II

106TH CONGRESS

1ST SESSION S. 516

To benefit consumers by promoting competition in the electric power industry,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 3, 1999

Mr. THOMAS introduced the following bill; which was read twice and referred

to the Committee on Energy and Natural Resources

A BILL

To benefit consumers by promoting competition in the

electric power industry, 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,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Electric Utility Re5 structuring Empowerment and Competitiveness Act of

6 1999’’.

7 SEC. 2. FINDINGS AND PURPOSES.

8 (a) FINDINGS.—Congress finds that—

9 (1) the Nation’s electricity generation, trans10 mission, and local distribution systems critically af-
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1 fect the economy and productivity of the United

2 States and the health, safety, welfare, and security

3 of all Americans;

4 (2) competition will provide greater choices,

5 lower prices, and innovative services and products to

6 all consumers of electricity;

7 (3)(A) States have traditionally regulated the

8 rates, terms, and conditions of selling electricity for

9 end-use;

10 (B) regulation of the rates, terms, and condi11 tions of selling electricity for end-use is properly the

12 exclusive jurisdiction of States;

13 (C) virtually every State is considering reforms

14 to traditional methods of regulating the provision of

15 retail electric service to promote competition;

16 (D) many States, through legislation or by ad17 ministrative decision, have already approved plans to

18 begin retail competition; and

19 (E) States should—

20 (i) continue to take the lead in managing

21 the transition to a competitive electricity mar22 ketplace; and

23 (ii) determine the retail electric policies

24 that provide the greatest benefits to consumers
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1 in a manner that recognizes the unique charac2 teristics of each State;

3 (4) all classes of consumers of electric energy

4 should benefit from competition in electricity sales;

5 (5) consumers should have access to adequate,

6 reliable, and efficient supplies of electricity;

7 (6) the transition to competition among elec8 tricity providers should not impair the ability of the

9 States to determine recovery of the substantial in10 vestments made by electric utilities to serve their

11 customers;

12 (7) reciprocity among competing retail elec13 tricity providers will ensure that the States do not

14 obtain undue advantages or disadvantages from the

15 timing of their decisions;

16 (8) the Federal Government must address the

17 matters within Federal jurisdiction as necessary to

18 promote competition, but such actions must not be

19 made at the expense of State authority; and

20 (9)(A) Congress should consider restricting gov21 ernmental utilities with respect to facilities financed

22 with tax-exempt debt;

23 (B) sales in a service territory in existence be24 fore the restriction may continue to be financed

25 using tax-exempt debt; and
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1 (C) a governmental utility should have to fi2 nance sales outside its service territory on the same

3 basis as other competitors.

4 (b) PURPOSE.—The purpose of this Act is to promote

5 competition in the electric power industry through empow6 ering the States, deregulation, and streamlining.

7 SEC. 3. STATE PROMOTION OF RETAIL COMPETITION.

8 (a) RETAINED STATE JURISDICTION.—Part II of the

9 Federal Power Act (16 U.S.C. 824 et seq.) is amended

10 by adding at the end the following:

11 ‘‘SEC. 215. STATE PROMOTION OF RETAIL COMPETITION.

12 ‘‘(a) DEFINITIONS.—In this section:

13 ‘‘(1) NONREGULATED ELECTRIC UTILITY.—The

14 term ‘nonregulated electric utility’ has the meaning

15 given the term in section 3 of the Public Utility Reg16 ulatory Policies Act of 1978 (16 U.S.C. 2602).

17 ‘‘(2) RETAIL ELECTRIC SUPPLY.—

18 ‘‘(A) IN GENERAL.—The term ‘retail elec19 tric supply’ means the production, generation,

20 manufacture, aggregation, retail marketing, re21 tail brokering, retail selling, or other retail sup22 plying of electricity.

23 ‘‘(B) EXCLUSION.—The term ‘retail elec24 tric supply’ does not include the transmission of

25 electricity in interstate commerce.
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1 ‘‘(3) RETAIL SALE.—The term ‘retail sale’

2 means any sale of electric energy for ultimate con3 sumption.

4 ‘‘(4) STATE REGULATED ELECTRIC UTILITY.—

5 The term ‘State regulated electric utility’ has the

6 meaning given the term in section 3 of the Public

7 Utility Regulatory Policies Act of 1978 (16 U.S.C.

8 2602).

9 ‘‘(b) JURISDICTION.—A State may regulate the pro10 vision of any retail electric supply (including self-genera11 tion) or any local distribution service provided to an ulti12 mate consumer of electricity in the State.

13 ‘‘(c) PERFORMANCE STANDARDS.—A State may es14 tablish and enforce performance standards for the retail

15 sale, marketing, or delivery of electric energy to ensure

16 system reliability, protect human health and public safety,

17 and protect retail consumers from unfair business prac18 tices.

19 ‘‘(d) STATE AUTHORITY OVER RETAIL TRANS20 ACTIONS.—Notwithstanding any other provision of this

21 Act, a State or a nonregulated electric utility may require,

22 as a condition of the purchase by any person or municipal23 ity located in the State or service area of the nonregulated

24 electric utility, as appropriate, of a retail electric supply

25 or local distribution service, the payment of a charge de-
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1 termined by the State or nonregulated electric utility to

2 further public policy goals, including—

3 ‘‘(1) recover electric industry transition costs;

4 ‘‘(2) ensure that adequate electric service is

5 available to all customers served by a retail elec6 tricity distribution system;

7 ‘‘(3) ensure and enhance the reliability of retail

8 electric service;

9 ‘‘(4) fund assistance to low-income consumers

10 of electricity;

11 ‘‘(5) encourage environmental programs, renew12 able-energy programs, energy-efficiency programs, or

13 conservation programs;

14 ‘‘(6) provide for transition costs of electric util15 ity workers adversely affected by restructuring; and

16 ‘‘(7) encourage research and development on

17 electric technologies.

18 ‘‘(e) WHOLESALE RECIPROCITY.—An electric utility

19 may not provide any wholesale electric supply in commerce

20 using open and nondiscriminatory transmission access un21 less the electric utility, and every affiliate of the electric

22 utility, provides comparable open and nondiscriminatory

23 transmission access over any facility owned, controlled, or

24 operated by the person or affiliate.
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1 ‘‘(f) RETAIL RECIPROCITY.—A State may provide

2 that a nonregulated electric utility, a State regulated elec3 tric utility, or a cooperative utility in the State may deny

4 local distribution access to any other nonregulated electric

5 utility, State regulated electric utility, or cooperative util6 ity (or affiliate of any such utility) that is offering electric

7 energy for sale (referred to in this subsection as the ‘sell8 er’) to a customer of the in-State utility if the seller or

9 an affiliate of the seller is not providing comparable access

10 to any local distribution facility owned, controlled, or oper11 ated by the seller or affiliate.’’.

12 (b) STATE AUTHORITY OVER SALES OF ELEC13 TRICITY TO FEDERAL FACILITIES.—Section 201 of the

14 Federal Power Act (16 U.S.C. 824) is amended by adding

15 at the end the following:

16 ‘‘(h) STATE AUTHORITY OVER SALES OF ELEC17 TRICITY TO FEDERAL FACILITIES.—The purchase of elec18 tricity for ultimate consumption by a Federal department,

19 agency, authority, instrumentality, facility, enclave, instal20 lation, establishment, or mixed-ownership government cor21 poration shall be subject to the laws (including regula22 tions) of the State in which the consumption of electricity

23 occurs with respect to the choice of supplier and rules,

24 rates, terms and conditions, if any, applicable to such a

25 purchase.’’.
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1 (c) UNIVERSAL SERVICE.—Section 201(b) of the

2 Federal Power Act (16 U.S.C. 824(b)) is amended by add3 ing at the end the following:

4 ‘‘(3) UNIVERSAL SERVICE.—Nothing in this Act

5 deprives a State of the authority to require, in ac6 cordance with State law, all electricity providers that

7 sell electricity to retail customers in the State to as8 sist in providing universal service.’’.

9 SEC. 4. DEREGULATION OF WHOLESALE SALES OF ELEC10 TRIC ENERGY.

11 (a) DEREGULATION OF WHOLESALE SALES OF

12 ELECTRIC ENERGY.—Section 205 of the Federal Power

13 Act (16 U.S.C. 824d) is amended by adding at the end

14 the following:

15 ‘‘(g) DEREGULATION OF WHOLESALE SALES OF

16 ELECTRIC ENERGY.—

17 ‘‘(1) IN GENERAL.—A contract or agreement

18 for the sale of electric energy for resale made after

19 the date of enactment of this subsection shall be ex20 empt from regulation of rates and charges under

21 parts II and III of this Act.

