In 2000, Congress passed the Commodity Futures Modernization Act in
2000 which exempted energy and metals trading from regulatory oversight
and excluded it completely if the trade was done electronically.
So today, as long as there is no delivery, there is no price
transparency. Again, this lack of transparency and oversight only
applies to energy. It does not apply if you are selling wheat or pork
bellies or any other tangible commodity.
And it did not take long for Enron Online, and others in the energy
sector, to take advantage of this new freedom by trading energy
derivatives absent any regulatory oversight.
Thus, after the 2000 legislation was enacted, Enron OnLine began to
trade energy derivatives bilaterally without being subject to proper
regulatory oversight. It should not surprise anyone that without the
transparency, prices soared.
Just yesterday Warren Buffett published a warning in Fortune Magazine
saying that ``Derivatives are financial weapons of mass destruction.''
In his annual warning letter to shareholders about what worries him
about the financial markets, Warren Buffett called derivatives and the
trading activities that go with them ``time bombs.''
In the letter, Warren Buffett states, ``In recent years some huge-
scale frauds and near-frauds have been facilitated by derivatives
trades. In the energy and electric utility sectors, for example,
companies used derivatives and
[[Page S3097]]
trading activities to report great `earnings'--until the roof fell in
when they actually tried to convert the derivatives-related receivables
on their balance sheets into cash.''
We clearly saw this with Enron.
Was Enron and its energy derivative trading arm, Enron-On-Line the
sole reason California and the West had an energy crisis? No.
Was it a contributing factor to the crisis? I certainly believe that
it was. Unfortunately, because of the energy exemptions in the 2000
CFMA, which took away the CFTC's authority to investigate, we may never
know for sure.
In the 107th Congress, this legislation was debated during
consideration of the Senate Energy Bill and it was the subject of a
hearing in the Agriculture Committee, but time ran out before the
legislation could be marked up and passed.
Since that time, Senators Lugar and Harkin have made significant
improvements to the legislation and we have added stronger penalties
for market abuse and wrongdoing.
Today I am pleased to note that the following companies and
organizations are supporting this legislation:
The National Rural Electric Cooperative Association,
The Derivatives Study Center,
The American Public Gas Association,
The American Public Power Association,
The California Municipal Utilities Association,
The Southern California Public Power Authority,
The Transmission Access Policy Study Group,
The U.S. Public Interest Research Group,
The Consumers Union,
The Consumers Federation of America,
Calpine,
Southern California Edison,
Pacific Gas and Electric, and
FERC Chairman Pat Wood.
I ask unanimous consent that the letters of support from these
organizations and companies be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Federal Energy
Regulatory Commission,
Washington, DC, February 21, 2003.
Hon. Dianne Feinstein,
U.S. Senate,
Washington, DC.
Dear Senator Feinstein: Thank you for bringing to my
attention your proposed legislation on, inter alia, the
penalty provisions in the Federal Power Act (FPA) and the
Natural Gas Act (NGA), refund provisions in the FPA, and
federal oversight of financial transactions involving energy
commodities. Your amendment would expand the penalties
allowed under the FPA and NGA, and also allow oversight by
the Commodity Futures Trading Commission (CFTC) of financial
transactions involving energy commodities.
I support your proposed changes to the FPA and NGA.
Increased penalty authority will help ensure compliance with
the requirements of these statutes. Also, your proposed
changes to the FPA refund provisions will allow greater
protection of utility customers.
Finally, you know how strongly I feel about customers
having access to the broadest range of useful market
information. Greater transparency is needed in energy
markets. Thus, I support providing for, or clarifying, CFTC
or other Federal regulatory oversight of trading platforms
that are relied on for price discovery. However, the details
of your proposed changes to the Commodity Exchange Act would
be better addressed by the CFTC or others and I would defer
to them with respect to any changes to the Commodity Exchange
Act.
Best regards,
Pat Wood III,
Chairman.
____
PG&E Corporation,
San Francisco, CA, January 8, 2003.
Hon. Thad Cochran,
U.S. Senate, Russell Senate Office Building,
Washington, DC.
