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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 426 Introduced in Senate (IS)]

109th CONGRESS
  1st Session
                                 S. 426

To enhance national security by improving the reliability of the United 
States electricity transmission grid, to ensure efficient, reliable and 
    affordable energy to American consumers, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           February 17, 2005

 Mr. Jeffords (for himself, Ms. Cantwell, and Mr. Kennedy) introduced 
the following bill; which was read twice and referred to the Committee 
                    on Energy and Natural Resources

_______________________________________________________________________

                                 A BILL

 
To enhance national security by improving the reliability of the United 
States electricity transmission grid, to ensure efficient, reliable and 
    affordable energy to American consumers, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Electric 
Reliability Security Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                          TITLE I--RELIABILITY

Sec. 101. Electric reliability standards.
Sec. 102. Model electric utility workers code.
Sec. 103. Electricity outage investigation.
Sec. 104. Study on reliability of United States energy grid.
                          TITLE II--EFFICIENCY

Sec. 201. System benefits fund.
Sec. 202. Electricity efficiency performance standard.
Sec. 203. Appliance efficiency.
Sec. 204. Loan guarantees.
                      TITLE III--ONSITE GENERATION

Sec. 301. Net metering.
Sec. 302. Interconnection.
Sec. 303. Onsite generation for emergency facilities.

                          TITLE I--RELIABILITY

SEC. 101. ELECTRIC RELIABILITY STANDARDS.

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

``SEC. 215. ELECTRIC RELIABILITY.