22 ‘‘(2) STATE AUTHORITY OVER RETAIL SALES

23 UNAFFECTED.—Nothing in this subsection affects

24 the authority of a State or State commission to reg25 ulate sales to an ultimate customer.’’.
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1 (b) OPEN ACCESS TRANSMISSION FROM ALL TRANS2 MITTING UTILITIES.—Part II of the Federal Power Act

3 (16 U.S.C. 824 et seq.) (as amended by section 3(a)) is

4 amended by adding at the end the following:

5 ‘‘SEC. 216. OPEN ACCESS TRANSMISSION FROM ALL TRANS6 MITTING UTILITIES.

7 ‘‘A transmitting utility and any other entity that

8 owns, operates, or controls transmission of electricity in

9 interstate commerce—

10 ‘‘(1) shall be subject to the jurisdiction of the

11 Commission under this Act regarding any wholesale

12 transmission service; and

13 ‘‘(2) shall comply with all requirements applica14 ble to a public utility regarding the provision of any

15 wholesale transmission service.’’.

16 SEC. 5. TAX BENEFITS TO UTILITIES.

17 Not later than 1 year after the date of enactment

18 of this Act, the Inspector General of the Treasury shall

19 submit to Congress a report detailing whether and how

20 Internal Revenue Code provisions relating to the following

21 benefits should be addressed in order to foster a competi22 tive retail electricity market:

23 (1) Benefits received as a result of the Internal

24 Revenue Code by an investor-owned electric utility
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1 that is not received by other nonutility private cor2 porations under the Internal Revenue Code.

3 (2) Benefits received as a result of the Internal

4 Revenue Code by a utility providing electric service

5 to the public that is—

6 (A) an instrumentality of a State;

7 (B) a political subdivision of a State;

8 (C) a corporation that has at any time re9 ceived a loan from the Rural Utilities Service or

10 the Rural Electrification Administration under

11 the Rural Electrification Act of 1936 (17

12 U.S.C. 901 et seq.) for the purposes of provid13 ing electric service; or

14 (D) an entity that is owned, directly or in15 directly, by an entity described in subparagraph

16 (A), (B), or (C).

17 SEC. 6. PURPA REFORM.

18 Section 210 of the Public Utility Regulatory Policies

19 Act of 1978 (16 U.S.C. 824a–3) is amended by adding

20 at the end the following:

21 ‘‘(m) LIMITATION ON RULES.—

22 ‘‘(1) DEFINITION OF FACILITY.—In this sub23 section, the term ‘facility’ means a facility for the

24 generation of electric energy or an addition to or ex-
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1 pansion of the generating capacity of a facility for

2 the generation of electric energy.

3 ‘‘(2) LIMITATION.—This section shall not apply

4 to a facility that begins commercial operation after

5 the date of enactment of this subsection, except for

6 a facility for which a power purchase contract was

7 entered into under this section before the date of en8 actment of this subsection.

9 ‘‘(3) CONTRACTS.—After the date of enactment

10 of this subsection, an electric utility shall not be re11 quired to enter into a new contract or obligation to

12 purchase or sell electric energy under this section.’’.

13 SEC. 7. REPEAL OF PUHCA.

14 (a) FINDINGS AND PURPOSES.—

15 (1) FINDINGS.—Congress finds that—

16 (A) the Public Utility Holding Company

17 Act of 1935 (15 U.S.C. 79a et seq.) was in18 tended to facilitate the work of Federal and

19 State regulators by placing certain constraints

20 on the activities of holding company systems;

21 (B) developments since 1935, including

22 changes in other regulation and in the electric

23 and gas industries, have called into question the

24 continued relevance of the model of regulation

25 established by that Act;
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1 (C) there is a continuing need for State

2 regulation in order to ensure the rate protection

3 of utility customers; and

4 (D) limited Federal regulation is necessary

5 to supplement the work of State commissions

6 for continued rate protection for electric and

7 gas utility customers.

8 (2) PURPOSES.—The purposes of this section

9 are—

10 (A) to eliminate unnecessary regulation,

11 yet continue to provide for consumer protection

12 by facilitating existing rate regulatory authority

13 through improved Federal and State commis14 sion access to books and records of all compa15 nies in a holding company system, to the extent

16 that such information is relevant to rates paid

17 by utility customers, while affording companies

18 the flexibility required to compete in the energy

19 markets; and

20 (B) to address protection of electric and

21 gas utility customers by providing for Federal

22 and State access to books and records of all

23 companies in a holding company system that

24 are relevant to utility rates.

25 (b) DEFINITIONS.—In this section:
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1 (1) AFFILIATE.—The term ‘‘affiliate’’ means

2 any company, 5 percent or more of the outstanding

3 voting securities of which are owned, controlled, or

4 held with power to vote, directly or indirectly, by a

5 parent company.

6 (2) ASSOCIATE COMPANY.—The term ‘‘associate

7 company’’ means any company in the same holding

8 company system with another company.

9 (3) COMMISSION.—The term ‘‘Commission’’

10 means the Federal Energy Regulatory Commission.

11 (4) COMPANY.—The term ‘‘company’’ means a

12 corporation, partnership, association, joint stock

13 company, business trust, or any organized group of

14 persons, whether incorporated or not, or a receiver,

15 trustee, or other liquidating agent of any such en16 tity.

17 (5) ELECTRIC UTILITY COMPANY.—The term

18 ‘‘electric utility company’’ means any company that

19 owns or operates facilities used for the generation,

20 transmission, or distribution of electric energy for

21 sale.

22 (6) EXEMPT WHOLESALE GENERATOR.—The

23 term ‘‘exempt wholesale generator’’ has the meaning

24 given the term in section 32(a) of the Public Utility

25 Holding Company Act of 1935 (15 U.S.C. 79z–
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1 5a(a)), as in effect on the day before the effective

2 date of this section.

3 (7) FOREIGN UTILITY COMPANY.—The term

4 ‘‘foreign utility company’’ has the meaning given the

5 term in section 33(a) of the Public Utility Holding

6 Company Act of 1935 (15 U.S.C. 79z–5b(a)), as in

7 effect on the day before the effective date of this sec8 tion.

9 (8) GAS UTILITY COMPANY.—The term ‘‘gas

10 utility company’’ means any company that owns or

11 operates facilities used for retail distribution (other

12 than the distribution only in enclosed portable con13 tainers or distribution to tenants or employees of the

14 company operating such facilities for their own use

15 and not for resale) of natural or manufactured gas

16 for heat, light, or power.

17 (9) HOLDING COMPANY.—The term ‘‘holding

18 company’’ means—

19 (A) a company that directly or indirectly

20 owns, controls, or holds, with power to vote, 10

21 percent or more of the outstanding voting secu22 rities of a public utility company or of a holding

23 company of any public utility company; and

24 (B) any person, determined by the Com25 mission, after notice and opportunity for hear-
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1 ing, to exercise directly or indirectly (either

2 alone or under an arrangement or understand3 ing with 1 or more persons) such a controlling

4 influence over the management or policies of

5 any public utility company or holding company

6 as to make it necessary or appropriate for rate

7 protection for utility customers with respect to

8 rates that such person be subject to the obliga9 tions, duties, and liabilities imposed by this Act

10 upon holding companies.

11 (10) HOLDING COMPANY SYSTEM.—The term

12 ‘‘holding company system’’ means a holding com13 pany and all subsidiary companies of the holding

14 company.

15 (11) JURISDICTIONAL RATE.—The term ‘‘juris16 dictional rate’’ means a rate established by the Com17 mission for the transmission of electric energy in

18 interstate commerce, the sale of electric energy at

19 wholesale in interstate commerce, the transportation

20 of natural gas in interstate commerce, and the sale

21 in interstate commerce of natural gas for resale for

22 ultimate public consumption for domestic, commer23 cial, industrial, or any other use.

24 (12) NATURAL GAS COMPANY.—The term ‘‘nat25 ural gas company’’ means a person engaged in the
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1 transportation of natural gas in interstate commerce

2 or the sale of natural gas in interstate commerce for

3 resale.

4 (13) PERSON.—The term ‘‘person’’ means an

5 individual or company.

6 (14) PUBLIC UTILITY.—The term ‘‘public util7 ity’’ means any person that owns or operates facili8 ties used for transmission of electric energy in inter9 state commerce or sales of electric energy at whole10 sale in interstate commerce.

11 (15) PUBLIC UTILITY COMPANY.—The term

12 ‘‘public utility company’’ means an electric utility

13 company or a gas utility company.

