I
107TH CONGRESS
1ST SESSION
H. R. 3406
To benefit consumers and enhance the Nation’s energy security by removing
barriers to the development of competitive markets for electric power,
providing for the reliability and increased capacity of the Nation’s electric
transmission networks, promoting the use of renewable and alternative
sources of electric power generation, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
DECEMBER 5, 2001
Mr. BARTON of Texas introduced the following bill; which was referred to the
Committee on Energy and Commerce, and in addition to the Committees
on Transportation and Infrastructure, and Resources, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee con-
cerned
A BILL
To benefit consumers and enhance the Nation’s energy secu-
rity by removing barriers to the development of competi-
tive markets for electric power, providing for the reli-
ability and increased capacity of the Nation’s electric
transmission networks, promoting the use of renewable
and alternative sources of electric power generation, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Electric Supply and
Transmission Act’’.
SEC. 2. TABLE OF CONTENTS.
Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Definitions.
TITLE I—ELECTRIC SUPPLY
Subtitle A—Interconnection; Net Metering; Demand Management
Sec. 101. Interconnection.
Sec. 102. Federal standards for State net metering programs.
Sec. 103. Price-responsive demand programs.
Subtitle B—Provisions Regarding Public Utility Holding Act of 1935
Sec. 111. Definitions.
Sec. 112. Repeal of the public utility holding company act of 1935.
Sec. 113. Federal access to books and records.
Sec. 114. State access to books and records.
Sec. 115. Exemption authority.
Sec. 116. Affiliate transactions.
Sec. 117. Applicability.
Sec. 118. Effect on other regulations.
Sec. 119. Enforcement.
Sec. 120. Savings provisions.
Sec. 121. Implementation.
Sec. 122. Transfer of resources.
Sec. 123. Effective date.
Sec. 124. Conforming amendment to the Federal power act.
Sec. 125. Effect on investment company act regulation.
Subtitle C—Provisions Regarding Public Utility Regulatory Policies Act of
1978
Sec. 131. Findings.
Sec. 132. Prospective repeal.
Sec. 133. Recovery of costs.
Sec. 134. Definitions.
Subtitle D—Redundant Review of Certain Matters
Sec. 141. Repeal of certain provisions of Federal power act regarding disposi-
tion of property, consolidation, and purchase of securities.
Sec. 142. Elimination of duplicative antitrust review.
TITLE II—TRANSMISSION OPERATION
Sec. 201. Open access for all transmitting utilities.
Sec. 202. Regional transmission organizations.
TITLE III—TRANSMISSION RELIABILITY
Sec. 301. Electric reliability.
TITLE IV—TRANSMISSION INFRASTRUCTURE
Sec. 401. Sustainable transmission networks rulemaking.
Sec. 402. Transmission siting.
TITLE V—FEDERAL UTILITIES
Subtitle A—Tennessee Valley Authority
Sec. 501. Definitions.
Sec. 502. Wholesale competition in the Tennessee valley region.
Sec. 503. Tennessee valley authority power sales.
Sec. 504. Tennessee valley authority electric generation facilities.
Sec. 505. Renegotiation of power contracts.
Sec. 506. Regulation of Tennessee valley authority transmission system.
Sec. 507. Regulation of Tennessee valley authority distributors.
Sec. 508. Stranded cost recovery.
Sec. 509. Application of antitrust law.
Sec. 510. Savings provision.
Subtitle B—Bonneville Power Authority
Sec. 521. Definitions.
Sec. 522. Regulation of Bonneville transmission system.
Sec. 523. Authority of administrator to participate in regional transmission or-
ganization.
Sec. 524. Limitation on retail services.
Sec. 525. Direct service industries.
Sec. 526. Conforming amendments.
Subtitle C—Other Federal Power Marketing Administrations
Sec. 531. Definitions.
Sec. 532. Wholesale power sales by Federal power marketing administrations.
Sec. 533. Regulation of Federal power marketing administration transmission
systems.
Sec. 534. Accounting.
Sec. 535. Application of antitrust law.
TITLE VI—CONSUMER PROTECTIONS
Sec. 601. Electric supply unfair trade practices.
Sec. 602. Consumer privacy.
Sec. 603. Aggregation.
Sec. 604. State public purpose charges.
Sec. 605. State authority to order retail electric competition.
Sec. 606. Universal and affordable service.
TITLE VII—INVESTIGATION AND CORRECTION OF
ANTICOMPETITIVE CONDUCT
Sec. 701. Uniform investigation authority.
Sec. 702. Uniform refund authority.
Sec. 703. Criminal and civil penalties.
SEC. 3. DEFINITIONS.
Section 3 of the Federal Power Act (16 U.S.C. 796)
is amended by adding at the end the following:
‘‘(26) APPROPRIATE
REGULATORY
AUTHOR-
ITY.—The term ‘appropriate regulatory authority’
means the entity with authority over the inter-
connection at issue in the absence of subsections (e)
and (f) of section 210. As appropriate to the con-
text, the term shall mean—
‘‘(A) the Commission;
‘‘(B) a State commission;
‘‘(C) a municipality;
‘‘(D) a cooperative that is self-regulating
under State law and is not a public utility; or
‘‘(E) an Indian tribe.
‘‘(27) GENERATING FACILITY.—The term ‘gen-
erating facility’ means a facility that generates elec-
tric energy.
‘‘(28) LOCAL
DISTRIBUTION
UTILITY.—The
term ‘local distribution utility’ means an entity, in-
cluding, notwithstanding section 201(f), any State or
municipal entity, that owns, controls, or operates a
local distribution facility that is used for the sale of
electric energy.
‘‘(29) NON-FEDERAL
REGULATORY
AUTHOR-
ITY.—The term ‘non-Federal regulatory authority’
transmission facilities and is independent of any
market participant.’’.
TITLE I—ELECTRIC SUPPLY
Subtitle A—Interconnection; Net
Metering; Demand Management
SEC. 101. INTERCONNECTION.
(a) INTERCONNECTION
TO DISTRIBUTION FACILI-
TIES.—Section 210 of the Federal Power Act (16 U.S.C.
