II 

Calendar No. 465

108TH CONGRESS 

2D SESSION S. 2236

To enhance the reliability of the electric system. 

IN THE SENATE OF THE UNITED STATES 

MARCH 25, 2004

Ms. CANTWELL (for herself, Mr. BINGAMAN, Mrs. CLINTON, Mr. JEFFORDS, 

Mr. SCHUMER, Mr. REID, and Mr. DASCHLE) introduced the following 

bill; which was read the first time 

MARCH 26, 2004

Read the second time and placed on the calendar 

A BILL

To enhance the reliability of the electric system.

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 Reliability Act 

5 of 2004’’. 
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1 SEC. 2. ELECTRIC RELIABILITY STANDARDS. 

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

3 (16 U.S.C. 824 et seq.) is amended by adding at the end 

4 the following: 

5 ‘‘SEC. 215. ELECTRIC RELIABILITY. 

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

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

8 ‘‘(A) facilities and control systems nec9 essary for operating an interconnected electric 

10 energy transmission network (or any portion 

11 thereof); and 

12 ‘‘(B) electric energy from generation facili13 ties needed to maintain transmission system re14 liability. 

15 The term does not include facilities used in the local 

16 distribution of electric energy. 

17 ‘‘(2) The terms ‘Electric Reliability Organiza18 tion’ and ‘ERO’ mean the organization certified by 

19 the Commission under subsection (c) the purpose of 

20 which is to establish and enforce reliability stand21 ards for the bulk-power system, subject to Commis22 sion review. 

23 ‘‘(3) The term ‘reliability standard’ means a re24 quirement, approved by the Commission under this 

25 section, to provide for reliable operation of the bulk26 power system. The term includes requirements for 
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1 the operation of existing bulk-power system facilities 

2 and the design of planned additions or modifications 

3 to such facilities to the extent necessary to provide 

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

5 the term does not include any requirement to en6 large such facilities or to construct new transmission 

7 capacity or generation capacity. 

8 ‘‘(4) The term ‘reliable operation’ means oper9 ating the elements of the bulk-power system within 

10 equipment and electric system thermal, voltage, and 

11 stability limits so that instability, uncontrolled sepa12 ration, or cascading failures of such system will not 

13 occur as a result of a sudden disturbance or unan14 ticipated failure of system elements. 

15 ‘‘(5) The term ‘Interconnection’ means a geo16 graphic area in which the operation of bulk-power 

17 system components is synchronized such that the 

18 failure of 1 or more of such components may ad19 versely affect the ability of the operators of other 

20 components within the system to maintain reliable 

21 operation of the facilities within their control. 

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

23 means a Regional Transmission Organization, Inde24 pendent System Operator, independent transmission 

25 provider, or other transmission organization finally 
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1 approved by the Commission for the operation of 

2 transmission facilities. 

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

4 having enforcement authority pursuant to subsection 

5 (e)(4). 

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

7 Commission shall have jurisdiction, within the United 

8 States, over the ERO certified by the Commission under 

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

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

11 limited to the entities described in section 201(f), for pur12 poses of approving reliability standards established under 

13 this section and enforcing compliance with this section. All 

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

15 shall comply with reliability standards that take effect 

16 under this section. 

17 ‘‘(2) The Commission shall issue a final rule to imple18 ment the requirements of this section not later than 180 

19 days after the date of enactment of this section. 

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

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

22 submit an application to the Commission for certification 

23 as the Electric Reliability Organization. The Commission 

24 may certify 1 such ERO if the Commission determines 

25 that such ERO—
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1 ‘‘(1) has the ability to develop and enforce, sub2 ject to subsection (e)(2), reliability standards that 

3 provide for an adequate level of reliability of the 

4 bulk-power system; and 

5 ‘‘(2) has established rules that—

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

7 and owners and operators of the bulk-power 

8 system, while assuring fair stakeholder rep9 resentation in the selection of its directors and 

10 balanced decisionmaking in any ERO com11 mittee or subordinate organizational structure; 

12 ‘‘(B) allocate equitably reasonable dues, 

13 fees, and other charges among end users for all 

14 activities under this section; 

15 ‘‘(C) provide fair and impartial procedures 

16 for enforcement of reliability standards through 

17 the imposition of penalties in accordance with 

18 subsection (e) (including limitations on activi19 ties, functions, or operations, or other appro20 priate sanctions); 

21 ‘‘(D) provide for reasonable notice and op22 portunity for public comment, due process, 

23 openness, and balance of interests in developing 

24 reliability standards and otherwise exercising its 

25 duties; and 
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1 ‘‘(E) provide for taking, after certification, 

2 appropriate steps to gain recognition in Canada 

3 and Mexico. 