14 (16) STATE COMMISSION.—The term ‘‘State

15 commission’’ means any commission, board, agency,

16 or officer, by whatever name designated, of a State,

17 municipality, or other political subdivision of a State

18 that, under the laws of such State, has jurisdiction

19 to regulate public utility companies.

20 (17) SUBSIDIARY COMPANY.—The term ‘‘sub21 sidiary company’’, in reference to a subsidiary com22 pany of a holding company, means—

23 (A) a company, 10 percent or more of the

24 outstanding voting securities of which are di25 rectly or indirectly owned, controlled, or held
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1 with power to vote, by the holding company;

2 and

3 (B) any person, the management or poli4 cies of which the Commission, after notice and

5 opportunity for hearing, determines to be sub6 ject to a controlling influence, directly or indi7 rectly, by the holding company (either alone or

8 under an arrangement or understanding with 1

9 or more other persons) so as to make it nec10 essary for the rate protection of utility cus11 tomers with respect to rates that the person be

12 subject to the obligations, duties, and liabilities

13 imposed by this section on subsidiary companies

14 of holding companies.

15 (18) VOTING SECURITY.—The term ‘‘voting se16 curity’’ means any security entitling the owner or

17 holder of the security to vote in the direction or

18 management of the affairs of a company.

19 (c) REPEAL OF THE PUBLIC UTILITY HOLDING COM20 PANY ACT OF 1935.—The Public Utility Holding Com21 pany Act of 1935 (15 U.S.C. 79a et seq.) is repealed.

22 (d) FEDERAL ACCESS TO BOOKS AND RECORDS.—

23 (1) IN GENERAL.—Each holding company and

24 each associate company of a holding company shall

25 maintain, and shall make available to the Commis-
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1 sion, such books, accounts, memoranda, and other

2 records as the Commission considers to be relevant

3 to costs incurred by a public utility or natural gas

4 company that is an associate company of the holding

5 company and necessary or appropriate for the pro6 tection of utility customers with respect to jurisdic7 tional rates for the transmission of electric energy in

8 interstate commerce, the sale of electric energy at

9 wholesale in interstate commerce, the transportation

10 of natural gas in interstate commerce, and the sale

11 in interstate commerce of natural gas for resale for

12 ultimate public consumption for domestic, commer13 cial, industrial, or other use.

14 (2) AFFILIATE COMPANIES.—Each affiliate of a

15 holding company or of any subsidiary company of a

16 holding company shall maintain, and make available

17 to the Commission, such books, accounts, memo18 randa, and other records with respect to any trans19 action with another affiliate, as the Commission con20 siders relevant to costs incurred by a public utility

21 or natural gas company that is an associate com22 pany of the holding company and necessary or ap23 propriate for the protection of utility customers with

24 respect to jurisdictional rates.
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1 (3) HOLDING COMPANY SYSTEMS.—The Com2 mission may examine the books, accounts, memo3 randa, and other records of any company in a hold4 ing company system, or any affiliate of a company

5 in a holding company system, as the Commission

6 considers relevant to costs incurred by a public util7 ity or natural gas company in the holding company

8 system and necessary or appropriate for the protec9 tion of utility customers with respect to jurisdic10 tional rates.

11 (4) CONFIDENTIALITY.—No member, officer, or

12 employee of the Commission shall divulge any fact or

13 information that may come to the knowledge of the

14 member, officer, or employee during the course of

15 examination of a book, account, memorandum, or

16 other record under this section, except as may be di17 rected by the Commission or by a court of com18 petent jurisdiction.

19 (e) STATE ACCESS TO BOOKS AND RECORDS.—

20 (1) IN GENERAL.—On the written request of a

21 State commission having jurisdiction to regulate a

22 public utility company in a holding company system,

23 a holding company or an associate or affiliate of a

24 holding company, wherever located, shall produce for
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1 inspection any book, account, memorandum, or other

2 record that—

3 (A) has been identified in reasonable detail

4 in a proceeding before the State commission;

5 (B) the State commission considers rel6 evant to costs incurred by the company; and

7 (C) is necessary for the effective discharge

8 of the responsibilities of the State commission

9 with respect to the proceeding.

10 (2) LIMITATION.—Paragraph (1) does not

11 apply to any person that is a holding company solely

12 by reason of ownership of 1 or more qualifying fa13 cilities under the Public Utility Regulatory Policies

14 Act of 1978 (16 U.S.C. 2601 et seq.).

15 (3) CONFIDENTIALITY OF INFORMATION.—The

16 production of books, accounts, memoranda, and

17 other records under paragraph (1) shall be subject

18 to such terms and conditions as are necessary to

19 safeguard against unwarranted disclosure to the

20 public of any trade secrets or sensitive commercial

21 information.

22 (4) EFFECT ON STATE LAW.—Nothing in this

23 section preempts applicable State law concerning the

24 provision of books, records, or any other informa25 tion, or in any way limit the rights of any State to
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1 obtain books, records, or any other information

2 under Federal law, contract, or otherwise.

3 (5) COURT JURISDICTION.—Any United States

4 district court located in the State in which the State

5 commission referred to in paragraph (1) is located

6 shall have jurisdiction to enforce compliance with

7 this section.

8 (f) EXEMPTION AUTHORITY.—

9 (1) RULEMAKING.—Not later than 90 days

10 after the effective date of this section, the Commis11 sion shall promulgate a final rule to exempt from the

12 requirements of subsection (d) any person that is a

13 holding company, solely with respect to 1 or more—

14 (A) qualifying cogeneration facilities or

15 qualifying small power production facilities

16 under section 210 of the Public Utility Regu17 latory Policies Act of 1978 (16 U.S.C. 824a–3

18 et seq.);

19 (B) exempt wholesale generators; or

20 (C) foreign utility companies.

21 (2) OTHER AUTHORITY.—If, on application or

22 on its own motion, the Commission finds that the

23 books, records, accounts, memoranda, and other

24 records of any person are not relevant to the juris25 dictional rates of a public utility company, or if the
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1 Commission finds that any class of transactions is

2 not relevant to the jurisdictional rates of a public

3 utility company, the Commission shall exempt the

4 person or transaction from the requirements of sub5 section (d).

6 (g) AFFILIATE TRANSACTIONS.—Nothing in this sec7 tion precludes the Commission or a State commission from

8 exercising its jurisdiction under otherwise applicable law

9 to determine whether a public utility company may recover

10 in rates any costs of an activity performed by an associate

11 company, or any costs of goods or services acquired by

12 the public utility company from an associate company.

13 (h) APPLICABILITY.—This section does not apply

14 to—

15 (1) the United States;

16 (2) a State or a political subdivision of a State;

17 (3) a foreign governmental authority not oper18 ating in the United States;

19 (4) an agency, authority, or instrumentality of

20 an entity referred to in paragraph (1), (2), or (3);

21 or

22 (5) an officer, agent, or employee of an entity

23 referred to in paragraph (1), (2), or (3) acting as

24 such in the course of the official duties of the offi25 cer, agent, or employee.
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1 (i) EFFECT ON OTHER REGULATIONS.—Nothing in

2 this section precludes the Commission or a State commis3 sion from exercising jurisdiction under other law to protect

4 utility customers.

5 (j) ENFORCEMENT.—The Commission shall have the

6 powers set forth in sections 306 through 317 of the Fed7 eral Power Act (16 U.S.C. 825d et seq.) to enforce this

8 section.

9 (k) SAVINGS PROVISIONS.—

10 (1) IN GENERAL.—Nothing in this section pro11 hibits a person from engaging in or continuing to

12 engage in an activity or transaction in which the

13 person was legally engaged or authorized to engage

14 (whether by rule, order, or otherwise) on the day be15 fore the effective date of this section, if the person

16 continues to comply with the terms of any authoriza17 tion.

18 (2) EFFECT ON OTHER COMMISSION AUTHOR19 ITY.—Nothing in this section limits the authority of

20 the Commission under the Federal Power Act (16

21 U.S.C. 791a et seq.) or the Natural Gas Act (15

22 U.S.C. 717 et seq.).

23 (l) IMPLEMENTATION.—Not later than 18 months

24 after the date of enactment of this Act, the Commission

25 shall—
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1 (1) promulgate such regulations as are nec2 essary or appropriate to implement this section

3 (other than subsection (c)); and

4 (2) submit to Congress detailed recommenda5 tions on technical and conforming amendments to

6 Federal law necessary to carry out this section and

7 the amendments made by this section.

8 (m) TRANSFER OF RESOURCES.—All books and

9 records that relate primarily to responsibilities of the

10 Commission under this section shall be transferred from

11 the Securities and Exchange Commission to the Commis12 sion.

