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Electric Restructuring Legislation: Handicapping the 106th Congress

Fortnightly Magazine - February 1 1999

consumer groups and those who have opposed stand-alone PUHCA reform."

The restructuring issue has stayed somewhat partisan, at least in the House.

"It's not a partisan issue, it's a regional issue, to me," notes another Hill observer. "I'm somewhat surprised that the Republicans haven't reached out more to the Democratic side of the aisle to work through a compromise. It's not like the tax bill where it's very partisan."

An earlier bill by DeLay, H.R. 1230, would have the FERC deferring to state commissions to regulate local distribution, lifeline service, certification of ESPs, universal service and conservation programs.

In the bill, DeLay was hopeful. He had electric restructuring taking effect Jan. 1, 1999.

That date is now history. Whether the 106th Congress becomes part of the annals of electricity deregulation remains to be seen. If the states and the FERC continue moving ahead, Congress could find itself left behind.

Joseph F. Schuler Jr. is senior associate editor at Public Utilities Fortnightly. Research assistance was provided by Carl J. Levesque.

Will Private Use Get Public Airing? Tax-exempt debt under fire.

Outside strict electric restructuring bills, the issue that could unleash the most venom in this Congress is legislation affecting private use of public power systems.

Public power systems are allowed to use tax-exempt bonds to finance their facilities, but the U.S. Constitution limits tax-exempt debt so that public credit isn't used for private purposes. The Tax Reform Act of 1986 placed the limit on government bonds. Private use may not exceed the lesser or either 10 percent or $15 million for a single project. Private use regulations violations can result in loss of tax exemptions for bondholders and forced recall of the bonds.

The U.S. Treasury Department passed temporary rules just over a year ago that allow public power systems to participate in independent system operators, but public power believes the rules don't go far enough. The new rules also apply to generation facilities financed by bonds.

Several bills that could shape the debate on private use, if they are introduced again this year, are S. 2182, by Sen. Slade Gorton (R-Wash.); S.1483, by Sen. Frank H. Murkowski (R-Alaska); H.R. 3927, by Philip S. English (R-Pa.); and H.R. 4732, by Robert T. Matsui (D-Calif.) and Richard E. Neal (D-Mass.).

There is some doubt whether Murkowski will put aside his "full-service" restructuring bill to revisit the private use issue. Murkowski's approach to help move public power to a competitive marketplace is seen by some as detrimental to public power. Under Murkowski's proposal, public power systems that have outstanding bonds would immediately have to call in their debt. Public power believes that by calling in outstanding bonds, worth almost $80 billion, one sector of the industry's electricity costs will increase, shortchanging the goal of competition.

According to Joe Nipper, associate executive director at the American Public Power Association, Gorton's S.2182 is the preferred solution. The bill deems open access transactions not to be private business use. It also allows public power systems to issue bonds for new transmission facilities and doesn't require public power systems