    ``(a) Definitions.--In this section:
            ``(1)(A) The term `bulk-power system' means--
                    ``(i) facilities and control systems necessary for 
                operating an interconnected electric energy 
                transmission network (or any portion thereof); and
                    ``(ii) electric energy from generation facilities 
                needed to maintain transmission system reliability.
            ``(B) The term `bulk-power system' does not include 
        facilities used in the local distribution of electric energy.
            ``(2) The terms `Electric Reliability Organization' and 
        `ERO' mean the organization certified by the Commission under 
        subsection (c) the purpose of which is to establish and enforce 
        reliability standards for the bulk-power system, subject to 
        Commission review.
            ``(3) The term `interconnection' means a geographic area in 
        which the operation of bulk-power system components is 
        synchronized such that the failure of 1 or more of such 
        components may adversely affect the ability of the operators of 
        other components within the system to maintain reliable 
        operation of the facilities within their control.
            ``(4) The term `regional entity' means an entity having 
        enforcement authority pursuant to subsection (e)(4).
            ``(5)(A) The term `reliability standard' means a 
        requirement, approved by the Commission under this section, to 
        provide for reliable operation of the bulk-power system.
            ``(B) The term `reliability standard' includes requirements 
        for the operation of existing bulk-power system facilities and 
        the design of planned additions or modifications to those 
        facilities to the extent necessary to provide for reliable 
        operation of the bulk-power system.
            ``(C) The term `reliability standard' does not include any 
        requirement to enlarge a facility described in subparagraph (B) 
        or to construct new transmission capacity or generation 
        capacity.
            ``(6) The term `reliable operation' means operating the 
        elements of the bulk-power system within equipment and electric 
        system thermal, voltage, and stability limits so that 
        instability, uncontrolled separation, or cascading failures of 
        such system will not occur as a result of a sudden disturbance 
        or unanticipated failure of system elements.
            ``(7) The term `transmission organization' means a regional 
        transmission organization, independent system operator, 
        independent transmission provider, or other transmission 
        organization finally approved by the Commission for the 
        operation of transmission facilities.
    ``(b) Jurisdiction and Applicability.--(1)(A) The Commission shall 
have jurisdiction, within the United States, over the ERO certified by 
the Commission under subsection (c), any regional entities, and all 
users, owners and operators of the bulk-power system, including the 
entities described in section 201(f), for purposes of approving 
reliability standards established under this section and enforcing 
compliance with this section.
    ``(B) All users, owners, and operators of the bulk-power system 
shall comply with reliability standards that take effect under this 
section.
    ``(2) Not later than 180 days after the date of enactment of this 
section, the Commission shall issue a final rule to implement this 
section.
    ``(c) Certification.--(1) Following the issuance of a Commission 
rule under subsection (b)(2), any person may submit an application to 
the Commission for certification as the Electric Reliability 
Organization.
    ``(2) The Commission may certify an ERO described in paragraph (1) 
if the Commission determines that the ERO--
            ``(A) has the ability to develop and enforce, subject to 
        subsection (e)(2), reliability standards that provide for an 
        adequate level of reliability of the bulk-power system; and
            ``(B) has established rules that--
                    ``(i) ensure the independence of the ERO from the 
                users and owners and operators of the bulk-power 
                system, while ensuring fair stakeholder representation 
                in the selection of directors of the ERO and balanced 
                decisionmaking in any ERO committee or subordinate 
organizational structure;
                    ``(ii) allocate equitably reasonable dues, fees, 
                and other charges among end users for all activities 
                under this section;
                    ``(iii) provide fair and impartial procedures for 
                enforcement of reliability standards through the 
                imposition of penalties in accordance with subsection 
                (e) (including limitations on activities, functions, or 
                operations, or other appropriate sanctions);
                    ``(iv) provide for reasonable notice and 
                opportunity for public comment, due process, openness, 
                and balance of interests in developing reliability 
                standards and otherwise exercising the duties of the 
                ERO; and
                    ``(v) provide for taking, after certification, 
                appropriate steps to gain recognition in Canada and 
                Mexico.
    ``(d) Reliability Standards.--(1) The Electric Reliability 
Organization shall file each reliability standard or modification to a 
reliability standard that the Electric Reliability Organization 
proposes to be made effective under this section with the Commission.
    ``(2)(A) The Commission may approve, by rule or order, a proposed 
reliability standard or modification to a reliability standard if the 
Commission determines that the standard is just, reasonable, not unduly 
discriminatory or preferential, and in the public interest.
    ``(B) The Commission--
            ``(i) shall give due weight to the technical expertise of 
        the Electric Reliability Organization with respect to the 
        content of a proposed standard or modification to a reliability 
        standard and to the technical expertise of a regional entity 
        organized on an interconnection-wide basis with respect to a 
        reliability standard to be applicable within that 
        interconnection; but
            ``(ii) shall not defer with respect to the effect of a 
        standard on competition.
    ``(C) A proposed standard or modification shall take effect upon 
approval by the Commission.
    ``(3) The Electric Reliability Organization shall rebuttably 
presume that a proposal from a regional entity organized on an 
interconnection-wide basis for a reliability standard or modification 
to a reliability standard to be applicable on an interconnection-wide 
basis is just, reasonable, and not unduly discriminatory or 
preferential, and in the public interest.
    ``(4) The Commission shall remand to the Electric Reliability 
Organization for further consideration a proposed reliability standard 
or a modification to a reliability standard that the Commission 
disapproves in whole or in part.
    ``(5) The Commission, upon a motion of the Commission or upon 
complaint, may order the Electric Reliability Organization to submit to 
the Commission a proposed reliability standard or a modification to a 
reliability standard that addresses a specific matter if the Commission 
considers such a new or modified reliability standard appropriate to 
carry out this section.
    ``(6)(A) The final rule adopted under subsection (b)(2) shall 
include fair processes for the identification and timely resolution of 
any conflict between a reliability standard and any function, rule, 
order, tariff, rate schedule, or agreement accepted, approved, or 
ordered by the Commission applicable to a transmission organization.
    ``(B) The transmission organization shall continue to comply with 
such function, rule, order, tariff, rate schedule, or agreement as is 
accepted, approved, or ordered by the Commission until--
            ``(i) the Commission finds a conflict exists between a 
        reliability standard and any such provision;
            ``(ii) the Commission orders a change to the provision 
        pursuant to section 206; and
            ``(iii) the ordered change becomes effective under this 
        part.
    ``(C) If the Commission determines that a reliability standard 
needs to be changed as a result of such a conflict, the Commission 
shall order the ERO to develop and file with the Commission a modified 
reliability standard under paragraph (4) or (5).
    ``(e) Enforcement.--(1) Subject to paragraph (2), the ERO may 
impose a penalty on a user or owner or operator of the bulk-power 
system for a violation of a reliability standard approved by the 
Commission under subsection (d) if the ERO, after notice and an 
opportunity for a hearing--
            ``(A) finds that the user or owner or operator has violated 
        a reliability standard approved by the Commission under 
        subsection (d); and
            ``(B) files notice and the record of the proceeding with 
        the Commission.
    ``(2)(A) A penalty imposed under paragraph (1) may take effect not 
earlier than the 31st day after the date on which the ERO files with 
the Commission notice of the penalty and the record of proceedings.
    ``(B) The penalty shall be subject to review by the Commission 
upon--
            ``(i) a motion by the Commission; or
            ``(ii) application by the user, owner, or operator that is 
        the subject of the penalty filed not later than 30 days after 
        the date on which the notice is filed with the Commission.
    ``(C) Application to the Commission for review, or the initiation 
of review by the Commission upon a motion of the Commission, shall not 
operate as a stay of the penalty unless the Commission orders otherwise 
upon a motion of the Commission or upon application by the user, owner, 
or operator that is the subject of the penalty.
    ``(D) In any proceeding to review a penalty imposed under paragraph 
(1), the Commission, after notice and opportunity for hearing (which 
hearing may consist solely of the record before the ERO and opportunity 
for the presentation of supporting reasons to affirm, modify, or set 
aside the penalty), shall by order affirm, set aside, reinstate, or 
modify the penalty, and, if appropriate, remand to the ERO for further 
proceedings.
    ``(E) The Commission shall implement expedited procedures for 
hearings described in subparagraph (D).
    ``(3) Upon a motion of the Commission or upon complaint, the 
Commission may order compliance with a reliability standard and may 
impose a penalty against a user or owner or operator of the bulk-power 
system if the Commission finds, after notice and opportunity for a 
hearing, that the user or owner or operator of the bulk-power system 
has engaged or is about to engage in any act or practice that 
constitutes or will constitute a violation of a reliability standard.
    ``(4)(A) The Commission shall issue regulations authorizing the ERO 
to enter into an agreement to delegate authority to a regional entity 
for the purpose of proposing reliability standards to the ERO and 
enforcing reliability standards under paragraph (1) if--
            ``(i) the regional entity is governed by an independent 
        board, a balanced stakeholder board, or a combination of an 
        independent and balanced stakeholder board;
            ``(ii) the regional entity otherwise meets the requirements 
        of paragraphs (1) and (2) of subsection (c); and
            ``(iii) the agreement promotes effective and efficient 
        administration of bulk-power system reliability.
    ``(B) The Commission may modify a delegation under this paragraph.
    ``(C) The ERO and the Commission shall rebuttably presume that a 
proposal for delegation to a regional entity organized on an 
interconnection-wide basis promotes effective and efficient 
administration of bulk-power system reliability and should be approved.
    ``(D) The regulations issued under this paragraph may provide that 
the Commission may assign the authority of the ERO to enforce 
reliability standards under paragraph (1) directly to a regional entity 
in accordance with this paragraph.
    ``(5) The Commission may take such action as the Commission 
determines to be appropriate against the ERO or a regional entity to 
ensure compliance with a reliability standard or any Commission order 
affecting the ERO or a regional entity.
    ``(6) Any penalty imposed under this section shall bear a 
reasonable relation to the seriousness of the violation and shall take 
into consideration the efforts of the user, owner, or operator to 
remedy the violation in a timely manner.
    ``(f) Changes in Electric Reliability Organization Rules.--(1) The 
Electric Reliability Organization shall file with the Commission for 
approval any proposed rule or proposed rule change, accompanied by an 
explanation of the basis and purpose of the rule and proposed rule 
change.
    ``(2) The Commission, upon a motion of the Commission or upon 
complaint, may propose a change to the rules of the ERO.
    ``(3) A proposed rule or proposed rule change shall take effect 
upon a finding by the Commission, after notice and opportunity for 
comment, that the change is just, reasonable, not unduly discriminatory 
or preferential, is in the public interest, and meets the requirements 
of subsection (c).
    ``(g) Reliability Reports.--The ERO shall conduct periodic 
assessments of the reliability and adequacy of the bulk-power system in 
North America.
    ``(h) Coordination With Canada and Mexico.--The President is urged 
to negotiate international agreements with the governments of Canada 
and Mexico to provide for effective compliance with reliability 
standards and the effectiveness of the ERO in the United States and 
Canada or Mexico.
    ``(i) Savings Provisions.--(1) The ERO may develop and enforce 
compliance with reliability standards for only the bulk-power system.
    ``(2) Nothing in this section authorizes the ERO or the Commission 
to order the construction of additional generation or transmission 
capacity or to set and enforce compliance with standards for adequacy 
or safety of electric facilities or services.
    ``(3) Nothing in this section preempts any authority of any State 
to take action to ensure the safety, adequacy, and reliability of 
electric service within that State, as long as such action is not 
inconsistent with any reliability standard.
    ``(4) Not later than 90 days after the date of application of the 
Electric Reliability Organization or other affected party, and after 
notice and opportunity for comment, the Commission shall issue a final 
order determining whether a State action is inconsistent with a 
reliability standard, taking into consideration any recommendation of 
the ERO.
    ``(5) The Commission, after consultation with the ERO and the State 
taking action, may stay the effectiveness of any State action, pending 
the issuance by the Commission of a final order.
    ``(j) Regional Advisory Bodies.--(1) The Commission shall establish 
a regional advisory body on the petition of at least \2/3\ of the 
States within a region that have more than \1/2\ of the electric load 
of the States served within the region.
    ``(2) A regional advisory body--
            ``(A) shall be composed of 1 member from each participating 
        State in the region, appointed by the Governor of the State; 
        and
            ``(B) may include representatives of agencies, States, and 
        provinces outside the United States.
    ``(3) A regional advisory body may provide advice to the Electric 
Reliability Organization, a regional entity, or the Commission 
regarding--
            ``(A) the governance of an existing or proposed regional 
        entity within the same region;
            ``(B) whether a standard proposed to apply within the 
        region is just, reasonable, not unduly discriminatory or 
        preferential, and in the public interest;
            ``(C) whether fees proposed to be assessed within the 
        region are just, reasonable, not unduly discriminatory or 
        preferential, and in the public interest; and
            ``(D) any other responsibilities requested by the 
        Commission.
    ``(4) The Commission may give deference to the advice of a regional 
advisory body if that body is organized on an interconnection-wide 
basis.
    ``(k) Alaska and Hawaii.--This section does not apply to Alaska or 
Hawaii.''.
    (b) Status of ERO.--The Electric Reliability Organization certified 
by the Federal Energy Regulatory Commission under section 215(c) of the 
Federal Power Act (as added by subsection (a)) and any regional entity 
delegated enforcement authority pursuant to section 215(e)(4) of that 
Act (as so added) are not departments, agencies, or instrumentalities 
of the United States Government.