Dear Senator Cochran: Congratulations on your assumption of
the Chairmanship of the Agriculture, Nutrition, and Forestry
Committee. We are writing to communicate our support for an
important bipartisan legislative proposal considered by the
Committee last year to provide oversight of energy
derivatives trading markets.
As you know, the Committee considered last summer a
proposal introduced by Senator Feinstein and co-sponsored by
Senators Harkin and Lugar, S. 2724, to repeal the current
exemption of energy derivatives trading from the jurisdiction
of the Commodity Futures Trading Commission (``CFTC''). The
proposal was similar to legislation offered earlier in the
year by Senator Feinstein as an amendment to the Senate
Energy Bill. Enclosed for your information is a letter that
was sent from our corporation to Senator Feinstein last year
concerning her amendment.
The legislation, which we hope Congress will consider again
this year, would re-establish authority over energy
derivatives trading to the CFTC, which has the most relevant
oversight capability, having regulated such trading prior to
2000. As a market participant, we believe that Senator
Feinstein's legislation will encourage transparency of market
information and ensure market stability, which in turn would
enable market participants to better manage risk, reduce
price volatility for electricity consumers and preserve
ultimately the viability of this marketplace.
We appreciate your considering our views on this important
issue, and look forward to working with you in the 108th
Congress.
Sincerely,
Dan Richard,
Senior Vice President, Public Affairs.
____
Calpine,
San Jose, CA, February 5, 2003.
Hon. Dianne Feinstein,
U.S. Senate, Hart Senate Office Building,
Washington, DC.
Dear Senator Feinstein: I am writing to let you know of
Calpine's continuing support for additional oversight of
certain energy derivative markets, as intended by the
legislation you plan to introduce again this year. While we
do not believe that energy trading was a primary cause of the
California energy crisis, we do believe there is a crisis of
confidence in the energy markets and that your legislation
will assist in restoring much needed public confidence in the
energy sector.
Specifically, we support the bill's strengthening of the
CFTC's anti-fraud and anti-manipulation authority and its
provision for increased cooperation and liaison between the
CFTC and the FERC. We are also pleased that your legislation
addresses concerns about the oversight and transparency of
electronic trading platforms. It is important that such
facilities, which play a significant price discovery role in
the energy trading markets, be subject to appropriate
reporting and oversight by the CFTC.
However, I also understand that typical over the counter
bilateral trading operations, such as those that operate from
a trading desk where various potential counterparties are
separately contacted by phone or email, are not intended to
be treated as electronic trading facilities under your bill.
This is an important distinction and one that may need
further clarification as the bill proceeds through the
legislative process.
Calpine would like to thank you for your leadership in
advocating reasonable measures to ensure the integrity of
important energy trading markets and we stand ready to
provide you with any information or assistance that you may
need.
Sincerely,
Joseph E. Ronan, Jr.,
Senior Vice President,
Government and Regulatory Affairs.
____
Edison International,
Rosemead, CA, February 4, 2003.
Hon. Dianne Feinstein,
U.S. Senate,
Washington, DC.
Dear Senator Feinstein: Thank you for asking Edison
International for our views on your Exempt Commodities
Transactions Act, soon to be reintroduced in the 108th
Congress. As you know, Edison shares your concern over
manipulation of the California electricity market by some
market participants, which contributed to the serious
problems the state faced from out-of-control energy prices.
Your legislation would provide transparency in the
electricity derivatives trading market, an industry that is
currently exempted from regulation under the Commodity
Futures Modernization Act of 2000 (CFMA).
I support your legislation, with a suggestion for your
consideration to further refine it. Our company and others
use energy derivatives trading to protect and hedge the
revenue from our power plants. This is in contrast to
companies that conduct middleman financial trading with no or
few power plants and trade to make money on financial
arbitrage. There should be guidance in the final language
which recognizes the difference between these two types of
businesses, particularly regarding further capital
requirements. Otherwise companies that trade in order to
hedge physical assets may be required to pay twice--once in
order to obtain capital for the assets and a second time in
order to meet any capital requirements to back their trades.
Thank you again for your efforts on behalf of California
consumers and businesses.
Sincerely,
John E. Bryson,
Chairman, President and
Chief Executive Officer.
____
American Public Gas Association,
Fairfax, VA, January 22, 2003.