13 (n) CONFORMING AMENDMENT TO THE FEDERAL

14 POWER ACT.—Section 318 of the Federal Power Act (16

15 U.S.C. 825q) is repealed.

16 (o) AUTHORIZATION OF APPROPRIATIONS.—There

17 are authorized to be appropriated such sums as are nec18 essary to carry out this section.

19 (p) EFFECTIVE DATE.—This section and the amend20 ments made by this section take effect on the date that

21 is 18 months after the date of enactment of this Act.
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1 SEC. 8. ELECTRIC RELIABILITY ORGANIZATION AND OVER2 SIGHT.

3 (a) IN GENERAL.—Part II of the Federal Power Act

4 (16 U.S.C. 824 et seq.) (as amended by section 4(b)) is

5 amended by adding at the end the following:

6 ‘‘SEC. 217. ELECTRIC RELIABILITY ORGANIZATION AND

7 OVERSIGHT.

8 ‘‘(a) DEFINITIONS.—In this section:

9 ‘‘(1) AFFILIATED REGIONAL RELIABILITY EN10 TITY.—The term ‘affiliated regional reliability entity’

11 means an entity delegated authority under sub12 section (h).

13 ‘‘(2) BULK-POWER SYSTEM.—

14 ‘‘(A) IN GENERAL.—The term ‘bulk-power

15 system’ means an interconnected transmission

16 grid in which electric power is transmitted over

17 transmission lines with a capacity of more than

18 115 kilovolts.

19 ‘‘(B) INCLUSIONS.—The term ‘bulk-power

20 system’ includes—

21 ‘‘(i) transmission lines, substations,

22 control centers, communications, data, op23 erations planning facilities, control sys24 tems, and all other facilities necessary for

25 the operation of all or any part of the

26 transmission grid; and
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1 ‘‘(ii) the output of generating units

2 necessary to maintain the reliability of the

3 transmission grid.

4 ‘‘(3) BULK-POWER SYSTEM USER.—The term

5 ‘bulk-power system user’ means an entity that—

6 ‘‘(A) sells, purchases, or transmits electric

7 power over a bulk-power system; or

8 ‘‘(B) owns, operates, or maintains facilities

9 or control systems that are part of a bulk-power

10 system.

11 ‘‘(4) ELECTRIC RELIABILITY ORGANIZATION.—

12 The term ‘electric reliability organization’ means the

13 organization designated by the Commission under

14 subsection (d).

15 ‘‘(5) ENTITY RULE.—The term ‘entity rule’

16 means a rule adopted by an affiliated regional reli17 ability entity for a specific region and designed to

18 implement or enforce 1 or more organization stand19 ards.

20 ‘‘(6) INDEPENDENT DIRECTOR.—The term

21 ‘independent director’ means a person that—

22 ‘‘(A) is not an officer or employee of an

23 entity that would reasonably be perceived as

24 having a direct financial interest in the outcome
27

•S 516 IS

1 of a decision by the board of directors of the

2 electric reliability organization; and

3 ‘‘(B) does not have a relationship that

4 would interfere with the exercise of independent

5 judgment in carrying out the responsibilities of

6 a director of the electric reliability organization.

7 ‘‘(7) INDUSTRY SECTOR.—The term ‘industry

8 sector’ means a group of bulk-power system users

9 with substantially similar commercial interests, as

10 determined by the board of directors of the electric

11 reliability organization.

12 ‘‘(8) INTERCONNECTION.—The term ‘inter13 connection’ means a geographic area in which the

14 operation of bulk-power system components is syn15 chronized so that the failure of 1 or more of the

16 components may adversely affect the ability of the

17 operators of other components within the inter18 connection to maintain safe and reliable operation of

19 the facilities within their control.

20 ‘‘(9) ORGANIZATION STANDARD.—

21 ‘‘(A) IN GENERAL.—The term ‘organiza22 tion standard’ means a policy or standard

23 adopted by the electric reliability organization

24 to provide for the reliable operation of a bulk25 power system.
28

•S 516 IS

1 ‘‘(B) INCLUSIONS.—The term ‘organiza2 tion standard’ includes—

3 ‘‘(i) an entity rule approved by the

4 electric reliability organization; and

5 ‘‘(ii) a variance approved by the elec6 tric reliability organization.

7 ‘‘(10) PUBLIC INTEREST GROUP.—

8 ‘‘(A) IN GENERAL.—The term ‘public in9 terest group’ means a nonprofit private or pub10 lic organization that has an interest in the ac11 tivities of the electric reliability organization.

12 ‘‘(B) INCLUSIONS.—The term ‘public in13 terest group’ includes—

14 ‘‘(i) a ratepayer advocacy group;

15 ‘‘(ii) an environmental group; and

16 ‘‘(iii) a State or local government or17 ganization that regulates participants in

18 and promulgates government policy with

19 respect to the market for electric power.

20 ‘‘(11) SYSTEM OPERATOR.—

21 ‘‘(A) IN GENERAL.—The term ‘system op22 erator’ means an entity that operates or is re23 sponsible for the operation of a bulk-power sys24 tem.
29

•S 516 IS

1 ‘‘(B) INCLUSIONS.—The term ‘system op2 erator’ includes—

3 ‘‘(i) a control area operator;

4 ‘‘(ii) an independent system operator;

5 ‘‘(iii) a transmission company;

6 ‘‘(iv) a transmission system operator;

7 and

8 ‘‘(v) a regional security coordinator.

9 ‘‘(12) VARIANCE.—The term ‘variance’ means

10 an exception from the requirements of an organiza11 tion standard (including a proposal for an organiza12 tion standard in a case in which there is no organi13 zation standard) that is adopted by an affiliated re14 gional reliability entity and is applicable to all or a

15 part of the region for which the affiliated regional

16 reliability entity is responsible.

17 ‘‘(b) JURISDICTION OF THE COMMISSION.—Within

18 the United States, the Commission shall have jurisdiction

19 over the electric reliability organization, all affiliated re20 gional reliability entities, all system operators, and all

21 bulk-power system users for purposes of approving organi22 zation standards and enforcing compliance with this sec23 tion.

24 ‘‘(c) EXISTING RELIABILITY STANDARDS.—
30

•S 516 IS

1 ‘‘(1) SUBMISSION TO THE COMMISSION.—Be2 fore designation of an electric reliability organization

3 under subsection (d), any person, including the

4 North American Electric Reliability Council and its

5 member Regional Reliability Councils, may submit

6 to the Commission any reliability standard, guid7 ance, or practice that the person proposes to be

8 made mandatory and enforceable.

9 ‘‘(2) REVIEW BY THE COMMISSION.—

10 ‘‘(A) IN GENERAL.—The Commission,

11 after allowing interested persons an opportunity

12 to submit comments, may approve any such

13 proposed mandatory standard, guidance, or

14 practice if the Commission finds that the stand15 ard, guidance, or practice is just, reasonable,

16 not unduly discriminatory or preferential, and

17 in the public interest.

18 ‘‘(B) SUMMARY APPROVAL.—The Commis19 sion may, without further proceeding or finding,

20 approve any standard, guidance, or practice for

21 which no substantive objections are submitted

22 during the comment period.

23 ‘‘(3) EFFECT OF APPROVAL.—A standard, guid24 ance, or practice shall be mandatory and applicable
31

•S 516 IS

1 according to its terms following approval by the

2 Commission and shall remain in effect until it is—

3 ‘‘(A) withdrawn, disapproved, or super4 seded by an organization standard that is

5 issued or approved by the electric reliability or6 ganization and made effective by the Commis7 sion under section (e); or

8 ‘‘(B) disapproved or suspended by the

9 Commission if, on complaint or upon motion by

10 the Commission and after notice and an oppor11 tunity for comment, the Commission finds the

12 standard, guidance, or practice to be unjust,

13 unreasonable, unduly discriminatory or pref14 erential or not in the public interest.

15 ‘‘(4) ENFORCEABILITY.—A standard, guidance,

16 or practice in effect under this subsection shall be

17 enforceable by the Commission.

18 ‘‘(d) DESIGNATION OF ELECTRIC RELIABILITY OR19 GANIZATION.—

20 ‘‘(1) REGULATIONS.—

21 ‘‘(A) PROPOSED REGULATIONS.—Not later

22 than 90 days after the date of enactment of

23 this section, the Commission shall propose regu24 lations specifying procedures and requirements
32

•S 516 IS

1 for an entity to apply for selection as the elec2 tric reliability organization.

3 ‘‘(B) NOTICE AND COMMENT.—The Com4 mission shall provide notice and opportunity for

5 comment on the proposed regulations.