SEC. 102. MODEL ELECTRIC UTILITY WORKERS CODE.

    Subtitle B of title I of the Public Utility Regulatory Policies Act 
of 1978 (16 U.S.C. 2621 et seq.) is amended by adding at the end the 
following:

``SEC. 118. MODEL CODE FOR ELECTRIC UTILITY WORKERS.

    ``(a) In General.--The Secretary shall develop by rule and 
circulate among the States for their consideration a model code 
containing standards for electric facility workers to ensure electric 
facility safety and reliability.
    ``(b) Consultation.--In developing the standards, the Secretary 
shall consult with all interested parties, including representatives of 
electric facility workers.
    ``(c) Not Affecting Occupational Safety and Health.--In issuing a 
model code under this section, the Secretary shall not, for purposes of 
section 4 of the Occupational Safety and Health Act of 1970 (29 U.S.C. 
653), be deemed to be exercising statutory authority to prescribe or 
enforce standards or regulations affecting occupational safety and 
health.''.

SEC. 103. ELECTRICITY OUTAGE INVESTIGATION.

    Part III of the Federal Power Act (16 U.S.C. 824) is amended--
            (1) by redesignating sections 320 and 321 (16 U.S.C. 825r, 
        791a) as sections 321 and 322, respectively; and
            (2) by inserting after section 319 (16 U.S.C. 825q) the 
        following:

``SEC. 320. ELECTRICITY OUTAGE INVESTIGATION BOARD.

    ``(a) Establishment.--There is established an Electricity Outage 
Investigation Board that shall be an independent establishment within 
the executive branch.
    ``(b) Membership.--(1) The Board shall consist of 7 members and 
shall include--
            ``(A) the Secretary of Energy (or a designee);
            ``(B) the Chairperson of the Federal Energy Regulatory 
        Commission (or a designee);
            ``(C) a representative of the National Academy of Sciences 
        appointed by the President;
            ``(D) a representative nominated by the majority leader of 
        the Senate and appointed by the President;
            ``(E) a representative nominated by the minority leader of 
        the Senate and appointed by the President;
            ``(F) a representative nominated by the majority leader of 
        the House of Representatives and appointed by the President; 
        and
            ``(G) a representative nominated by the minority leader of 
        the House of Representatives and appointed by the President.
    ``(2) Each member of the Board shall demonstrate relevant expertise 
in the field of electricity generation, transmission, and distribution, 
and such other expertise as will best assist in carrying out the duties 
of the Board.
    ``(c) Terms.--(1) Except as provided in paragraph (2), each member 
of the Board shall serve for a term of 3 years.
    ``(2) The Secretary of Energy and the Chairperson of the Federal 
Energy Regulatory Commission shall be permanent members of the Board.
    ``(d) Duties.--The Board shall--
            ``(1) upon request by Congress or the President, 
        investigate a major bulk-power system failure in the United 
        States to determine the causes of the failure;
            ``(2) report expeditiously to Congress and the President 
        the results of the investigation; and
            ``(3) recommend to Congress and the President actions to 
        minimize the possibility of future bulk-power system failure.
    ``(e) Compensation.--(1) Each member of the Board shall be paid at 
the rate payable for level III of the Executive Schedule for each day 
(including travel time) the member is engaged in the work of the Board.
    ``(2) Each member of the Board may receive travel expenses, 
including per diem in lieu of subsistence, in the same manner as is 
permitted under sections 5702 and 5703 of title 5, United States 
Code.''.