824i) is amended by inserting after subsection (e) the fol-
lowing:
‘‘(f) INTERCONNECTION TO DISTRIBUTION FACILI-
TIES.—
‘‘(1) INTERCONNECTION.—
‘‘(A) IN
GENERAL.—A local distribution
utility shall interconnect a generating facility
with the distribution facilities of the local dis-
tribution utility if the owner of the generating
facility—
‘‘(i) complies with the final rule pro-
mulgated under paragraph (2); and
‘‘(ii) pays the costs of the interconnec-
tion, including the generating facility’s ap-
propriate share of the necessary and rea-
sonable costs associated with any upgrades
to system facilities.
‘‘(B) COSTS.—The costs of the inter-
connection shall be—
‘‘(i) just and reasonable,
‘‘(ii) not unduly discriminatory or
preferential, and
‘‘(iii) comparable to the costs charged
by the local distribution utility for inter-
connection by any similarly situated gener-
ating facility to the distribution facilities of
the local distribution utility, as determined
by the appropriate regulatory authority.
‘‘(C) APPLICABLE
REQUIREMENTS.—The
right of a generating facility to interconnect
under subparagraph (A) does not—
‘‘(i) relieve the generating facility or
the local distribution utility of other Fed-
eral, State, or local requirements;
‘‘(ii) include a right to transmission or
distribution service for the generating facil-
ity; or
‘‘(iii) allow the generating facility or
its customer to bypass or avoid payment of
any costs approved for recovery by the ap-
propriate regulatory authority, or deprive
the generating facility or its customer of
any rights or arguments it might have to
avoid paying such costs.
‘‘(2) RULE.—
‘‘(A) IN GENERAL.—Not later than 1 year
after the date of enactment of this subsection,
the Commission shall promulgate a final rule
establishing reasonable and appropriate tech-
nical standards for the interconnection of a gen-
erating facility with the distribution facilities of
a local distribution utility, and shall provide for
the updating or modification of such standards
when appropriate.
‘‘(B) PROCESS.—To the extent feasible,
the Commission shall develop the standards
through a process involving interested parties,
and shall rely, where appropriate, on standards
developed through independent standard setting
organizations.
‘‘(3) RIGHT TO BACKUP POWER.—
‘‘(A) IN
GENERAL.—In accordance with
subparagraph (B), a local distribution utility
shall offer to provide backup power, as defined
in paragraph (35) of section 3, to a generating
facility or a retail electric consumer to the ex-
tent that the local distribution utility is obli-
gated under State law to provide electricity sup-
ply service to retail electric consumers in the
area in which the generating facility is located
and
‘‘(i) is not subject to an order of a
non-Federal regulatory authority to pro-
vide open access to its facilities;
‘‘(ii) has not offered to provide open
access to its facilities; or
‘‘(iii) does not allow a generating fa-
cility to purchase backup power from an-
other entity using its facilities under terms
that are just and reasonable, and not un-
duly discriminatory or preferential.
‘‘(B) RATES, TERMS, AND CONDITIONS.—A
sale of backup power under subparagraph (A),
for both firm and interruptible backup power
service, shall be at such rates and under such
terms and conditions, as determined by and
filed with the appropriate regulatory authority,
as are just and reasonable and not unduly dis-
criminatory 
or 
preferential, 
taking 
into
account—
‘‘(i) the actual incremental cost, when-
ever incurred by the local distribution util-
ity, to supply such backup power service
during the period in which the backup
power service is provided, and
‘‘(ii) any capacity charges assessed
against similarly situated generating facili-
ties in the area in which the generating fa-
cility is located.
‘‘(C) NO
REQUIREMENT
FOR
CERTAIN
SALES.—A local distribution utility shall not be
required to provide backup power for resale.
‘‘(D) NEW OR EXPANDED LOADS.—To the
extent backup power is used to serve a new or
expanded load on the distribution system, the
generating facility shall pay the appropriate
share of the necessary and reasonable costs as-
sociated with any upgrades to transmission, dis-
tribution, or generation facilities required to
provide such service, as determined by the ap-
propriate regulatory authority.
‘‘(4) ADMINISTRATION.—
‘‘(A) BY
A
NON-FEDERAL
REGULATORY
AUTHORITY.—Except where subject to the ju-
risdiction of the Commission pursuant to provi-
sions other than subparagraph (B), a non-Fed-
eral regulatory authority may administer and
enforce the rule promulgated under subpara-
graph (2)(A) and administer and enforce the
requirements of paragraph 3 for backup power.
‘‘(B) BY THE COMMISSION.—To the extent
that a non-Federal regulatory authority does
not administer and enforce the rule or the
backup power requirements, the Commission
shall administer and enforce the rule or the
backup power requirements, as appropriate,
with respect to interconnection in that jurisdic-
tion.’’.
(b) INTERCONNECTION TO TRANSMISSION FACILI-
TIES.—Section 210 of the Federal Power Act (16 U.S.C.
824i) is amended by inserting after subsection (f) (as
added by subsection (a) of this Act) the following:
‘‘(g) INTERCONNECTION TO TRANSMISSION FACILI-
TIES.—
‘‘(1) INTERCONNECTION.—
‘‘(A) DEFINITION.—For purposes of this
subsection and subsection (h), the term ‘trans-
mitting utility’ means any entity (notwith-
standing section 201 (f)) that owns, controls, or
operates an electric power transmission facility
that is used for the sale of electric energy.
‘‘(B) IN GENERAL.—Notwithstanding sub-
sections (a) and (c), a transmitting utility shall
interconnect a generating facility with the
transmission facilities of the transmitting utility
if the owner of the generating facility—
‘‘(i) complies with the final rule pro-
mulgated under paragraph (2); and
‘‘(ii) pays the costs of the interconnec-
tion, including the generating facility’s ap-
propriate share of the necessary and rea-
sonable costs associated with any upgrades
to system facilities.
‘‘(C) COSTS.—
‘‘(i) IN GENERAL.—The costs of the
interconnection shall be—
‘‘(I) comparable to the costs
charged by the transmitting utility for
interconnection by any similarly situ-
ated generating facility to the trans-
mission facilities of the transmitting
utility, or
‘‘(II) otherwise negotiated and
agreed to by the parties, provided that
such costs are approved by the Com-
mission as just and reasonable and
not unduly discriminatory or pref-
erential.
‘‘(ii) 
DETERMINATION
OF
INTER-
CONNECTION COSTS.—A non-Federal regu-
latory 
authority 
that, 
under 
section
206(e)(2) (as added by section 201(a) of
this Act), is authorized to determine the
rates for transmission service on facilities
subject to its jurisdiction shall be author-
ized to determine the costs of any inter-
connection to such facilities under this sub-
paragraph in accordance with that provi-
sion of Federal law.
