Free Market Energy Act of 2015

Summary: Free Market Energy Act of 2015 This bill amends the Federal Power Act to identify the elements of a distributed energy resource, including fuel cells, microgrids, and combined heat and power systems. Distributed energy resources shall have a general right of interconnection under the Public Utility Regulatory Policies Act of 1978 (PURPA), and all rates and fees for interconnection shall provide for the two-way benefit for the distributed energy resource and the electricity grid. Each state regulatory authority shall consider requiring that distributed energy resources be eligible to receive just and reasonable energy and rate treatment for time-of-use pricing and other specified features and values.  A state regulatory authority or nonregulated electric utility acting under state authority must consider specified interconnections standards that include:  setting rates that exceed the incremental cost of alternative electric energy for purchases from any distributed energy resource that is a qualifying facility for electricity generated, demand reduced, or service provided by the qualifying facility interconnected under this Act; and making any distributed energy resource project exempt from filing requirements with the Federal Energy Regulatory Commission (FERC).   A state regulatory authority must also consider:  designation, through a competitive process, of a regulated utility, other party, or a combination of regulated utilities and other parties to be a smart grid coordinator or distribution system operator for the state; and  nontransmission alternatives when a regulated utility proposes transmission projects.  

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Free Market Energy Act of 2015''.

SEC. 2. FINDINGS.

    Congress finds that it is in the public interest--
            (1) to enhance personal freedom and national security by 
        reinforcing the right to sovereignty over personal energy 
        choices; and
            (2) to enhance the diversity of the electricity supply and 
        energy independence of the United States by ensuring that there 
        is a free market for distributed energy resources by providing 
        for the nondiscriminatory interconnection of distributed energy 
        resources.

SEC. 3. DEFINITION OF DISTRIBUTED ENERGY RESOURCE.

    Section 3 of the Federal Power Act (16 U.S.C. 796) is amended by 
adding at the end the following:
            ``(30) Distributed energy resource.--The term `distributed 
        energy resource' is a resource on the electricity distribution 
        system that includes--
                    ``(A) distributed fossil generation;
                    ``(B) renewable generation (including biomass, 
                solar photovoltaics, geothermal, and hydropower);
                    ``(C) fuel cells;
                    ``(D) combined heat and power systems;
                    ``(E) energy storage;
                    ``(F) demand response;
                    ``(G) efficiency resources;
                    ``(H) microgrids; and
                    ``(I) any combination of the resources described in 
                this paragraph.''.

SEC. 4. GENERAL RIGHT TO NEUTRALITY OF INTERCONNECTION.

    The Public Utility Regulatory Policies Act of 1978 is amended by 
inserting after section 4 (16 U.S.C. 2603) the following:

``SEC. 5. GENERAL RIGHT TO NEUTRALITY OF INTERCONNECTION.

    ``(a) In General.--Distributed energy resources (as defined in 
section 3 of the Federal Power Act (16 U.S.C. 796)) shall have a 
general right of interconnection under this Act.
    ``(b) Rates and Fees.--All rates and fees for interconnection of 
distributed energy resources under this Act, regardless of whether the 
distributed energy resource is a qualifying facility, shall--
            ``(1) be just and reasonable;
            ``(2) provide for the 2-way benefit for the distributed 
        energy resource and the electricity grid;
            ``(3) shall not exceed the actual cost of service; and
            ``(4) shall not be punitive.
    ``(c) Timeframes.--Timeframes for interconnection of distributed 
energy resources under this Act, regardless of whether the distributed 
energy resource is a qualifying facility, shall be well-defined, 
expeditious, and not unduly protracted.''.

SEC. 5. ENERGY AND RATE TREATMENTS FOR DISTRIBUTED ENERGY RESOURCES.

    Section 111(d) of the Public Utility Regulatory Policies Act of 
1978 (16 U.S.C. 2621(d)) is amended by adding at the end the following:
            ``(20) Distributed energy resources.--Each State regulatory 
        authority shall consider requiring that distributed energy 
        resources (as defined in section 3 of the Federal Power Act (16 
        U.S.C. 796)) be eligible to receive just and reasonable energy 
        and rate treatment for--
                    ``(A) time-of-use pricing, which may account for 
                locational benefit, to be provided on an unbundled 
                basis, after accounting for the 2-way valuation of 
                time-of-use rates, and progressing to real-time 
                pricing, for--
                            ``(i) energy sold to an electric utility; 
                        and
                            ``(ii) energy purchased from an electric 
                        utility;
                    ``(B) capacity;
                    ``(C) energy conservation;
                    ``(D) demand-side management or demand response;
                    ``(E) peak monthly demand;
                    ``(F) the provision of ancillary services;
                    ``(G) the societal value of distributed energy 
                resources; and
                    ``(H) any other benefits that the State regulatory 
                authority considers to be appropriate.''.

