I 

108TH CONGRESS 

1ST SESSION H. R. 1370

To provide for expansion of electricity transmission networks in order to 

support competitive electricity markets, to ensure reliability of electric 

service, to modernize regulation and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 19, 2003

Mr. WYNN (for himself and Mr. BURR) introduced the following bill; which 

was referred to the Committee on Energy and Commerce, and in addition 

to the Committee on Ways and Means, for a period to be subsequently 

determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL

To provide for expansion of electricity transmission networks 

in order to support competitive electricity markets, to 

ensure reliability of electric service, to modernize regulation and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Interstate Transmission Act’’. 

4 (b) TABLE OF CONTENTS.—The table of contents is 

5 as follows:

Sec. 1. Short title and table of contents. 

Sec. 2. Findings. 

Sec. 3. Sustainable transmission networks rulemaking. 

Sec. 4. Electric reliability standards. 

Sec. 5. Disposition of property. 

Sec. 6. Promotion of voluntary development of regional transmission organizations, independent transmission providers, and similar organizations. 

Sec. 7. State and Federal authority to site transmission facilities. 

Sec. 8. PUHCA exemption for RTOs. 

Sec. 9. Independent transmission companies.

6 SEC. 2. FINDINGS. 

7 Congress finds as follows: 

8 (1) Transmission networks are the backbone of 

9 competitive power markets and increased interstate 

10 commerce in electricity. 

11 (2) Wholesale electric competition, already in 

12 effect across the nation, and retail electric competi13 tion, adopted by nearly half of the States, depend on 

14 adequate transmission networks to benefit electric 

15 consumers. 

16 (3) The expansion, enhancement, and improve17 ment of transmission facilities are necessary to 

18 maintain and improve reliability of electric service. 

19 (4) To support competitive power markets and 

20 to maintain and improve reliability of electric serv-
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1 ice, the regulation of transmission service must be 

2 reformed. 

3 SEC. 3. SUSTAINABLE TRANSMISSION NETWORKS RULE4 MAKING. 

5 Part II of the Federal Power Act (16 U.S.C. 824 et 

6 seq.) is amended by adding the following new section at 

7 the end thereof: 

8 ‘‘SEC. 215. SUSTAINABLE TRANSMISSION NETWORKS RULE9 MAKING. 

10 ‘‘(a) RULEMAKING REQUIREMENT.—Within 1 year 

11 after the enactment of this section, the Commission shall 

12 establish, by rule, transmission pricing policies and stand13 ards for promoting the expansion and improvement of 

14 interstate transmission networks through incentive-based, 

15 performance-based, participant-funded, and/or cost-based 

16 rate treatments to ensure reliability of the electric system, 

17 to support interstate wholesale markets for electric power, 

18 and expand transmission transfer capacity needed to sus19 tain wholesale competition. Policies and standards estab20 lished under this section shall specifically—

21 ‘‘(1) promote capital investment in the economi22 cally efficient enlargement of transmission networks 

23 to reduce congestion on transmission networks and 

24 provide accurate price signals so that new generation 
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1 and transmission is built where it provides the low2 est overall cost to consumers; 

3 ‘‘(2) encourage improved operation of trans4 mission facilities and deployment of transmission 

5 technologies to increase capacity and efficiency of 

6 existing networks and reduce line losses, including 

7 but not limited to high-capacity wires (including 

8 high-temperature superconducting cables), power 

9 electronics and information technologies (including 

10 flexible alternating current transmission system 

11 technologies), and high-voltage, direct current lines; 

12 and 

13 ‘‘(3) provide a return on equity that attracts 

14 new investment in transmission facilities and reason15 ably reflects the financial, operational and other 

16 risks taken by public utilities in restructuring trans17 mission assets. 

18 ‘‘(b) LIMITATION ON THE AUTHORITY OF THIS SEC19 TION.—In the case of any transmission rate approved by 

20 the Commission on or after the effective date of the rule 

21 established under this section, the rate shall comply 

22 with—

23 ‘‘(1) the policies and standards adopted pursu24 ant to this section as necessary or appropriate to im-
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1 plement the requirements of subsection (a) of this 

2 section; and 

3 ‘‘(2) the procedural and other requirements of 

4 this part, including the requirement of sections 205 

5 and 206, that all rates, charges, terms and condi6 tions be just and reasonable and not unduly dis7 criminatory.’’. 