‘‘(D) APPLICABLE
REQUIREMENTS.—The
right of a generating facility to interconnect
under subparagraph (B) does not—
‘‘(i) relieve the generating facility or
the transmitting utility of other Federal,
State, or local requirements;
‘‘(ii) include a right to transmission or
distribution service for the generating facil-
ity; or
‘‘(iii) allow the generating facility or
its customer to bypass or avoid payment of
any costs approved for recovery by the ap-
propriate regulatory authority, or deprive
the generating facility or its customer of
any rights or arguments it might have to
avoid paying such costs.’’.
‘‘(2) RULE.—
‘‘(A) IN GENERAL.—Not later than 1 year
after the date of enactment of this subsection,
the Commission shall promulgate a final rule
establishing reasonable, appropriate, and tech-
nically feasible technical standards for the
interconnection of a generating facility with the
transmission facilities of a transmitting utility.
‘‘(B) PROCESS.—To the extent feasible,
the Commission shall develop the standards
through a process involving interested parties,
and shall rely, where appropriate, on standards
developed through independent standard setting
organizations.
‘‘(3) RIGHT TO BACKUP POWER.—
‘‘(A) IN
GENERAL.—In accordance with
subparagraph (B), a local distribution utility
that is obligated under State law to provide
electricity supply to retail electric consumers in
the area in which the generating facility is lo-
cated shall offer to provide backup power to the
generating facility at the interconnection point
and to a retail electric consumer, in accordance
with the definition set forth in section 3(35),
unless—
‘‘(i) Federal, State, or local law (in-
cluding regulations) allows such a gener-
ating facility or retail electric consumer to
purchase backup power from an entity
other than the local distribution utility; or
‘‘(ii) the local distribution utility al-
lows a generating facility to purchase
backup power from an entity other than
the local distribution utility using—
‘‘(I) the transmission facilities of
the transmitting utility; or
‘‘(II) the transmission facilities
of any other transmitting utility that
allows such transmission.
‘‘(B) RATES, TERMS, AND CONDITIONS.—A
sale of backup power under subparagraph (A),
for both firm and interruptible backup power
service, shall be at such rates and under such
terms and conditions, as determined by and
filed with the appropriate regulatory authority,
as are just and reasonable and not unduly dis-
criminatory 
or 
preferential, 
taking 
into
account—
‘‘(i) the actual incremental cost, when-
ever incurred by the local distribution util-
ity, to supply such backup power service
during the period in which the backup
power service is provided, and
‘‘(ii) any capacity charges assessed
against similarly situated generating facili-
ties in the area in which the generating fa-
cility is located.
‘‘(C) NO
REQUIREMENT
FOR
CERTAIN
SALES.—A local distribution utility shall not be
required to provide backup power for resale.
‘‘(D) NEW OR EXPANDED LOADS.—To the
extent backup power is used to serve a new or
expanded load on the transmission system, the
generating facility shall pay the appropriate
share of the necessary and reasonable costs as-
sociated with any upgrades to transmission, dis-
tribution, or generating facilities required to
provide such service, as determined by the ap-
propriate regulatory authority.
‘‘(E) ADMINISTRATION.—
‘‘(i) BY A NON-FEDERAL REGULATORY
AUTHORITY.—Except there subject to the
jurisdiction of the Commission pursuant to
provisions other than clause (ii), a non-
Federal regulatory authority may admin-
ister and enforce the requirements of this
paragraph for backup power.
‘‘(ii) BY
THE
COMMISSION.—To the
extent that a non-Federal regulatory au-
thority does not administer and enforce the
backup power requirements, the Commis-
sion shall administer and enforce the
backup power requirements with respect to
interconnection in that jurisdiction.’’.
(c) TRANSMISSION INTERCONNECTION PROCESS AND
PROCEDURES.—Section 210 of the Federal Power Act is
amended by inserting after subsection (g) (as added by
subsection (b)) the following:
‘‘(h) TRANSMISSION INTERCONNECTION PROCESS
AND PROCEDURES.—(1) Within 180 days of the enact-
ment of this section, the Commission shall issue a rule
establishing procedures governing—
‘‘(A) the interconnection of new generating fa-
cilities to a transmission system owned or operated
by any transmitting utility or any regional trans-
mission organization approved by the Commission;
and
‘‘(B) the increase in capacity of an existing gen-
erating facility interconnected to a transmission sys-
tem owned or operated by any transmitting utility or
any regional transmission organization approved by
the Commission.
Such rulemaking proceeding shall establish interconnec-
tion procedures and required elements for interconnection
agreements as provided in paragraphs (2) and (3). The
Commission shall apply similar procedures and required
elements to the interconnection of new generating facilities
to a distribution system to the extent that the Commission
has jurisdiction to do so pursuant to paragraph (f)(4) of
this section. Nothing in this Section or Subsection shall
affect the terms and conditions of existing agreements be-
tween qualifying facilities and utilities pursuant to 18
CFR 292.
‘‘(2) INTERCONNECTION PROCEDURES.—Pursu-
ant to the rulemaking proceeding under paragraph
(1) of this subsection, the Commission shall estab-
lish interconnection procedures to govern the process
in which any transmitting utility or regional trans-
mission organization responds to and resolves inter-
connection requests. Such procedures shall include
provisions governing each of the following:
‘‘(A) The study or studies to be conducted
to ensure that the interconnection can occur
without compromising the reliability of the sys-
tem being interconnected.
‘‘(B) The time frames for completing such
study or studies.
‘‘(C) The priorities among generating fa-
cilities that submit interconnection requests.
‘‘(D) The rights that new generating facili-
ties have upon interconnection.
‘‘(E) Compensation, if and as appropriate,
for transmitting utilities or regional trans-
mission organizations for the costs of proc-
essing the interconnection requests.
‘‘(F) Criteria for assuring that such inter-
connections will meet applicable reliability
standards and will not adversely affect existing
transmission operations or service.
‘‘(G) Criteria for assuring that such inter-
connections will not violate applicable laws (in-
cluding safety and environmental laws), rules,
or contracts.
Any transmitting utility or regional transmission or-
ganization shall include such interconnection proce-
dures in its tariffs filed with and approved by the
Commission under section 205 of this Act. The
Commission may approve different or additional pro-
visions in the interconnection procedures if the dif-
ferent or additional provisions are substantially com-
parable with the procedures established by the Com-
mission pursuant to this section.