Re amending the Commodities Exchange Act.
Hon. Dianne Feinstein,
Hart Senate Office Building, U.S. Senate,
Washington, DC.
Dear Senator Feinstein: The American Public Gas Association
(APGA) is very pleased that you and Senator Lugar have again
taken the lead to amend the Commodity Exchange Act (CEA). The
provisions you propose, which amend the CEA, are significant
steps towards ensuring that natural gas prices are determined
in a competitive and informed marketplace. We applaud your
efforts to undo special exclusions and exemptions granted in
the closing hours of the
[[Page S3098]]
106th Congress, especially when those exclusions and
exemptions were specifically rejected by the Senate
Agriculture Committee.
The Commodity Futures Trading Commission (CFTC) plays a
front-line role in promoting a competitive natural gas
marketplace. Closing the gaps that impede effective federal
oversight of the natural gas marketplace is essential in
order to foster competitive commodity futures markets and
protect market users and the public from fraud, manipulation,
and abusive practices. APGA fully supports your provisions to
clarify and restore the CFTC's ability to monitor activity in
off-exchange, or over-the-counter (OTC), derivatives markets
that trade substantial volumes of natural gas derivatives.
Your limited and measured steps ensure a fair balance between
free market activities and the necessary protections from bad
conduct, which undermines the confidence and integrity of
market participants and consumers.
Eliminating those special exclusions and exemptions, which
were already rejected three years ago in the committee of
jurisdiction, will help the CFTC meet its obligation to make
sure that no important trading activities fall between the
cracks leaving some energy markets without a federal agency
with oversight authority. The consumers served by public gas
utilities across the country will benefit from your efforts
because they are less likely to be victimized by activities
that occur in a market where the CFTC exercises oversight.
Again, public gas utilities and the hundreds of communities
that we serve commend you for your thoughtful and deliberate
leadership on this very important issue. While there may be
some who will oppose this amendment, one need not look far to
see whether the opposition is looking out for the best
interests of Wall Street or Main Street. We pledge to work
with you in any way we can to pass this much-needed
amendment. Please let me know how I can assist you.
Sincerely,
Bob Cave,
President.
____
American Public Power Association,
Washington, DC, March 4, 2003.
Hon. Dianne Feinstein,
U.S. Senate, Hart Senate Office Building,
Washington, DC.
Dear Senator Feinstein: On behalf of the American Public
Power Association (APPA), I want to express support for the
intent and thrust of your legislation entitled the ``Energy
Market Oversight Act'' and to commend you for your leadership
in addressing these important consumer protection issues.
APPA represents the interests of more than 2,000 publicly
owned electric utility systems across the country, serving
approximately 40 million citizens. APPA member utilities
include state public power agencies and municipal electric
utilities that serve some of the nation's largest cities.
However, the vast majority of these publicly owned electric
utilities serve small and medium-sized communities in 49
states, all but Hawaii. In fact, 75 percent of our members
are located in cities with populations of 10,000 people or
less.
It is my understanding that your legislation would provide
the Commodity Futures Trading Commission (CFTC) with
jurisdiction over trading in energy derivatives and other
financial products. APPA is particularly supportive of
language in your bill that would increase the Federal Energy
Regulatory Commission's (FERC) ability to investigate market
manipulation and penalize such behavior.
Some of APPA's members may have concerns regarding the
impact the bill may have on public power, and I look forward
to working with you and your staff in an effort to resolve
these concerns. I would also like to join the California
Municipal Utilities Association (CMUA) in raising an issue
that I believe is consistent with the intent of your bill.
CMUA has attempted to get the California ISO to do a
benchmarking study comparing their costs to other ISOs
throughout the United States. The California ISO has informed
CMUA that they cannot conduct such a study because they
cannot get the information from other ISOs. To address this
problem, while keeping with your bill's goal of increasing
transparency, I would use you to add a provision to the bill
that would require FERC to gather such information as is
necessary from each ISO to compare their cost of services on
an annual basis.
APPA looks forward to working with you and your staff on
this legislation and other issues in the 108th Congress.
Sincerely,
Alan H. Richardson,
President and CEO.
____
New York Mercantile Exchange,
New York, NY.
