II 

114TH CONGRESS 

1ST SESSION S. 1213 

To amend the Public Utility Regulatory Policies Act of 1978 and the Federal 

Power Act to facilitate the free market for distributed energy resources. 

IN THE SENATE OF THE UNITED STATES 

MAY 6, 2015 

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

the Committee on Energy and Natural Resources 

A BILL 

To amend the Public Utility Regulatory Policies Act of 1978 

and the Federal Power Act to facilitate the free market 

for distributed energy resources. 

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 ‘‘Free Market Energy 

5 Act of 2015’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds that it is in the public interest— 

8 (1) to enhance personal freedom and national 

9 security by reinforcing the right to sovereignty over 

10 personal energy choices; and 


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1 (2) to enhance the diversity of the electricity 

2 supply and energy independence of the United 

3 States by ensuring that there is a free market for 

4 distributed energy resources by providing for the 

5 nondiscriminatory interconnection of distributed en6 ergy resources. 

7 SEC. 3. DEFINITION OF DISTRIBUTED ENERGY RESOURCE. 

8 Section 3 of the Federal Power Act (16 U.S.C. 796) 

9 is amended by adding at the end the following: 

10 ‘‘(30) DISTRIBUTED ENERGY RESOURCE.—The 

11 term ‘distributed energy resource’ is a resource on 

12 the electricity distribution system that includes— 

13 ‘‘(A) distributed fossil generation; 

14 ‘‘(B) renewable generation (including bio15 mass, solar photovoltaics, geothermal, and hy16 dropower); 

17 ‘‘(C) fuel cells; 

18 ‘‘(D) combined heat and power systems; 

19 ‘‘(E) energy storage; 

20 ‘‘(F) demand response; 

21 ‘‘(G) efficiency resources; 

22 ‘‘(H) microgrids; and 

23 ‘‘(I) any combination of the resources de24 scribed in this paragraph.’’. 


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1 SEC. 4. GENERAL RIGHT TO NEUTRALITY OF INTER2 CONNECTION. 

3 The Public Utility Regulatory Policies Act of 1978 

4 is amended by inserting after section 4 (16 U.S.C. 2603) 

5 the following: 

6 ‘‘SEC. 5. GENERAL RIGHT TO NEUTRALITY OF INTER7 CONNECTION. 

8 ‘‘(a) IN GENERAL.—Distributed energy resources (as 

9 defined in section 3 of the Federal Power Act (16 U.S.C. 

10 796)) shall have a general right of interconnection under 

11 this Act. 

12 ‘‘(b) RATES AND FEES.—All rates and fees for inter13 connection of distributed energy resources under this Act, 

14 regardless of whether the distributed energy resource is 

15 a qualifying facility, shall— 

16 ‘‘(1) be just and reasonable; 

17 ‘‘(2) provide for the 2-way benefit for the dis18 tributed energy resource and the electricity grid; 

19 ‘‘(3) shall not exceed the actual cost of service; 

20 and 

21 ‘‘(4) shall not be punitive. 

22 ‘‘(c) TIMEFRAMES.—Timeframes for interconnection 

23 of distributed energy resources under this Act, regardless 

24 of whether the distributed energy resource is a qualifying 

25 facility, shall be well-defined, expeditious, and not unduly 

26 protracted.’’. 


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1 SEC. 5. ENERGY AND RATE TREATMENTS FOR DISTRIB2 UTED ENERGY RESOURCES. 

3 Section 111(d) of the Public Utility Regulatory Poli4 cies Act of 1978 (16 U.S.C. 2621(d)) is amended by add5 ing at the end the following: 

6 ‘‘(20) DISTRIBUTED ENERGY RESOURCES.— 

7 Each State regulatory authority shall consider re8 quiring that distributed energy resources (as defined 

9 in section 3 of the Federal Power Act (16 U.S.C. 

10 796)) be eligible to receive just and reasonable en11 ergy and rate treatment for— 

12 ‘‘(A) time-of-use pricing, which may ac13 count for locational benefit, to be provided on 

14 an unbundled basis, after accounting for the 2- 

15 way valuation of time-of-use rates, and pro16 gressing to real-time pricing, for— 

17 ‘‘(i) energy sold to an electric utility; 

18 and 

19 ‘‘(ii) energy purchased from an elec20 tric utility; 

21 ‘‘(B) capacity; 

22 ‘‘(C) energy conservation; 

23 ‘‘(D) demand-side management or demand 

24 response; 

25 ‘‘(E) peak monthly demand; 

26 ‘‘(F) the provision of ancillary services; 


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1 ‘‘(G) the societal value of distributed en2 ergy resources; and 

3 ‘‘(H) any other benefits that the State reg4 ulatory authority considers to be appropriate.’’. 