‘‘(3) REQUIRED ELEMENTS FOR INTERCONNEC-
TION
AGREEMENTS.—Pursuant to the rulemaking
proceeding under paragraph (1) of this subsection,
the Commission shall also identify the required ele-
ments for interconnection agreements. Each such
interconnection agreement shall contain provisions
respecting—
‘‘(A) the cost responsibility for facilities
necessary to interconnect the new generating
facility or for upgrades to the transmission sys-
tem required to allow the reliable interconnec-
tion of the new generating facility;
‘‘(B) the security and creditworthiness re-
quirements for constructing the interconnection
facilities or system upgrades;
‘‘(C) the methods for preserving the con-
fidentiality of information exchanged between
any new generating facility, and any transmit-
ting utility or regional transmission organiza-
tion;
‘‘(D) the requirements for operating any
new generating facility in parallel with the
transmission system; and
‘‘(E) the methods for resolving disputes be-
tween any new generating facility, and any
transmitting utility or regional transmission or-
ganization.
‘‘(4) 
EXECUTION
OF
INTERCONNECTION
AGREEMENT.—Each 
interconnection 
agreement
under this section shall be executed both by any new
generating facility, and by any transmitting utility
or regional transmission organization before the
commencement of the construction of facilities nec-
essary to interconnect such new generating facility.
Such generating facility and transmitting utility or
regional transmission organization may agree to dif-
ferent or additional terms and conditions in their
interconnection agreement than required under para-
graph 3 if they are consistent with the elements for
interconnection agreements established by the Com-
mission. The Commission shall resolve any dispute
between the parties to such an agreement or any re-
fusal to execute such an agreement within sixty days
of notice by either party of the dispute or refusal.
‘‘(5) EXEMPTION FROM COMMISSION APPROVED
PROCEDURES.—Any transmitting utility or regional
transmission organization shall be exempted by the
Commission from the requirements of this sub-
section, upon a showing by the transmitting utility,
regional transmission organization, or a generating
facility that substantially comparable interconnection
procedures and agreements have previously been
filed with and approved by the Commission for inter-
connection with that entity. Any interconnecting
generating facility may be entitled to interconnect
with that entity under such substantially comparable
interconnection procedures and agreements.’’.
(d) CONFORMING AMENDMENTS.—Section 210 of the
Federal Power Act (16 U.S.C. 824i) is amended as fol-
lows:
(1) In subsection (a)(1)—
(A) by inserting ‘‘transmitting utility, local
distribution utility,’’ after ‘‘electric utility,’’;
and
(B) in subparagraph (A), by inserting
‘‘any transmitting utility,’’ after ‘‘small power
production facility,’’.
(2) In subsection (c)(2)—
(A) in subparagraph (B), by striking ‘‘or’’
at the end;
(B) in subparagraph (C), by striking
‘‘and’’ at the end and inserting ‘‘or’’; and
(C) by adding at the end the following:
‘‘(D) promote competition in electricity
markets, and’’.
(3) In subsection (d), by striking the last sen-
tence.
(4) In subsection (e)(1), by inserting ‘‘sub-
sections (a) through (d) of’’ after ‘‘used in’’.
SEC. 102. FEDERAL STANDARDS FOR STATE NET METERING
PROGRAMS.
(a) FINDINGS.—The Congress finds that it is in the
public interest to:
(1) Enable small businesses, residences, schools,
churches, farms, and other retail electric customers
who generate electric energy to reduce their electric
bills.
(2) Encourage private investment in renewable
and unconventional energy resources.
(3) Enhance the diversity of the Nation’s elec-
tric supply by increasing reliance on a wide range of
renewable and other environmentally sound distrib-
uted generation technologies.
(4) Reduce price volatility and enhance reli-
ability by reducing peak load on centrally generated
power supplies.
(5) Protect the environment by promoting clean
energy sources.
(b) NET METERING.—Part II of the Federal Power
Act is amended by adding the following new section at
the end thereof:
‘‘SEC. 215. STATE NET METERING PROGRAMS.
‘‘(a) DEFINITIONS.—As used in this section—
‘‘(1) The term ‘customer generator’ means the
owner or operator of an electric generation unit
qualified for net metering under this section.
‘‘(2) The term ‘net metering’ means measuring
the difference between the electricity supplied to a
customer-generator and the electricity generated by
a customer-generator that is delivered to a local dis-
tribution system as the same point of interconnec-
tion during an applicable billing period, and pro-
viding a crediting to the customer-generator for the
net amount, if any, by which the electricity gen-
erated by the customer-generator exceeds the elec-
tricity supplied to the customer generator during
that billing period.
‘‘(3) The terms ‘electric generation unit quali-
fied for net metering’ and ‘qualified generation unit’
mean an electric energy generation unit that meets
the requirements of subsection (b)(1) of this section.
‘‘(4) The term ‘retail electric supplier’ means
any person that sells electric energy to the ultimate
consumer thereof.
‘‘(5) The term ‘local distribution system’ means
any system for the distribution of electric energy to
the ultimate consumer thereof, whether or not the
owner or operator of such system is also a retail
electric supplier.
‘‘(b) NET METERING REQUIREMENT.—Each State,
electric utility not regulated by a State, and Federal power
marketing agency shall consider establishing a net meter-
ing program, or modifying an existing program, to meet
the minimum Federal standards set forth in subsection
(c) of this section. If the Commission determines that a
State, electric utility not regulated by a State, or Federal
power marketing agency has not established a net meter-
ing program that meets such minimum standards within
1 year after the effective date of the interconnection stand-
ards (for distribution facilities) required under section
210(e) of this Act, the Commission shall establish a pro-
gram (in such State or in the service territory of such elec-
tric utility or Federal power marketing agency) consistent
with such standards.
‘‘(c) MINIMUM FEDERAL STANDARDS FOR STATE
AND OTHER NET METERING PROGRAMS.—
‘‘(1) QUALIFIED
GENERATION
UNIT.—A gen-
eration unit that meets the following requirements
qualifies for net metering under this section:
‘‘(A) The unit is a fuel cell or uses as its
energy source either solar, wind, or biomass.
‘‘(B) The unit has a generating capacity of
up to 250 kilowatts.
‘‘(C) The unit is located on premises that
are owned, operated, leased, or otherwise con-
trolled by the customer-generator.