8 SEC. 4. ELECTRIC RELIABILITY STANDARDS. 

9 Part II of the Federal Power Act (16 U.S.C 824 et 

10 seq.) is amended by adding the following new section at 

11 the end thereof: 

12 ‘‘SEC. 216. ELECTRIC RELIABILITY. 

13 ‘‘(a) DEFINITIONS.—For purposes of this section—

14 ‘‘(1) The term ‘bulk-power system’ means—

15 ‘‘(A) facilities and control systems nec16 essary for operating an interconnected electric 

17 energy transmission network (or any portion 

18 thereof); and 

19 ‘‘(B) electric energy from generation facili20 ties needed to maintain transmission system re21 liability. 

22 The term does not include facilities used in the local 

23 distribution of electric energy. 

24 ‘‘(2) The terms ‘Electric Reliability Organiza25 tion’ and ‘ERO’ mean the organization certified by
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1 the Commission under subsection (c) the purpose of 

2 which is to establish and enforce reliability stand3 ards for the bulk-power system, subject to Commis4 sion review. 

5 ‘‘(3) The term ‘reliability standard’ means a re6 quirement, approved by the Commission under this 

7 section, to provide for reliable operation of the bulk8 power system. The term includes requirements for 

9 the operation of existing bulk-power system facilities 

10 and the design of planned additions or modifications 

11 to such facilities to the extent necessary to provide 

12 for reliable operation of the bulk-power system, but 

13 the term does not include any requirement to en14 large such facilities or to construct new transmission 

15 capacity or generation capacity. 

16 ‘‘(4) The term ‘reliable operation’ means oper17 ating the elements of the bulk-power system within 

18 equipment and electric system thermal, voltage, and 

19 stability limits so that instability, uncontrolled sepa20 ration, or cascading failures of such system will not 

21 occur as a result of a sudden disturbance or unan22 ticipated failure of system elements. 

23 ‘‘(5) The term ‘Interconnection’ means a geo24 graphic area in which the operation of bulk-power 

25 system components is synchronized such that the 
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1 failure of one or more of such components may ad2 versely affect the ability of the operators of other 

3 components within the system to maintain reliable 

4 operation of the facilities within their control. 

5 ‘‘(6) The term ‘transmission organization’ 

6 means a regional transmission organization, inde7 pendent system operator, independent transmission 

8 provider, or other transmission organization finally 

9 approved by the Commission for the operation of 

10 transmission facilities. 

11 ‘‘(7) The term ‘regional entity’ means an entity 

12 having enforcement authority pursuant to subsection 

13 (e)(4). 

14 ‘‘(b) JURISDICTION AND APPLICABILITY.—(1) The 

15 Commission shall have jurisdiction, within the United 

16 States, over the ERO certified by the Commission under 

17 subsection (c), any regional entities, and all users, owners 

18 and operators of the bulk-power system, including but not 

19 limited to the entities described in section 201(f), for pur20 poses of approving reliability standards established under 

21 this section and enforcing compliance with this section. All 

22 users, owners and operators of the bulk-power system 

23 shall comply with reliability standards that take effect 

24 under this section. 
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1 ‘‘(2) The Commission shall issue a final rule to imple2 ment the requirements of this section not later than 180 

3 days after the date of enactment of this section. 

4 ‘‘(c) CERTIFICATION.—Following the issuance of a 

5 Commission rule under subsection (b)(2), any person may 

6 submit an application to the Commission for certification 

7 as the Electric Reliability Organization (ERO). The Com8 mission may certify one such ERO if the Commission de9 termines that such ERO—

10 ‘‘(1) has the ability to develop and enforce, sub11 ject to subsection (e)(2), reliability standards that 

12 provide for an adequate level of reliability of the 

13 bulk-power system; 

14 ‘‘(2) has established rules that—

15 ‘‘(A) assure its independence of the users 

16 and owners and operators of the bulk-power 

17 system, while assuring fair stakeholder rep18 resentation in the selection of its directors and 

19 balanced decisionmaking in any ERO com20 mittee or subordinate organizational structure; 

21 ‘‘(B) allocate equitably reasonable dues, 

22 fees, and other charges among end users for all 

23 activities under this section; 

24 ‘‘(C) provide fair and impartial procedures 

25 for enforcement of reliability standards through 
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1 the imposition of penalties in accordance with 

2 subsection (e) (including limitations on activi3 ties, functions, or operations, or other appro4 priate sanctions); 

5 ‘‘(D) provide for reasonable notice and op6 portunity for public comment, due process, 

7 openness, and balance of interests in developing 

8 reliability standards and otherwise exercising its 

9 duties; and 

10 ‘‘(E) provide for taking, after certification, 

11 appropriate steps to gain recognition in Canada 

12 and Mexico. 

