tion systems shall be operated to achieve the following ob-
jectives:
(1) Organizational separation within remaining
vertically integrated firms, between individuals, as-
sets, and systems dedicated to the operation of
transmission and distribution systems and those in-
volved in the provision of electric service.
(2) Nondiscriminatory access to the trans-
mission and distribution systems whether for whole-
sale or retail sale of electric service.
(3) The prevention of preferential treatment (or
protection from competition) by system operators to-
ward affiliated service providers.
(4) Access to information on a nondiscrim-
inatory basis concerning—
(A) availability of transmission and dis-
tribution service;
(B) operating conditions on transmission
and distribution systems; and
(C) rates, terms, and conditions of any ar-
rangement between, or information provided
from, the transmission and distribution system
operators and their affiliated electric service
provider, if any.
(5) Ensuring that the transmission and dis-
tribution system operator—
(A) receives adequate and timely informa-
tion from electric service providers regarding
physical flows and physical transactions on the
transmission and distribution system;
(B) has access to assets and resources it
needs to maintain system balance in the event
of unanticipated events or the failure of an elec-
tric service provider to perform; and
(C) has authority to implement Commis-
sion approved sanctions and penalties for the
failure of electric service providers to conform
to the tariffs governing access to the trans-
mission and distribution system.
(b) COMMISSION AUTHORITY.—In order to ensure
consumers’ ability to access competing electric service pro-
viders, the Commission shall have the authority, by rule,
order, or decision, to provide for nondiscriminatory prices,
terms and conditions to transmission and distribution
services. With respect to distribution services, the Com-
mission shall defer to State authorities with respect to the
matter reserved to the States in section 4. The Commis-
sion shall also have the authority, by rule, order, or deci-
sion, to take the actions necessary to fulfill the obligations
imposed on it by this Act.
SEC. 6. FEDERAL TRANSMISSION TARIFF REFORM.
(a) INITIAL TARIFF REFORM.—By January 1, 1999,
the Commission shall promulgate and make effective, rules
which provide for nondiscriminatory access to trans-
mission and distribution service as provided in this Act
and which eliminate the barriers to competitive electric
service presented by existing contracts and arrange-
ments—
(1) between and among transmitting utilities
governing the pricing, terms, and conditions of ac-
cess to transmission and distribution facilities; and
(2) between transmitting utilities and any other
entities (directly connected to such transmitting util-
ity’s transmission system) providing for the sale of
power by such transmitting utilities to any other en-
tities.
(b) CONTINUING REFORM.—The Commission shall
by rule, order, or decision ensure that the existing electric
utilities are not permitted to exercise market power in the
sale of electric service. The Commission shall initiate pro-
ceedings following enactment, to be concluded on or before
January 1, 1999, in order to determine the extent to
which existing utilities have market power in the sale of
electric services; and to consider and determine the means
for mitigating such market power. In making and enforc-
ing such determinations, the Commission shall have the
authority to—
(1) restrict the ability of the electric utility, or
its affiliates, to sell such services at market-deter-
mined rates, provided that such restrictions shall be
limited to those areas and services where the electric
utility has market power; and
(2) order the divestiture of assets and functions
which are the source of market power, to the extent
reasonably necessary to mitigate such market power,
provided that such divestiture may include a variety
of alternatives including outright sale, lease, or out-
put contracts.
SEC. 7. APPLICATION OF PUBLIC UTILITY HOLDING COM-
PANY 
ACT 
AND 
PUBLIC 
UTILITY 
REGU-
LATORY POLICIES ACT .
(a) PUHCA.—The Public Utility Holding Company
Act of 1935 shall cease to apply to an electric utility sub-
ject to this Act or to any holding company (as defined
in such Act) of such utility if each State in which such
utility is providing electric energy services—
(1) determines that the retail customers served
by such utility and its affiliates have the ability to
purchase electric energy services in accordance with
the provisions of section 3 of this Act; and
(2) notifies the Commission and the Securities
and Exchange Commission of such determination.
(b) PURPA.—The provisions of section 210 of the
Public Utility Regulatory Policies Act of 1978 requiring
electric utilities to offer to purchase electric energy from
qualifying cogeneration facilities and qualifying small
power production facilities at the incremental cost to the
utility of alternative electric energy shall cease to apply
to an electric utility if each State in which such utility
is providing electric services—
(1) determines that the retail customers served
by such utility have the ability to purchase electric
energy services in accordance with the provisions of
section 3 of this Act; and
(2) notifies the Commission of such determina-
tion.
Nothing in this subsection shall be construed to affect any
obligation under a binding contract to purchase electric
energy entered into before the date of enactment of this
Act.
SEC. 8. TRANSITION PLANNING.
(a) COMMISSION
RECOMMENDATIONS.—Within 3
months of enactment, the Commission shall make a report
to Congress providing its plan for effectuating its obliga-
tions under this Act, including any potential obstacles it
identifies that could inhibit full and reasonably expeditious
implementation.
(b) COMMISSION
GUIDELINES.—The Commission
may publish preliminary, nonbinding guidelines to facili-
tate timely compliance with this Act by electric utilities.
Such guidelines shall be calculated to give notice of the
direction and substance of the Commission’s implementa-
tion of this Act to facilitate orderly transition and timely
compliance, but need not be entirely incorporated in the
Commission’s final rules.
(c) UTILITY COMPLIANCE.—Nothing in this Act shall
prevent utilities from submitting filings in advance of final
Commission rules, nor prevent the Commission from mak-
ing determinations on such filings subject to the final
rules.
SEC. 9. GENERATING SOURCES FREE TO SERVE CONSUM-
ERS AND RESELLERS.
No Federal, State, or local government authority
may—
(1) regulate the pricing, terms, or conditions of
service offerings by electric service providers; or
(2) except as provided in this Act, regulate who
may engage in selling electric energy.