Senator Dianne Feinstein,
Hart Senate Office Building,
Washington, DC.
Dear Senator Feinstein: As a result of concerns surrounding
the Enron bankruptcy, numerous congressional committees,
regulators, and financial institutions are closely examining
the broad impact of the collapse on American markets,
investors and employees. Much attention has been paid to
corporate governance, financial and accounting standards, and
market practices, with considerable focus on the energy
marketplace. On behalf of the New York Mercantile Exchange,
Inc. (``NYMEX'' or the ``Exchange''), we wish to applaud your
efforts to bring more accountability and greater transparency
to this nation's vitally important energy marketplace.
NYMEX is the world's largest forum for the trading and
clearing of energy futures contracts. As a federally
chartered marketplace, it is overseen by the independent
federal regulatory agency, the Commodity Futures trading
Commission (``CFTC''). NYMEX serves a diverse domestic and
international customer base by bringing price transparency,
market neutrality, competition and efficiency to energy
markets, and provides businesses with the financial tools to
deal with market uncertainty.
After studying your legislative proposal, we have concluded
that it is very worthy of support for the following reasons:
The proposal would refine the definition of trading
facility as applied to energy derivatives markets and would
further require that any such market not otherwise regulated
by the CFTC would be accountable to them.
In addition, the proposal would give the CFTC vitally
important tools to monitor such markets, including large
trader reporting and net capital standards.
The proposal would also ensure that the CFTC has the
authority and ability to obtain access to information
critical to market oversight and to make market information
public to the extent that the Commission determines that it
is in the public interest to do so.
With numerous reports of reduced confidence in market
integrity in the wake of the Enron bankruptcy, never has it
been more important to restore faith in the great American
resource, our competitive markets. S. 517's provisions
relating to addressing regulatory gaps in the CFTC regulatory
``umbrella'' can provide an important and meaningful
improvement in market oversight, and is an important step in
building faith and confidence in a competitive energy
marketplace.
We strongly support your efforts to enhance market
transparency and accountability, and we look forward to
working with you in this important endeavor.
Sincerely,
Vincent Viola,
Chairman.
J. Robert Collins,
President.
____
Southern California
Public Power Authority,
February 28, 2003.
Hon. Dianne Feinstein,
U.S. Senate,
Washington, DC.
Dear Senator Feinstein: On behalf of the Southern
California Public Power Authority (SCPPA), I would like to
express our support for your proposed legislation, the
``Energy Market Oversight Act,'' which would provide more
authority to the Federal Energy Regulatory Commission (FERC)
and the Commodity Futures Trading Commission (CFTC) to
oversee the trading in energy derivatives and other financial
transactions and to investigate and punish market
manipulation.
SCPPA is a non-profit, joint action agency formed in 1980
to represent the cities of Anaheim, Azusa, Banning, Burbank,
Cerritos, Colton, Glendale, Los Angeles, Pasadena, Riverside,
and Vernon; and the Imperial Irrigation District. The
community-owned utilities that make up SCPPA's membership
serve approximately five million citizens from northern Los
Angeles County to the Mexican border.
We support the intent of your legislation because we
believe it will enhance safeguards for consumers and foster a
more fully functioning competitive market. As you are well
aware, lack of effective market monitoring and market
transparency combined to allow for manipulation of the
markets, to the extreme detriment of California consumers. We
believe that federal legislation that promotes more effective
monitoring and remedies for fraud and market abuses will
improve the climate for investment in new generation,
increase consumer confidence, and reduce market volatility.
We are encouraged that this legislation increases the civil
and criminal penalties for manipulation, allows for prompt
investigatory action by FERC, and allows for an earlier
refund effective date when rates are not ``just and
reasonable.'' We think these actions will provide an improved
regulatory deterrent, as well as a means for swift and
complete refunds to consumers.
SCPPA commends you for taking a leadership role on these
critical issues and looks forward to working with you to
address a few issues of particular concern to our municipal
utility members.
Sincerely,
Bill Carnahan,
SCPPA Executive Director.
____
National Rural Electric
Cooperative Association,
Arlington, VA, January 29, 2003.
Hon. Dianne Feinstein,
U.S. Senate, Hart Office Building,
Washington, DC.