SEC. 6. QUALIFYING FACILITY; IMPROVED INTERCONNECTION STANDARDS FOR 
              DISTRIBUTED ENERGY RESOURCES.

    (a) Definition of Qualifying Facilities.--Section 3 of the Federal 
Power Act (16 U.S.C. 796) is amended--
            (1) in paragraph (17)(C)--
                    (A) by indenting appropriately; and
                    (B) by inserting ``(including a distributed energy 
                resource in any State in which a State regulatory 
                authority or nonregulated electric utility determines 
                not to establish standards in accordance with paragraph 
                (20) of section 111(d) of the Public Utility Regulatory 
                Policies Act of 1978 (16 U.S.C. 2621(d)))'' before 
                ``that the Commission determines''; and
            (2) in paragraph (18)(B)--
                    (A) by indenting appropriately; and
                    (B) by inserting ``(including a distributed energy 
                resource in any State in which a State regulatory 
                authority or nonregulated electric utility determines 
                not to establish standards in accordance with paragraph 
                (20) of section 111(d) of the Public Utility Regulatory 
                Policies Act of 1978 (16 U.S.C. 2621(d)))'' before 
                ``that the Commission determines''.
    (b) Improved Interconnection Standards for Distributed Energy 
Resources.--Section 111(d) of the Public Utility Regulatory Policies 
Act of 1978 (16 U.S.C. 2621(d)) (as amended by section 5) is amended by 
adding at the end the following:
            ``(21) Improved interconnections standards for distributed 
        energy resources.--Each State regulatory authority or 
        nonregulated electric utility, acting under State authority in 
        a State that has determined not to establish standards under 
        paragraph (20), shall consider--
                    ``(A) setting rates that exceed the incremental 
                cost of alternative electric energy for purchases from 
                any distributed energy resource (as defined in section 
                3 of the Federal Power Act (16 U.S.C. 796)) that is a 
                qualifying facility for electricity generated, demand 
                reduced, or service provided by the qualifying facility 
                interconnected under this Act, with--
                            ``(i) the rates to be established at the 
                        full retail rate; and
                            ``(ii) fixed monthly charges for 
                        residential electricity bills to be established 
                        at a charge of not more than 10 dollars per 
                        month, with optional reevaluations of the 
                        amount of charge to be considered on a periodic 
                        basis;
                    ``(B) making any distributed energy resource 
                project exempt from filing requirements with the 
                Commission;
                    ``(C) ensuring that any requirements considered 
                under this paragraph would not affect the purchase 
                obligation under section 210 for distributed energy 
                resource facilities; and
                    ``(D) requiring that all rates and fees for 
                interconnection of distributed generation facilities--
                            ``(i) shall be just and reasonable;
                            ``(ii) shall provide for the benefit of the 
                        distributed energy resource to the electricity 
                        grid and benefit of the electricity grid to the 
                        distributed energy resource; and
                            ``(iii) not exceed the actual cost of 
                        service.''.

SEC. 7. DESIGNATION OF SMART GRID COORDINATOR OR DISTRIBUTION SYSTEM 
              OPERATOR.

    Section 111(d) of the Public Utility Regulatory Policies Act of 
1978 (16 U.S.C. 2621(d)) (as amended by section 6(b)) is amended by 
adding at the end the following:
            ``(22) Designation of smart grid coordinator or 
        distribution system operator.--Each State regulatory authority 
        shall consider designating, through a competitive process, a 
        regulated utility, other party, or a combination of regulated 
        utilities and other parties to be a smart grid coordinator or 
        distribution system operator for the State.''.

SEC. 8. CONSIDERATION OF NONTRANSMISSION ALTERNATIVES.

