A bill to amend the Federal Power Act to provide for the protection of electric utility customers and enhance the stability of wholesale electric markets through the clarification of State regulatory jurisdiction.

Summary: Amends the Federal Power Act to deny the Federal Regulatory Energy Commission (FERC) jurisdiction over bundled retail sales of electric energy or to compel the unbundling of rates for bundled retail sales of electric energy. Defines bundled retail sales as sales of electric energy to retail customers in which generation, transmission, distribution, and other services necessary to supply electric energy are sold as a single delivered service by a single seller, acting under the regulatory jurisdiction of a State commission.

Directs FERC to ensure that certain load-serving entities shall be entitled to use either transmission facilities or rights to firm transmission service to meet their service obligations to their customers or to their existing wholesale contractual obligations before the transmission capacity is made available for other uses.

States that if a service obligation or contractual obligation is transferred to another load-serving entity, the successor shall be entitled to use the transmission facilities or firm transmission rights associated with such transfer.

Declares that a transmitting utility shall not be considered to be engaging in undue discrimination or preference if it reserves transmission capacity to meet certain service obligations or firm long-term wholesale contractual obligations.

Prescribes cost allocation guidelines for an applicant seeking seeking interconnection of facilities or transmission service.

Declares that a standard market design rule shall not be effective except to the extent it is: (1) approved by Congress in a law enacted after the date of enactment of this Act; and (2) consented to in writing by the pertinent State Commission. Defines a standard market design rule as: (1) one promulgated by FERC pursuant to a specified proposed rulemaking; or (2) any rule or order of general applicability addressing transmission access or market design in which FERC asserts jurisdiction over the transmission component of bundled retail sales of electric energy or requires the transfer of ownership, operation, or control of transmission facilities to a regional transmission organization, independent transmission provider, or similar organization.

SECTION 1. BUNDLED RETAIL SALES OF ELECTRIC ENERGY.

    (a) Jurisdiction.--Section 201(b)(1) of the Federal Power Act (16 
U.S.C. 824(b)(1)) is amended--
            (1) by striking ``(b)(1) The'' and inserting the following:
    ``(b) Applicability.--
            ``(1) In general.--The'';
            (2) by striking ``The Commission'' and inserting the 
        following:
            ``(2) Facilities.--The Commission''; and
            (3) by adding at the end the following:
            ``(3) Bundled retail sales of electric energy.--The 
        Commission shall not have jurisdiction--
                    ``(A) over bundled retail sales of electric energy 
                (including the transmission component of retail sales); 
                or
                    ``(B) to compel the unbundling of rates for bundled 
                retail sales of electric energy.''.
    (b) Definition of Bundled Retail Sales of Electric Energy.--Section 
201 of the Federal Power Act (16 U.S.C. 824) is amended by adding at 
the end the following:
    ``(h) Definition of Bundled Retail Sales of Electric Energy.--In 
this part, the term `bundled retail sales of electric energy' means 
sales of electric energy to retail customers in which generation, 
transmission, distribution, and other services necessary to supply 
electric energy to retail customers are sold as a single delivered 
service by a single seller, acting under the regulatory jurisdiction of 
a State commission.''.

SEC. 2. SERVICE OBLIGATION PROTECTION.

    Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is amended 
at the end the following:

``SEC. 215. SERVICE OBLIGATIONS OF LOAD-SERVING ENTITIES.