5 SEC. 6. QUALIFYING FACILITY; IMPROVED INTERCONNEC6 TION STANDARDS FOR DISTRIBUTED ENERGY 

7 RESOURCES. 

8 (a) DEFINITION OF QUALIFYING FACILITIES.—Sec9 tion 3 of the Federal Power Act (16 U.S.C. 796) is 

10 amended— 

11 (1) in paragraph (17)(C)— 

12 (A) by indenting appropriately; and 

13 (B) by inserting ‘‘(including a distributed 

14 energy resource in any State in which a State 

15 regulatory authority or nonregulated electric 

16 utility determines not to establish standards in 

17 accordance with paragraph (20) of section 

18 111(d) of the Public Utility Regulatory Policies 

19 Act of 1978 (16 U.S.C. 2621(d)))’’ before ‘‘that 

20 the Commission determines’’; and 

21 (2) in paragraph (18)(B)— 

22 (A) by indenting appropriately; and 

23 (B) by inserting ‘‘(including a distributed 

24 energy resource in any State in which a State 

25 regulatory authority or nonregulated electric 


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1 utility determines not to establish standards in 

2 accordance with paragraph (20) of section 

3 111(d) of the Public Utility Regulatory Policies 

4 Act of 1978 (16 U.S.C. 2621(d)))’’ before ‘‘that 

5 the Commission determines’’. 

6 (b) IMPROVED INTERCONNECTION STANDARDS FOR

7 DISTRIBUTED ENERGY RESOURCES.—Section 111(d) of 

8 the Public Utility Regulatory Policies Act of 1978 (16 

9 U.S.C. 2621(d)) (as amended by section 5) is amended 

10 by adding at the end the following: 

11 ‘‘(21) IMPROVED INTERCONNECTIONS STAND12 ARDS FOR DISTRIBUTED ENERGY RESOURCES.— 

13 Each State regulatory authority or nonregulated 

14 electric utility, acting under State authority in a 

15 State that has determined not to establish standards 

16 under paragraph (20), shall consider— 

17 ‘‘(A) setting rates that exceed the incre18 mental cost of alternative electric energy for 

19 purchases from any distributed energy resource 

20 (as defined in section 3 of the Federal Power 

21 Act (16 U.S.C. 796)) that is a qualifying facil22 ity for electricity generated, demand reduced, or 

23 service provided by the qualifying facility inter24 connected under this Act, with— 


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1 ‘‘(i) the rates to be established at the 

2 full retail rate; and 

3 ‘‘(ii) fixed monthly charges for resi4 dential electricity bills to be established at 

5 a charge of not more than 10 dollars per 

6 month, with optional reevaluations of the 

7 amount of charge to be considered on a 

8 periodic basis; 

9 ‘‘(B) making any distributed energy re10 source project exempt from filing requirements 

11 with the Commission; 

12 ‘‘(C) ensuring that any requirements con13 sidered under this paragraph would not affect 

14 the purchase obligation under section 210 for 

15 distributed energy resource facilities; and 

16 ‘‘(D) requiring that all rates and fees for 

17 interconnection of distributed generation facili18 ties— 

19 ‘‘(i) shall be just and reasonable; 

20 ‘‘(ii) shall provide for the benefit of 

21 the distributed energy resource to the elec22 tricity grid and benefit of the electricity 

23 grid to the distributed energy resource; 

24 and 


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1 ‘‘(iii) not exceed the actual cost of 

2 service.’’. 

3 SEC. 7. DESIGNATION OF SMART GRID COORDINATOR OR 

4 DISTRIBUTION SYSTEM OPERATOR. 

5 Section 111(d) of the Public Utility Regulatory Poli6 cies Act of 1978 (16 U.S.C. 2621(d)) (as amended by sec7 tion 6(b)) is amended by adding at the end the following: 

8 ‘‘(22) DESIGNATION OF SMART GRID COORDI9 NATOR OR DISTRIBUTION SYSTEM OPERATOR.—Each 

10 State regulatory authority shall consider desig11 nating, through a competitive process, a regulated 

12 utility, other party, or a combination of regulated 

13 utilities and other parties to be a smart grid coordi14 nator or distribution system operator for the 

15 State.’’. 

16 SEC. 8. CONSIDERATION OF NONTRANSMISSION ALTER17 NATIVES. 

18 Section 111(d) of the Public Utility Regulatory Poli19 cies Act of 1978 (16 U.S.C. 2621(d)) (as amended by sec20 tion 7) is amended by adding at the end the following: 

21 ‘‘(23) NONTRANSMISSION ALTERNATIVES.— 

22 ‘‘(A) IN GENERAL.—Each State regulatory 

23 authority shall consider nontransmission alter24 natives in instances in which a regulated utility 

25 proposes transmission projects. 


