SEC. 
4. 
ENCOURAGEMENT 
OF 
INDEPENDENT 
TRANS-
MISSION SYSTEM OPERATORS.
The creation of Independent Transmission System
Operators is encouraged in order to ensure that all sellers
and buyers of electricity in the United States have access
to nondiscriminatory transmission services. Nothing in
this section shall be construed as affecting any authority
of the Federal Energy Regulatory Commission under any
other provision of law to order the creation of Independent
Transmission System Operators.
SEC. 5. APPLICATION OF FERC OPEN ACCESS RULES TO
NONJURISDICTIONAL ENTITIES.
(a) DEFINITION
OF
PUBLIC
UTILITY.—Section
201(e) of the Federal Power Act (16 U.S.C. 824) is
amended to read as follows:
‘‘(e) The term ‘public utility’ when used in this part
or in the part next following means—
‘‘(1) any person who owns or operates facilities
subject to the jurisdiction of the Commission under
this part (other than facilities subject to such juris-
diction solely by reasons of section 210, 211, or
212); or
‘‘(2) any electric utility or Federal power mar-
keting agency not otherwise subject to the jurisdic-
tion of the Commission under this part, including—
‘‘(A) the Tennessee Valley Authority;
‘‘(B) a Federal power marketing agency;
‘‘(C) a State or any political subdivision of
a State or any agency, authority, or instrumen-
tality of a State or political subdivision;
‘‘(D) a corporation or association that has
ever received a loan for the purpose of pro-
viding electric service from the Administrator of
the Rural Electrification Administration or the
Rural Utilities Service under the Rural Elec-
trification Act of 1936; or
‘‘(E) any corporation or association which
is wholly owned, directly or indirectly, by any
one or more of the foregoing, but only with re-
spect to determining, fixing, and otherwise reg-
ulating the rates, terms, and conditions for the
transmission of electric energy under this
part.’’.
(b) APPLICATION OF PART TO GOVERNMENT UTILI-
TIES.—Section 201(f) of the Federal Power Act (16
U.S.C. 824(f)) is amended by striking ‘‘No provision’’ and
inserting ‘‘Except as provided in subsection (e)(2) and sec-
tion 3(23), no provision’’.
(c) DEFINITION OF TRANSMITTING UTILITY.—Para-
graph (23) of section 3 of the Federal Power Act (16
U.S.C. 796) is amended to read as follows:
‘‘(23) TRANSMITTING UTILITY.—The term ‘transmit-
ting utility’ means any electric utility, qualifying cogenera-
tion facility, qualifying small power production facility,
Federal power marketing agency, or any public utility, as
defined in section 201(e)(2), that owns or operates electric
power transmission facilities which are used for the sale
of electric energy.’’.
SEC. 6. REMOVAL OF FEDERAL BARRIERS TO COMPETI-
TION.
(a) REPEAL OF SECTION 210 OF PURPA.—
(1) NEW CONTRACTS.—After the date of the
enactment of this Act, no electric utility shall be re-
quired to enter into a new contract or obligation to
purchase or to sell electric energy or capacity pursu-
ant to section 210 of the Public Utility Regulatory
Policies Act of 1978.
(2) EXISTING RIGHTS AND REMEDIES NOT AF-
FECTED.—Nothing in this subsection affects the
rights or remedies of any party with respect to the
purchase or sale of electric energy or capacity from
or to a facility determined to be a qualifying small
power production facility or a qualifying cogenera-
tion facility under section 210 of the Public Utility
Regulatory Policies Act of 1978 pursuant to any
contract or obligation to purchase or to sell electric
energy or capacity in effect on the date of the enact-
ment of this Act, including the right to recover the
costs of purchasing such electric energy or capacity.
(3) INTERPRETATIONS AND ACTIONS TAKEN.—
Nothing in this subsection may be deemed or con-
strued as implying congressional ratification of any
interpretation of, or any action taken pursuant to,
the Public Utility Regulatory Policies Act of 1978.
(b) RECOVERY OF COSTS.—In order to assure recov-
ery by electric utilities purchasing electric energy or capac-
ity from a qualifying facility pursuant to any legally en-
forceable obligation entered into or imposed pursuant to
section 210 of the Public Utility Regulatory Policies Act
of 1978 prior to the date of the enactment of this Act,
of all costs associated with such purchases, the Commis-
sion shall promulgate and enforce such regulations as may
be required to assure that no utility shall be required di-
rectly or indirectly to absorb the costs associated with such
purchases from a qualifying facility. Such regulations shall
be treated as a rule enforceable under the Federal Power
Act (16 U.S.C. 791a–825r).
(c) DEFINITIONS.—For purposes of this section—
(1) The term ‘‘Commission’’ means the Federal
Energy Regulatory Commission.