6 ‘‘(C) FINAL REGULATION.—Not later than

7 180 days after the date of enactment of this

8 section, the Commission shall promulgate final

9 regulations under this subsection.

10 ‘‘(2) APPLICATION.—

11 ‘‘(A) SUBMISSION.—Following the promul12 gation of final regulations under paragraph (1),

13 an entity may submit an application to the

14 Commission for designation as the electric reli15 ability organization.

16 ‘‘(B) CONTENTS.—The applicant shall—

17 ‘‘(i) specify in the application the gov18 ernance and procedures of the applicant

19 and its funding mechanism and initial

20 funding requirements; and

21 ‘‘(ii) submit any organization stand22 ards proposed to take effect under sub23 section (e).

24 ‘‘(3) NOTICE AND COMMENT.—The Commission

25 shall—
33

•S 516 IS

1 ‘‘(A) provide public notice of the applica2 tion and the proposed organization standards;

3 and

4 ‘‘(B) afford interested parties an oppor5 tunity to comment.

6 ‘‘(4) DESIGNATION OF ELECTRIC RELIABILITY

7 ORGANIZATION.—The Commission shall designate

8 the applicant as the electric reliability organization

9 if the Commission determines that the applicant—

10 ‘‘(A) has the ability to develop, implement,

11 and enforce standards that provide for an ade12 quate level of reliability of bulk-power systems;

13 ‘‘(B) permits voluntary membership to any

14 bulk-power system user or public interest

15 group;

16 ‘‘(C) ensures fair representation of its

17 members in the selection of its directors and

18 fair management of its affairs, taking into ac19 count the need for efficiency and effectiveness

20 in decisionmaking and operations and the re21 quirements for technical competency in the de22 velopment of organization standards and the ex23 ercise of oversight of bulk-power system reliabil24 ity;
34

•S 516 IS

1 ‘‘(D) ensures that no 2 industry sectors

2 have the ability to control, and no 1 industry

3 sector has the ability to veto, the applicant’s

4 discharge of its responsibilities as the electric

5 reliability organization (including actions by

6 committees recommending standards for ap7 proval by the board or other board actions to

8 implement and enforce standards);

9 ‘‘(E) provides for governance by a board

10 wholly comprised of independent directors;

11 ‘‘(F) provides a funding mechanism and

12 requirements that—

13 ‘‘(i) are just, reasonable, not unduly

14 discriminatory or preferential and in the

15 public interest; and

16 ‘‘(ii) satisfy the requirements of sub17 section (l);

18 ‘‘(G) has established procedures for devel19 opment of organization standards that—

20 ‘‘(i) provide reasonable notice and op21 portunity for public comment, taking into

22 account the need for efficiency and effec23 tiveness in decisionmaking and operations

24 and the requirements for technical com-
35

•S 516 IS

1 petency in the development of organization

2 standards; and

3 ‘‘(ii) ensure openness, a balancing of

4 interests, and due process, subject to the

5 application of alternative procedures when

6 necessitated by a need to respond to an

7 emergency;

8 ‘‘(H) has established fair and impartial

9 procedures for implementation and enforcement

10 of organization standards, either directly or

11 through delegation to an affiliated regional reli12 ability entity, including the imposition of pen13 alties, limitations on activities, functions, or op14 erations, or other appropriate sanctions;

15 ‘‘(I) has established procedures for notice

16 and opportunity for public observation of all

17 meetings, except that the procedures for public

18 observation may include alternative procedures

19 for emergencies or for the discussion of infor20 mation that the directors determine should take

21 place in closed session, such as litigation, per22 sonnel actions, or commercially sensitive infor23 mation;
36

•S 516 IS

1 ‘‘(J) provides for the consideration of rec2 ommendations of States and State commissions;

3 and

4 ‘‘(K) addresses such other matters as the

5 Commission deems necessary or appropriate to

6 ensure that the procedures, governance, and

7 funding of the electric reliability organization

8 are just, reasonable, not unduly discriminatory

9 or preferential, and in the public interest.

10 ‘‘(5) EXCLUSIVE DESIGNATION.—

11 ‘‘(A) IN GENERAL.—The Commission shall

12 designate only 1 electric reliability organization.

13 ‘‘(B) MULTIPLE APPLICATIONS.—If the

14 Commission receives 2 or more timely applica15 tions that satisfy the requirements of this sub16 section, the Commission shall approve only the

17 application that the Commission determines will

18 best implement this section.

19 ‘‘(e) ORGANIZATION STANDARDS.—

20 ‘‘(1) SUBMISSION OF PROPOSALS TO COMMIS21 SION.—

22 ‘‘(A) IN GENERAL.—If the electric reliabil23 ity organization proposes a new organization

24 standard or modification to an organization

25 standard, the electric reliability organization
37

•S 516 IS

1 shall submit the new organization standard or

2 modification to the Commission for review.

3 ‘‘(B) CONTENTS.—A proposal submitted

4 under subparagraph (A) shall include—

5 ‘‘(i) a concise statement of the pur6 pose of the proposal; and

7 ‘‘(ii) a record of any proceedings con8 ducted with respect to the proposal.

9 ‘‘(2) REVIEW BY THE COMMISSION.—

10 ‘‘(A) NOTICE AND COMMENT.—The Com11 mission shall—

12 ‘‘(i) provide notice of a proposal under

13 paragraph (1); and

14 ‘‘(ii) allow interested persons 30 days

15 to submit comments on the proposal.

16 ‘‘(B) ACTION BY THE COMMISSION.—After

17 taking into consideration any submitted com18 ments, the Commission shall approve or dis19 approve a proposed organization standard or

20 modification not later than the end of the 60-

21 day period beginning on the date of the dead22 line for the submission of comments, except

23 that the Commission may extend the 60-day pe24 riod for an additional 90 days for good cause.
38

•S 516 IS

1 ‘‘(C) FAILURE TO ACT.—If the Commis2 sion does not act to approve or disapprove a

3 proposed organization standard or modification

4 within the period specified by subparagraph

5 (B), the proposed organization standard or

6 modification shall take effect subject to its

7 terms, without prejudice to the authority of the

8 Commission thereafter to suspend or modify the

9 organization standard or modification in ac10 cordance with this section.

11 ‘‘(D) EFFECTIVE DATE.—An organization

12 standard or modification approved by the Com13 mission shall take effect—

14 ‘‘(i) not earlier than 30 days after the

15 date of the Commission’s order of ap16 proval; or

17 ‘‘(ii) if the organization standard is to

18 take effect under subparagraph (C), on the

19 date that is 30 days after the end of the

20 applicable period under subparagraph (B).

21 ‘‘(E) STANDARDS FOR APPROVAL OR SUS22 PENSION.—

23 ‘‘(i) IN GENERAL.—The Commission

24 shall approve a proposed new organization

25 standard or modification if the Commission
39

•S 516 IS

1 determines the organization standard or

2 modification to be just, reasonable, not un3 duly discriminatory or preferential, and in

4 the public interest.

5 ‘‘(ii) SUSPENSION.—The Commission,

6 on complaint or upon the motion of the

7 Commission, shall suspend an organization

8 standard or modification if the Commission

9 determines the standard to be unjust, un10 reasonable, unduly discriminatory or pref11 erential, or not in the public interest.

12 ‘‘(iii) CONSIDERATIONS.—In the exer13 cise of its review responsibilities under this

14 subsection, the Commission—

15 ‘‘(I) shall give due weight to the

16 technical expertise of the electric reli17 ability organization with respect to

18 the content of a new organization

19 standard or modification; but

20 ‘‘(II) shall not defer to the elec21 tric reliability organization with re22 spect to the effect of the organization

23 standard on competition.

24 ‘‘(F) REMAND.—
40

•S 516 IS

1 ‘‘(i) IN GENERAL.—An existing or

2 proposed organization standard that is dis3 approved or suspended in whole or in part

4 by the Commission shall be remanded to

5 the electric reliability organization for fur6 ther consideration.

7 ‘‘(ii) GUIDANCE.—The Commission

8 may offer guidance to the electric reliabil9 ity organization as to how to cure the de10 termined deficiency.

11 ‘‘(3) ORDERS TO DEVELOP OR MODIFY ORGANI12 ZATION STANDARDS.—The Commission, on com13 plaint or on motion of the Commission, may order

14 the electric reliability organization to develop and

15 submit to the Commission, by a date specified in the

16 order, an organization standard or modification to

17 an existing organization standard to address a spe18 cific matter if the Commission considers a new orga19 nization standard or modification appropriate to

20 carry out this section.

