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‘‘(i) affirm, set aside, reinstate, or modify the 
penalty; and 
‘‘(ii) if appropriate, remand to the ERO for fur-
ther proceedings. 
‘‘(E) The Commission shall implement expedited pro-
cedures for the hearings described in subparagraph (D). 
‘‘(3) On a motion of the Commission or on 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 Commis-
sion 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 au-
thorizing 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— 
‘‘(I) an independent board; 
‘‘(II) a balanced stakeholder board; or 
‘‘(III) a combination independent and bal-
anced stakeholder board;
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‘‘(ii) the regional entity otherwise meets the re-
quirements of paragraphs (1) and (2) of subsection 
(c); and 
‘‘(iii) the agreement promotes effective and effi-
cient 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 effec-
tive and efficient administration of bulk-power system reli-
ability and should be approved. 
‘‘(D) The regulation 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 is nec-
essary or 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— 
‘‘(A) bear a reasonable relation to the seriousness 
of the violation; and
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‘‘(B) take into consideration the efforts of the 
user, owner, or operator to remedy the violation in a 
timely manner. 
‘‘(f) CHANGES IN ELECTRIC RELIABILITY ORGANIZA-
TION RULES.—(1) The Electric Reliability Organization 
shall file with the Commission for approval any proposed 
rule or proposed rule change, accompanied by an expla-
nation of the basis and purpose of the rule and proposed 
rule change. 
‘‘(2) The Commission, upon a motion of the Commis-
sion 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, reason-
able, and 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 agree-
ments with the governments of Canada and Mexico to pro-
vide for effective compliance with reliability standards and
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the effectiveness of the ERO in the United States and Can-
ada 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 genera-
tion or transmission capacity or to set and enforce compli-
ance with standards for adequacy or safety of electric facili-
ties 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 the action is not inconsistent with any reliability stand-
ard. 
‘‘(4) Not later than 90 days after the date of applica-
tion of the Electric Reliability Organization or other af-
fected 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
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any State action, pending the issuance by the Commission 
of a final order. 
‘‘(j) REGIONAL ADVISORY BODIES.—(1) The Commis-
sion 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 with-
in the region is just, reasonable, not unduly discrimi-
natory or preferential, and in the public interest; 
‘‘(C) whether fees proposed to be assessed within 
the region are just, reasonable, not unduly discrimi-
natory or preferential, and in the public interest; and
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‘‘(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 Orga-
nization certified by the Commission under section 215(c) 
of the Federal Power Act (as added by subsection (a)) and 
any regional entity delegated enforcement authority pursu-
ant to section 215(e)(4) of that Act (as so added) are not 
departments, agencies, or instrumentalities of the Federal 
Government. 
Subtitle B—Transmission 
Infrastructure Modernization 
SEC. 1221. SITING OF INTERSTATE ELECTRIC TRANS-
MISSION FACILITIES. 
(a) IN GENERAL.—Part II of the Federal Power Act 
(16 U.S.C. 824 et seq.) (as amended by section 1211(a)) 
is amended by adding at the end the following: 
‘‘SEC. 216. SITING OF INTERSTATE ELECTRIC TRANS-
MISSION FACILITIES. 
‘‘(a) DESIGNATION OF NATIONAL INTEREST ELECTRIC 
TRANSMISSION CORRIDORS.—(1) Not later than 1 year
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after the date of enactment of this section and every 3 years 
thereafter, the Secretary of Energy (referred to in this sec-
tion as the ‘Secretary’), in consultation with affected States, 
shall conduct a study of electric transmission congestion. 
‘‘(2) After considering alternatives and recommenda-
tions from interested parties (including an opportunity for 
comment from affected States), the Secretary shall issue a 
report, based on the study, which may designate any geo-
graphic area experiencing electric energy transmission ca-
pacity constraints or congestion that adversely affects con-
sumers as a national interest electric transmission corridor. 
‘‘(3) The Secretary shall conduct the study and issue 
the report in consultation with any appropriate regional 
entity referred to in section 215. 
‘‘(4) In determining whether to designate a national 
interest electric transmission corridor under paragraph (2), 
the Secretary may consider whether— 
‘‘(A) the economic vitality and development of 
the corridor, or the end markets served by the cor-
ridor, may be constrained by lack of adequate or rea-
sonably priced electricity; 
‘‘(B)(i) economic growth in the corridor, or the 
end markets served by the corridor, may be jeopard-
ized by reliance on limited sources of energy; and 
‘‘(ii) a diversification of supply is warranted;
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‘‘(C) the energy independence of the United 
States would be served by the designation; 
‘‘(D) the designation would be in the interest of 
national energy policy; and 
‘‘(E) the designation would enhance national de-
fense and homeland security. 
‘‘(b) CONSTRUCTION PERMIT.—Except as provided in 
subsection (i), the Commission may, after notice and an 
opportunity for hearing, issue 1 or more permits for the 
construction or modification of electric transmission facili-
ties in a national interest electric transmission corridor 
designated by the Secretary under subsection (a) if the Com-
mission finds that— 
‘‘(1)(A) a State in which the transmission facili-
ties are to be constructed or modified does not have 
authority to— 
‘‘(i) approve the siting of the facilities; or 
‘‘(ii) consider the interstate benefits expected 
to be achieved by the proposed construction or 
modification of transmission facilities in the 
State; 
‘‘(B) the applicant for a permit is a transmit-
ting utility under this Act but does not qualify to 
apply for a permit or siting approval for the pro-
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posed project in a State because the applicant does 
not serve end-use customers in the State; or 
‘‘(C) a State commission or other entity that has 
authority to approve the siting of the facilities has— 
‘‘(i) withheld approval for more than 1 year 
after the filing of an application seeking ap-
proval pursuant to applicable law or 1 year 
after the designation of the relevant national in-
terest electric transmission corridor, whichever is 
later; or 
‘‘(ii) conditioned its approval in such a 
manner that the proposed construction or modi-
fication will not significantly reduce trans-
mission congestion in interstate commerce or is 
not economically feasible; 
‘‘(2) the facilities to be authorized by the permit 
will be used for the transmission of electric energy in 
interstate commerce; 
‘‘(3) the proposed construction or modification is 
consistent with the public interest; 
‘‘(4) the proposed construction or modification 
will significantly reduce transmission congestion in 
interstate commerce and protects or benefits con-
sumers;
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‘‘(5) the proposed construction or modification is 
consistent with sound national energy policy and will 
enhance energy independence; and 
‘‘(6) the proposed modification will maximize, to 
the extent reasonable and economical, the trans-
mission capabilities of existing towers or structures so 
as to minimize the environmental and visual impact 
of the proposed modification. 
‘‘(c) PERMIT APPLICATIONS.—(1) Permit applications 
under subsection (b) shall be made in writing to the Com-
mission. 
‘‘(2) The Commission shall issue rules specifying— 
‘‘(A) the form of the application; 
‘‘(B) the information to be contained in the ap-
plication; and 
‘‘(C) the manner of service of notice of the permit 
application on interested persons. 
‘‘(d) COMMENTS.—In any proceeding before the Com-
mission under subsection (b), the Commission shall afford 
each State in which a transmission facility covered by the 
permit is or will be located, each affected Federal agency 
and Indian tribe, private property owners, and other inter-
ested persons, a reasonable opportunity to present their 
views and recommendations with respect to the need for and 
impact of a facility covered by the permit.