13 ‘‘(d) RELIABILITY STANDARDS.—(1) The Electric 

14 Reliability Organization shall file each reliability standard 

15 or modification to a reliability standard that it proposes 

16 to be made effective under this section with the Commis17 sion. 

18 ‘‘(2) The Commission may approve by rule or order 

19 a proposed reliability standard or modification to a reli20 ability standard if it determines that the standard is just, 

21 reasonable, not unduly discriminatory or preferential, and 

22 in the public interest. The Commission shall give due 

23 weight to the technical expertise of the Electric Reliability 

24 Organization with respect to the content of a proposed 

25 standard or modification to a reliability standard and to 
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1 the technical expertise of a regional entity organized on 

2 an Interconnection-wide basis with respect to a reliability 

3 standard to be applicable within that Interconnection, but 

4 shall not defer with respect to the effect of a standard 

5 on competition. A proposed standard or modification shall 

6 take effect upon approval by the Commission. 

7 ‘‘(3) The Electric Reliability Organization shall 

8 rebuttably presume that a proposal from a regional entity 

9 organized on an Interconnection-wide basis for a reliability 

10 standard or modification to a reliability standard to be ap11 plicable on an Interconnection-wide basis is just, reason12 able, and not unduly discriminatory or preferential, and 

13 in the public interest. 

14 ‘‘(4) The Commission shall remand to the Electric 

15 Reliability Organization for further consideration a pro16 posed reliability standard or a modification to a reliability 

17 standard that the Commission disapproves in whole or in 

18 part. 

19 ‘‘(5) The Commission, upon its own motion or upon 

20 complaint, may order the Electric Reliability Organization 

21 to submit to the Commission a proposed reliability stand22 ard or a modification to a reliability standard that ad23 dresses a specific matter if the Commission considers such 

24 a new or modified reliability standard appropriate to carry 

25 out this section.
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1 ‘‘(6) The final rule adopted under subsection (b)(2) 

2 shall include fair processes for the identification and time3 ly resolution of any conflict between a reliability standard 

4 and any function, rule, order, tariff, rate schedule, or 

5 agreement accepted, approved, or ordered by the Commis6 sion applicable to a transmission organization. Such trans7 mission organization shall continue to comply with such 

8 function, rule, order, tariff, rate schedule or agreement ac9 cepted, approved, or ordered by the Commission until—

10 ‘‘(A) the Commission finds a conflict exists 

11 between a reliability standard and any such 

12 provision; 

13 ‘‘(B) the Commission orders a change to 

14 such provision pursuant to section 206 of this 

15 part; and 

16 ‘‘(C) the ordered change becomes effective 

17 under this part. 

18 If the Commission determines that a reliability standard 

19 needs to be changed as a result of such a conflict, it shall 

20 order the ERO to develop and file with the Commission 

21 a modified reliability standard under paragraph (4) or (5) 

22 of this subsection. 

23 ‘‘(e) ENFORCEMENT.—(1) The ERO may impose, 

24 subject to paragraph (2), a penalty on a user or owner 

25 or operator of the bulk-power system for a violation of a 
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1 reliability standard approved by the Commission under 

2 subsection (d) if the ERO, after notice and an opportunity 

3 for a hearing—

4 ‘‘(A) finds that the user or owner or operator 

5 has violated a reliability standard approved by the 

6 Commission under subsection (d); and 

7 ‘‘(B) files notice and the record of the pro8 ceeding with the Commission. 