SEC. 104. STUDY ON RELIABILITY OF UNITED STATES ELECTRICITY GRID.

    (a) Study on Reliability.--Not later than 45 days after the date of 
enactment of this Act, the Secretary of Energy shall enter into a 
contract with the National Academy of Sciences under which the Academy 
shall conduct a study on the reliability of the United States 
electricity grid to examine the effectiveness of the current United 
States electricity transmission and distribution system at providing 
efficient, secure, and affordable power to United States consumers.
    (b) Contents.--The study shall include an analysis of--
            (1) the vulnerability of the transmission and distribution 
        system to disruption by natural, mechanical or human causes 
        including sabotage;
            (2) the most efficient and cost-effective solutions for 
        dealing with vulnerabilities or other problems of the 
        electricity transmission and distribution system of the United 
        States, including a comparison of investments in--
                    (A) efficiency;
                    (B) distributed generation;
                    (C) technical advances in software and other 
                devices to improve the efficiency and reliability of 
                the grid;
                    (D) new power line construction; and
                    (E) any other relevant matters.
    (c) Report.--The contract shall provide that, not later than 180 
days after the date of execution of the contract, the National Academy 
of Sciences shall submit to the President and Congress a report that 
details the findings and recommendations of the study.

                          TITLE II--EFFICIENCY

SEC. 201. SYSTEM BENEFITS FUND.

    (a) Definitions.--In this section:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Environmental Protection Agency.
            (2) Board.--The term ``Board'' means the System Benefits 
        Trust Fund Board established under subsection (b).
            (3) Commission.--The term ``Commission'' means the Federal 
        Energy Regulatory Commission.
            (4) Farm system.--The term ``farm system'' means an 
        electric generating facility that generates electric energy 
        from the anaerobic digestion of agricultural waste produced by 
        farming that is located on the farm where substantially all of 
        the waste used is produced.
            (5) Fund.--The term ``Fund'' means the System Benefits 
        Trust Fund established under subsection (c).
            (6) Renewable Energy.--The term ``renewable energy'' means 
        electricity generated from wind, ocean energy, organic waste 
        (excluding incinerated municipal solid waste), biomass 
        (including anaerobic digestion from farm systems and landfill 
        gas recovery) or a geothermal, solar thermal, or photovoltaic 
        source.
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
    (b) Board.--
            (1) Establishment.--The Secretary shall establish a System 
        Benefits Trust Fund Board to carry out the functions and 
        responsibilities described in this section.
            (2) Membership.--The Board shall be composed of--
                    (A) 1 representative of the Federal Energy 
                Regulatory Commission appointed by the Federal Energy 
                Regulatory Commission;
                    (B) 2 representatives of the Secretary of Energy 
                appointed by the Secretary;
                    (C) 2 persons nominated by the National Association 
                of Regulatory Utility Commissioners and appointed by 
                the Secretary;
                    (D) 1 person nominated by the National Association 
                of State Utility Consumer Advocates and appointed by 
                the Secretary;
                    (E) 1 person nominated by the National Association 
                of State Energy Officials and appointed by the 
                Secretary;
                    (F) 1 person nominated by the National Energy 
                Assistance Directors' Association and appointed by the 
                Secretary; and
                    (G) 1 representative of the Environmental 
                Protection Agency appointed by the Administrator.
            (3) Chairperson.--The Secretary shall select a member of 
        the Board to serve as Chairperson of the Board.
    (c) Establishment of Fund.--
            (1) In general.--The Board shall establish an account or 
        accounts at 1 or more financial institutions, which account or 
        accounts shall--
                    (A) be known as the ``System Benefits Trust Fund''; 
                and
                    (B) consist of amounts deposited in the Fund under 
                subsection (e).
            (2) Status of fund.--The wires charges collected under 
        subsection (e) and deposited in the Fund--
                    (A) shall not constitute funds of the United 
                States;
                    (B) shall be held in trust by the Board solely for 
                the purposes stated in subsection (d); and
                    (C) shall not be available to meet any obligations 
                of the United States.
    (d) Use of Fund.--
            (1) Funding of state programs.--Amounts in the Fund shall 
        be used by the Board to provide matching funds to States and 
        Indian tribes for the support of State or tribal public 
        benefits programs relating to--
                    (A) energy conservation and efficiency;
                    (B) renewable energy sources;
                    (C) assisting low-income households in meeting 
                their home energy needs; or
                    (D) research and development in areas described in 
                subparagraphs (A) through (C).
            (2) Distribution.--
                    (A) In general.--Except for amounts needed to pay 
                costs of the Board in carrying out its duties under 
                this section, the Board shall distribute all amounts in 
                the Fund to States or Indian tribes to fund public 
                benefits programs under paragraph (1).
                    (B) Fund share.--
                            (i) In general.--Subject to clause (iii), 
                        the Fund share of a public benefits program 
funded under paragraph (1) shall be 50 percent.
                            (ii) Proportionate reduction.--To the 
                        extent that the amount of matching funds 
                        requested by States and Indian tribes exceeds 
                        the maximum projected revenues of the Fund, the 
                        matching funds distributed to each State and 
                        Indian tribe shall be reduced by an amount 
                        equal to the proportion that the annual 
                        consumption of electricity of the State or 
                        Indian tribe bears to the annual consumption of 
                        electricity of all States and Indian tribes.
                            (iii) Additional state or indian tribe 
                        funding.--A State or Indian tribe may apply 
                        funds to public benefits programs in addition 
                        to the amount of funds applied for the purpose 
                        of matching the Fund share.
            (3) Program criteria.--The Board shall recommend 
        eligibility criteria for public benefits programs funded under 
        this section for approval by the Secretary.
            (4) Application.--Not later than August 1 of each year 
        beginning in 2006, a State or Indian tribe seeking matching 
        funds for the following fiscal year shall file with the Board, 
        in such form as the Board may require, an application--
                    (A) certifying that the funds will be used for an 
                eligible public benefits program;
                    (B) stating the amount of State or Indian tribe 
                funds earmarked for the program; and
                    (C) summarizing how amounts from the Fund from the 
                previous calendar year (if any) were spent by the State 
                and what the State accomplished as a result of the 
                expenditures.
    (e) Wires Charge.--
            (1) Determination of needed funding.--Not later than 
        September 1 of each year, the Board shall determine and inform 
        the Commission of the aggregate amount of wires charges that 
        will be necessary to be paid into the Fund to pay matching 
        funds to States and Indian tribes and pay the operating costs 
        of the Board in the following fiscal year.
            (2) Imposition of wires charge.--
                    (A) In general.--Not later than December 15 of each 
                year, the Commission shall impose a nonbypassable, 
                competitively neutral wires charge, to be paid directly 
                into the Fund by the operator of the wire, on 
                electricity carried through the wire (measured as the 
                electricity exits at the busbar at a generation 
                facility, or, for electricity generated outside the 
                United States, at the point of delivery to the wire 
                operator's system) in interstate commerce.
                    (B) Amount.--The wires charge shall be set at a 
                rate equal to the lesser of--
                            (i) 1.0 mills per kilowatt hour; or
                            (ii) a rate that is estimated to result in 
                        the collection of an amount of wires charges 
                        that is, to the maximum extent practicable, 
                        equal to the amount of needed funding 
                        determined under paragraph (1).
            (3) Deposit in the fund.--The wires charge shall be paid by 
        the operator of the wire directly into the Fund at the end of 
        each month during the calendar year for distribution by the 
        Board under subsection (c).
            (4) Penalties.--The Commission may assess against a wire 
        operator that fails to pay a wires charge as required by this 
        subsection a civil penalty in an amount equal to not more than 
        the amount of the unpaid wires charge.
    (f) Auditing.--
            (1) In general.--The Fund shall be audited annually by a 
        firm of independent certified public accountants in accordance 
        with generally accepted auditing standards.
            (2) Access to records.--Representatives of the Secretary 
        and the Commission shall have access to all books, accounts, 
        reports, files, and other records pertaining to the Fund as 
        necessary to facilitate and verify the audit.
            (3) Reports.--
                    (A) In general.--A report on each audit shall be 
                submitted to the Secretary, the Commission, and the 
                Secretary of the Treasury, who shall submit the report 
                to the President and Congress not later than 180 days 
                after the end of the fiscal year.
                    (B) Requirements.--An audit report shall--
                            (i) set forth the scope of the audit; and
                            (ii) include--
                                    (I) a statement of assets and 
                                liabilities, capital, and surplus or 
                                deficit;
                                    (II) a surplus of deficit analysis;
                                    (III) a statement of income and 
                                expenses;
                                    (IV) any other information that may 
                                be considered necessary to keep the 
                                President and Congress informed of the 
                                operations and financial condition of 
                                the Fund; and
                                    (V) any recommendations with 
                                respect to the Fund that the Secretary 
                                or the Commission may have.