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‘‘(e) RIGHTS-OF-WAY.—(1) In the case of a permit 
under subsection (b) for electric transmission facilities to 
be located on property other than property owned by the 
United States or a State, if the permit holder cannot ac-
quire by contract, or is unable to agree with the owner of 
the property to the compensation to be paid for, the nec-
essary right-of-way to construct or modify the transmission 
facilities, the permit holder may acquire the right-of-way 
by the exercise of the right of eminent domain in the district 
court of the United States for the district in which the prop-
erty concerned is located, or in the appropriate court of the 
State in which the property is located. 
‘‘(2) Any right-of-way acquired under paragraph (1) 
shall be used exclusively for the construction or modification 
of electric transmission facilities within a reasonable period 
of time after the acquisition. 
‘‘(3) The practice and procedure in any action or pro-
ceeding under this subsection in the district court of the 
United States shall conform as nearly as practicable to the 
practice and procedure in a similar action or proceeding 
in the courts of the State in which the property is located. 
‘‘(f) COMPENSATION.—(1) Any right-of-way acquired 
pursuant to subsection (e) shall be considered a taking of 
private property for which just compensation is due.
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‘‘(2) Just compensation shall be an amount equal to 
the fair market value (including applicable severance dam-
ages) of the property taken on the date of the exercise of 
eminent domain authority. 
‘‘(g) STATE LAW.—Nothing in this section precludes 
any person from constructing or modifying any trans-
mission facility in accordance with State law. 
‘‘(h) COORDINATION OF FEDERAL AUTHORIZATIONS 
FOR TRANSMISSION FACILITIES.—(1) In this subsection: 
‘‘(A) The term ‘Federal authorization’ means 
any authorization required under Federal law in 
order to site a transmission facility. 
‘‘(B) The term ‘Federal authorization’ includes 
such permits, special use authorizations, certifi-
cations, opinions, or other approvals as may be re-
quired under Federal law in order to site a trans-
mission facility. 
‘‘(2) The Department of Energy shall act as the lead 
agency for purposes of coordinating all applicable Federal 
authorizations and related environmental reviews of the fa-
cility. 
‘‘(3) To the maximum extent practicable under appli-
cable Federal law, the Secretary shall coordinate the Fed-
eral authorization and review process under this subsection 
with any Indian tribes, multistate entities, and State agen-
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cies that are responsible for conducting any separate per-
mitting and environmental reviews of the facility, to ensure 
timely and efficient review and permit decisions. 
‘‘(4)(A) As head of the lead agency, the Secretary, in 
consultation with agencies responsible for Federal author-
izations and, as appropriate, with Indian tribes, multistate 
entities, and State agencies that are willing to coordinate 
their own separate permitting and environmental reviews 
with the Federal authorization and environmental reviews, 
shall establish prompt and binding intermediate milestones 
and ultimate deadlines for the review of, and Federal au-
thorization decisions relating to, the proposed facility. 
‘‘(B) The Secretary shall ensure that, once an applica-
tion has been submitted with such data as the Secretary 
considers necessary, all permit decisions and related envi-
ronmental reviews under all applicable Federal laws shall 
be completed— 
‘‘(i) within 1 year; or 
‘‘(ii) if a requirement of another provision of 
Federal law does not permit compliance with clause 
(i), as soon thereafter as is practicable. 
‘‘(C) The Secretary shall provide an expeditious pre- 
application mechanism for prospective applicants to confer 
with the agencies involved to have each such agency deter-
mine and communicate to the prospective applicant not
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later than 60 days after the prospective applicant submits 
a request for such information concerning— 
‘‘(i) the likelihood of approval for a potential fa-
cility; and 
‘‘(ii) key issues of concern to the agencies and 
public. 
‘‘(5)(A) As lead agency head, the Secretary, in con-
sultation with the affected agencies, shall prepare a single 
environmental review document, which shall be used as the 
basis for all decisions on the proposed project under Federal 
law. 
‘‘(B) The Secretary and the heads of other agencies 
shall streamline the review and permitting of transmission 
within corridors designated under section 503 of the Federal 
Land Policy and Management Act (43 U.S.C. 1763) by 
fully taking into account prior analyses and decisions relat-
ing to the corridors. 
‘‘(C) The document shall include consideration by the 
relevant agencies of any applicable criteria or other matters 
as required under applicable law. 
‘‘(6)(A) If any agency has denied a Federal authoriza-
tion required for a transmission facility, or has failed to 
act by the deadline established by the Secretary pursuant 
to this section for deciding whether to issue the authoriza-
tion, the applicant or any State in which the facility would
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be located may file an appeal with the President, who shall, 
in consultation with the affected agency, review the denial 
or failure to take action on the pending application. 
‘‘(B) Based on the overall record and in consultation 
with the affected agency, the President may— 
‘‘(i) issue the necessary authorization with any 
appropriate conditions; or 
‘‘(ii) deny the application. 
‘‘(C) The President shall issue a decision not later than 
90 days after the date of the filing of the appeal. 
‘‘(D) In making a decision under this paragraph, the 
President shall comply with applicable requirements of Fed-
eral law, including any requirements of— 
‘‘(i) the National Forest Management Act of 
1976 (16 U.S.C. 472a et seq.); 
‘‘(ii) the Endangered Species Act of 1973 (16 
U.S.C. 1531 et seq.); 
‘‘(iii) the Federal Water Pollution Control Act 
(33 U.S.C. 1251 et seq.); 
‘‘(iv) the National Environmental Policy Act of 
1969 (42 U.S.C. 4321 et seq.); and 
‘‘(v) the Federal Land Policy and Management 
Act of 1976 (43 U.S.C. 1701 et seq.).
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‘‘(7)(A) Not later than 18 months after the date of en-
actment of this section, the Secretary shall issue any regula-
tions necessary to implement this subsection. 
‘‘(B)(i) Not later than 1 year after the date of enact-
ment of this section, the Secretary and the heads of all Fed-
eral agencies with authority to issue Federal authorizations 
shall enter into a memorandum of understanding to ensure 
the timely and coordinated review and permitting of elec-
tricity transmission facilities. 
‘‘(ii) Interested Indian tribes, multistate entities, and 
State agencies may enter the memorandum of under-
standing. 
‘‘(C) The head of each Federal agency with authority 
to issue a Federal authorization shall designate a senior 
official responsible for, and dedicate sufficient other staff 
and resources to ensure, full implementation of the regula-
tions and memorandum required under this paragraph. 
‘‘(8)(A) Each Federal land use authorization for an 
electricity transmission facility shall be issued— 
‘‘(i) for a duration, as determined by the Sec-
retary, commensurate with the anticipated use of the 
facility; and 
‘‘(ii) with appropriate authority to manage the 
right-of-way for reliability and environmental protec-
tion.
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‘‘(B) On the expiration of the authorization (including 
an authorization issued before the date of enactment of this 
section), the authorization shall be reviewed for renewal tak-
ing fully into account reliance on such electricity infra-
structure, recognizing the importance of the authorization 
for public health, safety, and economic welfare and as a 
legitimate use of Federal land. 