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

5 Reliability Organization shall file each reliability standard

6 or modification to a reliability standard that it proposes 

7 to be made effective under this section with the Commis8 sion. 

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

10 a proposed reliability standard or modification to a reli11 ability standard if it determines that the standard is just, 

12 reasonable, not unduly discriminatory or preferential, and 

13 in the public interest. The Commission shall give due 

14 weight to the technical expertise of the Electric Reliability 

15 Organization with respect to the content of a proposed 

16 standard or modification to a reliability standard and to 

17 the technical expertise of a regional entity organized on 

18 an Interconnection-wide basis with respect to a reliability 

19 standard to be applicable within that Interconnection, but 

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

21 on competition. A proposed standard or modification shall 

22 take effect upon approval by the Commission. 

23 ‘‘(3) The Electric Reliability Organization shall 

24 rebuttably presume that a proposal from a regional entity 

25 organized on an Interconnection-wide basis for a reliability 
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1 standard or modification to a reliability standard to be ap2 plicable on an Interconnection-wide basis is just, reason3 able, and not unduly discriminatory or preferential, and 

4 in the public interest. 

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

6 Reliability Organization for further consideration a pro7 posed reliability standard or a modification to a reliability 

8 standard that the Commission disapproves in whole or in 

9 part. 

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

11 complaint, may order the Electric Reliability Organization 

12 to submit to the Commission a proposed reliability stand13 ard or a modification to a reliability standard that ad14 dresses a specific matter if the Commission considers such 

15 a new or modified reliability standard appropriate to carry 

16 out this section. 

17 ‘‘(6) The final rule adopted under subsection (b)(2) 

18 shall include fair processes for the identification and time19 ly resolution of any conflict between a reliability standard 

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

21 agreement accepted, approved, or ordered by the Commis22 sion applicable to a transmission organization. Such trans23 mission organization shall continue to comply with such 

24 function, rule, order, tariff, rate schedule or agreement ac25 cepted approved, or ordered by the Commission until—
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1 ‘‘(A) the Commission finds a conflict exists be2 tween a reliability standard and any such provision; 

3 ‘‘(B) the Commission orders a change to such 

4 provision pursuant to section 206 of this part; and 

5 ‘‘(C) the ordered change becomes effective 

6 under this part. 

7 If the Commission determines that a reliability standard 

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

9 order the ERO to develop and file with the Commission 

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

11 of this subsection. 

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

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

14 or operator of the bulk-power system for a violation of a 

15 reliability standard approved by the Commission under 

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

17 for a hearing—

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

19 has violated a reliability standard approved by the 

20 Commission under subsection (d); and 

21 ‘‘(B) files notice and the record of the pro22 ceeding with the Commission. 

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

24 take effect not earlier than the 31st day after the ERO 

25 files with the Commission notice of the penalty and the 
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1 record of proceedings. Such penalty shall be subject to re2 view by the Commission, on its own motion or upon appli3 cation by the user, owner or operator that is the subject 

4 of the penalty filed within 30 days after the date such 

5 notice is filed with the Commission. Application to the 

6 Commission for review, or the initiation of review by the 

7 Commission on its own motion, shall not operate as a stay 

8 of such penalty unless the Commission otherwise orders 

9 upon its own motion or upon application by the user, 

10 owner or operator that is the subject of such penalty. In 

11 any proceeding to review a penalty imposed under para12 graph (1), the Commission, after notice and opportunity 

13 for hearing (which hearing may consist solely of the record 

14 before the ERO and opportunity for the presentation of 

15 supporting reasons to affirm, modify, or set aside the pen16 alty), shall by order affirm, set aside, reinstate, or modify 

17 the penalty, and, if appropriate, remand to the ERO for 

18 further proceedings. The Commission shall implement ex19 pedited procedures for such hearings. 

20 ‘‘(3) On its own motion or upon complaint, the Com21 mission may order compliance with a reliability standard 

22 and may impose a penalty against a user or owner or oper23 ator of the bulk-power system if the Commission finds, 

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

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

2 constitute or will constitute a violation of a reliability 

3 standard. 

4 ‘‘(4) The Commission shall issue regulations author5 izing the ERO to enter into an agreement to delegate au6 thority to a regional entity for the purpose of proposing 

7 reliability standards to the ERO and enforcing reliability 

8 standards under paragraph (1) if—

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

10 ‘‘(i) an independent board; 

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

12 ‘‘(iii) a combination independent and bal13 anced stakeholder board. 

14 ‘‘(B) the regional entity otherwise satisfies the 

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

16 ‘‘(C) the agreement promotes effective and effi17 cient administration of bulk-power system reliability. 