‘‘(D) The unit operates in parallel with the
retail electric supplier.
‘‘(E) The unit is used primarily to offset
part or all of the customer-generator’s require-
ments for electric energy.
‘‘(F) The unit is not intended to offset or
provide credits for electric consumption at an-
other location of the customer or for any other
customer.
‘‘(2) METERING AND COSTS.—The retail elec-
tric supplier shall make available upon request net
metering service to any customer-generator that the
supplier serves if the retail customer-generator pays
any incremental costs, including those incurred by
suppliers and local distribution systems for equip-
ment or services for safety or performance that are
necessary to meet the standards referred to in this
section. If a State, nonregulated utility, or Federal
power marketing agency determines that the use of
a real-time net meter or interval net meter will ad-
vance the purposes of this section for such units, a
customer-generator in that State (or, in the case of
a nonregulated utility or Federal power marketing
agency, the relevant service territory) may be re-
quired to use the appropriate meter and pay the rea-
sonable incremental costs for such meter and its in-
stallation.
‘‘(3) RATES.—Rates and charges for retail elec-
tric service to customer-generators, including the
amount of a net metering credit, shall be established
by the appropriate State regulatory authority and
nonpublic utilities. To the extent that a State regu-
latory authority, nonregulated utility, or Federal
power marketing agency does not establish such
rates and charges, such rates and charges shall be
established by the Commission. The rates and
charges established pursuant to this section shall be
just and reasonable and shall promote the purposes
of this section.
‘‘(4) SAFETY
AND
PERFORMANCE
STAND-
ARDS.—A qualified generation unit and net metering
system used by a customer-generator shall meet all
applicable safety and performance and reliability
standards established by the national electrical code,
the Institute of Electrical and Electronic Engineers,
Underwriters Laboratories, or the American Na-
tional Standards Institute, except that a State may
adopt additional or different standards provided that
such standard is consistent with the purposes of this
section and does not impose an unjust or unreason-
able burden on a customer-generator that seeks to
participate in the State’s net metering program.
‘‘(5) STATE AUTHORITY TO ESTABLISH ADDI-
TIONAL REQUIREMENTS.—Consistent with the limits
of its jurisdiction under this part, nothing in this
section shall preclude a State from establishing or
imposing—
‘‘(A) requirements or incentives to encour-
age qualified generation and net metering that
are in addition to or in excess of the minimum
standards established in this section (including
but not limited to additional eligible fuels, high-
er capacity limits, and credit amounts that vary
by fuel or capacity);
‘‘(B) limits on the State-wide aggregate
amount of generating capacity of customer-gen-
erators with qualified generation facilities and
net metering systems, provided that such limits
are not unduly discriminatory and are con-
sistent with the purposes of this section; or
‘‘(C) administrative and enforcement pro-
cedures and requirements such State deems
necessary or appropriate to implement a net
metering program under this section, if such
procedures and requirements are consistent
with the purposes of this section and does not
impose an unjust or unreasonable burden on a
customer-generator that seeks to participate in
the State’s net metering program.
‘‘(6) INTERCONNECTION
STANDARDS.—Retail
electric suppliers and customer-generators shall be
subject to Federal interconnection standards estab-
lished under section 210(e) of this Act (relating to
interconnection to distribution facilities).
‘‘(7) NOT A WHOLESALE SALE.—A net meter-
ing credit under a net metering program established
under this section shall not be considered a sale for
resale for the purposes of Federal or State law.’’.
SEC. 103. PRICE-RESPONSIVE DEMAND PROGRAMS.
(a) FINDING.—The Congress finds that price-respon-
sive demand mechanisms are necessary to enable customer
participation in wholesale energy markets, reduce loads,
improve reliability, expand customer options, and lower
costs when bulk energy prices are high.
(b) DEMAND RESPONSE PROGRAMS.—The Federal
Energy Regulatory Commission shall develop and imple-
ment price-responsive demand programs in consultation
with the States, regional transmission organizations, elec-
tric utilities, Federal power marketing agencies, and the
Secretary of Energy. Such programs shall be designed, to
the extent practicable, to meet a goal of reducing annual
peak demand by at least 5 percent relative to annual peak
demand in calendar year 2001. Such programs shall not
preempt or displace existing non-Federal price responsive
demand programs.
(c) SPECIFIC
REQUIREMENTS.—Programs imple-
mented under this section shall serve a variety of customer
groups and address removal of barriers in utility, market
and regulatory arenas that hamper demand-side pro-
grams, distributed generation, advanced metering, and
other relevant enabling technologies.
Subtitle B—Provisions Regarding
Public Utility Holding Act of 1935
SEC. 111. DEFINITIONS.
For purposes of this subtitle:
(1) The term ‘‘affiliate’’ of a company means
any company 5 percent or more of the outstanding
voting securities of which are owned, controlled, or
held with power to vote, directly or indirectly, by
such company.
(2) The term ‘‘associate company’’ of a com-
pany means any company in the same holding com-
pany system with such company.
(3) The term ‘‘Commission’’ means the Federal
Energy Regulatory Commission.
(4) The term ‘‘company’’ means a corporation,
partnership, association, joint stock company, busi-
ness trust, or any organized group of persons,
whether incorporated or not, or a receiver, trustee,
or other liquidating agent of any of the foregoing.
(5) The term ‘‘electric utility company’’ means
any company that owns or operates facilities used
for the generation, transmission, or distribution of
electric energy for sale.
(6) The terms ‘‘exempt wholesale generator’’
and ‘‘foreign utility company’’ have the same mean-
ings as in sections 32 and 33, respectively, of the
Public Utility Holding Company Act of 1935, as
those sections existed on the day before the effective
date of this subtitle.
(7) The term ‘‘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 or distribution
to tenants or employees of the company operating
such facilities for their own use and not for resale)
of natural or manufactured gas for heat, light, or
power.
(8) The term ‘‘holding company’’ means—
(A) any company that directly or indirectly
owns, controls, or holds, with power to vote, 10
percent or more of the outstanding voting secu-
rities of a public utility company or of a holding
company of any public utility company; and
(B) any person, determined by the Com-
mission, after notice and opportunity for hear-
ing, to exercise directly or indirectly (either
alone or pursuant to an arrangement or under-
standing with one or more persons) such a con-
trolling influence over the management or poli-
cies of any public utility company or holding
company as to make it necessary or appropriate
for the protection of utility customers with re-
spect to rates that such person be subject to the
obligations, duties, and liabilities imposed by
this subtitle upon holding companies.