‘‘(9) In exercising the responsibilities under this sec-
tion, the Secretary shall consult regularly with— 
‘‘(A) the Federal Energy Regulatory Commis-
sion; 
‘‘(B) electric reliability organizations (including 
related regional entities) approved by the Commis-
sion; and 
‘‘(C) Transmission Organizations approved by 
the Commission. 
‘‘(i) INTERSTATE COMPACTS.—(1) The consent of Con-
gress is given for 3 or more contiguous States to enter into 
an interstate compact, subject to approval by Congress, es-
tablishing regional transmission siting agencies to— 
‘‘(A) facilitate siting of future electric energy 
transmission facilities within those States; and 
‘‘(B) carry out the electric energy transmission 
siting responsibilities of those States.
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‘‘(2) The Secretary may provide technical assistance 
to regional transmission siting agencies established under 
this subsection. 
‘‘(3) The regional transmission siting agencies shall 
have the authority to review, certify, and permit siting of 
transmission facilities, including facilities in national in-
terest electric transmission corridors (other than facilities 
on property owned by the United States). 
‘‘(4) The Commission shall have no authority to issue 
a permit for the construction or modification of an electric 
transmission facility within a State that is a party to a 
compact, unless the members of the compact are in disagree-
ment and the Secretary makes, after notice and an oppor-
tunity for a hearing, the finding described in subsection 
(b)(1)(C). 
‘‘(j) RELATIONSHIP TO OTHER LAWS.—(1) Except as 
specifically provided, nothing in this section affects any re-
quirement of an environmental law of the United States, 
including the National Environmental Policy Act of 1969 
(42 U.S.C. 4321 et seq.). 
‘‘(2) Subsection (h)(6) shall not apply to any unit of 
the National Park System, the National Wildlife Refuge 
System, the National Wild and Scenic Rivers System, the 
National Trails System, the National Wilderness Preserva-
tion System, or a National Monument.’’.
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(b) REPORTS
TO CONGRESS
ON CORRIDORS
AND 
RIGHTS OF WAY ON FEDERAL LANDS.—Not later than 90 
days after the date of enactment of this Act, the Secretary 
of the Interior, the Secretary, the Secretary of Agriculture, 
and the Chairman of the Council on Environmental Qual-
ity shall submit to Congress a joint report identifying— 
(1)(A) all existing designated transmission and 
distribution corridors on Federal land and the status 
of work related to proposed transmission and dis-
tribution corridor designations under title V of the 
Federal Land Policy and Management Act of 1976 
(43 U.S.C. 1761 et seq.); 
(B) the schedule for completing the work; 
(C) any impediments to completing the work; 
and 
(D) steps that Congress could take to expedite the 
process; 
(2)(A) the number of pending applications to lo-
cate transmission facilities on Federal land; 
(B) key information relating to each such facil-
ity; 
(C) how long each application has been pending; 
(D) the schedule for issuing a timely decision as 
to each facility; and
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(E) progress in incorporating existing and new 
such rights-of-way into relevant land use and resource 
management plans or the equivalent of those plans; 
and 
(3)(A) the number of existing transmission and 
distribution rights-of-way on Federal land that will 
come up for renewal within the following 5-, 10-, and 
15-year periods; and 
(B) a description of how the Secretaries plan to 
manage the renewals. 
SEC. 1222. THIRD-PARTY FINANCE. 
(a) EXISTING FACILITIES.—The Secretary, acting 
through the Administrator of the Western Area Power Ad-
ministration (referred to in this section as ‘‘WAPA’’) or the 
Administrator of the Southwestern Power Administration 
(referred to in this section as ‘‘SWPA’’), or both, may carry 
out a project to design, develop, construct, operate, main-
tain, or own, or participate with other entities in designing, 
developing, constructing, operating, maintaining, or own-
ing, an electric power transmission facility and related fa-
cilities needed to upgrade existing transmission facilities 
owned by the SWPA or WAPA if the Secretary, in consulta-
tion with the applicable Administrator, determines that the 
proposed project—
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(1)(A) is located in a national interest electric 
transmission corridor designated under section 216(a) 
of the Federal Power Act and will reduce congestion 
of electric transmission in interstate commerce; or 
(B) is necessary to accommodate an actual or 
projected increase in demand for electric transmission 
capacity; 
(2) is consistent with— 
(A) transmission needs identified, in a 
transmission expansion plan or otherwise, by the 
appropriate Transmission Organization (as de-
fined in section 3 of the Federal Power Act (16 
U.S.C. 796)), if any, or approved regional reli-
ability organization; and 
(B) efficient and reliable operation of the 
transmission grid; and 
(3) would be operated in conformance with pru-
dent utility practice. 
(b) NEW FACILITIES.—The Secretary, acting through 
the WAPA or SWPA, or both, may carry out a project to 
design, develop, construct, operate, maintain, or own, or 
participate with other entities in designing, developing, 
constructing, operating, maintaining, or owning, a new 
electric power transmission facility and related facilities lo-
cated within any State in which the WAPA or SWPA oper-
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ates if the Secretary, in consultation with the applicable 
Administrator, determines that the proposed project— 
(1)(A) is located in a national interest electric 
transmission corridor designated under section 216(a) 
of the Federal Power Act and will reduce congestion 
of electric transmission in interstate commerce; or 
(B) is necessary to accommodate an actual or 
projected increase in demand for electric transmission 
capacity; 
(2) is consistent with— 
(A) transmission needs identified, in a 
transmission expansion plan or otherwise, by the 
appropriate Transmission Organization, if any, 
or approved regional reliability organization; 
and 
(B) efficient and reliable operation of the 
transmission grid; 
(3) will be operated in conformance with pru-
dent utility practice; 
(4) will be operated by, or in conformance with 
the rules of, the appropriate— 
(A) Transmission Organization, if any; or 
(B) if such an organization does not exist, 
regional reliability organization; and
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(5) will not duplicate the functions of existing 
transmission facilities or proposed facilities that are 
the subject of ongoing or approved siting and related 
permitting proceedings. 
(c) OTHER FUNDS.— 
(1) IN
GENERAL.—In carrying out a project 
under subsection (a) or (b), the Secretary may accept 
and use funds contributed by another entity for the 
purpose of carrying out the project. 
(2) AVAILABILITY.—The contributed funds shall 
be available for expenditure for the purpose of car-
rying out the project— 
(A) without fiscal year limitation; and 
(B) as if the funds had been appropriated 
specifically for the project. 
(3) ALLOCATION OF COSTS.—In carrying out a 
project under subsection (a) or (b), any costs of the 
project not paid for by contributions from another en-
tity shall be— 
(A) collected through rates charged to cus-
tomers using the new transmission capability 
provided by the project; and 
(B) allocated equitably among these project 
beneficiaries using the new transmission capa-
bility.
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(d) RELATIONSHIP TO OTHER LAWS.—Nothing in this 
section affects any requirement of— 
(1) any Federal environmental law, including 
the National Environmental Policy Act of 1969 (42 
U.S.C. 4321 et seq.); 
(2) any Federal or State law relating to the 
siting of energy facilities; or 
(3) any authorizing law in effect on the date of 
enactment of this Act. 
(e) SAVINGS CLAUSE.—Nothing in this section con-
strains or restricts an Administrator in the use of other 
authority delegated to the Administrator of the WAPA or 
SWPA. 
