SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Interstate Transmission Act''.

SEC. 2. FINDINGS.

    Congress finds as follows:
            (1) Transmission networks are the backbone of competitive 
        power markets and increased interstate commerce in electricity.
            (2) To support competitive power markets and to bring the 
        benefits of less regulation of such markets to transmission 
        customers, consumers, businesses, and the public, both today 
        and in the future, transmission networks must be expanded, 
        enhanced, and improved.
            (3) The expansion, enhancement, and improvement of 
        transmission facilities also are necessary to maintain and 
        improve reliability of electric service.
            (4) The regulation of transmission service must be 
        reformed.

SEC. 3. CLARIFICATION OF JURISDICTION.

    (a) Declaration of Policy.--Section 201(a) of the Federal Power Act 
(16 U.S.C. 824(a)) is amended by inserting after ``transmission of 
electric energy in interstate commerce'' the following: ``, including 
the unbundled transmission of electric energy sold at retail,''.
    (b) Application of Part.--Section 201(b)(1) of the Federal Power 
Act (16 U.S.C. 824(b)(1)) is amended by--
            (1) inserting after ``the transmission of electric energy 
        in interstate commerce'' the following: ``, including the 
        unbundled transmission of electric energy sold at retail,''; 
        and
            (2) adding at the end of subsection (b) the following new 
        paragraph:
            ``(3) After consulting with the appropriate State 
        regulatory authorities, the Commission shall determine by rule 
        or order which facilities used for the transmission and 
        delivery of electric energy are used for transmission in 
        interstate commerce subject to the jurisdiction of the 
        Commission under this part, and which are used for local 
        distribution subject to State jurisdiction.''.
    (c) Definition of Interstate Commerce.--Section 201(c) of the 
Federal Power Act (16 U.S.C. 824(c)) is amended after ``outside 
thereof' by inserting ``(including consumption in a foreign country)''.
    (d) Definitions of Types of Sales.--Section 201(d) of the Federal 
Power Act (16 U.S.C. 824(d)) is amended by--
            (1) inserting ``(1)'' after the subsection designation; and
            (2) adding at the end the following:
    ``(2) The term `bundled retail sale of electric energy' means the 
sale of electric energy to an ultimate consumer in which the generation 
and transmission service are not sold separately.
    ``(3) The term `unbundled local distribution service' means the 
delivery of electric energy to an ultimate consumer if--
            ``(A) the electric energy and the service of delivering it 
        are sold separately; and
            ``(B) the delivery uses facilities for local distribution 
        as determined by the Commission under subsection (b)(3).
    ``(4) The term `unbundled transmission of electric energy sold at 
retail' means the transmission of electric energy to an ultimate 
consumer if--
            ``(A) the electric energy and the service of transmitting 
        it are sold separately, and
            ``(B) the transmission uses facilities for transmission in 
        interstate commerce as determined by the Commission under 
        subsection (b)(3).''.
    (e) Definition of Public Utility.--Section 201(e) of the Federal 
Power Act (16 U.S.C. 824(e)) is amended to read as follows:
    ``(e) The term `public utility', when used in this part or in the 
part next following means--
            ``(1) any person who owns or operates facilities subject to 
        the jurisdiction of the Commission under this part (other than 
        facilities subject to such jurisdiction solely by reason of 
        section 210, 211, or 212); and
            ``(2) any transmitting utility that is not a public utility 
        under paragraph (1), but only with respect to determining, 
        fixing, and otherwise regulating the rates, terms, and 
        conditions for the transmission of electric energy under this 
        part.''.
    (f) Application of Part to Government Utilities.--Section 201(f) of 
the Federal Power Act (16 U.S.C. 824(f)) is amended by striking ``No 
provision'' and inserting in lieu thereof ``Except as provided in 
subsection (e)(2) and section 3(23), no provision''.

SEC. 4. DISPOSITION OF PROPERTY.

    Section 203 of the Federal Power Act (16 U.S.C. 824b) is repealed.