(9) The term ‘‘holding company system’’ means
a holding company, together with its subsidiary com-
panies.
(10) The term ‘‘jurisdictional rates’’ means
rates established by the Commission for the trans-
mission of electric energy in interstate commerce,
the sale of electric energy at wholesale in interstate
commerce, the transportation of natural gas in inter-
state commerce, and the sale in interstate commerce
of natural gas for resale for ultimate public con-
sumption for domestic, commercial, industrial, or
any other use.
(11) The term ‘‘natural gas company’’ means a
person engaged in the transportation of natural gas
in interstate commerce or the sale of such gas in
interstate commerce for resale.
(12) The term ‘‘person’’ means an individual or
company.
(13) The term ‘‘public utility’’ means any per-
son who owns or operates facilities used for trans-
mission of electric energy in interstate commerce or
sales of electric energy at wholesale in interstate
commerce.
(14) The term ‘‘public utility company’’ means
an electric utility company or a gas utility company.
(15) The term ‘‘State commission’’ means any
commission, board, agency, or officer, by whatever
name designated, of a State, municipality, or other
political subdivision of a State that, under the laws
of such State, has jurisdiction to regulate public util-
ity companies.
(16) The term ‘‘subsidiary company’’ of a hold-
ing company means—
(A) any company, 10 percent or more of
the outstanding voting securities of which are
directly or indirectly owned, controlled, or held
with power to vote, by such holding company;
and
(B) any person, the management or poli-
cies of which the Commission, after notice and
opportunity for hearing, determines to be sub-
ject to a controlling influence, directly or indi-
rectly, by such holding company (either alone or
pursuant to an arrangement or understanding
with one or more other persons) so as to make
it necessary for the protection of utility cus-
tomers with respect to rates that such person
be subject to the obligations, duties, and liabil-
ities imposed by this subtitle upon subsidiary
companies of holding companies.
(17) The term ‘‘voting security’’ means any se-
curity presently entitling the owner or holder thereof
to vote in the direction or management of the affairs
of a company.
SEC. 112. REPEAL OF THE PUBLIC UTILITY HOLDING COM-
PANY ACT OF 1935.
The Public Utility Holding Company Act of 1935 (15
U.S.C. 79a and following) is repealed, effective 12 months
after the date of enactment of this Act.
SEC. 113. FEDERAL ACCESS TO BOOKS AND RECORDS.
(a) IN GENERAL.—Each holding company and each
associate company thereof shall maintain, and shall make
available to the Commission, such books, accounts, memo-
randa, and other records as the Commission determines
are necessary to identify costs incurred by a public utility
or natural gas company that is an associate company of
such holding company and necessary or appropriate for
the protection of utility customers with respect to jurisdic-
tional rates.
(b) AFFILIATE COMPANIES.—Each affiliate of a hold-
ing company or of any subsidiary company of a holding
company shall maintain, and make available to the Com-
mission, such books, accounts, memoranda, and other
records with respect to any transaction with another affil-
iate, as the Commission determines are necessary to iden-
tify costs incurred by a public utility or natural gas com-
pany that is an associate company of such holding com-
pany and necessary or appropriate for the protection of
utility customers with respect to jurisdictional rates.
(c) HOLDING COMPANY SYSTEMS.—The Commission
may examine the books, accounts, memoranda, and other
records of any company in a holding company system, or
any affiliate thereof, as the Commission determines are
necessary to identify costs incurred by a public utility or
natural gas company within such holding company system
and necessary or appropriate for the protection of utility
customers with respect to jurisdictional rates.
(d) CONFIDENTIALITY.—No member, officer, or em-
ployee of the Commission shall divulge any fact or infor-
mation that may come to his or her knowledge during the
course of examination of books, accounts, memoranda, or
other records as provided in this section, except as may
be directed by the Commission or by a court of competent
jurisdiction.
SEC. 114. STATE ACCESS TO BOOKS AND RECORDS.
(a) IN GENERAL.—Upon the written request of a
State commission having jurisdiction to regulate a public
utility company in a holding company system, and subject
to such terms and conditions as may be necessary and ap-
propriate to safeguard against unwarranted disclosure to
the public of any trade secrets or sensitive commercial in-
formation, a holding company or its associate company or
affiliate thereof, wherever located, shall produce for in-
spection books, accounts, memoranda, and other records
that—
(1) have been identified in reasonable detail in
a proceeding before the State commission;
(2) the State commission determines are nec-
essary to identify costs incurred by such public util-
ity company; and
(3) are necessary for the effective discharge of
the responsibilities of the State commission with re-
spect to such proceeding.
(b) EFFECT ON STATE LAW.—Nothing in this section
shall preempt applicable State law concerning the provi-
sion of books, accounts, memoranda, or other records, or
in any way limit the rights of any State to obtain books,
accounts, memoranda, or other records under Federal law,
contract, or otherwise.
(c) COURT JURISDICTION.—Any United States dis-
trict court located in the State in which the State commis-
sion referred to in subsection (a) is located shall have ju-
risdiction to enforce compliance with this section.
SEC. 115. EXEMPTION AUTHORITY.
(a) RULEMAKING.—Not later than 90 days after the
date of enactment of this Act, the Commission shall pro-
mulgate a final rule to exempt from the requirements of
section 113 any person that is a holding company, solely
with respect to one or more—
(1) qualifying facilities under the Public Utility
Regulatory Policies Act of 1978;
(2) exempt wholesale generators; or
(3) foreign utility companies.
(b) OTHER AUTHORITY.—If, upon application or
upon its own motion, the Commission finds that the books,
accounts, memoranda, and other records of any person are
not relevant to the jurisdictional rates of a public utility
company or natural gas company, or if the Commission
finds that any class of transactions is not relevant to the
jurisdictional rates of a public utility company, the Com-
mission shall exempt such person or transaction from the
requirements of section 113.
SEC. 116. AFFILIATE TRANSACTIONS.
Nothing in this subtitle shall preclude the Commis-
sion or a State commission from exercising its jurisdiction
under otherwise applicable law to determine whether a
public utility company, public utility, or natural gas com-
pany may recover in rates any costs of an activity per-
formed by an associate company, or any costs of goods
or services acquired by such public utility company, public
utility, or natural gas company from an associate com-
pany.
SEC. 117. APPLICABILITY.