(f) SECRETARIAL DETERMINATIONS.—Any determina-
tion made pursuant to subsection (a) or (b) shall be based 
on findings by the Secretary using the best available data. 
(g) MAXIMUM FUNDING AMOUNT.—The Secretary shall 
not accept and use more than $100,000,000 under sub-
section (c)(1) for the period of fiscal years 2006 through 
2013. 
SEC. 1223. ADVANCED TRANSMISSION TECHNOLOGIES. 
(a) DEFINITION OF ADVANCED TRANSMISSION TECH-
NOLOGY.—In this section, the term ‘‘advanced transmission 
technology’’ means a technology that increases the capacity,
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efficiency, or reliability of an existing or new transmission 
facility, including— 
(1) high-temperature lines (including super-
conducting cables); 
(2) underground cables; 
(3) advanced conductor technology (including 
advanced composite conductors, high-temperature low- 
sag conductors, and fiber optic temperature sensing 
conductors); 
(4) high-capacity ceramic electric wire, connec-
tors, and insulators; 
(5) optimized transmission line configurations 
(including multiple phased transmission lines); 
(6) modular equipment; 
(7) wireless power transmission; 
(8) ultra-high voltage lines; 
(9) high-voltage DC technology; 
(10) flexible AC transmission systems; 
(11) energy storage devices (including pumped 
hydro, compressed air, superconducting magnetic en-
ergy storage, flywheels, and batteries); 
(12) controllable load; 
(13) distributed generation (including PV, fuel 
cells, and microturbines); 
(14) enhanced power device monitoring;
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(15) direct system state sensors; 
(16) fiber optic technologies; 
(17) power electronics and related software (in-
cluding real time monitoring and analytical soft-
ware); 
(18) mobile transformers and mobile substations; 
and 
(19) any other technologies the Commission con-
siders appropriate. 
(b) AUTHORITY.—In carrying out the Federal Power 
Act (16 U.S.C. 791a et seq.) and the Public Utility Regu-
latory Policies Act of 1978 (16 U.S.C. 2601 et seq.), the 
Commission shall encourage, as appropriate, the deploy-
ment of advanced transmission technologies. 
SEC. 1224. ADVANCED POWER SYSTEM TECHNOLOGY IN-
CENTIVE PROGRAM. 
(a) DEFINITIONS.—In this section: 
(1) QUALIFYING
ADVANCED
POWER
SYSTEM 
TECHNOLOGY
FACILITY.—The term ‘‘qualifying ad-
vanced power system technology facility’’ means a fa-
cility using an advanced fuel cell, turbine, or hybrid 
power system or power storage system to generate or 
store electric energy. 
(2) QUALIFYING SECURITY AND ASSURED POWER 
FACILITY.—The term ‘‘qualifying security and as-
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sured power facility’’ means a qualifying advanced 
power system technology facility determined by the 
Secretary, in consultation with the Secretary of 
Homeland Security, to be in critical need of secure, 
reliable, rapidly available, high-quality power for 
critical governmental, industrial, or commercial ap-
plications. 
(b) PROGRAM.—The Secretary may establish an ad-
vanced power system technology incentive program to— 
(1) support the deployment of certain advanced 
power system technologies; and 
(2) improve and protect certain critical govern-
mental, industrial, and commercial processes. 
(c) INCENTIVE PAYMENTS.— 
(1) IN
GENERAL.—Funds provided under this 
section shall be used by the Secretary to make incen-
tive payments to eligible owners or operators of ad-
vanced power system technologies to increase power 
generation through enhanced operational, economic, 
and environmental performance. 
(2) APPLICATION.—Payments under this section 
may only be made on receipt by the Secretary of an 
incentive payment application establishing an appli-
cant as—
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(A) a qualifying advanced power system 
technology facility; or 
(B) a qualifying security and assured 
power facility. 
(3) PAYMENT RATES.—Subject to availability of 
funds— 
(A) a payment of 1.8 cents per kilowatt- 
hour shall be paid to the owner or operator of a 
qualifying advanced power system technology fa-
cility under this section for electricity generated 
at the facility; and 
(B) an additional 0.7 cents per kilowatt- 
hour shall be paid to the owner or operator of a 
qualifying security and assured power facility 
for electricity generated at the facility. 
(4) PAYMENT
QUANTITY.—Any facility quali-
fying under this section shall be eligible for an incen-
tive payment for up to, but not more than, the first 
10,000,000 kilowatt-hours produced in any fiscal 
year. 
(d) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated to the Secretary to carry out 
this section $10,000,000 for each of fiscal years 2006 
through 2012.
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Subtitle C—Transmission 
Operation Improvements 
SEC. 1231. OPEN NONDISCRIMINATORY ACCESS. 
Part II of the Federal Power Act (16 U.S.C. 824 et 
seq.) is amended by inserting after section 211 (16 U.S.C. 
824j) the following: 
‘‘SEC. 211A. OPEN ACCESS BY UNREGULATED TRANSMIT-
TING UTILITIES. 
‘‘(a) DEFINITION OF UNREGULATED TRANSMITTING 
UTILITY.—In this section, the term ‘unregulated transmit-
ting utility’ means an entity that— 
‘‘(1) owns or operates facilities used for the 
transmission of electric energy in interstate com-
merce; and 
‘‘(2) is an entity described in section 201(f). 
‘‘(b) TRANSMISSION OPERATION IMPROVEMENTS.— 
Subject to section 212(h), the Commission may, by rule or 
order, require an unregulated transmitting utility to pro-
vide transmission services— 
‘‘(1) at rates that are comparable to those that 
the unregulated transmitting utility charges itself; 
and 
‘‘(2) on terms and conditions (not relating to 
rates) that are comparable to those under which the 
unregulated transmitting utility provides trans-
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mission services to itself and that are not unduly dis-
criminatory or preferential. 
‘‘(c) EXEMPTION.—The Commission shall exempt from 
any rule or order under this section any unregulated trans-
mitting utility that— 
‘‘(1) sells not more than 4,000,000 megawatt 
hours of electricity per year; 
‘‘(2) does not own or operate any transmission 
facilities that are necessary for operating an inter-
connected transmission system (or any portion of the 
system); or 
‘‘(3) meets other criteria the Commission deter-
mines to be in the public interest. 
‘‘(d) LOCAL DISTRIBUTION FACILITIES.—The require-
ments of subsection (b) shall not apply to facilities used 
in local distribution. 
‘‘(e) EXEMPTION TERMINATION.—If the Commission, 
after an evidentiary hearing held on a complaint and after 
giving consideration to reliability standards established 
under section 215, finds on the basis of a preponderance 
of the evidence that any exemption granted pursuant to sub-
section (c) unreasonably impairs the continued reliability 
of an interconnected transmission system, the Commission 
shall revoke the exemption granted to the transmitting util-
ity.
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‘‘(f) APPLICATION TO UNREGULATED TRANSMITTING 
UTILITIES.—The rate changing procedures applicable to 
public utilities under subsections (c) and (d) of section 205 
are applicable to unregulated transmitting utilities for pur-
poses of this section. 
‘‘(g) REMAND.—In exercising authority under sub-
section (b)(1), the Commission may remand transmission 
rates to an unregulated transmitting utility for review and 
revision if necessary to meet the requirements of subsection 
(b). 