18 The Commission may modify such delegation. The ERO 

19 and the Commission shall rebuttably presume that a pro20 posal for delegation to a regional entity organized on an 

21 Interconnection-wide basis promotes effective and efficient 

22 administration of bulk-power system reliability and should 

23 be approved. Such regulation may provide that the Com24 mission may assign the ERO’s authority to enforce reli25 ability standards under paragraph (1) directly to a re-
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1 gional entity consistent with the requirements of this para2 graph.

3 ‘‘(5) The Commission may take such action as is nec4 essary or appropriate against the ERO or a regional entity 

5 to ensure compliance with a reliability standard or any 

6 Commission order affecting the ERO or a regional entity. 

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

8 bear a reasonable relation to the seriousness of the viola9 tion and shall take into consideration the efforts of such 

10 user, owner, or operator to remedy the violation in a time11 ly manner. 

12 ‘‘(f) CHANGES IN ELECTRIC RELIABILITY ORGANIZA13 TION RULES.—The Electric Reliability Organization shall 

14 file with the Commission for approval any proposed rule 

15 or proposed rule change, accompanied by an explanation 

16 of its basis and purpose. The Commission, upon its own 

17 motion or complaint, may proposed a change to the rules 

18 of the ERO. A proposed rule or proposed rule change shall 

19 take effect upon a finding by the Commission, after notice 

20 and opportunity for comment, that the change is just, rea21 sonable, not unduly discriminatory or preferential, is in 

22 the public interest, and satisfies the requirements of sub23 section (c). 
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1 ‘‘(g) RELIABILITY REPORTS.—The ERO shall con2 duct periodic assessments of the reliability and adequacy 

3 of the bulk-power system in North America. 

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

5 The President is urged to negotiate international agree6 ments with the governments of Canada and Mexico to pro7 vide for effective compliance with reliability standards and 

8 the effectiveness of the ERO in the United States and 

9 Canada or Mexico. 

10 ‘‘(i) SAVINGS PROVISIONS.—(1) The ERO shall have 

11 authority to develop and enforce compliance with reli12 ability standards for only the bulk-power system. 

13 ‘‘(2) This section does not authorize the ERO or the 

14 Commission to order the construction of additional gen15 eration or transmission capacity or to set and enforce com16 pliance with standards for adequacy or safety of electric 

17 facilities or services. 

18 ‘‘(3) Nothing in this section shall be construed to pre19 empt any authority of any State to take action to ensure 

20 the safety, adequacy, and reliability of electric service 

21 within that State, as long as such action is not incon22 sistent with any reliability standard. 

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

24 Reliability Organization or other affected party, and after 

25 notice and opportunity for comment, the Commission shall 
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1 issue a final order determining whether a State action is 

2 inconsistent with a reliability standard, taking into consid3 eration any recommendation of the ERO. 

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

5 ERO and the State taking action, may stay the effective6 ness of any State action, pending the Commission’s 

7 issuance of a final order. 

8 ‘‘(j) REGIONAL ADVISORY BODIES.—The Commis9 sion shall establish a regional advisory body on the petition 

of at least 2 10 ⁄3 of the States within a region that have more 

than 1 11 ⁄2 of their electric load served within the region. A 

12 regional advisory body shall be composed of 1 member 

13 from each participating State in the region, appointed by 

14 the Governor of each State, and may include representa15 tives of agencies, States, and provinces outside the United 

16 States. A regional advisory body may provide advice to the 

17 Electric Reliability Organization, a regional entity, or the 

18 Commission regarding the governance of an existing or 

19 proposed regional entity within the same region, whether 

20 a standard proposed to apply within the region is just, 

21 reasonable, not unduly discriminatory or preferential, and 

22 in the public interest, whether fees proposed to be assessed 

23 within the region are just, reasonable, not unduly discrimi24 natory or preferential, and in the public interest and any 

25 other responsibilities request by the Commission. The 
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1 Commission may give deference to the advice of any such 

2 regional advisory body if that body is organized on an 

3 Interconnection-wide basis. 

4 ‘‘(k) ALASKA AND HAWAII.—The provisions of this 

5 section do not apply to Alaska or Hawaii.’’. 

6 (b) STATUS OF ERO.—The Electric Reliability Orga7 nization certified by the Federal Energy Regulatory Com8 mission under section 215(c) of the Federal Power Act 

9 and any regional entity delegated enforcement authority 

10 pursuant to section 215(e)(4) of that Act are not depart11 ments, agencies, or instrumentalities of the United States 

12 Government.

Calendar No. 465

108TH CONGRESS 

2D SESSION S. 2236

A BILL

To enhance the reliability of the electric system 

MARCH 26, 2004

Read the second time and placed on the calendar