(2) The term ‘‘electric utility’’ means any per-
son, State agency, or Federal agency, which sells
electric energy.
(3) The term ‘‘qualifying small power produc-
tion facility’’ has the same meaning as provided in
section 3(17)(C) of the Federal Power Act.
(4) The term ‘‘qualifying cogeneration facility’’
has the same meaning as provided in section
3(18)(A) of the Federal Power Act.
(5) The term ‘‘qualifying facility’’ means either
a small power production facility or a qualifying co-
generation facility.
(d) REPEAL
OF
THE PUBLIC UTILITY HOLDING
COMPANY ACT
OF 1935.—The Public Utility Holding
Company Act of 1935 is hereby repealed, effective one
year from the date of enactment of this Act.
SEC. 7. ENACTMENT OF THE PUBLIC UTILITY HOLDING
COMPANY REGULATION.
(a) PURPOSE.—Limited Federal regulation is nec-
essary to supplement the work of State commissions for
the continued rate protection of electric and gas utility
consumers. This section is intended to address these con-
cerns by providing for Federal and State access to books
and records of all companies in a holding company system
and for federal oversight of affiliate transactions, to the
extent that such activities affect rates.
(b) DEFINITIONS.—When used in this section:
(1) ‘‘Person’’ means an individual or company.
(2) ‘‘Company’’ means a corporation, joint
stock company, partnership, association, business
trust, organized group of persons, whether incor-
porated or not, or a receiver or receivers, trustee or
trustees of any of the foregoing.
(3) ‘‘Electric utility company’’ means any com-
pany that owns or operates facilities used for the
generation, transmission, or distribution of electric
energy for sale.
(4) ‘‘Gas utility company’’ means any company
that owns or operates facilities used for distribution
at retail (other than the distribution only in enclosed
portable containers) of natural or manufactured gas
for heat, light or power.
(5) ‘‘Public utility company’’ means an electric
utility company or gas utility company but does not
mean a qualifying facility as defined in the Public
Utility Regulatory Policies Act of 1992, or an ex-
empt wholesale generator or a foreign utility com-
pany defined by the Energy Policy Act of 1992.
(6) ‘‘Holding company’’ means (A) any com-
pany that directly or indirectly owns, controls, or
holds with power to vote, 10 percent or more of the
outstanding voting securities of a public utility com-
pany or of a holding company of any public utility
company; and (B) any person, determined by the
Commission, after notice and opportunity for hear-
ing, to exercise directly or indirectly (either alone or
pursuant to an arrangement or understanding with
one or more persons) such a controlling influence
over the management or policies of any public utility
or holding company as to make it necessary or ap-
propriate for the protection of consumers with re-
spect to rates that such person be subject to the ob-
ligations, duties, and liabilities imposed in this title
upon holding companies.
(7) ‘‘Subsidiary company’’ of a holding com-
pany means (A) any company 10 percent or more of
the outstanding voting securities of which are di-
rectly or indirectly owned, controlled, or held with
power to vote, by such holding company; and (B)
any person the management or policies of which the
Commission, after notice and opportunity for hear-
ing, determines to be subject to a controlling influ-
ence, directly or indirectly, by such holding company
ical subdivision of a State that under the law of such
State has jurisdiction to regulate public utility com-
panies.
(c) GOVERNMENTS.—No provision in this section
shall apply to, or be deemed to include: (1) the United
States, (2) a State or any political subdivision of a State,
(3) any foreign governmental authority not operating in
the United States, (4) any agency, authority, or instru-
mentality of any of the foregoing, or (5) any officer, agent,
or employee of any of the foregoing acting as such in the
course of his official duty.
(d) EXEMPTIONS.—(1) The provisions of this section
shall not apply to any person previously exempted, by rule
or order, from regulation under the Public Utility Holding
Company Act of 1935 and such person shall continue to
be exempted from the provisions of this section, except
that the Commission may institute proceedings to termi-
nate such exemption if the termination of such exemption
would be necessary for regulating the rates of a public
utility company and necessary for the protection of con-
sumers.
(2) The Commission, by rules and regulations, or by
order upon application, may conditionally or uncondition-
ally exempt any person or transaction, or any class or
classes of persons or transactions, from any provision or
provisions of this title or of any rule or regulation there-
under, if the Commission finds that regulation of such per-
son or transaction is not relevant to the rates of a public
utility company; in considering whether to grant such an
exemption, the Commission shall consult with the affected
State commissions.
(e) FEDERAL ACCESS TO BOOKS AND RECORDS.—
(1) Every holding company and subsidiary company there-
of shall maintain, and make available to the Commission,
such books, records, accounts, and other documents as the
Commission deems relevant to costs incurred by a public
utility company that is an associate company of such hold-
ing company and necessary or appropriate for the protec-
tion of consumers with respect to rates.