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1 ‘‘(B) COST.—To reduce the cost to the 

2 ratepayer of a potential transmission upgrade, a 

3 nontransmission alternative considered under 

4 subparagraph (A), shall receive the avoided cost 

5 of the transmission upgrade, minus a reason6 able discount, as determined by the State regu7 latory authority. 

8 ‘‘(C) RECOVERY.—If a nontransmission al9 ternative proposed under subparagraph (A) ob10 viates the need for a reliability-based trans11 mission upgrade, the cost of the nontrans12 mission alternative shall be recovered from the 

13 ratebase in the same manner as the trans14 mission upgrade would have been.’’. 

15 SEC. 9. COMPLIANCE. 

16 (a) TIME LIMITATIONS.—Section 112(b) of the Pub17 lic Utility Regulatory Policies Act of 1978 (16 U.S.C. 

18 2622(b)) is amended by adding at the end the following: 

19 ‘‘(7)(A) Not later than 1 year after the date of 

20 enactment of this paragraph, each State regulatory 

21 authority (with respect to each electric utility for 

22 which the authority has ratemaking authority) and 

23 each nonregulated utility shall, with respect to the 

24 standards established by paragraphs (20), (22), and 

25 (23) of section 111(d)— 


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1 ‘‘(i) commence the consideration required 

2 under those paragraphs; or 

3 ‘‘(ii) set a hearing date for the consider4 ation. 

5 ‘‘(B) Not later than 2 years after the date of 

6 enactment of this paragraph, each State regulatory 

7 authority (with respect to each electric utility for 

8 which the authority has ratemaking authority) and 

9 each nonregulated electric utility, shall, with respect 

10 to the standards established by paragraphs (20), 

11 (22), and (23) of section 111(d)— 

12 ‘‘(i) complete the consideration under sub13 paragraph (A); and 

14 ‘‘(ii) make the determination referred to in 

15 section 111 with respect to the standards estab16 lished by those paragraphs. 

17 ‘‘(8)(A) Not later than 2 years after the date 

18 of enactment of this paragraph, each State regu19 latory authority (with respect to each electric utility 

20 for which the authority has ratemaking authority) 

21 and each nonregulated utility shall, with respect to 

22 the standards established by section 111(d)(21)— 

23 ‘‘(i) commence the consideration required 

24 under that paragraph; or 


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1 ‘‘(ii) set a hearing date for the consider2 ation. 

3 ‘‘(B) Not later than 3 years after the date of 

4 enactment of this paragraph, each State regulatory 

5 authority (with respect to each electric utility for 

6 which the authority has ratemaking authority) and 

7 each nonregulated electric utility, shall, with respect 

8 to the standards established by section 111(d)(21)— 

9 ‘‘(i) complete the consideration required 

10 under that paragraph; and 

11 ‘‘(ii) make the determination referred to in 

12 section 111 with respect to the standards estab13 lished by section 111(d)(21).’’. 

14 (b) FAILURE TO COMPLY.—Section 112(c) of the 

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

16 2622(c)) is amended by adding at the end the following: 

17 ‘‘(1) In the case of the standards established by 

18 paragraphs (20) through (23) of section 111(d), the 

19 reference contained in this subsection to the date of 

20 enactment of this Act shall be deemed to be a ref21 erence to the date of enactment of those para22 graphs.’’. 

23 (c) PRIOR STATE ACTIONS.— 

24 (1) IN GENERAL.—Section 112 of the Public 

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


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1 2622) is amended by adding at the end the fol2 lowing: 

3 ‘‘(g) PRIOR STATE ACTIONS.—Subsections (b) and 

4 (c) shall not apply to a standard established under para5 graphs (20) through (23) of section 111(d) in the case 

6 of any electric utility in a State if, before the date of enact7 ment of this subsection— 

8 ‘‘(1) the State has implemented for the electric 

9 utility the standard (or a comparable standard); 

10 ‘‘(2) the State regulatory authority for the 

11 State, or the relevant nonregulated electric utility, 

12 has conducted a proceeding to consider implementa13 tion of the standard (or a comparable standard) for 

14 the electric utility; or 

15 ‘‘(3) the State legislature has voted on the im16 plementation of the standard (or a comparable 

17 standard) for the electric utility.’’. 

18 (2) CROSS-REFERENCE.—Section 124 of the 

19 Public Utility Regulatory Policies Act of 1978 (16 

20 U.S.C. 2634) is amended by adding at the end the 

21 following: ‘‘In the case of each standard established 

22 under paragraphs (20) through (23) of section 

23 111(d), the reference contained in this subsection to 

24 the date of enactment of this Act shall be deemed 


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1 to be a reference to the date of enactment of those 

2 paragraphs.’’. 

3 SEC. 10. EFFECT OF ACT. 

4 Nothing in this Act (or an amendment made by this 

5 Act) shall apply to distributed energy resource contracts 

6 in effect on the date of enactment of this Act. 

Æ 


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