9 ‘‘(2) A penalty imposed under paragraph (1) may 

10 take effect not earlier than the 31st day after the electric 

11 reliability organization files with the Commission notice of 

12 the penalty and the record of proceedings. Such penalty 

13 shall be subject to review by the Commission, on its own 

14 motion or upon application by the user, owner or operator 

15 that is the subject of the penalty filed within 30 days after 

16 the date such notice is filed with the Commission. Applica17 tion to the Commission for review, or the initiation of re18 view by the Commission on its own motion, shall not oper19 ate as a stay of such penalty unless the Commission other20 wise orders upon its own motion or upon application by 

21 the user, owner or operator that is the subject of such 

22 penalty. In any proceeding to review a penalty imposed 

23 under paragraph (1), the Commission, after notice and op24 portunity for hearing (which hearing may consist solely 

25 of the record before the electric reliability organization and 
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1 opportunity for the presentation of supporting reasons to 

2 affirm, modify, or set aside the penalty), shall by order 

3 affirm, set aside, reinstate, or modify the penalty, and, 

4 if appropriate, remand to the electric reliability organiza5 tion for further proceedings. The Commission shall imple6 ment expedited procedures for such hearings. 

7 ‘‘(3) On its own motion or upon complaint, the Com8 mission may order compliance with a reliability standard 

9 and may impose a penalty against a user or owner or oper10 ator of the bulk-power system, if the Commission finds, 

11 after notice and opportunity for a hearing, that the user 

12 or owner or operator of the bulk-power system has en13 gaged or is about to engage in any acts or practices that 

14 constitute or will constitute a violation of a reliability 

15 standard. 

16 ‘‘(4) The Commission shall establish regulations au17 thorizing the ERO to enter into an agreement to delegate 

18 authority to a regional entity for the purpose of proposing 

19 reliability standards to the ERO and enforcing reliability 

20 standards under paragraph (1) if—

21 ‘‘(A) the regional entity is governed by—

22 ‘‘(i) an independent board; 

23 ‘‘(ii) a balanced stakeholder board; or 

24 ‘‘(iii) a combination independent and bal25 anced stakeholder board; 
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1 ‘‘(B) the regional entity otherwise satisfies the 

2 provisions of subsection (c)(1) and (2); and 

3 ‘‘(C) the agreement promotes effective and effi4 cient administration of bulk-power system reliability. 

5 The Commission may modify such delegation. The ERO 

6 and the Commission shall rebuttably presume that a pro7 posal for delegation to a regional entity organized on an 

8 Interconnection-wide basis promotes effective and efficient 

9 administration of bulk-power system reliability and should 

10 be approved. Such regulation may provide that the Com11 mission may assign the ERO’s authority to enforce reli12 ability standards under paragraph (1) directly to a re13 gional entity consistent with the requirements of this para14 graph. 

15 ‘‘(5) The Commission may take such action as is nec16 essary or appropriate against the ERO or a regional entity 

17 to ensure compliance with a reliability standard or any 

18 Commission order affecting the ERO or a regional entity. 

19 ‘‘(6) Any penalty imposed under this section shall 

20 bear a reasonable relation to the seriousness of the viola21 tion and shall take into consideration the efforts of such 

22 user, owner, or operator to remedy the violation in a time23 ly manner. 

24 ‘‘(f) CHANGES IN ELECTRICITY RELIABILITY ORGA25 NIZATION RULES.—The Electric Reliability Organization 
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1 shall file with the Commission for approval any proposed 

2 rule or proposed rule change, accompanied by an expla3 nation of its basis and purpose. The Commission, upon 

4 its own motion or complaint, may propose a change to the 

5 rules of the Electric Reliability Organization. A proposed 

6 rule or proposed rule change shall take effect upon a find7 ing by the Commission, after notice and opportunity for 

8 comment, that the change is just, reasonable, not unduly 

9 discriminatory or preferential, is in the public interest, and 

10 satisfies the requirements of subsection (c). 

11 ‘‘(g) RELIABILITY REPORTS.—The Electric Reli12 ability Organization shall conduct periodic assessments of 

13 the reliability and adequacy of the bulk-power system in 

14 North America. 

15 ‘‘(h) COORDINATION WITH CANADA AND MEXICO.— 

16 The President is urged to negotiate international agree17 ments with the governments of Canada and Mexico to pro18 vide for effective compliance with reliability standards and 

19 the effectiveness of the Electric Reliability Organization 

20 in the United States and Canada or Mexico. 