(2) Every affiliate of a holding company or of any
subsidiary company thereof shall maintain, and make
available to the Commission, such books, records, ac-
counts, and other documents with respect to any trans-
action with another affiliate, as the Commission deems rel-
evant to costs incurred by a public utility company that
is an associate company of such holding company and nec-
essary or appropriate for the protection of consumers with
respect to rates.
(3) The Commission may examine the books and
records of any company in a holding company system, or
any affiliate thereof, as the Commission deems relevant
to costs incurred by a public utility company within such
holding company system and necessary or appropriate for
the protection of consumers with respect to rates.
(4) No member, officer, or employee of the Commis-
sion shall divulge any fact or information that may come
to his knowledge during the course of examination of
books, accounts, or other information as herein before pro-
vided, except insofar as he may be directed by the Com-
mission or by a court.
(f) STATE ACCESS TO BOOKS AND RECORDS.—(1)
Upon the written request of a State commission having
jurisdiction to regulate a public utility company in a hold-
ing company system, and subject to such terms and condi-
tions as may be necessary and appropriate to safeguard
against unwarranted disclosure to the public of any trade
secrets or sensitive commercial information, a holding
company or its associate company or affiliate thereof,
wherever located, shall produce for inspection such books
and records as have been identified in reasonable detail
in a proceeding before the State commission, are relevant
to costs incurred by such public utility company and are
necessary for the effective discharge of the State commis-
sion’s responsibilities with respect to such proceeding.
(2) Nothing in this section shall preempt applicable
State law concerning the provision of records and other
information, or in any way limit a State’s rights to obtain
books and records and other information under Federal
law, contract, or otherwise.
(g) AFFILIATE TRANSACTIONS.—Nothing in this sec-
tion shall preclude the Commission or a State commission
from exercising its jurisdiction under otherwise applicable
law to determine whether a public utility company may
recover in rates any costs of an activity performed by an
associate company, or any costs of goods or services ac-
quired by such public utility company from an associate
company.
(h) EFFECT ON OTHER REGULATION.—Nothing in
this section shall preclude a State commission from exer-
cising its jurisdiction under otherwise applicable law to
protect utility consumers.
(i) ENFORCEMENT.—The Commission shall have the
same powers as set forth in Sections 306 through 317 of
the Federal Power Act (16 U.S.C. 825d–825p) to enforce
the provisions of this section.
(j) SAVINGS PROVISION.—Nothing in this section
prohibits a person from engaging in activities in which it
is legally engaged or authorized to engage on the effective
date of the Public Utility Holding Company Act of 1996,
provided that it continues to comply with the terms of any
authorization, whether by rule or by order.
(k) IMPLEMENTATION.—The Commission shall pro-
mulgate regulations necessary or appropriate to imple-
ment this section not later than one year after the date
of the enactment of this Act.
(l) RESOURCES.—All books and records that relate
primarily to the function hereby vested in the Commission
shall be transferred from the Securities and Exchange
Commission to the Commission. It is the sense of the Con-
gress that, subject to the approval of the Director of the
Office of Management and Budget and the Chairman of
the Securities and Exchange Commission all personnel of
the Office of Public Utility Regulation of the Securities
and Exchange Commission as of the date of enactment
of this title should be transferred to the Commission.
(m) EFFECTIVE DATE.—This section shall take ef-
fect one year after the date of enactment of this Act.
(n) SEVERABILITY.—If any provision of this section,
or the application of such provision to any person or cir-
cumstance, shall be held invalid, the remainder of the sec-
tion, and the application of such provision to persons or
circumstances other than those as to which it is held in-
valid, shall not be affected thereby.
(o) FEDERAL POWER ACT.—Section 318 of the Fed-
eral Power Act (16 U.S.C. 285g) is hereby repealed.
SEC. 8. RELIABILITY COUNCIL.
Part III of the Federal Power Act is amended by in-
serting the following after section 319:
‘‘SEC. 319A. ELECTRIC RELIABILITY COUNCIL.
‘‘(a) CONSENT OF CONGRESS; FORMATION AND OP-
ERATION OF COUNCIL; PURPOSES.—The consent of Con-
gress is hereby given for the formation and operation of
the Electric Reliability Council. The Council shall be a
body composed of all electricity industry participants, as
specified in this section, and shall carry out its functions
and responsibilities in accordance with this section. The
Council shall continue in force as specified in this section
and shall not be construed to be an agency or instrumen-
tality of the United States for the purpose of any Federal
law. The Council shall provide the best technical electricity
industry advice and recommendations to the Commission,
regarding the reliability of—
‘‘(1) wholesale sales of electricity in interstate
commerce, and
‘‘(2) the transmission of electricity in interstate
commerce,
in order to ensure that the competitive restructuring of
the Nation’s electricity industry does not lessen the high
reliability of traditional electric service.