SEC. 202. ELECTRICITY EFFICIENCY PERFORMANCE STANDARD.

    Title VI of the Public Utility Regulatory Policies Act of 1978 (16 
U.S.C. 2621 note) is amended by adding at the end the following:

``SEC. 609. FEDERAL ELECTRICITY EFFICIENCY PERFORMANCE STANDARD.

    ``(a) In General.--Each electric retail supplier shall implement 
energy efficiency and load reduction programs and measures to achieve 
verified improvements in energy efficiency and peak load reduction in 
retail customer facilities and the distribution systems that serve 
those facilities.
    ``(b) Power Savings.--The programs and measures under subsection 
(a) shall produce savings in total peak power demand and total 
electricity use by retail customers by an amount that is equal to or 
greater than the following percentages relative to the peak demand and 
electricity used in that year by the retail electric supplier's 
customers:

------------------------------------------------------------------------
                                                 Reduction    Reduction
                                                 in demand      in use
------------------------------------------------------------------------
In calendar year 2006.........................           1%         .75%
In calendar year 2007.........................           2%         1.5%
In calendar year 2009.........................           4%         3.0%
In calendar year 2011.........................           6%         4.5%
In calendar year 2013.........................           8%         6.0%
In calendar year 2015.........................          10%         7.5%
------------------------------------------------------------------------

    ``(c) Beginning Date.--For purposes of this section, savings shall 
be counted only for measures installed after January 1, 2006.
    ``(d) Rulemaking.--(1) Not later than June 30, 2005, the Secretary 
shall establish, by rule--
            ``(A) procedures and standards for counting and 
        independently verifying energy and demand savings for purposes 
        of enforcing the energy efficiency performance standards 
        imposed by this section; and
            ``(B) procedures and a schedule for reporting findings to 
        the Department of Energy and for making the reports available 
        to the public.
    ``(2) In developing the procedures, standards, and schedule under 
paragraph (1), the Secretary shall consult with--
            ``(A) the association representing public utility 
        regulators in the United States; and
            ``(B) the association representing the State energy 
        officials in the United States.
    ``(e) Reporting.--(1) Not later than June 30, 2008, and every 2 
years thereafter, each retail electric supplier shall file with the 
State public utilities commission in each State in which the supplier 
provides service to retail customers a report demonstrating that the 
retail electric supplier has taken action to comply with the energy 
efficiency performance standards of this section.
    ``(2) A report filed under paragraph (1) shall include independent 
verification of the estimated savings pursuant to standards established 
by the Secretary.
    ``(3)(A) A State public utilities commission may--
            ``(i) accept a report as filed under paragraph (1); or
            ``(ii) review and investigate the accuracy of the report.
    ``(B) Each State public utilities commission shall--
            ``(i) make findings on any deficiencies relating to the 
        requirements under section 2; and
            ``(ii) issue a remedial order for the correction of any 
        deficiencies that are found.
    ``(f) Utilities Outside State Jurisdiction.--(1) An electric retail 
supplier that is not subject to the jurisdiction of a State public 
utilities commission shall submit reports in accordance with subsection 
(e) to the governing body of the electric retail supplier.
    ``(2) A report submitted under paragraph (1) shall include 
independent verification of the estimated savings pursuant to standards 
established by the Secretary.
    ``(g) Program Participation.--(1) An electric retail supplier may 
demonstrate satisfaction of the standard under this section, in whole 
or part, by savings achieved through participation in statewide, 
regional, or national programs that can be demonstrated to 
significantly improve the efficiency of electric distribution and use.
    ``(2) Verified efficiency savings resulting from programs described 
in paragraph (1) may be assigned to each participating retail supplier 
based upon the degree of participation of the supplier in the programs.
    ``(3) An electric retail supplier may purchase rights to extra 
savings achieved by other electric retail suppliers if the selling 
supplier or another electric retail supplier does not also take credit 
for those savings.
    ``(h) Remedies for Failure To Comply.--(1) In the event that any 
retail electric supplier fails to achieve its energy savings or load 
reduction target for a specific year, any aggrieved party may bring a 
civil action or file an administrative claim to seek prompt remedial 
action before a State public utilities commission (or, in the case of 
an electric retail supplier not subject to State public utility 
commission jurisdiction, before an appropriate governing body).
    ``(2)(A) The State public utilities commission or other appropriate 
governing body shall have a maximum of 1 year to craft a remedy for a 
civil action or claim filed under paragraph (1).
    ``(B) If a State public utilities commission or other governing 
body certifies that the commission or body has inadequate resources or 
authority to promptly resolve enforcement actions under this section, 
or fails to take action within the time period specified in 
subparagraph (A), the commission or body or an aggrieved party may seek 
enforcement in Federal district court.
    ``(3)(A) If a commission or court determines that energy savings or 
load reduction targets for a specific year have not been achieved by a 
retail electric supplier under this section, the commission or court 
shall--
            ``(i) determine the amount of the deficit; and
            ``(ii) fashion an equitable remedy to restore the lost 
        savings as soon as practicable.
    ``(B) A remedy under subparagraph (A)(ii) may include--
            ``(i) a refund to retail electric customers of an amount 
        equal to the retail cost of the electricity consumed due to the 
        failure to reach the target; and
            ``(ii) the appointment of a special master to administer a 
        bidding system to procure the energy and demand savings equal 
        to 125 percent of the deficit.''.