21 ‘‘(i) SAVINGS PROVISIONS.—(1) The Electric Reli22 ability Organization shall have authority to develop and 

23 enforce compliance with reliability standards for only the 

24 bulk-power system.
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1 ‘‘(2) This section does not authorize the Electric Reli2 ability Organization or the Commission to order the con3 struction of additional generation or transmission capacity 

4 or to set and enforce compliance with standards for ade5 quacy or safety of electric facilities or services. 

6 ‘‘(3) Nothing in this section shall be construed to pre7 empt any authority of any State to take action to ensure 

8 the safety, adequacy, and reliability of electric service 

9 within that State, as long as such action is not incon10 sistent with any reliability standard, except that the State 

11 of New York may establish rules that result in greater 

12 reliability within that State, as long as such action does 

13 not result in lesser reliability outside the State than that 

14 provided by the reliability standards. 

15 ‘‘(4) Within 90 days of the application of the Electric 

16 Reliability Organization or other affected party, and after 

17 notice and opportunity for comment, the Commission shall 

18 issue a final order determining whether a State action is 

19 inconsistent with a reliability standard, taking into consid20 eration any recommendation of the Electric Reliability Or21 ganization. 

22 ‘‘(5) The Commission, after consultation with the 

23 Electric Reliability Organization and the State taking ac24 tion, may stay the effectiveness of any State action, pend25 ing the Commission’s issuance of a final order. 
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1 ‘‘(j) REGIONAL ADVISORY BODIES.—The Commis2 sion shall establish a regional advisory body on the petition 

3 of at least two-thirds of the States within a region that 

4 have more than one-half of their electric load served within 

5 the region. A regional advisory body shall be composed or 

6 of one member from each participating State in the region, 

7 appointed by the Governor of each State, and may include 

8 representatives of agencies, States, and provinces outside 

9 the United States. A regional advisory body may provide 

10 advice to the Electric Reliability Organization, a regional 

11 entity, or the Commission regarding the governance of an 

12 existing or proposed regional entity within the same re13 gion, whether a standard proposed to apply within the re14 gion is just, reasonable, not unduly discriminatory or pref15 erential, and in the public interest, whether fees proposed 

16 to be assessed within the region are just, reasonable, not 

17 unduly discriminatory or preferential, and in the public 

18 interest and any other responsibilities requested by the 

19 Commission. The Commission may give deference to the 

20 advice of any such regional advisory body if that body is 

21 organized on an Interconnection-wide basis. 

22 ‘‘(k) APPLICATION TO ALASKA AND HAWAII.—The 

23 provisions of this section do not apply to Alaska or Ha24 waii.’’. 
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1 SEC. 5. DISPOSITION OF PROPERTY. 

2 Section 203 of the Federal Power Act (16 U.S.C. 

3 824b) is repealed. 

4 SEC. 6. PROMOTION OF VOLUNTARY DEVELOPMENT OF RE5 GIONAL TRANSMISSION ORGANIZATIONS, 

6 INDEPENDENT TRANSMISSION PROVIDERS, 

7 AND SIMILAR ORGANIZATIONS. 

8 Part II of the Federal Power Act (16 U.S.C. 824 et 

9 seq.) is amended by adding at the end thereof the fol10 lowing new section: 

11 ‘‘SEC. 217. PROMOTION OF VOLUNTARY DEVELOPMENT OF 

12 REGIONAL TRANSMISSION ORGANIZATIONS, 

13 INDEPENDENT TRANSMISSION PROVIDERS, 

14 AND SIMILAR ORGANIZATIONS. 

15 ‘‘(a) IN GENERAL.—The Commission may approve 

16 and may encourage the formation of regional transmission 

17 organizations, independent transmission providers, and 

18 similar organizations (referred to in this section as ‘trans19 mission organizations’) for the purpose of enhancing the 

20 transmission of electric energy in interstate commerce. 

21 Among options for the formation of a transmission organi22 zation, the Commission shall prefer those in which—

23 ‘‘(1) participation in the organization by trans24 mitting utilities is voluntary; 
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1 ‘‘(2) the form, structure, and operating entity 

2 of the organization are approved of by participating 

3 transmitting utilities; and 

4 ‘‘(3) market incentives exist to promote invest5 ment for expansion of transmission facilities and for 

6 the introduction of new transmission technologies 

7 within the territory of the organization. 