21 ‘‘(4) VARIANCES AND ENTITY RULES.—

22 ‘‘(A) PROPOSAL.—An affiliated regional

23 reliability entity may propose a variance or en24 tity rule to the electric reliability organization.
41

•S 516 IS

1 ‘‘(B) EXPEDITED CONSIDERATION.—If ex2 pedited consideration is necessary to provide for

3 bulk-power system reliability, the affiliated re4 gional reliability entity may—

5 ‘‘(i) request that the electric reliability

6 organization expedite consideration of the

7 proposal; and

8 ‘‘(ii) file a notice of the request with

9 the Commission.

10 ‘‘(C) FAILURE TO ACT.—

11 ‘‘(i) IN GENERAL.—If the electric reli12 ability organization fails to adopt the vari13 ance or entity rule, in whole or in part, the

14 affiliated regional reliability entity may re15 quest that the Commission review the pro16 posal.

17 ‘‘(ii) ACTION BY THE COMMISSION.—

18 If the Commission determines, after a re19 view of the request, that the action of the

20 electric reliability organization did not con21 form to the applicable standards and pro22 cedures approved by the Commission, or if

23 the Commission determines that the vari24 ance or entity rule is just, reasonable, not

25 unduly discriminatory or preferential, and
42

•S 516 IS

1 that the electric reliability organization has

2 unreasonably rejected or failed to act on

3 the proposal, the Commission may—

4 ‘‘(I) remand the proposal for fur5 ther consideration by the electric reli6 ability organization; or

7 ‘‘(II) order the electric reliability

8 organization or the affiliated regional

9 reliability entity to develop a variance

10 or entity rule consistent with that re11 quested by the affiliated regional reli12 ability entity.

13 ‘‘(D) PROCEDURE.—A variance or entity

14 rule proposed by an affiliated regional reliability

15 entity shall be submitted to the electric reliabil16 ity organization for review and submission to

17 the Commission in accordance with the proce18 dures specified in paragraph (2).

19 ‘‘(5) IMMEDIATE EFFECTIVENESS.—

20 ‘‘(A) IN GENERAL.—Notwithstanding any

21 other provision of this subsection, a proposed

22 organization standard or modification shall take

23 effect according to its terms if the electric reli24 ability organization determines that an emer25 gency exists requiring that the proposed organi-
43

•S 516 IS

1 zation standard or modification take effect

2 without advance notice or comment.

3 ‘‘(B) NOTIFICATION.—The electric reliabil4 ity organization shall—

5 ‘‘(i) notify the Commission imme6 diately after making a determination under

7 subparagraph (A);

8 ‘‘(ii) submit the emergency organiza9 tion standard or modification to the Com10 mission not later than 5 days after making

11 the determination; and

12 ‘‘(iii) include in the submission an ex13 planation of the need for the emergency or14 ganization standard.

15 ‘‘(C) NOTICE AND COMMENT.—The Com16 mission shall—

17 ‘‘(i) provide notice of the new organi18 zation standard or modification for com19 ment; and

20 ‘‘(ii) follow the procedures specified in

21 paragraphs (2) and (3) for review of the

22 new organization standard or modification.

23 ‘‘(D) DURATION OF EFFECTIVENESS.—An

24 emergency organization standard or modifica-
44

•S 516 IS

1 tion shall remain in effect unless and until sus2 pended or disapproved by the Commission.

3 ‘‘(E) SUSPENSION OR DISAPPROVAL.—If

4 the Commission determines at any time that

5 the emergency organization standard or modi6 fication is not necessary, the Commission may

7 suspend or disapprove the emergency organiza8 tion standard or modification.

9 ‘‘(6) COMPLIANCE.—Each bulk power system

10 user shall comply with an organization standard that

11 takes effect under this section.

12 ‘‘(f) COORDINATION WITH CANADA AND MEXICO.—

13 ‘‘(1) RECOGNITION.—The electric reliability or14 ganization shall take all appropriate steps to gain

15 recognition by the governments of and the industry

16 in Canada and Mexico.

17 ‘‘(2) INTERNATIONAL AGREEMENTS.—

18 ‘‘(A) IN GENERAL.—The United States

19 shall use its best efforts to enter into agree20 ments with the appropriate governments of

21 Canada and Mexico to provide for—

22 ‘‘(i) effective compliance with organi23 zation standards; and
45

•S 516 IS

1 ‘‘(ii) the effectiveness of the electric

2 reliability organization in carrying out its

3 mission and responsibilities.

4 ‘‘(B) ACTION CONSISTENT WITH INTER5 NATIONAL AGREEMENTS.—All actions taken by

6 the electric reliability organization, any affili7 ated regional reliability entity, or the Commis8 sion shall be consistent with any international

9 agreements described in subparagraph (A).

10 ‘‘(g) CHANGES IN PROCEDURES, GOVERNANCE, OR

11 FUNDING.—

12 ‘‘(1) SUBMISSION TO THE COMMISSION.—The

13 electric reliability organization shall submit to the

14 Commission—

15 ‘‘(A) any proposed change in a procedure,

16 governance, or funding provision; or

17 ‘‘(B) any change in an affiliated regional

18 reliability entity’s procedure, governance, or

19 funding provision relating to delegated func20 tions.

21 ‘‘(2) CONTENTS.—A submission under para22 graph (1) shall include an explanation of the basis

23 and purpose for the change.

24 ‘‘(3) EFFECTIVE DATE.—

25 ‘‘(A) CHANGES IN PROCEDURES.—
46

•S 516 IS

1 ‘‘(i) STATEMENTS WITH RESPECT TO

2 EXISTING PROCEDURES.—A proposed

3 change in a procedure may take effect 90

4 days after submission to the Commission if

5 the change constitutes a statement of pol6 icy, practice, or interpretation with respect

7 to the meaning or enforcement of a proce8 dure that the Commission has determined

9 to meet the requirements of subparagraph

10 (G), (H), or (I) of subsection (d)(4).

11 ‘‘(ii) OTHER CHANGES IN PROCE12 DURES.—A proposed change in procedure

13 other than a change described in clause (i)

14 shall take effect if the Commission, after

15 notice and opportunity for comment, deter16 mines that the change—

17 ‘‘(I) is just, reasonable, not un18 duly discriminatory or preferential,

19 and in the public interest; and

20 ‘‘(II) satisfies the requirements

21 of subsection (d)(4).

22 ‘‘(B) CHANGES IN GOVERNANCE OR FUND23 ING.—A change in governance or funding shall

24 take effect if the Commission, after notice and
47

•S 516 IS

1 opportunity for comment, determines that the

2 change—

3 ‘‘(i) is just, reasonable, not unduly

4 discriminatory or preferential, and in the

5 public interest; and

6 ‘‘(ii) satisfies the requirements of sub7 section (d)(4).

8 ‘‘(4) SUSPENSION.—The Commission, on com9 plaint or on the motion of the Commission, may sus10 pend application of a procedure, governance, or

11 funding provision if the Commission determines that

12 the provision—

13 ‘‘(A) is unjust, unreasonable, unduly dis14 criminatory or preferential, or not in the public

15 interest; or

16 ‘‘(B) does not meet the requirements of

17 subsection (d)(4).

18 ‘‘(5) ORDER TO AMEND.—

19 ‘‘(A) IN GENERAL.—The Commission, on

20 complaint or on the motion of the Commission,

21 may require the electric reliability organization

22 to amend a procedure, governance, or funding

23 provision if the Commission determines that the

24 amendment is necessary to meet the require25 ments of this section.
48

•S 516 IS

1 ‘‘(B) FILING.—The electric reliability or2 ganization shall submit the amendment in ac3 cordance with paragraph (1).

4 ‘‘(h) DELEGATIONS OF AUTHORITY.—

5 ‘‘(1) IN GENERAL.—

6 ‘‘(A) IMPLEMENTATION AND ENFORCE7 MENT OF COMPLIANCE.—At the request of an

8 affiliated regional reliability entity, the electric

9 reliability organization shall enter into an

10 agreement with the affiliated regional reliability

11 entity for the delegation of authority to imple12 ment and enforce compliance with organization

13 standards in a specified geographic area if the

14 electric reliability organization finds that—

15 ‘‘(i) the affiliated regional reliability

16 entity satisfies the requirements of sub17 paragraphs (A), (B), (C), (D), (F), and

18 (K) of subsection (d)(4); and

19 ‘‘(ii) the delegation would promote the

20 effective and efficient implementation and

21 administration of bulk-power system reli22 ability.

23 ‘‘(B) OTHER AUTHORITY.—The electric re24 liability organization may enter into an agree25 ment to delegate to the affiliated regional au-
49

•S 516 IS

1 thority entity any other authority, except that

2 the electric reliability organization shall reserve

3 the right to set and approve standards for bulk4 power system reliability.