‘‘(h) OTHER REQUESTS.—The provision of trans-
mission services under subsection (b) does not preclude a 
request for transmission services under section 211. 
‘‘(i) LIMITATION.—The Commission may not require 
a State or municipality to take action under this section 
that would violate a private activity bond rule for purposes 
of section 141 of the Internal Revenue Code of 1986. 
‘‘(j) TRANSFER OF CONTROL OF TRANSMITTING FA-
CILITIES.—Nothing in this section authorizes the Commis-
sion to require an unregulated transmitting utility to 
transfer control or operational control of its transmitting 
facilities to a Transmission Organization that is designated 
to provide nondiscriminatory transmission access.’’.
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SEC. 1232. REGIONAL TRANSMISSION ORGANIZATIONS. 
Part II of the Federal Power Act (16 U.S.C. 824 et 
seq.) (as amended by section 1221(a)) is amended by adding 
at the end the following: 
‘‘SEC. 217. PROMOTION OF VOLUNTARY TRANSMISSION OR-
GANIZATIONS. 
‘‘(a) IN GENERAL.—The Commission may encourage 
and may approve the voluntary formation of RTOs, ISOs, 
or other similar organizations approved by the Commission 
for the purposes of— 
‘‘(1) promoting fair, open access to electric trans-
mission service; 
‘‘(2) facilitating wholesale competition; 
‘‘(3) improving efficiencies in transmission grid 
management; 
‘‘(4) promoting grid reliability; 
‘‘(5) removing opportunities for unduly discrimi-
natory or preferential transmission practices; and 
‘‘(6) providing for the efficient development of 
transmission infrastructure needed to meet the grow-
ing demands of competitive wholesale power markets. 
‘‘(b) OPERATIONAL CONTROL.—No order issued under 
this Act shall be conditioned on or require a transmitting 
utility to transfer operational control of jurisdictional fa-
cilities to a Transmission Organization approved by the 
Commission.
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‘‘(c) ANNUAL AUDITS.—(1) Each Transmission Orga-
nization shall report to the Commission on a scheduled 
basis, as determined by the Commission, the means by 
which the Transmission Organization will ensure that the 
Transmission Organization will operate and perform the 
functions of the Transmission Organization in a cost effec-
tive manner that is also consistent with the obligations of 
the Transmission Organization under the Commission-ap-
proved tariffs and agreements of the Transmission Organi-
zation. 
‘‘(2) The Commission shall annually audit the compli-
ance of the Transmission Organization with the filed plan 
and any additional Commission requirements concerning 
the performance, operations, and cost efficiencies of the 
Transmission Organization. 
‘‘(3) The Commission shall establish appropriate ac-
counting procedures for recording costs to facilitate com-
parisons among Transmission Organizations and, to the ex-
tent practicable, among other transmitting utilities per-
forming similar functions.’’. 
SEC. 1233. FEDERAL UTILITY PARTICIPATION IN TRANS-
MISSION ORGANIZATIONS. 
(a) DEFINITIONS.—In this section—
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(1) APPROPRIATE
FEDERAL
REGULATORY
AU-
THORITY.—The term ‘‘appropriate Federal regulatory 
authority’’ means— 
(A) in the case of a Federal power mar-
keting agency, the Secretary, except that the Sec-
retary may designate the Administrator of a 
Federal power marketing agency to act as the 
appropriate Federal regulatory authority with 
respect to the transmission system of the Federal 
power marketing agency; and 
(B) in the case of the Tennessee Valley Au-
thority, the Board of Directors of the Tennessee 
Valley Authority. 
(2) FEDERAL POWER MARKETING AGENCY.—The 
term ‘‘Federal power marketing agency’’ has the 
meaning given the term in section 3 of the Federal 
Power Act (16 U.S.C. 796). 
(3) FEDERAL UTILITY.—The term ‘‘Federal util-
ity’’ means— 
(A) a Federal power marketing agency; or 
(B) the Tennessee Valley Authority. 
(4) TRANSMISSION
ORGANIZATION.—The term 
‘‘Transmission Organization’’ has the meaning given 
the term in section 3 of the Federal Power Act (16 
U.S.C. 796).
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(5) TRANSMISSION SYSTEM.—The term ‘‘trans-
mission system’’ means an electric transmission facil-
ity owned, leased, or contracted for by the United 
States and operated by a Federal utility. 
(b) TRANSFER.—The appropriate Federal regulatory 
authority may enter into a contract, agreement, or other 
arrangement transferring control and use of all or part of 
the transmission system of a Federal utility to a Trans-
mission Organization. 
(c) CONTENTS.—The contract, agreement, or arrange-
ment shall include— 
(1) performance standards for operation and use 
of the transmission system that the head of the Fed-
eral utility determines are necessary or appropriate, 
including standards that ensure— 
(A) recovery of all of the costs and expenses 
of the Federal utility related to the transmission 
facilities that are the subject of the contract, 
agreement, or other arrangement; 
(B) consistency with existing contracts and 
third-party financing arrangements; and 
(C) consistency with the statutory authori-
ties, obligations, and limitations of the Federal 
utility;
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(2) provisions for monitoring and oversight by 
the Federal utility of the Transmission Organiza-
tion’s terms and conditions of the contract, agree-
ment, or other arrangement, including a provision for 
the resolution of disputes through arbitration or other 
means with the Transmission Organization or with 
other participants, notwithstanding the obligations 
and limitations of any other law regarding arbitra-
tion; and 
(3) a provision that allows the Federal utility to 
withdraw from the Transmission Organization and 
terminate the contract, agreement, or other arrange-
ment in accordance with its terms. 
(d) COMMISSION.—Neither this section, actions taken 
pursuant to this section, nor any other transaction of a 
Federal utility participating in a Transmission Organiza-
tion shall confer on the Commission jurisdiction or author-
ity over— 
(1) the electric generation assets, electric capac-
ity, or energy of the Federal utility that the Federal 
utility is authorized by law to market; or 
(2) the power sales activities of the Federal util-
ity. 
(e) EXISTING
STATUTORY
AND
OTHER
OBLIGA-
TIONS.—
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(1) SYSTEM
OPERATION
REQUIREMENTS.—No 
statutory provision requiring or authorizing a Fed-
eral utility to transmit electric power or to construct, 
operate, or maintain the transmission system of the 
Federal utility prohibits a transfer of control and use 
of the transmission system pursuant to, and subject 
to, the requirements of this section. 
(2) OTHER OBLIGATIONS.—This subsection does 
not— 
(A) suspend, or exempt any Federal utility 
from, any provision of Federal law in effect on 
the date of enactment of this Act, including any 
requirement or direction relating to the use of 
the transmission system of the Federal utility, 
environmental protection, fish and wildlife pro-
tection, flood control, navigation, water delivery, 
or recreation; or 
(B) authorize abrogation of any contract or 
treaty obligation. 
(3) CONFORMING AMENDMENT.—Section 311 of 
the Energy and Water Development Appropriations 
Act, 2001 (16 U.S.C. 824n) is repealed. 
SEC. 1234. STANDARD MARKET DESIGN. 
The proposed rulemaking of the Commission entitled 
‘‘Remedying Undue Discrimination through Open Access
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Transmission Service and Standard Electricity Market De-
sign’’ (Docket No. RM01–12–000) (commonly known as 
‘‘SMD NOPR’’) is terminated and shall not be reissued. 