8 ‘‘(b) CONDITIONS.—No order issued under this Act 

9 shall be conditioned upon or require a transmitting utility 

10 to transfer operational control of jurisdictional facilities 

11 to an independent system operator or other transmission 

12 organization. 

13 ‘‘(c) COMPLAINT.—In addition to any other rights or 

14 remedies it may have under this Act, any entity serving 

15 electric load that is denied services by a transmission orga16 nization that the transmission organization makes avail17 able to other load serving entities shall be entitled to file 

18 a complaint with the Commission concerning the denial 

19 of such services. If the Commission shall find, after an 

20 evidentiary hearing on the record, that the denial of serv21 ices complained of was unjust, unreasonable, unduly dis22 criminatory or preferential, or contrary to the public inter23 est, the Commission may order the provision of such serv24 ices at rates and on terms and conditions that shall be 

25 in accordance with section 215 of this Act.’’. 
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1 SEC. 7. STATE AND FEDERAL AUTHORITY TO SITE TRANS2 MISSION FACILITIES. 

3 Part II of the Federal Power Act (16 U.S.C. 824 et 

4 seq.) is amended by adding at the end thereof the fol5 lowing new section: 

6 ‘‘SEC. 218. STATE AND FEDERAL AUTHORITY TO SITE 

7 TRANSMISSION FACILITIES. 

8 ‘‘(a) In order to ensure the availability of adequate 

9 capacity to provide for reliable, economic transmission of 

10 electric energy in interstate commerce, upon enactment of 

11 this section, and after notice and opportunity for com12 ment, the Commission shall publish a report, which it shall 

13 revise each year thereafter, describing areas where addi14 tional facilities are necessary to increase electric trans15 mission capacity. The report shall include information 

16 from the regional transmission organization planning 

17 processes explaining the feasibility of providing additional 

18 transmission capacity through existing transmission rights 

19 of way, and shall assess efforts to promote adequate and 

20 economically efficient transmission of electricity through 

21 the introduction of new transmission technologies, and to 

22 encourage investment in new and existing transmission fa23 cilities. The Commission shall rely upon information pro24 vided by regional transmission organizations developed in 

25 conjunction with States through regional transmission or26 ganization planning processes, information provided by
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1 State public utility commissions, and such other informa2 tion about transmission constraints, reliability, and prices 

3 of electric energy as the Commission deems appropriate. 

4 In the report, the Commission shall review the status of 

5 facilities for which an application has been submitted pur6 suant to subsection (b). 

7 ‘‘(b) A regional transmission organization or a re8 gional transmission entity which has submitted an applica9 tion to a State or local agency for approval of transmission 

10 facilities to provide additional transmission capacity in an 

11 area identified in the report required by subsection (a) 

12 shall notify the Commission by providing a copy of the 

13 application, including a description of the facilities and the 

14 proposed route. The regional transmission organization 

15 shall submit to the Commission with a copy of the applica16 tion a statement assessing the feasibility of upgrading ex17 isting transmission facilities to provide additional capacity 

18 in an area identified in the report required by subsection 

19 (a). 

20 ‘‘(c) If a regional transmission organization or a re21 gional transmission entity has not received approval of its 

22 application to the State to construct transmission facilities 

23 in an area identified in the report required by subsection 

24 (a) within one year of the notice to the Commission pursu25 ant to subsection (b), or within two years of such notice 
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1 has not received all permits and approvals required to con2 struct the facilities, the Commission may, after consid3 ering the feasibility of upgrading existing facilities to in4 crease electric transmission capacity, upon its own motion 

5 or upon request, and after notice and opportunity for 

6 hearing, issue a certificate of public convenience and ne7 cessity to construct a proposed transmission facility if it 

8 finds the facilities to be authorized by the certificate are 

9 or will be required by public convenience and necessity. 

10 ‘‘(d) The Commission shall have the power to attach 

11 to the issuance of such certificate and to the exercise of 

12 the rights granted thereunder such reasonable terms and 

13 conditions related to the construction of such facility as 

14 the public convenience and necessity may require. 

15 ‘‘(e) The Commission shall require that construction 

16 on the proposed transmission facility commence within 18 

17 months after the Commision grants an issuance of certifi18 cate. If construction does not commence within the allowed 

19 time, the certificate reverts back to the Commission. The 

20 owner of the proposed transmission facility may apply for 

21 up to two six-month extensions. 