No provision of this subtitle 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 op-
erating in the United States;
(4) any agency, authority, or instrumentality of
any entity referred to in paragraph (1), (2), or (3);
or
(5) any officer, agent, or employee of any entity
referred to in paragraph (1), (2), or (3) acting as
such in the course of such officer, agent, or employ-
ee’s official duty.
SEC. 118. EFFECT ON OTHER REGULATIONS.
Nothing in this subtitle precludes the Commission or
a State commission from exercising its jurisdiction under
otherwise applicable law to protect utility customers.
SEC. 119. 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. 825e–825p) to enforce the provisions of
this subtitle.
SEC. 120. SAVINGS PROVISIONS.
(a) IN GENERAL.—Nothing in this subtitle prohibits
a person from engaging in or continuing to engage in ac-
tivities or transactions in which it is legally engaged or
authorized to engage on the date of enactment of this Act,
if that person continues to comply with the terms of any
such authorization, whether by rule or by order.
(b) EFFECT ON OTHER COMMISSION AUTHORITY.—
Nothing in this subtitle limits the authority of the Com-
mission under the Federal Power Act (16 U.S.C. 791a and
following) (including section 301 of that Act) or the Nat-
ural Gas Act (15 U.S.C. 717 and following) (including sec-
tion 8 of that Act).
SEC. 121. IMPLEMENTATION.
Not later than 12 months after the date of enactment
of this Act, the Commission shall—
(1) promulgate such regulations as may be nec-
essary or appropriate to implement this subtitle; and
(2) submit to the Congress detailed rec-
ommendations on technical and conforming amend-
ments to Federal law necessary to carry out this
subtitle and the amendments made by this subtitle.
SEC. 122. TRANSFER OF RESOURCES.
All books and records that relate primarily to the
functions transferred to the Commission under this sub-
title shall be transferred from the Securities and Exchange
Commission to the Commission.
SEC. 123. EFFECTIVE DATE.
This subtitle shall take effect 12 months after the
date of enactment of this Act.
SEC. 124. CONFORMING AMENDMENT TO THE FEDERAL
POWER ACT.
Section 318 of the Federal Power Act (16 U.S.C.
825q) is repealed.
SEC. 125. EFFECT ON INVESTMENT COMPANY ACT REGULA-
TION.
(a) GRANDFATHER OF EXISTING HOLDINGS.—A per-
son that, on December 31, 2001—
(1) was an affiliate of a holding company, and
(2) held investment securities of one or more
companies engaged directly or indirectly in the elec-
tric or gas utility business, or other permitted busi-
ness activities for a registered holding company and
its subsidiaries,
shall not be treated as being an investment company under
section 3(a)(1)(C) of the Investment Company Act of
1940 (15 U.S.C. 80a–3(a)(1)(C)) on the basis of invest-
ing, reinvesting, owning, holding, or trading any invest-
ment securities issued by companies in which such person
held such investment securities as of such date.
(b) DEFINITIONS.—As used in subsection (a):
(1) HOLDING
COMPANY.—The term ‘‘holding
company’’ has the meaning provided in section
2(a)(7) of the Public Utilities Holding Company Act
of 1935 (15 U.S.C. 79b(a)(7)).
(2) AFFILIATE.—The term ‘‘affiliate’’ has the
meaning provided in section 2(a)(11) of such Act
(15 U.S.C. 79b(a)(11)).
(3) INVESTMENT SECURITIES.—The term ‘‘in-
vestment securities’’ has the meaning provided in
section 3(a)(2) of the Investment Company Act of
1940 (15 U.S.C. 80a–3(a)(2)).
Subtitle C—Provisions Regarding
Public Utility Regulatory Poli-
cies Act of 1978
SEC. 131. FINDINGS.
The Congress finds that—
(1) implementation of section 210 of the Public
Utility Regulatory Policies Act of 1978 (16 U.S.C.
824a–3) resulted in many consumers paying exces-
sive rates for electricity;
(2) the Energy Policy Act of 1992 gives non-
regulated producers of electricity additional access to
the wholesale electric market through transmission
access and exemption from the Public Utility Hold-
ing Company Act of 1935; and
(3) in light of the competitive wholesale electric
marketplace brought about by the Energy Policy Act
of 1992, section 210 of the Public Utility Regulatory
Policies Act of 1978 need no longer exist.
SEC. 132. PROSPECTIVE REPEAL.
(a) NEW CONTRACTS.—After the date of enactment
of this Act, no electric utility shall be required to enter
into a new contract or obligation to purchase or to sell
electric energy or capacity pursuant to section 210 of the
Public Utility Regulatory Policies Act of 1978.
(b) EXISTING RIGHTS
AND REMEDIES NOT AF-
FECTED.—Nothing in this section 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 deter-
mined to be a qualifying small power production facility
or a qualifying cogeneration facility under section 210 of
the Public Utility Regulatory Policies Act of 1978 pursu-
ant to any contract or obligation to purchase or to sell
electric energy or capacity in effect on January 6, 1999,
including the right to recover the costs of purchasing such
electric energy or capacity.
(c) INTERPRETATIONS AND ACTIONS TAKEN.—Noth-
ing in this Act may be deemed or construed as implying
congressional ratification of any interpretation of, or any
action taken pursuant to, the Public Utility Regulatory
Policies Act of 1978.
SEC. 133. RECOVERY OF COSTS.
In order to assure recovery by electric utilities pur-
chasing electric energy or capacity from a qualifying facil-
ity pursuant to any legally enforceable obligation entered
into or imposed pursuant to section 210 of the Public Util-
ity Regulatory Policies Act of 1978 prior to the date of
enactment of this Act of all costs associated with such pur-
chases, the Commission shall promulgate and enforce such
regulations as may be required to assure that no utility
shall be required directly 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).
SEC. 134. DEFINITIONS.
For purposes of this subtitle:
(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.
Subtitle D—Redundant Review of
Certain Matters
SEC. 141. REPEAL OF CERTAIN PROVISIONS OF FEDERAL
POWER ACT REGARDING DISPOSITION OF
PROPERTY, CONSOLIDATION, AND PURCHASE
OF SECURITIES.
Section 203 of the Federal Power Act (16 U.S.C.
824b) is repealed.
SEC. 142. ELIMINATION OF DUPLICATIVE ANTITRUST RE-
VIEW.