    Section 111(d) of the Public Utility Regulatory Policies Act of 
1978 (16 U.S.C. 2621(d)) (as amended by section 7) is amended by adding 
at the end the following:
            ``(23) Nontransmission alternatives.--
                    ``(A) In general.--Each State regulatory authority 
                shall consider nontransmission alternatives in 
                instances in which a regulated utility proposes 
                transmission projects.
                    ``(B) Cost.--To reduce the cost to the ratepayer of 
                a potential transmission upgrade, a nontransmission 
                alternative considered under subparagraph (A), shall 
                receive the avoided cost of the transmission upgrade, 
                minus a reasonable discount, as determined by the State 
                regulatory authority.
                    ``(C) Recovery.--If a nontransmission alternative 
                proposed under subparagraph (A) obviates the need for a 
                reliability-based transmission upgrade, the cost of the 
                nontransmission alternative shall be recovered from the 
                ratebase in the same manner as the transmission upgrade 
                would have been.''.

SEC. 9. COMPLIANCE.

    (a) Time Limitations.--Section 112(b) of the Public Utility 
Regulatory Policies Act of 1978 (16 U.S.C. 2622(b)) is amended by 
adding at the end the following:
            ``(7)(A) Not later than 1 year after the date of enactment 
        of this paragraph, each State regulatory authority (with 
        respect to each electric utility for which the authority has 
        ratemaking authority) and each nonregulated utility shall, with 
        respect to the standards established by paragraphs (20), (22), 
        and (23) of section 111(d)--
                    ``(i) commence the consideration required under 
                those paragraphs; or
                    ``(ii) set a hearing date for the consideration.
            ``(B) Not later than 2 years after the date of enactment of 
        this paragraph, each State regulatory authority (with respect 
        to each electric utility for which the authority has ratemaking 
        authority) and each nonregulated electric utility, shall, with 
        respect to the standards established by paragraphs (20), (22), 
        and (23) of section 111(d)--
                    ``(i) complete the consideration under subparagraph 
                (A); and
                    ``(ii) make the determination referred to in 
                section 111 with respect to the standards established 
                by those paragraphs.
            ``(8)(A) Not later than 2 years after the date of enactment 
        of this paragraph, each State regulatory authority (with 
        respect to each electric utility for which the authority has 
        ratemaking authority) and each nonregulated utility shall, with 
        respect to the standards established by section 111(d)(21)--
                    ``(i) commence the consideration required under 
                that paragraph; or
                    ``(ii) set a hearing date for the consideration.
            ``(B) Not later than 3 years after the date of enactment of 
        this paragraph, each State regulatory authority (with respect 
        to each electric utility for which the authority has ratemaking 
        authority) and each nonregulated electric utility, shall, with 
        respect to the standards established by section 111(d)(21)--
                    ``(i) complete the consideration required under 
                that paragraph; and
                    ``(ii) make the determination referred to in 
                section 111 with respect to the standards established 
                by section 111(d)(21).''.
    (b) Failure To Comply.--Section 112(c) of the Public Utility 
Regulatory Policies Act of 1978 (16 U.S.C. 2622(c)) is amended by 
adding at the end the following:
            ``(1) In the case of the standards established by 
        paragraphs (20) through (23) of section 111(d), the reference 
        contained in this subsection to the date of enactment of this 
        Act shall be deemed to be a reference to the date of enactment 
        of those paragraphs.''.
    (c) Prior State Actions.--
            (1) In general.--Section 112 of the Public Utility 
        Regulatory Policies Act of 1978 (16 U.S.C. 2622) is amended by 
        adding at the end the following:
    ``(g) Prior State Actions.--Subsections (b) and (c) shall not apply 
to a standard established under paragraphs (20) through (23) of section 
111(d) in the case of any electric utility in a State if, before the 
date of enactment of this subsection--
            ``(1) the State has implemented for the electric utility 
        the standard (or a comparable standard);
            ``(2) the State regulatory authority for the State, or the 
        relevant nonregulated electric utility, has conducted a 
        proceeding to consider implementation of the standard (or a 
        comparable standard) for the electric utility; or
            ``(3) the State legislature has voted on the implementation 
        of the standard (or a comparable standard) for the electric 
        utility.''.
            (2) Cross-reference.--Section 124 of the Public Utility 
        Regulatory Policies Act of 1978 (16 U.S.C. 2634) is amended by 
        adding at the end the following: ``In the case of each standard 
        established under paragraphs (20) through (23) of section 
        111(d), the reference contained in this subsection to the date 
        of enactment of this Act shall be deemed to be a reference to 
        the date of enactment of those paragraphs.''.

SEC. 10. EFFECT OF ACT.

    Nothing in this Act (or an amendment made by this Act) shall apply 
to distributed energy resource contracts in effect on the date of 
enactment of this Act.