‘‘(b) CERTAIN FEDERAL LAWS NOT APPLICABLE.—
No Federal law relating to the making of contracts, con-
flicts of interest, financial disclosure, open meetings of the
Council, advisory committees, disclosure of information,
and related matters shall apply to the Council. No con-
tract, obligation, or other action of the Council shall be
construed as an obligation of the United States or an obli-
gation secured by the full faith and credit of the United
States. For the purpose of judicial review of any action
of the Council or challenging any provision of this Act re-
lating to functions and responsibilities of the Council, not-
withstanding any other provision of law, the courts of the
United States shall have exclusive jurisdiction of any such
review.
‘‘(c) RESPONSIBILITY.—The Council shall be respon-
sible for proposing to the Commission advice and regula-
tions setting forth not unduly discriminatory criteria re-
specting the reliability of wholesale sales of electricity in
interstate commerce and the transmission of electricity in
interstate commerce.
‘‘(d) MEMBERSHIP.—All electricity suppliers, trans-
mitting utilities, and local distribution companies shall be
members of the Council.
‘‘(e) FUNDING.—The Commission shall determine in
advance the reasonable expenses of the Council for each
fiscal year, and shall provide funds to pay all such ex-
penses by assessing and collecting Council charges from
each Council member, on a fair and equitable basis in pro-
portion to each member’s annual revenues from electricity-
related business activities, and remitting such charges to
the Council.
‘‘(f) GOVERNANCE.—The Council shall develop a gov-
ernance board which shall represent the interests of elec-
tric utilities, transmitting utilities, local distribution com-
panies, independent electricity generators, electricity con-
sumers, and electricity marketers and brokers. Such board
shall also have advisory members, one each appointed by
each existing electric reliability council. The members, offi-
cers, and employees of the Council shall be deemed not
to be officers or employees of the United States for any
purpose. Pursuant to bylaws adopted by it, the board shall
select from among themselves a chairman, and may pro-
vide for term limits for board members, staggered terms,
eligibility criteria, reasonable administrative procedures,
compensation, the assignment and delegation of duties,
and similar matters.
‘‘(g) ACTION AND AUTHORITY OF THE BOARD.—The
board of the Council shall act by a majority vote, a
quorum of the board being present. Two-thirds of the
board shall constitute a quorum. The board shall have the
authority to hire necessary staff, establish offices, procure
necessary equipment, and carry out similar administrative
duties.
‘‘(h) RECOMMENDATION TO THE COMMISSION.—Any
reliability criteria duly adopted by the Council shall there-
after be proposed by the Council to the Commission, as
a petition for a rulemaking under this Act. The Commis-
sion, pursuant to this Act, shall consider such petition,
provide notice of such petition as a proposed rule, and pro-
vide an opportunity for comment thereon, as in any other
Commission rulemaking proceeding; and may thereafter,
in accordance with this Act, adopt such petition without
change as a final rule under this Act; or may amend it
in any respect and as amended, adopt it as such a final
rule, or may refuse to adopt it. If adopted in any respect,
such final rule shall be treated for all purposes, including
enforcement, as a rule under this Act.
‘‘(i) REPORTING
BY
THE COUNCIL.—The Council
shall submit an annual report to the President, Congress,
the Commission, and its members which—
‘‘(1) summarizes the condition of the Nation’s
electric generation, transmission, and distribution
systems;
‘‘(2) specifies the need, if any, for improve-
ments and upgrades in the Nation’s electric trans-
mission system;
‘‘(3) specifies steps, if any, that are needed to
improve the coordination of the operations of the
Nation’s electric generation, transmission, and dis-
tribution systems;
‘‘(4) identifies regions in which additional gen-
erating capacity may be required within 5 and 10
yeas; and
‘‘(5) beginning 2 years after the establishment
of the Council, rates each Council member according
to its performance under the established reliability
criteria.
‘‘(j) REPORTING BY COUNCIL MEMBERS.—All Coun-
cil members shall report to the Council any material elec-
tric generation, transmission, or distribution system emer-
gency, failure, or outage in the time and manner pre-
scribed by the Council. For purposes of this section, the
Council shall in advance generally identify and define the
circumstances constituting such a material system emer-
gency, failure, or outage.
‘‘(k) 
STATE
AUTHORITY
RESPECTING
RELI-
ABILITY.—Nothing in this section shall limit the authority
under otherwise applicable law of any State regulatory au-
thority or of any nonregulated electric utility or local dis-
tribution company, to ensure, with respect to any sale or
service subject to State jurisdiction under section 201(h),
the reliability, safety, and effective interconnection and co-
ordination of any State regulated or nonregulated electric
utility or local distribution company facilities.’’.
Æ