To amend the Internal Revenue Code of 1986 to restrict the use of tax-exempt financing by governmentally owned electric utilities and to subject certain activities of such utilities to income tax.

Amends the Internal Revenue Code to revise the definition of a private activity bond to include a bond issued for the construction or acquisition of a governmental electric output facility, except for a bond issued for the construction or acquisition of a local governmental electric output facility (as defined).

Subjects to taxation income derived by any governmental utility from sales of electric energy services to persons: (1) not within a qualified governmental service area of such utility; and (2) for resale if such resale is to persons outside such service area. Sets forth exceptions.