22 ‘‘(f) The Commission shall issue its final decision in 

23 the certificate proceeding within 18 months after the filing 

24 of a request for a certificate or the initiation of pro25 ceedings on its own motion. 
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1 ‘‘(g) When any holder of a certificate of public con2 venience and necessity for electric transmission facilities 

3 issued by the Commission pursuant to subsection (c) can4 not acquire by contract, or is unable to agree with the 

5 owner of the property to the compensation to be paid for 

6 the necessary rights-of-way to construct, operate and 

7 maintain such transmission facility, it may acquire the 

8 same by the exercise of the right of eminent domain in 

9 the district court of the United States for the district in 

10 which such property may be located, or in the State 

11 courts.’’. 

12 SEC. 8. PUBLIC UTILITY HOLDING COMPANY ACT EXEMP13 TION FOR RTOS. 

14 The Public Utility Holding Company Act (15 U.S.C. 

15 79 et seq.) is amended—

16 (1) by redesignating section 36 as section 37; 

17 and 

18 (2) by inserting after section 35 the following: 

19 ‘‘SEC. 36. SAVINGS CLAUSE. 

20 ‘‘(a) IN GENERAL.—This Act shall not apply to a 

21 multistate independent transmission company or to any 

22 action to form, modify, finance, sell, purchase, operate, or 

23 otherwise affect such an organization. 

24 ‘‘(b) DEFINITIONS.—For purposes of subsection (a): 
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1 ‘‘(1) The term ‘multistate independent trans2 mission’ means any person which owns or operates 

3 facilities in more than one State used for the trans4 mission of electric energy in interstate commerce 

5 and which—

6 ‘‘(A) is not engaged in the generation or 

7 sale of electric energy; or 

8 ‘‘(B) the Federal Energy Regulatory Com9 mission determines is not a market participant 

10 (within the meaning of the Commission’s rules 

11 applicable to regional transmission organiza12 tions). 

13 ‘‘(2) The term ‘transmission of electric energy 

14 in interstate commerce’ shall have the meaning given 

15 such term in section 201 of the Federal Power 

16 Act.’’. 

17 SEC. 9. INDEPENDENT TRANSMISSION COMPANIES. 

18 (a) IN GENERAL.—Section 1033 of the Internal Rev19 enue Code of 1986 (relating to involuntary conversions) 

20 is amended by redesignating subsection (k) as subsection 

21 (l) and by inserting after subsection (j) the following new 

22 subsection: 

23 ‘‘(k) SALES OR DISPOSITIONS TO IMPLEMENT FED24 ERAL ENERGY REGULATORY COMMISSION OR STATE

25 ELECTRIC RESTRUCTURING POLICY.—
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1 ‘‘(1) IN GENERAL.—For purposes of this sub2 title, if a taxpayer elects the application of this sub3 section to a qualifying electric transmission trans4 action—

5 ‘‘(A) such transaction shall be treated as 

6 an involuntary conversion to which this section 

7 applies, and 

8 ‘‘(B) exempt utility property shall be treat9 ed as property which is similar or related in 

10 service or use to the property disposed of in 

11 such transaction. 

12 ‘‘(2) EXTENSION OF REPLACEMENT PERIOD.—

13 In the case of any involuntary conversion described 

14 in paragraph (1), subsection (a)(2)(B) shall be ap15 plied by substituting ‘4 years’ for ‘2 years’ in clause 

16 (i) thereof. 

17 ‘‘(3) QUALIFYING ELECTRIC TRANSMISSION

18 TRANSACTION.—For purposes of this subsection, the 

19 term ‘qualifying electric transmission transaction’ 

20 means any sale or other disposition before January 

21 1, 2009, of—

22 ‘‘(A) property used in the trade or business 

23 of providing electric transmission services, or 

24 ‘‘(B) any stock or partnership interest in a 

25 corporation or partnership, as the case may be,
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1 whose principal trade or business consists of 

2 providing electric transmission services, 

3 but only if such sale or disposition is to an inde4 pendent transmission company. 