SEC. 203. APPLIANCE EFFICIENCY.

    Section 325(d)(3) of the Energy Policy and Conservation Act (42 
U.S.C. 6295(d)(3)) is amended by striking subparagraph (B) and 
inserting the following:
    ``(B) Not later than January 1, 2009, the Secretary shall publish a 
final rule to determine whether the standards in effect for central air 
conditioners and central air conditioning heat pumps should be amended. 
The rule shall address both system annual energy use and peak electric 
demand and may include more than 1 efficiency descriptor. The rule 
shall apply to products manufactured on or after January 1, 2012.''.

SEC. 204. LOAN GUARANTEES.

    (a) Definitions.--In this section:
            (1) Eligible activity.--The term ``eligible activity'' 
        means--
                    (A) advanced technologies for high-efficiency 
                electricity transmission control and operation, 
                including high-efficiency power electronics 
                technologies (including software-controlled computer 
                chips and sensors to diagnose trouble spots and re-
                route power into appropriate areas), high-efficiency 
                electricity storage systems, and high-efficiency 
                transmission wire or transmission cable system;
                    (B) distributed generation systems fueled solely 
                by--
                            (i) solar, wind, biomass, geothermal, or 
                        ocean energy;
                            (ii) landfill gas;
                            (iii) natural gas systems utilizing best 
                        available control technology;
                            (iv) fuel cells; or
                            (v) any combination of the above;
                    (C) combined heat and power systems; and
                    (D) energy efficiency systems producing 
                demonstrable electricity savings.
            (2) Qualifying entity.--The term ``qualifying entity'' 
        means an individual, corporation, partnership, joint venture, 
        trust or other entity identified by the Secretary under 
        subsection (d)(1) as eligible for a guaranteed loan under this 
        section.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
    (b) Authority.--The Secretary may guarantee not more than 50 
percent of the principal of any loan made to a qualifying entity for 
eligible activities under this section.
    (c) Conditions.--
            (1) In general.--The Secretary shall not guarantee a loan 
        under this section unless--
                    (A) the guarantee is a qualifying entity;
                    (B) the guarantee has filed an application with the 
                Secretary;
                    (C) the project, activity, program, or system for 
                which the loan is made is an eligible activity; and
                    (D) the project, activity, program, or system for 
                which the loan is made will significantly enhance the 
                reliability, security, efficiency, and cost-
                effectiveness of electricity generation, transmission 
                or distribution.
            (2) Priority.--The Secretary shall give priority to 
        guaranteed loans under this section for eligible activities 
        that accomplish the objectives of this section in the most 
        environmentally beneficial manner.
            (3) Eligible financial institutions.--A loan guaranteed 
        under this section shall be made by a financial institution 
        subject to the examination of the Secretary.
    (d) Rules.--Not later than 1 year after the date of enactment of 
this section, the Secretary shall publish a final rule establishing 
guidelines for loan requirements under this section, including 
establishment of--
            (1) criteria for determining which entities shall be 
        considered qualifying entities eligible for loan guarantees 
        under this section;
            (2) criteria for determining which projects, activities, 
        programs, or systems shall be considered eligible activities 
        eligible for loan guarantees in accordance with the purposes of 
        this section;
            (3) loan requirements including term, maximum size, 
        collateral requirements; and
            (4) any other relevant features.
    (e) Limitation on Size.--The Secretary may make commitments to 
guarantee loans under this section only to the extent that the total 
principal, any part of which is guaranteed, will not exceed 
$10,000,000,000.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary such sums as are necessary to cover the 
cost of loan guarantees (as defined by section 502(5) of the Federal 
Credit Reform Act of 1990 (2. U.S.C. 661a(5))) under this section.

                      TITLE III--ONSITE GENERATION

SEC. 301. NET METERING.

