A bill to amend the Federal Power Act to establish reliability standards.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Electric Reliability Act of 2004''.

SEC. 2. ELECTRIC RELIABILITY STANDARDS.

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

``SEC. 215. ELECTRIC RELIABILITY.

    ``(a) Definitions.--In this section:
            ``(1) Bulk-power system.--The term `bulk-power system' 
        means a network of interconnected transmission facilities and 
        generating facilities.
            ``(2) Electric reliability organization.--The term 
        `electric reliability organization' means a self-regulating 
        organization certified by the Commission under subsection (c) 
        the purpose of which is to promote the reliability of a bulk-
        power system.
            ``(3) Reliability standard.--The term `reliability 
        standard' means a requirement to provide for reliable operation 
        of a bulk-power system approved by the Commission under this 
        section.
    ``(b) Jurisdiction and Applicability.--
            ``(1) In general.--The Commission shall have jurisdiction, 
        within the United States, over each electric reliability 
        organization, regional entity, and user, owner, and operator of 
        a bulk-power system (including an entity described in section 
        201(f)), for the purpose of approving reliability standards and 
        enforcing compliance with this section.
            ``(2) Compliance.--Each user, owner, and operator of the 
        bulk-power system shall comply with reliability standards that 
        take effect under this section.
    ``(c) Certification.--
            ``(1) Final rule.--Not later than 180 days after the date 
        of enactment of this section, the Commission shall promulgate a 
        final rule to implement the requirements of this section.
            ``(2) Submission of application.--Following the 
        promulgation of a Commission rule under paragraph (1), any 
        person may submit an application to the Commission for 
        certification as an electric reliability organization.
            ``(3) Requirements for certification.--The Commission may 
        certify an applicant if the Commission determines that the 
        applicant--
                    ``(A) has the ability to develop, and enforce, 
                reliability standards that provide for an adequate 
                level of reliability of the bulk-power system;
                    ``(B) has established rules that--
                            ``(i) ensure the independence of the 
                        applicant from users, owners, and operators of 
                        the bulk-power system, while ensuring fair 
                        stakeholder representation in the selection of 
                        the directors of the applicant and balanced 
                        decisionmaking in any committee or subordinate 
                        organizational structure;
                            ``(ii) allocate equitably dues, fees, and 
                        other charges among end users for all 
                        activities conducted under this section;
                            ``(iii) provide fair and impartial 
                        procedures for enforcement of reliability 
                        standards through imposition of penalties 
                        (including limitations on activities, 
                        functions, or operations, or other appropriate 
                        sanctions); and
                            ``(iv) provide for reasonable notice and 
                        opportunity for public comment, due process, 
                        openness, and balance of interests in 
                        developing reliability standards and otherwise 
                        exercising the duties of the applicant.
            ``(4) Multiple applications.--If the Commission receives 2 
        or more timely applications that satisfy the requirements of 
        this subsection, the Commission shall approve only the 
        application that the Commission concludes will best implement 
        this section.
    ``(d) Reliability Standards.--
            ``(1) Filing.--An electric reliability organization shall 
        file a proposed reliability standard or modification to a 
        reliability standard with the Commission.
            ``(2) Approval.--
                    ``(A) In general.--The Commission may approve a 
                proposed reliability standard or modification to a 
                reliability standard if the Commission determines that 
                the standard is just, reasonable, not unduly 
                discriminatory or preferential, and in the public 
                interest.
                    ``(B) Deferral to electric reliability 
                organizations.--The Commission--
                            ``(i) shall give due weight to the 
                        technical expertise of the electric reliability 
                        organization with respect to the content of a 
                        proposed standard or modification to a 
                        reliability standard; but
                            ``(ii) shall not defer with respect to the 
                        effect of the standard or modification on 
                        competition.
            ``(3) Rebuttable presumptions for interconnection-wide 
        organizations.--The electric reliability organization and the 
        Commission shall rebuttably presume that a proposal from a 
        regional entity organized on an interconnection-wide basis for 
        a reliability standard or modification to a reliability 
        standard to be applicable on an interconnection-wide basis is 
        just, reasonable, not unduly discriminatory or preferential, 
        and in the public interest.