5 ‘‘(2) APPROVAL BY THE COMMISSION.—

6 ‘‘(A) SUBMISSION TO THE COMMISSION.—

7 The electric reliability organization shall submit

8 to the Commission—

9 ‘‘(i) any agreement entered into under

10 this subsection; and

11 ‘‘(ii) any information the Commission

12 requires with respect to the affiliated re13 gional reliability entity to which authority

14 is delegated.

15 ‘‘(B) STANDARDS FOR APPROVAL.—The

16 Commission shall approve the agreement, fol17 lowing public notice and an opportunity for

18 comment, if the Commission finds that the

19 agreement—

20 ‘‘(i) meets the requirements of para21 graph (1); and

22 ‘‘(ii) is just, reasonable, not unduly

23 discriminatory or preferential, and in the

24 public interest.
50

•S 516 IS

1 ‘‘(C) REBUTTABLE PRESUMPTION.—A pro2 posed delegation agreement with an affiliated

3 regional reliability entity organized on an inter4 connection-wide basis shall be rebuttably pre5 sumed by the Commission to promote the effec6 tive and efficient implementation and adminis7 tration of the reliability of the bulk-power sys8 tem.

9 ‘‘(D) INVALIDITY ABSENT APPROVAL.—No

10 delegation by the electric reliability organization

11 shall be valid unless approved by the Commis12 sion.

13 ‘‘(3) PROCEDURES FOR ENTITY RULES AND

14 VARIANCES.—

15 ‘‘(A) IN GENERAL.—A delegation agree16 ment under this subsection shall specify the

17 procedures by which the affiliated regional reli18 ability entity may propose entity rules or

19 variances for review by the electric reliability

20 organization.

21 ‘‘(B) INTERCONNECTION-WIDE ENTITY

22 RULES AND VARIANCES.—In the case of a pro23 posal for an entity rule or variance that would

24 apply on an interconnection-wide basis, the elec25 tric reliability organization shall presume that
51

•S 516 IS

1 the proposal is valid if the proposal is made by

2 an interconnection-wide affiliated regional reli3 ability entity unless the electric reliability orga4 nization makes a written finding that the entity

5 rule or variance—

6 ‘‘(i) was not developed in a fair and

7 open process that provided an opportunity

8 for all interested parties to participate;

9 ‘‘(ii) would have a significant adverse

10 impact on reliability or commerce in other

11 interconnections;

12 ‘‘(iii) fails to provide a level of reliabil13 ity of the bulk-power system within the

14 interconnection such that the entity rule or

15 variance would constitute a serious and

16 substantial threat to public health, safety,

17 welfare, or national security; or

18 ‘‘(iv) would create a serious and sub19 stantial burden on competitive markets

20 within the interconnection that is not nec21 essary for reliability.

22 ‘‘(C) NONINTERCONNECTION-WIDE ENTITY

23 RULES AND VARIANCES.—In the case of a pro24 posal for an entity rule or variance that would

25 apply only to part of an interconnection, the
52

•S 516 IS

1 electric reliability organization shall find the

2 proposal valid if the affiliated regional reliabil3 ity entity making the proposal demonstrates

4 that the proposal—

5 ‘‘(i) was developed in a fair and open

6 process that provided and opportunity for

7 all interested parties to participate;

8 ‘‘(ii) would not have an adverse im9 pact on commerce that is not necessary for

10 reliability;

11 ‘‘(iii) provides a level of bulk-power

12 system reliability that is adequate to pro13 tect public health, safety, welfare, and na14 tional security and would not have a sig15 nificant adverse impact on reliability; and

16 ‘‘(iv) in the case of a variance, is

17 based on a technical difference between re18 gions or between subregions within the af19 filiated regional reliability entity’s geo20 graphic area that necessitates application

21 of different entity rules in different regions

22 or subregions.

23 ‘‘(D) ACTION BY THE ELECTRIC RELIABIL24 ITY ORGANIZATION.—
53

•S 516 IS

1 ‘‘(i) IN GENERAL.—The electric reli2 ability organization shall approve or dis3 approve a proposal under subparagraph

4 (A) within 120 days after the proposal is

5 submitted.

6 ‘‘(ii) FAILURE TO ACT.—If the electric

7 reliability organization fails to act within

8 the time specified in clause (i), the pro9 posal shall be deemed to have been ap10 proved.

11 ‘‘(iii) SUBMISSION TO THE COMMIS12 SION.—After approving a proposal under

13 subparagraph (A), the electric reliability

14 organization shall submit the proposal to

15 the Commission for approval under sub16 section (e)(1).

17 ‘‘(E) NO DIRECT SUBMISSIONS.—An affili18 ated regional reliability entity may not submit

19 a proposal for approval directly to the Commis20 sion except as provided in subsection (e)(4)(C).

21 ‘‘(4) FAILURE TO REACH DELEGATION AGREE22 MENT.—

23 ‘‘(A) IN GENERAL.—If an affiliated re24 gional reliability entity requests, consistent with

25 paragraph (1), that the electric reliability orga-
54

•S 516 IS

1 nization delegate authority to it, but is unable

2 within 180 days to reach agreement with the

3 electric reliability organization with respect to

4 the requested delegation, the entity may seek

5 relief from the Commission.

6 ‘‘(B) REVIEW BY THE COMMISSION.—The

7 Commission may order the electric reliability

8 organization to make a delegation requested

9 under subparagraph (A) if, after notice and op10 portunity for comment, the Commission deter11 mines that—

12 ‘‘(i) a delegation to the affiliated re13 gional reliability entity would—

14 ‘‘(I) meet the requirements of

15 paragraph (1); and

16 ‘‘(II) be just, reasonable, not un17 duly discriminatory or preferential,

18 and in the public interest; and

19 ‘‘(ii) the electric reliability organiza20 tion unreasonably withheld the delegation.

21 ‘‘(5) ORDERS TO MODIFY DELEGATION AGREE22 MENTS.—

23 ‘‘(A) IN GENERAL.—On compliant, or on

24 motion of the Commission, after notice to the

25 appropriate affiliated regional reliability entity,
55

•S 516 IS

1 the Commission may order the electric reliabil2 ity organization to propose a modification to a

3 delegation agreement under this subsection if

4 the Commission determines that—

5 ‘‘(i) the affiliated regional reliability

6 entity—

7 ‘‘(I) no longer has the capacity to

8 carry out effectively or efficiently the

9 implementation or enforcement re10 sponsibilities under the delegation

11 agreement;

12 ‘‘(II) has failed to meet its obli13 gations under the delegation agree14 ment; or

15 ‘‘(III) has violated this section;

16 ‘‘(ii) the rules, practices, or proce17 dures of the affiliated regional reliability

18 entity no longer provide for fair and im19 partial discharge of the implementation or

20 enforcement responsibilities under the dele21 gation agreement;

22 ‘‘(iii) the geographic boundary of a

23 transmission entity approved by the Com24 mission is not wholly within the boundary

25 of an affiliated regional reliability entity,
56

•S 516 IS

1 and the discrepancy in the boundaries is

2 inconsistent with the effective and efficient

3 implementation and administration of

4 bulk-power system reliability; or

5 ‘‘(iv) the agreement is inconsistent

6 with another delegation agreement as a re7 sult of actions taken under paragraph (4).

8 ‘‘(B) SUSPENSION.—

9 ‘‘(i) IN GENERAL.—Following an

10 order to modify a delegation agreement

11 under subparagraph (A), the Commission

12 may suspend the delegation agreement if

13 the electric reliability organization or the

14 affiliated regional reliability entity does not

15 propose an appropriate and timely modi16 fication.

17 ‘‘(ii) RESUMPTION OF RESPONSIBIL18 ITIES.—If a delegation agreement is sus19 pended, the electric reliability organization

20 shall resume the responsibilities delegated

21 under the delegation agreement.

22 ‘‘(iii) APPEAL.—The Commission shall

23 allow the electric reliability organization

24 and the affiliated regional reliability entity
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1 an opportunity to appeal a suspension

2 under clause (i).

3 ‘‘(i) ORGANIZATION MEMBERSHIP.—Each system op4 erator shall be a member of—

5 ‘‘(1) the electric reliability organization; and

6 ‘‘(2) any affiliated regional reliability entity op7 erating under an agreement effective under sub8 section (h) applicable to the region in which the sys9 tem operator operates or is responsible for the oper10 ation of bulk-power system facilities.