    (a) Adoption of Standard.--Section 111(d) of the Public Utility 
Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is amended by 
adding at the end the following:
    ``(11) Net metering.--
            ``(A) In general.--Each electric utility shall make 
        available upon request net metering service to any electric 
        consumer that the electric utility serves.
            ``(B) References.--For purposes of implementing this 
        paragraph, any reference contained in this section to the date 
        of enactment of this Act shall be deemed to be a reference to 
        the date of enactment of this paragraph.''.
    (b) Special Rules for Net Metering.--Section 115 of the Public 
Utility Regulatory Policies Act of 1978 (16 U.S.C. 2625) is amended by 
adding at the end the following:
    ``(i) Net Metering.--(1) In this subsection:
            ``(A) The term `eligible onsite generating facility' 
        means--
                    ``(i) a facility on the site of a residential 
                electric consumer with a maximum generating capacity of 
                25 kilowatts or less; or
                    ``(ii) a facility on the site of a commercial 
                electric consumer with a maximum generating capacity of 
                1,000 kilowatts or less,
        that is fueled solely by a renewable energy resource.
            ``(B) The term `net metering service' means service to an 
        electric consumer under which electric energy generated by that 
        electric consumer from an eligible onsite generating facility 
        and delivered to the local distribution facilities may be used 
        to offset electric energy provided by the electric utility to 
        the electric consumer during the applicable billing period.
            ``(C) The term `renewable energy resource' means--
                    ``(i) solar, wind, biomass, geothermal, or wave 
                energy;
                    ``(ii) landfill gas;
                    ``(iii) fuel cells; and
                    ``(iv) a combined heat and power system.
    ``(2) In undertaking the consideration and making the determination 
concerning net metering established by section 111(d)(11), the 
following shall apply:
            ``(A) An electric utility--
                    ``(i) shall charge the owner or operator of an 
                onsite generating facility rates and charges that are 
                identical to those that would be charged other electric 
                consumers of the electric utility in the same rate 
                class; and
                    ``(ii) shall not charge the owner or operator of an 
                onsite generating facility any additional standby, 
                capacity, interconnection, or other rate or charge.
            ``(B) An electric utility that sells electric energy to the 
        owner or operator of an onsite generating facility shall 
        measure the quantity of electric energy produced by the onsite 
        facility and the quantity of electricity consumed by the owner 
        or operator of an onsite generating facility during a billing 
        period in accordance with normal metering practices.
            ``(C) If the quantity of electric energy sold by the 
        electric utility to an on-site generating facility exceeds the 
        quantity of electric energy supplied by the onsite generating 
        facility to the electric utility during the billing period, the 
        electric utility may bill the owner or operator for the net 
        quantity of electric energy sold, in accordance with normal 
        metering practices.
            ``(D) If the quantity of electric energy supplied by the 
        onsite generating facility to the electric utility exceeds the 
        quantity of electric energy sold by the electric utility to the 
        onsite generating facility during the billing period--
                    ``(i) the electric utility may bill the owner or 
                operator of the onsite generating facility for the 
                appropriate charges for the billing period in 
                accordance with subparagraph (B); and
                    ``(ii) the owner or operator of the onsite 
                generating facility shall be credited for the excess 
                kilowatt-hours generated during the billing period, 
                with the kilowatt-hour credit appearing on the bill for 
                the following billing period.
            ``(E) An eligible onsite generating facility and net 
        metering system used by an electric consumer shall meet all 
        applicable safety, performance, reliability, and 
        interconnection standards established by the National 
        Electrical Code, the Institute of Electrical and Electronics 
        Engineers, and Underwriters Laboratories.
            ``(F) The Commission, after consultation with State 
        regulatory authorities and nonregulated electric utilities and 
        after notice and opportunity for comment, may adopt, by rule, 
        additional control and testing requirements for onsite 
        generating facilities and net metering systems that the 
        Commission determines are necessary to protect public safety 
        and system reliability.
            ``(G) An electric utility must provide net metering 
        services to electric consumers until the cumulative generating 
        capacity of net metering systems equals 1.0 percent of the 
        utility's peak demand during the most recent calendar year.
            ``(H) Nothing in this subsection precludes a State from 
        imposing additional requirements regarding the amount of net 
        metering available within a State consistent with the 
        requirements of this section.''.

SEC. 302. INTERCONNECTION.