            ``(4) Disapproval.--The Commission shall remand to the 
        electric reliability organization for further consideration a 
        proposed reliability standard or a modification to a 
        reliability standard that the Commission disapproves in whole 
        or in part.
            ``(5) Mandatory submission.--The Commission, on its own 
        motion or on complaint, may order an electric reliability 
        organization to submit to the Commission a proposed reliability 
        standard or a modification to a reliability standard that 
        addresses a specific matter if the Commission considers such a 
        new or modified reliability standard to be appropriate to carry 
        out this section.
    ``(e) Enforcement.--
            ``(1) Penalties by electric reliability organizations on 
        users, owners, or operators.--An electric reliability 
        organization may impose a penalty on a user, owner, or operator 
        of a bulk-power system if the electric reliability 
        organization, after notice and an opportunity for a hearing--
                    ``(A) finds that the user, owner, or operator of 
                the bulk-power system has violated a reliability 
                standard approved by the Commission under subsection 
                (d); and
                    ``(B) files notice with the Commission, which shall 
                affirm, set aside, or modify the action.
            ``(2) Orders or penalties by commission on users, owners, 
        or operators.--On its own motion or on complaint, the 
        Commission may order compliance with a reliability standard, 
        and may impose a penalty against a user, owner, or operator of 
        a bulk-power system, if the Commission finds, after notice and 
        opportunity for a hearing, that the user, owner, or operator of 
        the bulk-power system has violated or threatens to violate a 
        reliability standard.
            ``(3) Delegation to regional entity.--
                    ``(A) In general.--The Commission shall promulgate 
                regulations authorizing the electric reliability 
                organization to--
                            ``(i) enter into an agreement to delegate 
                        authority to a regional entity for the purpose 
                        of proposing and enforcing reliability 
                        standards (including related activities) if--
                                    ``(I) the regional entity satisfies 
                                the requirements of subparagraphs (A) 
                                and (B) of subsection (c)(2); and
                                    ``(II) the agreement promotes 
                                effective and efficient administration 
                                of bulk-power system reliability; and
                            ``(ii) modify the delegation.
                    ``(B) Rebuttable presumptions for interconnection-
                wide organizations.--The electric reliability 
                organization and the Commission shall rebuttably 
                presume that a proposal for delegation to a regional 
                entity organized on an interconnection-wide basis 
                promotes effective and efficient administration of 
                bulk-power system reliability and should be approved.
                    ``(C) Direct delegation to regional entity.--The 
                regulations may provide that the Commission may assign 
                the authority of the electric reliability organization 
                to enforce reliability standards directly to a regional 
                entity consistent with this paragraph.
            ``(4) Compliance.--The Commission may take such action as 
        is necessary or appropriate against the electric reliability 
        organization or a regional entity to ensure compliance with a 
        reliability standard or any Commission order affecting the 
        electric reliability organization or regional entity.
    ``(f) Changes in Electricity Reliability Organization Rules.--
            ``(1) Filing.--An electric reliability organization shall 
        file with the Commission for approval any proposed rule or 
        proposed rule change, accompanied by an explanation of the 
        basis and purpose of the rule or change.
            ``(2) Commission initiative.--The Commission, on its own 
        motion or complaint, may propose a change to the rules of the 
        electric reliability organization.
            ``(3) Effective date.--A proposed rule or proposed rule 
        change shall take effect on a finding by the Commission, after 
        notice and opportunity for comment, that the change is just, 
        reasonable, not unduly discriminatory or preferential, is in 
        the public interest, and satisfies the requirements of 
        subsection (c)(2).
    ``(g) Coordination With Canada and Mexico.--
            ``(1) Recognition.--The electric reliability organization 
        shall take all appropriate steps to gain recognition in Canada 
        and Mexico.
            ``(2) International agreements.--The President shall, to 
        the maximum extent practicable, enter into international 
        agreements with the governments of Canada and Mexico to provide 
        for effective compliance with reliability standards and the 
        effectiveness of the electric reliability organization in the 
        United States and Canada or Mexico.
    ``(h) Reliability Reports.--The electric reliability organization 
shall conduct periodic assessments of the reliability and adequacy of 
the interconnected bulk-power system in North America.
    ``(i) Savings Provisions.--
            ``(1) Compliance.--The electric reliability organization 
        shall have authority to develop and enforce compliance with 