SEC. 1235. NATIVE LOAD SERVICE OBLIGATION. 
Part II of the Federal Power Act (16 U.S.C. 824 et 
seq.) (as amended by section 1232) is amended by adding 
at the end the following: 
‘‘SEC. 218. NATIVE LOAD SERVICE OBLIGATION. 
‘‘(a) DEFINITIONS.—In this section: 
‘‘(1) The term ‘distribution utility’ means an 
electric utility that has a service obligation to end- 
users or to a State utility or electric cooperative that, 
directly or indirectly, through 1 or more additional 
State utilities or electric cooperatives, provides elec-
tric service to end-users. 
‘‘(2) The term ‘load-serving entity’ means a dis-
tribution utility or an electric utility that has a serv-
ice obligation. 
‘‘(3) The term ‘service obligation’ means a re-
quirement applicable to, or the exercise of authority 
granted to, an electric utility under Federal, State, or 
local law or under long-term contracts to provide elec-
tric service to end-users or to a distribution utility. 
‘‘(4) The term ‘State utility’ means a State or 
any political subdivision of a State, or any agency,
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authority, or instrumentality of any 1 or more States 
or political subdivisions, or a corporation that is 
wholly owned, directly or indirectly, by any 1 or 
more of the States or political subdivisions, competent 
to carry on the business of developing, transmitting, 
using, or distributing power. 
‘‘(b) MEETING SERVICE OBLIGATIONS.—(1) Para-
graph (2) applies to any load-serving entity that, as of the 
date of enactment of this section— 
‘‘(A) owns generation facilities, markets the out-
put of Federal generation facilities, or holds rights 
under 1 or more wholesale contracts to purchase elec-
tric energy, for the purpose of meeting a service obli-
gation; and 
‘‘(B) by reason of ownership of transmission fa-
cilities, or 1 or more contracts or service agreements 
for firm transmission service, holds firm transmission 
rights for delivery of the output of the generation fa-
cilities or the purchased energy to meet the service ob-
ligation. 
‘‘(2) Any load-serving entity described in paragraph 
(1) is entitled to use the firm transmission rights, or, equiv-
alent tradable or financial transmission rights, in order to 
deliver the output or purchased energy, or the output of 
other generating facilities or purchased energy to the extent
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deliverable using the rights, to the extent required to meet 
the service obligation of the load-serving entity. 
‘‘(3)(A) To the extent that all or a portion of the service 
obligation covered by the firm transmission rights or equiv-
alent tradable or financial transmission rights is trans-
ferred to another load-serving entity, the successor load- 
serving entity shall be entitled to use the firm transmission 
rights or equivalent tradable or financial transmission 
rights associated with the transferred service obligation. 
‘‘(B) Subsequent transfers to another load-serving enti-
ty, or back to the original load-serving entity, shall be enti-
tled to the same rights. 
‘‘(4) The Commission shall exercise the authority of the 
Commission under this Act in a manner that facilitates the 
planning and expansion of transmission facilities to meet 
the reasonable needs of load-serving entities to satisfy the 
service obligations of the load-serving entities, and enables 
load-serving entities to secure firm transmission rights (or 
equivalent tradable or financial rights) on a long term basis 
for long term power supply arrangements made, or 
planned, to meet such needs. 
‘‘(c) ALLOCATION OF TRANSMISSION RIGHTS.—Noth-
ing in subsections (b)(1), (b)(2) and (b)(3) of this section 
shall affect any existing or future methodology employed by 
a Transmission Organization for allocating or auctioning
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transmission rights if such Transmission Organization was 
authorized by the Commission to allocate or auction finan-
cial transmission rights on its system as of January 1, 
2005, and the Commission determines that any future allo-
cation or auction is just, reasonable and not unduly dis-
criminatory or preferential, provided, however, that if such 
a Transmission Organization never allocated financial 
transmission rights on its system that pertained to a period 
before January 1, 2005, with respect to any application by 
such Transmission Organization that would change its 
methodology the Commission shall exercise its authority in 
a manner consistent with the Act and that takes into ac-
count the policies expressed in subsections (b)(1), (b)(2) and 
(b)(3) as applied to firm transmission rights held by a load- 
serving entity as of January 1, 2005, to the extent the asso-
ciated generation ownership or power purchase arrange-
ments remain in effect. 
‘‘(d) CERTAIN TRANSMISSION RIGHTS.—The Commis-
sion may exercise authority under this Act to make trans-
mission rights not used to meet an obligation covered by 
subsection (b) available to other entities in a manner deter-
mined by the Commission to be just, reasonable, and not 
unduly discriminatory or preferential. 
‘‘(e) OBLIGATION TO BUILD.—Nothing in this Act re-
lieves a load-serving entity from any obligation under State
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or local law to build transmission or distribution facilities 
adequate to meet the service obligations of the load-serving 
entity. 
‘‘(f) CONTRACTS.—Nothing in this section shall pro-
vide a basis for abrogating any contract or service agree-
ment for firm transmission service or rights in effect as of 
the date of the enactment of this subsection. If an ISO in 
the Western Interconnection had allocated financial trans-
mission rights prior to the date of enactment of this section 
but had not done so with respect to one or more load-serving 
entities’ firm transmission rights held under contracts to 
which the preceding sentence applies (or held by reason of 
ownership or future ownership of transmission facilities), 
such load-serving entities may not be required, without 
their consent, to convert such firm transmission rights to 
tradable or financial rights, except where the load-serving 
entity has voluntarily joined the ISO as a participating 
transmission owner (or its successor) in accordance with 
the ISO tariff. 
‘‘(g) WATER PUMPING FACILITIES.—The Commission 
shall ensure that any entity described in section 201(f) that 
owns transmission facilities used predominately to support 
its own water pumping facilities shall have, with respect 
to the facilities, protections for transmission service com-
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parable to those provided to load-serving entities pursuant 
to this section. 
‘‘(h) ERCOT.—This section shall not apply within the 
area referred to in section 212(k)(2)(A). 
‘‘(i) JURISDICTION.—This section does not authorize 
the Commission to take any action not otherwise within 
the jurisdiction of the Commission. 
‘‘(j) TVA AREA.—(1) Subject to paragraphs (2) and 
(3), for purposes of subsection (b)(1)(B), a load-serving en-
tity that is located within the service area of the Tennessee 
Valley Authority and that has a firm wholesale power sup-
ply contract with the Tennessee Valley Authority shall be 
considered to hold firm transmission rights for the trans-
mission of the power provided. 
‘‘(2) Nothing in this subsection affects the requirements 
of section 212(j). 
‘‘(3) The Commission shall not issue an order on the 
basis of this subsection that is contrary to the purposes of 
section 212(j).’’. 
(h) FERC RULEMAKING
ON LONG-TERM TRANS-
MISSION RIGHTS IN ORGANIZED MARKETS.—Within one 
year after the date of enactment of this section and after 
notice and an opportunity for comment, the Commission 
shall by rule or order implement subsection (b)(4) in Trans-
mission Organizations with organized electricity markets.
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(i) EFFECT OF EXERCISING RIGHTS.—An entity that 
to the extent required to meet its service obligations exercises 
rights described in subsection (b) shall not be considered by 
such action as engaging in undue discrimination or pref-
erence under this Act. 