SEC. 5. ECONOMICALLY EFFICIENT TRANSMISSION SERVICE AND EXPANSION OF 
              TRANSMISSION NETWORKS.

    Part II of the Federal Power Act is amended by adding at the end 
thereof the following new section:

``SEC. 215. STANDARDS FOR ESTABLISHING RATES, CHARGES, TERMS, AND 
              CONDITIONS FOR TRANSMISSION SERVICE.

    ``(a) Recovery of Costs.--In reviewing rates, charges, terms, and 
conditions for transmission services under this Act, the Commission 
shall permit a transmitting utility to recover all of the costs 
incurred by the utility in connection with the transmission services 
and necessary associated services, including, but not limited to, the 
costs of any enlargement of transmission facilities.
    ``(b) Consideration of Cost and Benefit.--In reviewing the rates, 
charges, terms, and conditions of transmission services that are 
provided by a regional transmission organization and that make use of 
facilities constructed after the date of enactment of this section, the 
Commission shall take into account the incremental cost and the benefit 
to interconnected transmission systems of such facilities.
    ``(c) Certain Requirements.--Rates, charges, terms and conditions 
established pursuant to subsections (a) and (b) shall--
            ``(1) promote the economically efficient transmission of 
        electricity, the expansion of transmission networks, the 
        introduction of new transmission technologies, and the 
        provision of transmission services by regional transmission 
        organizations;
            ``(2) prevent the shifting of costs to the rates for 
        services outside the jurisdiction of the Commission; and
            ``(3) be just and reasonable and not unduly discriminatory 
        or preferential.
    ``(d) Voluntary Innovative Pricing Policies.--Notwithstanding 
subsection (a) of this section, the Commission shall encourage 
innovative pricing policies voluntarily filed by transmitting 
utilities. Innovative pricing policies include policies that--
            ``(1) provide incentives to transmitting utilities to 
        promote the voluntary participation in and formation of 
        regional transmission organizations, without having the effect 
        of forcing transmitting utilities to join regional transmission 
        organizations and extend such incentives to transmitting 
        utilities that already have formed a regional transmission 
        organization;
            ``(2) limit the charging of multiple rates for transmission 
        service over the transmission facilities operated by the 
        regional transmission organization, provided, however, that a 
        reasonable transition mechanism or period may be used before 
        eliminating such rates;
            ``(3) minimize the shifting of costs among existing 
        customers of the transmitting utilities within the regional 
        transmission organization;
            ``(4) encourage the efficient and reliable operation of the 
        transmission grid and supply of transmission services through 
        congestion management, performance-based or incentive 
        ratemaking, and other measures; and
            ``(5) encourage efficient and adequate investment in and 
        expansion of the transmission facilities owned or controlled by 
        the regional transmission organization.
    ``(e) Negotiated Rates.--Notwithstanding subsection (a) of this 
section, the Commission may permit the charging of negotiated rates for 
transmission services without regard to costs whenever an individual 
company or companies are willing to pay such negotiated rates, 
provided, however, that such costs shall not be recovered from other 
transmission customers.
    ``(f) Effective Competition.--Notwithstanding subsection (a) of 
this section, in reviewing rates, charges, terms, and conditions for 
transmission rates under this Act, the Commission may permit the 
recovery of market-based rates for transmission services where it finds 
that relevant geographic and product markets for transmission services 
or for delivered wholesale power are subject to effective competition.
    ``(g) Rulemaking.--Within 180 days after enactment of this section, 
the Commission shall establish by rule definitions and standards that 
it shall determine are necessary to give effect to subsections (d) and 
(e) of this section. Within 2 years of enactment of this section, the 
Commission shall establish by rule definitions and standards that it 
shall determine are required to give effect to subsection (f) of this 
section.''.

SEC. 6. ELECTRIC RELIABILITY STANDARDS.

    Part II of the Federal Power Act is amended by adding at the end 
thereof the following new section:

``SEC. 216. ELECTRIC RELIABILITY STANDARDS.