        standards for the reliable operation of only the bulk-power 
        system.
            ``(2) Additional capacity; adequacy or safety.--This 
        section does not provide the electric reliability organization 
        or the Commission with the authority--
                    ``(A) to order the construction of additional 
                generation or transmission capacity; or
                    ``(B) to establish and enforce compliance with 
                standards for adequacy or safety of electric facilities 
                or services.
            ``(3) State action.--Nothing in this section preempts any 
        authority of a State to take action to ensure the safety, 
        adequacy, and reliability of electric service within that 
        State, as long as the action is not inconsistent with any 
        reliability standard.
            ``(4) Consistency with reliability standards.--Not later 
        than 90 days after the filing of the application of the 
        electric reliability organization or other affected party, and 
        after notice and opportunity for comment, the Commission shall 
        issue a final order determining whether a State action is 
        inconsistent with a reliability standard, taking into 
        consideration any recommendation of the electric reliability 
        organization.
            ``(5) Stays.--The Commission, after consultation with the 
        electric reliability organization, may stay the effectiveness 
        of any State action, pending the issuance of a final order by 
        the Commission.
    ``(j) Application of Antitrust Laws.--
            ``(1) Definition of antitrust laws.--In this subsection:
                    ``(A) In general.--The term `antitrust laws' has 
                the meaning given the term in subsection (a) of the 
                first section of the Clayton Act (15 U.S.C. 12(a)).
                    ``(B) Inclusion.--The term `antitrust laws' 
                includes section 5 of the Federal Trade Commission Act 
                (15 U.S.C. 45), to the extent that section applies to 
                unfair methods of competition.
            ``(2) Application.--To the extent undertaken to develop, 
        implement, or enforce a reliability standard, each of the 
        following activities shall not, in any action under the 
        antitrust laws, be deemed illegal per se:
                    ``(A) Activities undertaken by an electric 
                reliability organization under this section.
                    ``(B) Activities of a user, owner, or operator of 
                the bulk-power system undertaken in good faith under 
                the rules of an electric reliability organization.
            ``(3) Rule of reason.--In any action under the antitrust 
        laws, an activity described in paragraph (2) shall be judged on 
        the basis of the reasonableness of the activity, taking into 
        account all relevant factors affecting competition and 
        reliability.
    ``(k) Regional Advisory Bodies.--
            ``(1) In general.--The Commission shall establish a 
        regional advisory body on the petition of at least \2/3\ of the 
        States within a region that have more than \1/2\ of their 
        electric loads served within the region.
            ``(2) Composition.--A regional advisory body--
                    ``(A) shall be composed of 1 member from each 
                participating State in the region, appointed by the 
                Governor of the State; and
                    ``(B) may include representatives of agencies, 
                States, and provinces outside the United States.
            ``(3) Advice.--A regional advisory body may provide advice 
        to an electric reliability organization, a regional reliability 
        entity, or the Commission regarding--
                    ``(A) the governance of an existing or proposed 
                regional reliability entity within the same region;
                    ``(B) whether a standard proposed to apply within 
                the region is just, reasonable, not unduly 
                discriminatory or preferential, and in the public 
                interest;
                    ``(C) whether fees proposed to be assessed within 
                the region are just, reasonable, not unduly 
                discriminatory or preferential, and in the public 
                interest; and
                    ``(D) any other responsibilities requested by the 
                Commission.
            ``(4) Interconnection-wide basis.--The Commission may give 
        deference to the advice of any such regional advisory body if 
        the regional advisory board is organized on an interconnection-
        wide basis.
    ``(l) Nonapplication to Alaska and Hawaii.--This section does not 
apply to Alaska or Hawaii.''.

Summary: Electric Reliability Act of 2004 - Amends the Federal Power Act to extend Federal Energy Regulatory Commission (FERC) jurisdiction over each electric reliability organization (ERO), regional entity, and user, owner, and operator of a bulk-power system for purposes of approving reliability standards and enforcing compliance with this Act. Prescribes procedural guidelines for: (1) certification as an ERO, (2) filing of reliability standards. And (3) imposition of penalties by either an ERO or FERC for noncompliance with this Act Requires an ERO to: (1) file with FERC for approval any proposed rule or rule change. And (2) take all appropriate steps to gain recognition in Canada and Mexico. Requires an ERO to assess periodically the reliability and adequacy of the interconnected bulk-power system in North America. Directs FERC to establish a regional advisory body on the petition of at least two-thirds of the States within a region that have more than half of their electric loads served within the region Declares this Act inapplicable to Alaska or Hawaii.