SEC. 1236. PROTECTION OF TRANSMISSION CONTRACTS IN 
THE PACIFIC NORTHWEST. 
Part II of the Federal Power Act (16 U.S.C. 824 et 
seq.) (as amended by section 1235) is amended by adding 
at the end the following: 
‘‘SEC. 219. PROTECTION OF TRANSMISSION CONTRACTS IN 
THE PACIFIC NORTHWEST. 
‘‘(a) DEFINITION OF ELECTRIC UTILITY OR PERSON.— 
In this section, the term ‘electric utility or person’ means 
an electric utility or person that— 
‘‘(1) as of the date of enactment of the Energy 
Policy Act of 2005 holds firm transmission rights 
pursuant to contract or by reason of ownership of 
transmission facilities; and 
‘‘(2) is located— 
‘‘(A) in the Pacific Northwest, as that re-
gion is defined in section 3 of the Pacific North-
west Electric Power Planning and Conservation 
Act (16 U.S.C. 839a); or
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‘‘(B) in that portion of a State included in 
the geographic area proposed for a regional 
transmission organization in Commission Docket 
Number RT01–35 on the date on which that 
docket was opened. 
‘‘(b) PROTECTION OF TRANSMISSION CONTRACTS.— 
Nothing in this Act confers on the Commission the author-
ity to require an electric utility or person to convert to 
tradable or financial rights— 
‘‘(1) firm transmission rights described in sub-
section (a)(1); or 
‘‘(2) firm transmission rights obtained by exer-
cising contract or tariff rights associated with the 
firm transmission rights described in subsection 
(a)(1).’’. 
Subtitle D—Transmission Rate 
Reform 
SEC. 1241. TRANSMISSION INFRASTRUCTURE INVESTMENT. 
Part II of the Federal Power Act (16 U.S.C. 824 et 
seq.) (as amended by section 1236) is amended by adding 
at the end the following: 
‘‘SEC. 220. TRANSMISSION INFRASTRUCTURE INVESTMENT. 
‘‘(a) RULEMAKING REQUIREMENT.—Not later than 1 
year after the date of enactment of this section, the Commis-
sion shall establish, by rule, incentive-based (including per-
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formance-based) rate treatments for the transmission of 
electric energy in interstate commerce by public utilities for 
the purpose of benefiting consumers by ensuring reliability 
and reducing the cost of delivered power by reducing trans-
mission congestion. 
‘‘(b) CONTENTS.—The rule shall— 
‘‘(1) promote reliable and economically efficient 
transmission and generation of electricity by pro-
moting capital investment in the enlargement, im-
provement, maintenance, and operation of all facili-
ties for the transmission of electric energy in inter-
state commerce, regardless of the ownership of the fa-
cilities; 
‘‘(2) provide a return on equity that attracts 
new investment in transmission facilities (including 
related transmission technologies); 
‘‘(3) encourage deployment of transmission tech-
nologies and other measures to increase the capacity 
and efficiency of existing transmission facilities and 
improve the operation of the facilities; and 
‘‘(4) allow recovery of— 
‘‘(A) all prudently incurred costs necessary 
to comply with mandatory reliability standards 
issued pursuant to section 215; and
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‘‘(B) all prudently incurred costs related to 
transmission infrastructure development pursu-
ant to section 216. 
‘‘(c) JUST AND REASONABLE RATES.—All rates ap-
proved under the rules adopted pursuant to this section, in-
cluding any revisions to the rules, are subject to the require-
ments of sections 205 and 206 that all rates, charges, terms, 
and conditions be just and reasonable and not unduly dis-
criminatory or preferential.’’. 
SEC. 1242. FUNDING NEW INTERCONNECTION AND TRANS-
MISSION UPGRADES. 
The Commission may approve a participant funding 
plan that allocates costs related to transmission upgrades 
or new generator interconnection, without regard to whether 
an applicant is a member of a Commission-approved 
Transmission Organization, if the plan results in rates 
that— 
(1) are just and reasonable; 
(2) are not unduly discriminatory or pref-
erential; and 
(3) are otherwise consistent with sections 205 
and 206 of the Federal Power Act (16 U.S.C. 824d, 
824e).
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Subtitle E—Amendments to PURPA 
SEC. 1251. NET METERING AND ADDITIONAL STANDARDS. 
(a) ADOPTION OF STANDARDS.—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.—Each electric utility 
shall make available upon request net metering serv-
ice to any electric consumer that the electric utility 
serves. For purposes of this paragraph, the term ‘net 
metering service’ means service to an electric con-
sumer under which electric energy generated by that 
electric consumer from an eligible on-site generating 
facility and delivered to the local distribution facili-
ties may be used to offset electric energy provided by 
the electric utility to the electric consumer during the 
applicable billing period. 
‘‘(12) FUEL
SOURCES.—Each electric utility 
shall develop a plan to minimize dependence on 1 fuel 
source and to ensure that the electric energy it sells 
to consumers is generated using a diverse range of 
fuels and technologies, including renewable tech-
nologies. 
‘‘(13) FOSSIL FUEL GENERATION EFFICIENCY.— 
Each electric utility shall develop and implement a
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10-year plan to increase the efficiency of its fossil fuel 
generation.’’. 
(b) COMPLIANCE.— 
(1) TIME LIMITATIONS.—Section 112(b) of the 
Public Utility Regulatory Policies Act of 1978 (16 
U.S.C. 2622(b)) is amended by adding at the end the 
following: 
‘‘(3)(A) Not later than 2 years after the enactment of 
this paragraph, each State regulatory authority (with re-
spect to each electric utility for which it has ratemaking 
authority) and each nonregulated electric utility shall com-
mence the consideration referred to in section 111, or set 
a hearing date for such consideration, with respect to each 
standard established by paragraphs (11) through (13) of 
section 111(d). 
‘‘(B) Not later than 3 years after the date of the enact-
ment of this paragraph, each State regulatory authority 
(with respect to each electric utility for which it has rate-
making authority), and each nonregulated electric utility, 
shall complete the consideration, and shall make the deter-
mination, referred to in section 111 with respect to each 
standard established by paragraphs (11) through (13) of 
section 111(d).’’. 
(2) FAILURE TO COMPLY.—Section 112(c) of the 
Public Utility Regulatory Policies Act of 1978 (16
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U.S.C. 2622(c)) is amended by adding at the end the 
following: 
‘‘In the case of each standard established by paragraphs 
(11) through (13) of section 111(d), the reference contained 
in this subsection to the date of enactment of this Act shall 
be deemed to be a reference to the date of enactment of such 
paragraphs (11) through (13).’’. 
(3) PRIOR STATE ACTIONS.— 
(A) IN GENERAL.—Section 112 of the Public 
Utility Regulatory Policies Act of 1978 (16 
U.S.C. 2622) is amended by adding at the end 
the following: 
‘‘(d) PRIOR STATE ACTIONS.—Subsections (b) and (c) 
of this section shall not apply to the standards established 
by paragraphs (11) through (13) of section 111(d) in the 
case of any electric utility in a State if, before the enact-
ment of this subsection— 
‘‘(1) the State has implemented for such utility 
the standard concerned (or a comparable standard); 
‘‘(2) the State regulatory authority for such 
State or relevant nonregulated electric utility has con-
ducted a proceeding to consider implementation of the 
standard concerned (or a comparable standard) for 
such utility; or
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‘‘(3) the State legislature has voted on the imple-
mentation of such standard (or a comparable stand-
ard) for such utility.’’. 