5 ‘‘(4) INDEPENDENT TRANSMISSION COM6 PANY.—For purposes of this subsection, the term 

7 ‘independent transmission company’ means—

8 ‘‘(A) a regional transmission organization 

9 approved by the Federal Energy Regulatory 

10 Commission, 

11 ‘‘(B) a person—

12 ‘‘(i) who the Federal Energy Regu13 latory Commission determines in its au14 thorization of the transaction under section 

15 203 of the Federal Power Act (16 U.S.C. 

16 823b) is not a market participant within 

17 the meaning of such Commission’s rules 

18 applicable to regional transmission organi19 zations, and 

20 ‘‘(ii) whose transmission facilities to 

21 which the election under this subsection 

22 applies are under the operational control of 

23 a Federal Energy Regulatory Commission24 approved regional transmission organiza25 tion before the close of the period specified 
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1 in such authorization, but not later than 

2 the close of the period applicable under 

3 subsection (a)(2)(B) as extended under 

4 paragraph (2), or 

5 ‘‘(C) in the case of facilities subject to the 

6 exclusive jurisdiction of the Public Utility Com7 mission of Texas, a person which is approved by 

8 that Commission as consistent with Texas State 

9 law regarding an independent transmission or10 ganization. 

11 ‘‘(5) EXEMPT UTILITY PROPERTY.—For pur12 poses of this subsection—

13 ‘‘(A) IN GENERAL.—The term ‘exempt 

14 utility property’ means property used in the 

15 trade or business of—

16 ‘‘(i) generating, transmitting, distrib17 uting, or selling electricity, or 

18 ‘‘(ii) producing, transmitting, distrib19 uting, or selling natural gas. 

20 ‘‘(B) NONRECOGNITION OF GAIN BY REA21 SON OF ACQUISITION OF STOCK.—Acquisition of 

22 control of a corporation shall be taken into ac23 count under this section with respect to a quali24 fying electric transmission transaction only if 

25 the principal trade or business of such corpora-
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1 tion is a trade or business referred to in sub2 paragraph (A). 

3 ‘‘(6) SPECIAL RULE FOR CONSOLIDATED

4 GROUPS.—In the case of a corporation which is a 

5 member of an affiliated group filing a consolidated 

6 return, such corporation shall be treated as satis7 fying the purchase requirement of subsection (a)(2) 

8 with respect to any qualifying electric transmission 

9 transaction engaged in by such corporation to the 

10 extent such requirement is satisfied by another 

11 member of such group. 

12 ‘‘(7) ELECTION.—An election under paragraph 

13 (1), once made, shall be irrevocable.’’

14 (b) EXCEPTION FROM GAIN RECOGNITION UNDER

15 SECTION 1245.—Subsection (b) of section 1245 of such 

16 Code is amended by adding at the end the following new 

17 paragraph: 

18 ‘‘(9) DISPOSITIONS TO IMPLEMENT FEDERAL

19 ENERGY REGULATORY COMMISSION OR STATE ELEC20 TRIC RESTRUCTURING POLICY.—At the election of 

21 the taxpayer, the amount of gain which would (but 

22 for this paragraph) be recognized under this section 

23 on any qualified electric transmission transaction (as 

24 defined in section 1033(k)) for which an election 

25 under section 1033 is made shall be reduced by the 
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1 aggregate reduction in the basis of section 1245 

2 property held by the taxpayer or, if insufficient, by 

3 a member of an affiliated group which includes the 

4 taxpayer at any time during the taxable year in 

5 which such transaction occurred. The manner and 

6 amount of such reduction shall be determined under 

7 regulations prescribed by the Secretary.’’

8 (c) EFFECTIVE DATE.—The amendments made by 

9 subsections (a) and (b) of this section shall apply to trans10 actions occurring after the date of the enactment of this 

11 Act. 

12 (d) DISTRIBUTIONS OF STOCK TO IMPLEMENT FED13 ERAL ENERGY REGULATORY COMMISSION OR STATE

14 ELECTRIC RESTRUCTURING POLICY.—

15 (1) IN GENERAL.—Subparagraph (A) of section 

16 355(e)(3) of such Code (relating to special rules re17 lating to acquisitions) is amended by inserting after 

18 clause (iv) the following new clause: 

19 ‘‘(v) The acquisition of stock in any 

20 controlled corporation in a qualifying elec21 tric transmission transaction (as defined in 

22 section 1033(k)).’’. 
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1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply to distributions after 

3 the date of the enactment of this Act.

Æ