    ``(a) Definitions.--In this section:
            ``(1) Existing wholesale contractual obligation.--
                    ``(A) In general.--The term `existing wholesale 
                contractual obligation' means an obligation under a 
                firm long-term wholesale contract that was in effect on 
                March 28, 2003.
                    ``(B) Contract modifications.--A contract 
                modification after March 28, 2003 (other than a 
                contract modification that increases the quantity of 
                electric energy sold under the contract), shall not 
                affect the status of a contract described in 
                subparagraph (A) as an existing wholesale contractual 
                obligation.
            ``(2) Load-serving entity.--
                    ``(A) In general.--The term `load-serving entity' 
                means a transmitting utility that has an obligation 
                under Federal, State, or local law, or a long-term 
                contract, to provide electric service to--
                            ``(i) electric consumers (as defined in 
                        section 3 of the Public Utility Regulatory 
                        Policies Act of 1978 (16 U.S.C. 2602)); or
                            ``(ii) an electric utility (as defined in 
                        section 3 of that Act) that has an obligation 
                        to provide electric service to electric 
                        consumers.
                    ``(B) Service obligation.--For purposes of this 
                section, an obligation described in subparagraph (A) 
                shall be considered a service obligation.
    ``(b) Service Obligations.--
            ``(1) Applicability.--This subsection applies to any load-
        serving entity that--
                    ``(A) owns transmission facilities for the 
                transmission of electric energy in interstate commerce 
                used to purchase or deliver electric energy to meet a 
                service obligation to customers or an existing 
                wholesale contractual obligation; or
                    ``(B) holds a contract or service agreement for 
                firm transmission service used to purchase or deliver 
                electric energy to meet a service obligation to 
                customers or an existing wholesale contractual 
                obligation.
            ``(2) Use of transmission facilities or services.--In 
        exercising authority under this Act, the Commission shall 
        ensure that any entity described in paragraph (1) shall be 
        entitled to use transmission facilities or rights to firm 
        transmission service described in paragraph (1) to meet service 
        obligations described in paragraph (1) before transmission 
        capacity is made available for other uses.
    ``(c) Use by Successors in Interest.--
            ``(1) In general.--If all or a portion of the service 
        obligation or contractual obligation described in subsection 
        (b) is transferred to another load-serving entity, the 
        successor shall be entitled to use the transmission facilities 
        or firm transmission rights associated with the transferred 
        service obligation consistent with subsection (b).
            ``(2) Subsequent transfers.--A subsequent transfer to 
        another load-serving entity, or a retransfer to the original 
        load-serving entity, shall be entitled as provided in paragraph 
        (1).
    ``(d) Relationship to Other Provisions.--If a transmitting utility 
reserves transmission capacity (or reserves the equivalent capacity in 
the form of tradable transmission rights) to meet service obligations 
or firm long-term wholesale contractual obligations under subsection 
(b), the transmitting utility shall not be considered to be engaging in 
undue discrimination or preference under this Act or any other law.
    ``(e) Applicability.--This section does not apply to an area served 
by a utility located in an area described in section 212(k)(2)(B).
    ``(f) Savings Clause.--Nothing in this section alters or affects 
the allocation of transmission rights approved by the Commission before 
the date of enactment of this section by an independent system operator 
or regional transmission organization.''.

SEC. 3. COST ALLOCATION.

    Section 205 of the Federal Power Act (16 U.S.C. 824d) is amended by 
adding at the end the following:
    ``(g) Cost Allocation.--
            ``(1) Applicability.--This subsection applies to any rule 
        or order of general applicability issued by the Commission 
        under this Act that--
                    ``(A) requires the physical connection of any 
                cogeneration facility, any small power production 
                facility, any other electric power generation facility 
                that makes wholesale sales of electric power, or the 
                transmission facilities of any electric utility, with 
                the facilities of any electric utility, Federal power 
                marketing agency, geothermal power producer (including 
                a producer that is not an electric utility), qualifying 
                cogenerator, or qualifying small power producer; or
                    ``(B) setting rates for transmission service.
            ``(2) Costs.--Any order or rule described in paragraph (1) 
        shall require that the applicant seeking the interconnection of 
        facilities or transmission service to pay--
                    ``(A) the necessary and reasonable costs of any new 
                facility required to provide the interconnection or 
                transmission service that would not have been necessary 
                absent the interconnection or transmission service 
                request;
                    ``(B) an equitable share of the fixed costs of the 
                existing system necessary to complete the 
                interconnection or transmission service transaction; 
                and
                    ``(C) the costs of any other services that are 
                ancillary to the interconnection or transmission 
                service transaction.
            ``(3) Transmission service credits.--The requestor of 
        interconnection or transmission service shall not be entitled 
        to transmission service credits as a result of payments made 
        under this subsection.''.

SEC. 4. STANDARD MARKET DESIGN RULE.

    Section 206 of the Federal Power Act (16 U.S.C. 824i) (as amended 
by section 3) is amended by adding at the end the following:
    ``(g) Standard Market Design Rule.--
            ``(1) Definition of standard market design rule.--In this 
        subsection, the term `standard market design rule' means--
                    ``(A) a rule promulgated pursuant to the notice of 
                proposed rulemaking issued by the Commission on July 
                31, 2002, in Docket No. RM01-12-0000, including any 
                modification of the rule that is within the scope of 
                the notice; or
                    ``(B) any rule or order of general applicability 
                under this Act that addresses transmission access or 
                market design and in which the Commission--
                            ``(i) asserts jurisdiction over the 
                        transmission component of bundled retail sales 
                        of electric energy; or
                            ``(ii) requires the transfer of ownership, 
                        operation, or control of transmission 
                        facilities to a regional transmission 
                        organization, independent transmission 
                        provider, or similar organization.
            ``(2) Effectiveness.--Except as provided in paragraph (3), 
        a standard market design rule shall not be effective except to 
        the extent that the standard market design rule is approved by 
        Congress in a law enacted after the date of enactment of this 
        subsection.
            ``(3) State consent.--A standard market design rule that is 
        otherwise valid under this Act may take effect in a region 
        consisting entirely of States the State Commission has 
        consented in writing to the application of the standard market 
        design rule in the State.''.