11 ‘‘(j) ENFORCEMENT.—

12 ‘‘(1) DISCIPLINARY ACTIONS.—

13 ‘‘(A) IN GENERAL.—Consistent with proce14 dures that the Commission has determined to

15 meet the requirements of subsection (d)(4)(H)

16 and with any international agreement under

17 subsection (f), the electric reliability organiza18 tion may impose a penalty, limitation on activi19 ties, functions, or operations, or other discipli20 nary action that the electric reliability organiza21 tion finds appropriate against a bulk-power sys22 tem user if the electric reliability organization,

23 after notice and an opportunity for interested

24 parties to be heard, issues a written finding
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1 that the bulk-power system user has violated an

2 organization standard.

3 ‘‘(B) NOTIFICATION.—The electric reliabil4 ity organization shall immediately notify the

5 Commission of any disciplinary action imposed

6 with respect to an act or failure to act of a

7 bulk-power system user that affected or threat8 ened to affect bulk-power system facilities lo9 cated in the United States.

10 ‘‘(C) RIGHT TO PETITION.—A bulk-power

11 system user that is the subject of disciplinary

12 action under paragraph (1) shall have the right

13 to petition the Commission for a modification

14 or rescission of the disciplinary action.

15 ‘‘(D) INJUNCTIONS.—If the electric reli16 ability organization finds it necessary to prevent

17 a serious threat to reliability, the electric reli18 ability organization may seek injunctive relief in

19 the United States district court for the district

20 in which the affected facilities are located.

21 ‘‘(E) EFFECTIVE DATE.—

22 ‘‘(i) IN GENERAL.—Unless the Com23 mission, on motion of the Commission or

24 on application by the bulk-power system

25 user that is the subject of the disciplinary
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1 action, suspends the effectiveness of a dis2 ciplinary action, the disciplinary action

3 may take effect not earlier than the 30th

4 day after the date on which—

5 ‘‘(I) the electric reliability organi6 zation has submitted to the Commis7 sion a written finding under subpara8 graph (A) and record of proceedings

9 before the electric reliability organiza10 tion; and

11 ‘‘(II) the Commission has issued

12 a written finding.

13 ‘‘(ii) DURATION.—A disciplinary ac14 tion shall remain in effect or remain sus15 pended until the Commission, after notice

16 and opportunity for hearing, affirms, sets

17 aside, modifies, or reinstates the discipli18 nary action.

19 ‘‘(iii) EXPEDITED CONSIDERATION.—

20 The Commission shall conduct the hearing

21 under procedures established to ensure ex22 pedited consideration of the action taken.

23 ‘‘(2) COMPLIANCE ORDERS.—The Commission,

24 on motion of the Commission, may order compliance

25 with an organization standard and may impose a
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1 penalty, limitation on activities, functions, or oper2 ations, or take such other disciplinary action as the

3 Commission finds appropriate, against a bulk-power

4 system user with respect to actions affecting or

5 threatening to affect bulk-power system facilities lo6 cated in the United States if the Commission finds,

7 after notice and opportunity for a hearing, that the

8 bulk-power system user has violated or threatens to

9 violate an organization standard.

10 ‘‘(3) OTHER ACTIONS.—The Commission may

11 take such action as is necessary against the electric

12 reliability organization or an affiliated regional reli13 ability entity to ensure compliance with an organiza14 tion standard, or any Commission order affecting

15 electric reliability organization or affiliated regional

16 reliability entity.

17 ‘‘(k) RELIABILITY REPORTS.—The electric reliability

18 organization shall—

19 ‘‘(1) conduct periodic assessments of the reli20 ability and adequacy of the interconnected bulk21 power system in North America; and

22 ‘‘(2) report annually to the Secretary of Energy

23 and the Commission its findings and recommenda24 tions for monitoring or improving system reliability

25 and adequacy.
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1 ‘‘(l) ASSESSMENT AND RECOVERY OF CERTAIN

2 COSTS.—

3 ‘‘(1) IN GENERAL.—The reasonable costs of the

4 electric reliability organization, and the reasonable

5 costs of each affiliated regional reliability entity that

6 are related to implementation or enforcement of or7 ganization standards or other requirements con8 tained in a delegation agreement approved under

9 subsection (h), shall be assessed by the electric reli10 ability organization and each affiliated regional reli11 ability entity, respectively, taking into account the

12 relationship of costs to each region and based on an

13 allocation that reflects an equitable sharing of the

14 costs among all end-users of electric power in each

15 region.

16 ‘‘(2) RULES.—The Commission shall provide by

17 rule for the review of costs and allocations under

18 paragraph (1) in accordance with the standards in

19 this subsection and subsection (d)(4)(F).

20 ‘‘(m) APPLICATION OF ANTITRUST LAWS.—

21 ‘‘(1) IN GENERAL.—Notwithstanding any other

22 provision of law, the following activities are

23 rebuttably presumed to be in compliance with the

24 antitrust laws of the United States:
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1 ‘‘(A) Activities undertaken by the electric

2 reliability organization under this section or af3 filiated regional reliability entity operating

4 under a delegation agreement under subsection

5 (h).

6 ‘‘(B) Activities of a member of the electric

7 reliability organization or affiliated regional re8 liability entity in pursuit of the objectives under

9 this section undertaken in good faith under the

10 rules of the organization.

11 ‘‘(2) APPLICABILITY OF LAW.—The law relating

12 to the doctrine of primary jurisdiction and to immu13 nities and other affirmative defenses shall be avail14 able in any action brought alleging a violation of the

15 antitrust laws to the extent otherwise applicable.

16 ‘‘(n) STATE AUTHORITY.—Nothing in this section

17 limits the authority of a State to impose requirements nec18 essary to ensure the continued reliability and public safety

19 of electric facilities in the State.

20 ‘‘(o) REGIONAL ADVISORY ROLE.—

21 ‘‘(1) ESTABLISHMENT.—The Secretary of En22 ergy shall establish a regional advisory body on the

petition of the Governors of 2 23 ⁄3 of the States within

a region that have more than 1 24 ⁄2 of their electrical

25 loads served within the region.
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1 ‘‘(2) MEMBERSHIP.—A regional advisory

2 body—

3 ‘‘(A) shall be composed of 1 member from

4 each State in the region, appointed by the Gov5 ernor of each State; and

6 ‘‘(B) may include representatives of agen7 cies, States, and provinces outside the United

8 States, on execution of an appropriate inter9 national agreement described in subsection (f).

10 ‘‘(3) FUNCTIONS.—A regional advisory body

11 may provide advice to the Commission, the electric

12 reliability organization, or an affiliated regional reli13 ability entity regarding—

14 ‘‘(A) the governance of an affiliated re15 gional reliability entity existing or proposed

16 within a region;

17 ‘‘(B) whether a standard proposed to apply

18 within the region is just, reasonable, not unduly

19 discriminatory or preferential, and in the public

20 interest; and

21 ‘‘(C) whether fees proposed to be assessed

22 within the region are—

23 ‘‘(i) just, reasonable, not unduly dis24 criminatory or preferential, and in the pub25 lic interest; and
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1 ‘‘(ii) consistent with the requirements

2 of subsection (l).

3 ‘‘(4) DEFERENCE.—

4 ‘‘(A) ENTIRE INTERCONNECTION.—

5 ‘‘(i) IN GENERAL.—In a case in which

6 a regional advisory body encompasses an

7 entire interconnection, the Commission

8 shall give deference to the findings of the

9 regional advisory body unless the Commis10 sion determines that the findings by the

11 regional advisory body are not just, not

12 reasonable, unduly discriminatory or pref13 erential, or not in the public interest.

14 ‘‘(ii) NO PRECEDENTIAL VALUE.—

15 Commission deference to the findings of a

16 regional advisory body under clause (i)

17 shall not constitute precedent outside the

18 interconnection unless the Commission so

19 indicates.

20 ‘‘(B) IN GENERAL.—The Commission may

21 give deference to any findings made by a re22 gional advisory body.

23 ‘‘(p) REGULATIONS.—The Commission may, by regu24 lation, define any term used in this section, so long as
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1 the definition is consistent with the definitions in, and the

2 purposes and intent of, this Act.’’.

3 (b) ENFORCEMENT.—

4 (1) GENERAL PENALTIES.—Section 316(c) of

5 the Federal Power Act (16 U.S.C. 825o(c)) is

6 amended—

7 (A) by striking ‘‘subsection’’ and inserting

8 ‘‘section’’; and

9 (B) by striking ‘‘or 214’’ and inserting

10 ‘‘214 or 217’’.

11 (2) CERTAIN PROVISIONS.—Section 316A of the

12 Federal Power Act (16 U.S.C. 825o–1) is amended

13 by striking ‘‘or 214’’ each place it appears and in14 serting ‘‘214, or 217’’.

Æ