(B) CROSS
REFERENCE.—Section 124 of 
such Act (16 U.S.C. 2634) is amended by adding 
the following at the end thereof: ‘‘In the case of 
each standard established by paragraphs (11) 
through (13) of section 111(d), the reference con-
tained in this subsection to the date of enactment 
of this Act shall be deemed to be a reference to 
the date of enactment of such paragraphs (11) 
through (13).’’. 
SEC. 1252. SMART METERING. 
(a) IN GENERAL.—Section 111(d) of the Public Utili-
ties Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) 
is amended by adding at the end the following: 
‘‘(14) TIME-BASED METERING AND COMMUNICA-
TIONS.— 
‘‘(A) Not later than 18 months after the 
date of enactment of this paragraph, each electric 
utility shall offer each of its customer classes, 
and provide individual customers upon customer 
request, a time-based rate schedule under which 
the rate charged by the electric utility varies 
during different time periods and reflects the
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variance, if any, in the utility’s costs of gener-
ating and purchasing electricity at the wholesale 
level. The time-based rate schedule shall enable 
the electric consumer to manage energy use and 
cost through advanced metering and communica-
tions technology. 
‘‘(B) The types of time-based rate schedules 
that may be offered under the schedule referred 
to in subparagraph (A) include, among others— 
‘‘(i) time-of-use pricing whereby elec-
tricity prices are set for a specific time pe-
riod on an advance or forward basis, typi-
cally not changing more often than twice a 
year, based on the utility’s cost of gener-
ating and/or purchasing such electricity at 
the wholesale level for the benefit of the con-
sumer. Prices paid for energy consumed 
during these periods shall be pre-established 
and known to consumers in advance of such 
consumption, allowing them to vary their 
demand and usage in response to such 
prices and manage their energy costs by 
shifting usage to a lower cost period or re-
ducing their consumption overall;
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‘‘(ii) critical peak pricing whereby 
time-of-use prices are in effect except for 
certain peak days, when prices may reflect 
the costs of generating and/or purchasing 
electricity at the wholesale level and when 
consumers may receive additional discounts 
for reducing peak period energy consump-
tion; 
‘‘(iii) real-time pricing whereby elec-
tricity prices are set for a specific time pe-
riod on an advanced or forward basis, re-
flecting the utility’s cost of generating and/ 
or purchasing electricity at the wholesale 
level, and may change as often as hourly; 
and 
‘‘(iv) credits for consumers with large 
loads who enter into pre-established peak 
load reduction agreements that reduce the 
planned capacity obligations of a utility. 
‘‘(C) Each electric utility subject to sub-
paragraph (A) shall provide each customer re-
questing a time-based rate with a time-based 
meter capable of enabling the utility and cus-
tomer to offer and receive such rate, respectively.
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‘‘(D) For purposes of implementing this 
paragraph, any reference contained in this sec-
tion to the date of enactment of the Public Util-
ity Regulatory Policies Act of 1978 shall be 
deemed to be a reference to the date of enactment 
of this paragraph. 
‘‘(E) In a State that permits third-party 
marketers to sell electric energy to retail electric 
consumers, such consumers shall be entitled to re-
ceive the same time-based metering and commu-
nications device and service as a retail electric 
consumer of the electric utility. 
‘‘(F) Notwithstanding subsections (b) and 
(c) of section 112, each State regulatory author-
ity shall, not later than 18 months after the date 
of enactment of this paragraph conduct an inves-
tigation in accordance with section 115(i) and 
issue a decision whether it is appropriate to im-
plement the standards set out in subparagraphs 
(A) and (C).’’. 
(b) STATE INVESTIGATION OF DEMAND RESPONSE AND 
TIME-BASED METERING.—Section 115 of the Public Utili-
ties Regulatory Policies Act of 1978 (16 U.S.C. 2625) is 
amended as follows:
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(1) By inserting in subsection (b) after the 
phrase ‘‘the standard for time-of-day rates established 
by section 111(d)(3)’’ the following: ‘‘and the stand-
ard for time-based metering and communications es-
tablished by section 111(d)(14)’’. 
(2) By inserting in subsection (b) after the 
phrase ‘‘are likely to exceed the metering’’ the fol-
lowing: ‘‘and communications’’. 
(3) By adding at the end the following: 
‘‘(i) TIME-BASED METERING AND COMMUNICATIONS.— 
In making a determination with respect to the standard 
established by section 111(d)(14), the investigation require-
ment of section 111(d)(14)(F) shall be as follows: Each 
State regulatory authority shall conduct an investigation 
and issue a decision whether or not it is appropriate for 
electric utilities to provide and install time-based meters 
and communications devices for each of their customers 
which enable such customers to participate in time-based 
pricing rate schedules and other demand response pro-
grams.’’. 
(c) FEDERAL ASSISTANCE ON DEMAND RESPONSE.— 
Section 132(a) of the Public Utility Regulatory Policies Act 
of 1978 (16 U.S.C. 2642(a)) is amended by striking ‘‘and’’ 
at the end of paragraph (3), striking the period at the end
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HR 6 PAP 
of paragraph (4) and inserting ‘‘; and’’, and by adding the 
following at the end thereof: 
‘‘(5) technologies, techniques, and rate-making 
methods related to advanced metering and commu-
nications and the use of these technologies, techniques 
and methods in demand response programs.’’. 
(d) FEDERAL GUIDANCE.—Section 132 of the Public 
Utility Regulatory Policies Act of 1978 (16 U.S.C. 2642) 
is amended by adding the following at the end thereof: 
‘‘(d) DEMAND RESPONSE.—The Secretary shall be re-
sponsible for— 
‘‘(1) educating consumers on the availability, ad-
vantages, and benefits of advanced metering and com-
munications technologies, including the funding of 
demonstration or pilot projects; 
‘‘(2) working with States, utilities, other energy 
providers and advanced metering and communica-
tions experts to identify and address barriers to the 
adoption of demand response programs; and 
‘‘(3) not later than 180 days after the date of en-
actment of the Energy Policy Act of 2005, providing 
Congress with a report that identifies and quantifies 
the national benefits of demand response and makes 
a recommendation on achieving specific levels of such 
benefits by January 1, 2007.’’.
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(e) DEMAND RESPONSE AND REGIONAL COORDINA-
TION.— 
(1) IN GENERAL.—It is the policy of the United 
States to encourage States to coordinate, on a re-
gional basis, State energy policies to provide reliable 
and affordable demand response services to the public. 
(2) TECHNICAL
ASSISTANCE.—The Secretary 
shall provide technical assistance to States and re-
gional organizations formed by 2 or more States to 
assist them in— 
(A) identifying the areas with the greatest 
demand response potential; 
(B) identifying and resolving problems in 
transmission and distribution networks, includ-
ing through the use of demand response; 
(C) developing plans and programs to use 
demand response to respond to peak demand or 
emergency needs; and 
(D) identifying specific measures consumers 
can take to participate in these demand response 
programs. 
(3) REPORT.—Not later than 1 year after the 
date of enactment of this Act, the Commission shall 
prepare and publish an annual report, by appro-
priate region, that assesses demand response re-