Dear Senator Feinstein: I would like to take this
opportunity to express the appreciation of the National Rural
Electric Cooperative Association for our efforts to restore
transparency and integrity to the energy markets. We are
pleased that you have introduced legislation with Senators
Lugar, Harkin, Fitzgerald and others (the Energy Market
Oversight Act) that reestablished the ability of the
Commodity Futures Trading Commission to police all energy
derivatives
[[Page S3099]]
markets for fraud and commodity price manipulation.
Today, consumers and investors have little confidence that
the energy markets are operating fairly and for the benefit
of all. Much blame for the current crisis in confidence can
be placed on the so-called ENRON exemption, adopted in 2000,
as part of the legislation that deregulated the over-the-
counter derivatives market for energy commodities.
The legislation created a gap in the regulation of energy
derivatives where price and trade manipulation can occur
unchecked by adequate regulatory oversight. Although the
Commodity Futures Trading Commission (CFTC) has authority to
prosecute fraud and price manipulation that occurs on the
commodity exchanges, the CFTC has no clear authority to
pursue violations of the Federal anti-fraud and anti-
manipulation laws in the over-the-counter energy market.
Energy derivatives contracts, whether traded on well-
regulated commodities exchanges or in the over-the-counter
market, play an important role in determining the costs and
availability of electricity and other energy products to
consumers. But, consumers suffer when much of the market for
energy derivatives lacks transparency and operates without
accountability for manipulation and fraud, which is the case
for the over-the-counter markets.
Recent headlines underscore the need for this important
legislation. The news has been filed with the indictments of
energy traders for manipulation of the energy markets and
admissions by energy companies that they have engaged in
deceptive market practices, including wash trades on an
unregulated over-the-counter exchange.
Consumer-owned electric co-ops now purchase more than 50%
of their electric power on the market and are exposed to the
risks that an unstable market creates. As the representative
of America's 900 consumer-owned electric co-op utilities, the
NRECA believes that it is vitally important to restore
confidence in the energy markets by ensuring that market
participants have access to reliable and credible
information.
Your legislation represents an important step in creating
more transparent energy markets. I want to thank you for your
leadership on this critical issue and offer the support of
America's electric cooperatives in this effort to restore
credibility to the nation's energy markets. We look forward
to working with you and your staff to improve the legislation
as it moves forward.
Sincerely,
Glenn English,
Chief Executive Officer.
____
Washington, DC,
February 7, 2003.
Dear Senator Feinstein: We are writing to express our
support for the Energy Market Oversight Act being offered by
yourself and Senators Lugar, Cantwell and Leahy. This
important legislation will assure that over-the-counter
derivatives markets in ``exempt'' commodities such as energy
will be covered by federal prohibitions on fraud and
manipulation. This regulatory assistance comes at a critical
time. According to the Federal Energy Regulatory Commission's
Director of the Office of Market Oversight, ``energy markets
are in severe financial distress.'' Along with the decline in
credit quality in these markets, the loss of confidence and
trust has led to a ruin in the liquidity and depth of these
markets. This legislation will go a long way to address this
problem.
Derivatives are highly leveraged financial transactions,
and this allows investors to potentially take a large
position in the market without committing an equivalent
amount of capital. Moreover, derivatives traded in over-the-
counter markets are devoid of the transparency that
characterizes exchange-traded derivatives such as futures,
and this lack of transparency that characterizes exchange-
traded derivatives such as futures, and this lack of
transparency introduces a greater potential for abuse through
fraud and manipulation.
Derivatives are often combined into highly complex
structured transactions that are difficult--even for seasoned
securities traders and finance professionals--to understand
and price in the market. Enron used such over-the-counter
derivatives extensively in order to hide the nature of their
activities from investors. The failure of Enron and the
demise of other energy derivatives dealers has had a
devastating impact of the level of trust in energy markets.
This legislation would help ensure that over-the-counter
derivatives markets operate with proper federal oversight
which will make the markets more stable and transparent. It
is appropriate to place this oversight authority with the
Commodity Futures Trading Commission which, as the principal
federal regulator of derivatives transactions since its
founding in 1975, will provide oversight, surveillance and
enforcement of anti-fraud and anti-manipulation laws. The
CFTC has the experience to handle these complex financial
transactions and to develop the best rules to implement these
protections. The legislation also requires the cooperation of
the Federal Energy Regulatory Commission, the entity charged
with overseeing the energy markets, in providing a stable and
honest market for the investing public.