    (a) Definitions.--Section 3 of the Federal Power Act (16 U.S.C. 
796) is amended--
            (1) by striking paragraph 23 and inserting the following:
            ``(23) Transmitting utility.--The term `transmitting 
        utility' means any entity (notwithstanding section 201(f)) that 
        owns, controls, or operates an electric power transmission 
        facility that is used for the sale of electric energy.''; and
            (2) by adding at the end the following:
            ``(26) Appropriate regulatory authority.--The term 
        `appropriate regulatory authority' means--
                    ``(A) the Commission;
                    ``(B) a State commission;
                    ``(C) a municipality; or
                    ``(D) a cooperative that is self-regulating under 
                State law and is not a public utility.
            ``(27) Generating facility.--The term `generating facility' 
        means a facility that generates electric energy.
            ``(28) Local distribution utility.--The term `local 
        distribution facility' means an entity that owns, controls, or 
        operates an electric power distribution facility that is used 
        for the sale of electric energy.
            ``(29) Non-federal regulatory authority.--The term `non-
        Federal regulatory authority' means an appropriate regulatory 
        authority other than the Commission.''.
    (b) Interconnection to Distribution Facilities.--Section 210 of the 
Federal Power Act (16 U.S.C. 824i) is amended--
            (1) by redesignating subsection (e) as subsection (g); and
            (2) by inserting after subsection (d) the following:
    ``(e) Interconnection to Distribution Facilities.--(1)(A) A local 
distribution utility shall interconnect a generating facility with the 
distribution facilities of the local distribution utility if the owner 
of the generating facility--
            ``(i) complies with the final rule promulgated under 
        paragraph (2); and
            ``(ii) pays the costs of the interconnection.
    ``(B) The costs of the interconnection--
            ``(i) shall be just and reasonable, and not unduly 
        discriminatory or preferential, as determined by the 
        appropriate regulatory authority; and
            ``(ii) shall be comparable to the costs charged by the 
        local distribution utility for interconnection by any similarly 
        situated generating facility to the distribution facilities of 
        the local distribution utility.
    ``(C) The right of a generating facility to interconnect under 
subparagraph (A) does not relieve the generating facility or the local 
distribution utility of other Federal, State, or local requirements.
    ``(2) Not later than 180 days after the date of enactment of this 
subparagraph, the Commission shall promulgate final rules establishing 
reasonable and appropriate technical standards for the interconnection 
of a generating facility with the distribution facilities of a local 
distribution utility.
    ``(3)(A) In accordance with subparagraph (B) a local distribution 
utility shall offer to sell backup power to a generating facility that 
has interconnected with the local distribution utility to the extent 
that the local distribution utility--
            ``(i) is not subject to an order of a non-Federal 
        regulatory authority to provide open access to the distribution 
        facilities of the local distribution utility;
            ``(ii) has not offered to provide open access to the 
        distribution facilities of the local distribution utility; or
            ``(iii) does not allow a generating facility to purchase 
        backup power from another entity using the distribution 
        facilities of the local distribution utility.
    ``(B) A sale of backup power under subparagraph (A) shall be at 
such a rate, and under such terms and conditions as are just and 
reasonable and not unduly discriminatory or preferential, taking into 
account the actual incremental cost, whenever incurred by the local 
distribution utility, to supply such backup power service during the 
period in which the backup power service is provided, as determined by 
the appropriate regulatory authority.
    ``(C) A local distribution utility shall not be required to offer 
backup power for resale to any entity other than the entity for which 
the backup power is purchased.
    ``(D) To the extent backup power is used to serve a new or expanded 
load on the distribution system, the generating facility shall pay any 
reasonable cost associated with any transmission, distribution, or 
generating upgrade required to provide such service.''.
    (c) Interconnection to Transmission Facilities.--Section 210 of the 
Federal Power Act (16 U.S.C. 824i) (as amended by subsection (b)) is 
amended by inserting after subsection (e) the following:
    ``(f) Interconnection to Transmission Facilities.--(1)(A) 
Notwithstanding subsections (a) and (c), a transmitting utility shall 
interconnect a generating facility with the transmission facilities of 
the transmitting utility if the owner of the generating facility--
            ``(i) complies with the final rules promulgated under 
        paragraph (2); and
            ``(ii) pays the costs of interconnection.
    ``(B) Subject to subparagraph (C), the costs of interconnection--
            ``(i) shall be just and reasonable and not unduly 
        discriminatory or preferential; and
            ``(ii) shall be comparable to the costs charged by the 
        transmitting utility for interconnection by any similarly 
        situated generating facility to the transmitting facilities of 
        the transmitting utility.
    ``(C) A non-Federal regulatory authority that is authorized under 
Federal law to determine the rates for transmission service shall be 
authorized to determine the costs of any interconnection under this 
subparagraph.
    ``(D) The right of a generating facility to interconnect under 
subparagraph (A) does not relieve the generating facility or the 
transmitting utility of other Federal, State, or local requirements.
    ``(2) Not later than 180 days after the date of enactment of this 
subparagraph, the Commission shall promulgate rules establishing 
reasonable and appropriate technical standards for the interconnection 
of a generating facility with the transmission facilities of a 
transmitting utility.
    ``(3)(A) In accordance with subparagraph (B), a transmitting 
utility shall offer to sell backup power to a generating facility that 
has interconnected with the transmitting utility unless--
            ``(i) Federal or State law allows a generating facility to 
        purchase backup power from an entity other than the 
        transmitting utility; or
            ``(ii) a transmitting utility allows a generating facility 
        to purchase backup power from an entity other than the 
        transmitting utility using the transmission facilities of the 
        transmitting utility and the transmission facilities of any 
        other transmitting utility.
    ``(B) A sale of backup power under subparagraph (A) shall be at 
such a rate and under such terms and conditions as are just and 
reasonable and not unduly discriminatory or preferential, taking into 
account the actual incremental cost, whenever incurred by the local 
distribution utility, to supply such backup power service during the 
period in which the backup power service is provided, as determined by 
the appropriate regulatory authority.
    ``(C) A transmitting utility shall not be required to offer backup 
power for resale to any entity other than the entity for which the 
backup power is purchased.
    ``(D) To the extent backup power is used to serve a new or expanded 
load on the transmission system, the generating facility shall pay any 
reasonable costs associated with any transmission, distribution, or 
generation upgrade required to provide the service.''.
    (d) Conforming Amendments.--Section 210 of the Federal Power Act 
(16 U.S.C. 824i) is amended--
            (1) in subsection (a)(1)--
                    (A) by inserting ``transmitting utility, local 
                distribution utility,'' after ``electric utility,''; 
                and
                    (B) in subparagraph (A), by inserting ``any 
                transmitting utility,'' after ``small power production 
                facility,'';
            (2) in subsection (b)(2), by striking ``an evidentiary 
        hearing'' and inserting ``a hearing'';
            (3) in subsection (c)(2)--
                    (A) in subparagraph (B), by striking ``or'' at the 
                end;
                    (B) in subparagraph (C), by striking ``and'' at the 
                end and inserting ``or''; and
                    (C) by adding at the end the following:
                    ``(D) promote competition in electricity markets, 
                and''; and
            (4) in subsection (d), by striking the last sentence.

SEC. 303. ONSITE GENERATION FOR EMERGENCY FACILITIES.

    (a) Definitions.--In this section:
            (1) Eligible facility.--The term ``eligible facility'' 
        means a building owned or operated by a State or local 
        government that is used for--
                    (A) critical governmental dispatch and 
                communication;
                    (B) police, fire, or emergency services;
                    (C) traffic control systems; or
                    (D) public water or sewer systems.
            (2) Renewable uninterruptible power supply system.--The 
        term ``renewable uninterruptible power supply system'' means a 
        system designed to maintain electrical power to critical loads 
        in a public facility in the event of a loss or disruption in 
        conventional grid electricity, where such system derives its 
        energy production or storage capacity solely from--
                    (A) solar, wind, biomass, geothermal, or ocean 
                energy;
                    (B) natural gas;
                    (C) landfill gas;
                    (D) a fuel cell device; or
                    (E) a combination of energy described in 
                subparagraphs (A) through (D).
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
    (b) Demonstration and Technology Transfer Program.--The Secretary 
shall establish a demonstration program for the implementation of 
innovative technologies for renewable uninterruptible power supply 
systems located in eligible buildings and for the dissemination of 
information on those systems to interested parties.
    (c) Limit on Federal Funding.--The Secretary shall provide not more 
than 40 percent of the costs of projects funded under this section.
    (d) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section $30,000,000 for each of fiscal 
years 2006 through 2009.
                                 <all>
```