    ``(a) Policies and Standards.--A transmitting utility may require 
its transmission customers and any other transmitting utility with 
which it is either directly or indirectly interconnected to observe, as 
a condition of receiving transmission service, policies, or standards 
duly adopted by an electric reliability organization approved by the 
Commission. A transmitting utility may require its transmission 
customers and any other transmitting utility to which it is either 
directly or indirectly interconnected to observe, as a condition of 
receiving transmission service, policies, or standards duly adopted by 
a regional affiliate of such electric reliability organization.
    ``(b) Commission Authority.--Whenever the Commission, after a 
hearing had upon its own motion or upon complaint, shall find that any 
policy or standard adopted by an electric reliability organization 
approved by the Commission, or by any affiliate of such electric 
reliability organization, or the application of such policy or standard 
by a transmitting utility, is unjust, unreasonable, unduly 
discriminatory or preferential, the Commission may disapprove, and 
prohibit the application of, such policy or standard, and shall remand 
the matter to the electric reliability organization for further 
consideration.''.

SEC. 7. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL TRANSMISSION 
              ORGANIZATIONS.

    Part II of the Federal Power Act is amended by inserting at the end 
thereof the following new section:

``SEC. 217. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL TRANSMISSION 
              ORGANIZATIONS.

    ``(a) In General.--The Commission may approve and may encourage the 
formation of regional transmission organizations for the purpose of 
enhancing the transmission of electric energy in interstate commerce. 
Among options for the formation of regional transmission organizations, 
the Commission shall prefer those in which--
            ``(1) participation in the regional transmission 
        organization by transmitting utilities is voluntary;
            ``(2) the form, structure, and operating entity of the 
        regional transmission organization are approved of by 
        participating transmitting utilities; and
            ``(3) market incentives exist to promote investment for 
        expansion of transmission facilities and for the introduction 
        of new transmission technologies within the territory of the 
        regional transmission organization.
    ``(b) Conditions.--No order issued under this Act shall be 
conditioned upon or require a transmitting utility to transfer 
operational control of jurisdictional facilities to an independent 
system operator or other regional transmission organization.
    ``(c) Complaint.--In addition to any other rights or remedies it 
may have under this Act, any entity serving electric load that is 
denied services by a regional transmission organization that the 
regional transmission organization makes available to other load 
serving entities shall be entitled to file a complaint with the 
Commission concerning the denial of such services. If the Commission 
shall find, after an evidentiary hearing on the record, that the denial 
of services complained of was unjust, unreasonable, unduly 
discriminatory or preferential, or contrary to the public interest, the 
Commission may order the provision of such services at rates and on 
terms and conditions that shall be in accordance with section 215 of 
this Act.''.
(Sec. 3) Directs the Federal Energy Regulatory Commission (FERC) to determine by rule or order which facilities used for the transmission and delivery of electric energy are used in interstate commerce (subject to its jurisdiction), and which are used for local distribution (subject to State jurisdiction).
Redefines "interstate commerce" to include, for FPA purposes, consumption of electricity in a foreign country.
(Sec. 4) Repeals the statutory constraints placed upon the disposition of property by a public utility subject to FERC jurisdiction.
(Sec. 5) Requires FERC to permit a transmitting utility to recover all its costs incurred in connection with the transmission services and necessary associated services, including the costs of any enlargement of transmission facilities. Prescribes guidelines for FERC review of rates, charges, terms, and conditions for transmission service, including: (1) voluntary innovative pricing policies; (2) negotiated rates; and (3) recovery of market-based rates for transmission services.
(Sec. 6) Authorizes a transmitting utility to require both its transmission customers and any transmitting utility with which it is interconnected to observe policies or standards adopted by a FERC- approved electric reliability organization as a prerequisite to receiving transmission service.
(Sec. 7) Authorizes FERC encouragement of the formation of regional transmission organizations to enhance transmission of electric energy in interstate commerce.
Interstate Transmission Act