At a time when these energy markets are deeply distressed
and the investing public looks skeptically at derivatives
trading and firms engaged in derivatives trading, we should
take decisive steps to ensure that the public is protected
from Enron-like abuses. This amendment is just such a step,
and we support it.
Thank you for introducing this important legislation.
Sincerely,
Adam J. Goldberg,
Policy Analyst, Consumers Union.
Mark N. Cooper,
Director of Research, Consumer Federation of America.
Edmund Mierzwinski,
Consumer Program Director, U.S. Public Interest Research
Group.
Randall Dodd,
Director, Derivatives Study Center.
____
Transmission Access
Policy Study Group,
February 25, 2003.
Re Energy Market Oversight Act.
Hon. Dianne Feinstein,
U.S. Senate, Hart Senate Office Building,
Washington, DC.
Dear Senator Feinstein: I understand that you will be
introducing shortly a stand-alone bill, entitled The Energy
Market Oversight Act, which is similar to the amendment you
offered last season to S. 517, the Energy Policy Act of 2002.
This bill would, among other things, place derivative
products for energy under the jurisdiction of the Commodities
Future Trading Commission (CFTC), and enhance the Federal
Energy Regulatory Commission's (FERC) remedial and penal
authority.
On behalf of the Transmission Access Policy Study Group
(TAPS), I would like to express our support for the policy
objective of your proposed legislation: better protecting
consumers from manipulation in the volatile energy markets.
We look forward to working with you to refine the bill as it
moves through the legislative process. Expanding the CFTC and
FERC role in preventing and redressing energy market abuses
is one of a number of avenues for enhanced consumer and
market power protection that should be included if an
electricity title moves forward this year. TAPS
representatives would like to sit down with your staff and
discuss the details of your bill and related matters, when
convenient.
The other key related components of any electricity title
are (i) strong consumer protections, as were offered in the
Cantwell amendment (SA 3234) to the Energy Policy Act of
2002, (ii) expanding FERC's merger review authority as was
done in S. 517, (iii) a strong market transparency
requirement, and (iv) further strengthening FERC powers to
remedy and penalize abuses of market power and market
manipulation. Finally, we would strongly urge you to oppose
repeal of the Public Utility Holding Company Act this year.
Repealing PUHCA would lead to massive consolidation in the
industry, increasing dramatically opportunities for
manipulation of the market.
Very truly yours,
Roy Thilly,
TAPS Chairman.
Mrs. FEINSTEIN. Mr. President, here is an explanation of what this
bill does: It applies anti-fraud and anti-manipulation authority to all
exempt commodity transactions--an exempt commodity is a commodity which
is not financial and not agricultural and mainly includes energy and
metals.
The bill sets up two classes of swaps. For those made between
``sophisticated persons,'' basically institutions and wealthy
individuals, that are not entered into on a ``trading facility''--for
example, an exchange--anti-fraud and anti-manipulation provisions apply
and wash trades are prohibited.
The following regulations would apply to all swaps made on an
``electronic trading facility'' and a ``dealer market'', which includes
dealers who buy and sell swaps in exempt commodities, and the entity on
which the swap takes place: anti-fraud and anti-manipulation provisions
and the prohibition of wash trades apply; if the entity on which the
swap takes place serves a pricing or price discovery function,
increased notice, reporting, bookkeeping, and other transparency
requirements; and the requirement to maintain sufficient capital
commensurate with the risk associated with the swap;
Except for the anti-fraud and anti-manipulation provisions, the CFTC
has the discretion to tailor the above requirements to fit the
character and financial risk involved with the swap or entity. While
the CFTC could require daily public disclosure of trading data like
open and closing prices, similar to the requirements of futures
exchanges, it could not require real-time publication of proprietary
trading information or prohibit an entity from selling their data.
The CFTC may allow entities to meet certain self-regulatory
responsibilities- as provided in a list of ``core principles.'' If an
entity chose to become a
[[Page S3100]]
self-regulator, these core principles would obligate the entity to
monitor trading to prevent fraud and manipulation as well as assure
that its other regulatory obligations are met.
The penalties for manipulation are greatly increased. The civil
monetary penalty for manipulation is increased from $100,000 to $1
million. Wash trades are subject to the monetary civil penalty for each
violation, and imprisonment up to 10 years.
The FERC is required to improve communications with other Federal
regulatory agencies. A shortcoming in the main anti-fraud provision of
the CEA is also corrected by allowing CFTC enforcement of fraud to
apply to instances of either defrauding a person for oneself or on
behalf of others.
It requires the FERC and the CFTC to meet quarterly and discuss how
energy derivative markets are functioning and affecting energy
deliveries.
It grants the FERC the authority to use monetary penalties on
companies that don't comply with requests for information. It is
essentially the same authority that the SEC has.
It makes it easier for FERC to hire the necessary outside help they
need including accountants, lawyers, and investigators for
investigative purposes.
It eliminates the requirement that FERC receive approval from the
Office of Management and Budget before launching an investigation or
price discovery of electricity or natural gas markets involving more
than 10 companies.
It increases the penalty amounts to $1 million instead of the current
$5,000 for violations of the Federal Power Act and the Natural Gas Act;
five years instead of the current two for violations of the statute;
and, $50,000 per violation per day instead of the current $500 for
violations of rules or orders under the Federal Power Act and Natural
Gas Act.
The Commission's authority to impose civil penalties is broadened to
all sections of Part II of the Federal Power Act and the penalty amount
is increased from $10,000 to $50,000 per violation per day.
It modifies Section 206 of the Federal Power Act to allow for an
earlier refund effective date to increase the opportunity for refunds
as a deterrent to fraudulent and manipulative behavior in the energy
markets.
This legislation is not going to do anything to change what happened
in California and the West. But it does provide the necessary authority
for the CFTC and FERC which will help protect against another energy
crisis.
When regulatory agencies have the will but not the authority to
regulate, Congress must step in and ensure that our regulators have the
necessary tools. Unfortunately, sometimes an agency has neither. In
this case I am glad to have the support of FERC and I hope that the
CFTC will reconsider and support this legislation.
______
By Ms. SNOWE (for herself and Ms. Collins):
S. 510. A bill to establish a commercial truck highway safety
demonstration program in the State of Maine, and for other purposes; to
the Committee on Commerce, Science, and Transportation.
Ms. SNOWE. Mr. President, I rise today, along with my colleague
Senator Collins, to introduce legislation, the Commercial Truck Highway
Safety Demonstration Program Act, to create a safety pilot program for
commercial trucks.
This bill would authorize a safety demonstration program in my home
State of Maine that could be a model for other States. I have been
working closely with the Maine Department of Transportation,
communities in my State, and others to address statewide concerns about
the existing Federal interstate truck weight limit of 80,000 pounds.
I believe that safety must be the No. 1 priority on our roads and
highways, and I am very concerned that the existing interstate weight
limit has the perverse impact of forcing commercial trucks onto State
and local secondary roads that were never designed to handle heavy
commercial trucks safely. We are talking about narrow roads, lanes, and
rotaries, with frequent pedestrian crossings and school zones.
I have been working to address this concern for many years. During
the 105th Congress, for example, I authored a provision providing a
waiver from Federal weight limits on the Maine Turnpike, the 100-mile
section of Maine's interstate in the southern portion of the State, and
it was signed into law as part of TEA-21. I have also shared my
concerns with the Department of Transportation and the Senate
Environment and Public Works Committee to urge them to work with me in
an effort to address this challenge.
In addition, the Main Department of Transportation is in the process
of conducting a study of the truck weight limit waiver on the Maine
Turnpike, and I have been working closely with the State in the hopes
of expanding this study, which will focus on the safety impact of
higher limits, infrastructure issues, air quality issues, and economic
issues as well, in order to secure the data necessary to ensure that
commercial trucks operate in the safest possible manner.
Federal law attempts to provide uniform truck weight limits, 80,000
pounds, on the Interstate System, but the fact is there are a myriad of
exemptions and grandfathering provisions. Furthermore, interstate
highways have safety features specifically designed for heavy truck
traffic, whereas the narrow, winding State and local roads don't.
The legislation I am submitting today would simply direct the
Secretary of Transportation to establish a 3-year pilot program to
improve commercial motor vehicle safety in the State of Maine.
Specifically, the measure would direct the Secretary, during this
period, to waive Federal vehicle weight limitations on certain
commercial vehicles weighing over 80,000 pounds using the Interstate
System within Maine, permitting the State to set the weight limit. In
addition, it would provide for the waiver to become permanent unless
the Secretary determines it has resulted in an adverse impact on
highway safety.
I believe this is a measured, responsible approach to a very serious
public safety issue. I hope to work with all of those with a stake in
this issue, safety advocates, truckers, States, and communities, to
address this matter in the most effective possible way, and I hope that
my colleagues will join me in this effort.
Ms. COLLINS. Mr. President, I rise to join with my senior colleague
from Maine in sponsoring the Commercial Truck Highway Safety
Demonstration Program Act, an important bill that addresses a
significant safety problem in our State.
Under current law, trucks weighing as much as 100,000 pounds are
allowed to travel on Interstate 95 from Maine's border with New
Hampshire to Augusta, our capital city. At Augusta, trucks weighing
more than 80,000 pounds are forced off Interstate 95, which proceeds
north to Houlton. Heavy trucks are forced onto smaller, secondary roads
that pass through cities, towns, and villages.
Trucks weighing up to 100,000 pounds are permitted on interstate
highways in New Hampshire, Massachusetts, and New York as well as the
Canadian provinces of New Brunswick and Quebec. The weight limit
disparity on various segments of Maine's Interstate Highway System
forces trucks traveling to and from destinations in these States and
provinces to use Maine's State and local roads, nearly all of which
have two lanes, rather than four. Consequently, many Maine communities
along the interstate see substantially more truck traffic than would
otherwise be the case if the weight limit were 100,000 pounds for all
of Maine's interstate highways.
The problem Maine faces because of the disparity in truck weight
limit is perhaps most pronounced in our State capital. Augusta is the
Maine Turnpike's northern terminus where heavy trucks that are
prohibited from traveling along the northern segment of Interstate 95
enter and exit the turnpike. The high number of trucks that must
traverse Augusta's local roads, and particularly its two rotaries,
creates a hazard for those who live and work in as well as visit the
city.
The Maine Department of Transportation estimates that the truck
weight disparity sends 310 vehicles in excess of 80,000 pounds through
Augusta every day. These vehicles, which are sometimes transporting
hazardous materials, must pass through Cony Circle, one of the State's
most dangerous traffic circles and the scene of 130 accidents per year.
The fact that the circle
[[Page S3101]]
is named for the 1,200 student high school that it abuts adds to the
severity of the problem.
A uniform truck weight limit of 100,000 pounds on Maine's interstate
highways would reduce the highway miles and travel times necessary to
transport freight through Maine, resulting in economic and
environmental benefits. Moreover, Maine's extensive network and local
roads will be better preserved without the wear and tear of heavy truck
traffic. Most important, however, a uniform truck weight limit will
keep trucks on the interstate where they belong, rather than on roads
and highways that pass through Maine's cities, towns, and
neighborhoods.
The legislation that Senator Snowe and I are introducing addresses
the safety issues we face in Maine because of the disparities in truck
weight limits. The legislation directs the Secretary of Transportation
to establish a commercial truck safety pilot program in Maine. Under
the pilot program, the truck weight limit on all Maine highways that
are part of the Interstate Highway System would be set at 100,000
pounds for 3 years. During the waiver period, the Secretary would study
the impact of the pilot program on safety, and would receive the input
of a panel that would include State officials, safety organizations,
municipalities, and the commercial trucking industry. The waiver would
become permanent if the panel determined that motorists were safer as a
result of a uniform truck weight limit on Maine's Interstate Highway
System.
Maine's citizens and motorists are needlessly at risk because too
many heavy trucks are forced off the interstate and on to local roads.
The legislation Senator Snowe and I are introducing is a commonsense
approach to a significant safety problem in my State. I hope my
colleagues will support passage of this important legislation.
____________________