(a) IN GENERAL.—Section 105 of the Atomic Energy
Act of 1954 (42 U.S.C. 2135) is amended by striking sub-
section c. and inserting the following:
‘‘c. CONDITIONS.—
‘‘(1) IN GENERAL.—A condition for a grant of
a license imposed by the Commission under this sec-
tion in effect on the date of enactment of the Elec-
tric Supply and Transmission Act shall remain in ef-
fect until the condition is modified or removed by
the Commission.
‘‘(2) MODIFICATION.—If a person that is li-
censed to construct or operate a utilization or pro-
duction facility applies for reconsideration under this
section of a condition imposed in the person’s li-
cense, the Commission shall conduct a proceeding,
on an expedited basis, to determine whether the li-
cense condition—
‘‘(A) is necessary to ensure compliance
with subsection a.; or
‘‘(B) should be modified or removed.’’.
(b) SAVINGS PROVISION.—(1) Nothing in this section
or the amendments made by this section shall be construed
to modify, impair, or supersede the applicability of any
of the antitrust laws.
(2) As used in this subsection, the term ‘‘antitrust
laws’’ has the meaning given it in subsection (a) of the
first section of the Clayton Act (15 U.S.C. 12(a)), except
that such term includes the Act of June 19, 1936 (49
Stat. 1526; 15 U.S.C. 13 et seq.), commonly known as
the Robinson-Patman Act, and section 5 of the Federal
Trade Commission Act (15 U.S.C. 45) to the extent that
such section 5 applies to unfair methods of competition.
TITLE II—TRANSMISSION
OPERATION
SEC. 201. OPEN ACCESS FOR ALL TRANSMITTING UTILI-
TIES.
(a) OPEN ACCESS TRANSMISSION AUTHORITY.—Sec-
tion 206 of the Federal Power Act is amended by adding
the following new subsection after subsection (d):
‘‘(e) OPEN ACCESS TRANSMISSION SERVICES.—
‘‘(1) PUBLIC
UTILITIES.—Under section 205
and this section, the Commission may, by rule or
order, require public utilities to provide transmission
services on a not unduly discriminatory or pref-
erential basis, subject to section 212(h). This para-
graph applies to any rule or order promulgated by
the Commission before, on, or after the date of en-
actment of this subsection.
‘‘(2) TRANSMITTING UTILITIES.—(A) Subject to
section 212(h), the Commission may, by rule or
order, require transmitting utilities that are not pub-
lic utilities (other than the Federal power marketing
administrations, the Tennessee Valley Authority,
and utilities to which section 212(k) applies) to pro-
vide transmission services—
‘‘(i) at rates that are comparable to those
each such transmitting utility charges itself and
that are not unduly discriminatory or pref-
erential, and
‘‘(ii) on terms and conditions (not relating
to rates) that are comparable to those required
under paragraph (1) for transmission service
provided by public utilities.
In exercising its authority under this subparagraph,
the Commission may remand transmission rates to
a transmitting utility for review and revision where
necessary. The Commission may authorize recovery
of wholesale stranded costs, as defined by the Com-
mission, arising from any requirement to provide
transmission service under this paragraph.
‘‘(B)(i) Within 180 days after the date of en-
actment of this subsection, after notice and oppor-
tunity for comment, the Commission shall adopt
rules providing criteria and procedures to exempt
certain transmitting utilities from subparagraph (A).
The Commission shall exempt from subparagraph
(A) any transmitting utility that is a small electric
utility that does not own or operate any trans-
mission facilities that are part of the bulk-power sys-
tem, or that meets other criteria the Commission de-
termines to be in the public interest.
‘‘(ii) The procedures established by the Com-
mission shall permit exemptions, after notice and op-
portunity for comment, based on a letter application
containing a sworn statement, by a representative le-
gally authorized to bind the applicant, attesting to
the facts demonstrating that the applicant meets the
exemption standards. A good faith application for an
exemption shall be deemed granted unless, within 60
days of its receipt of such application, the Commis-
sion makes a determination that the applicant does
not meet the exemption criteria.
‘‘(iii) Upon complaint of any electric utility or
transmitting utility and after notice and opportunity
for comment, the Commission may revoke an exemp-
tion if it determines the transmitting utility does not
satisfy the exemption criteria. In determining wheth-
er a transmitting utility owns or operates trans-
mission facilities that are part of the bulk-power sys-
tem, the Commission shall consider any position
taken by an electric reliability organization in the re-
gion where the transmitting utility is located.
‘‘(iv) For purposes of this subparagraph, the
term ‘small electric utility’ means an electric utility
that sells no more than 4,000,000 megawatt hours
of electric energy per year; and the terms ‘bulk-
power system’, and ‘electric reliability organization’
have the meanings given such terms in section
218(a).
‘‘(3) 
CERTAIN
WHOLESALE
STRANDED
COSTS.—The Commission shall authorize recovery of
wholesale stranded costs of a public utility or trans-
mitting utility that occur when retail electric con-
sumers cease to be served by that public utility or
transmitting utility by reason of the establishment of
a local distribution company owned or operated by
a State or a political subdivision of a State serving
such consumers. In calculating such wholesale
stranded costs, the Commission shall use a reason-
able expectation period that is based on the weighted
average remaining useful life of generation assets
owned or power purchased under contract by the
public utility and included in wholesale or retail
rates in effect on July 9, 1996. This paragraph shall
apply to wholesale stranded cost determinations
made by the Commission before, on, or after the
date of enactment of this paragraph.’’.
(b) RETAIL WHEELING
IN RETAIL COMPETITION
STATES.—Section 212(h) of the Federal Power Act is
amended as follows:
(1) By inserting ‘‘(1)’’ before ‘‘No’’.
(2) By striking ‘‘(1)’’, ‘‘(2)’’, ‘‘(A)’’, and ‘‘(B)’’
and inserting in their places ‘‘(A)’’, ‘‘(B)’’, ‘‘(i)’’,
and ‘‘(ii)’’ respectively.
(3) By striking from redesignated paragraph
(1)(B)(ii) ‘‘the date of enactment of this subsection’’
and inserting ‘‘October 24, 1992,’’.
(4) By adding the following new paragraph at
the end:
‘‘(2) Notwithstanding paragraph (1), the Commission
may issue an order that requires the transmission of elec-
tric energy for purposes of a sale of such energy to retail
electric consumers served by local distribution facilities
that are subject to open access, consistent with State
law.’’.
(c) CONFORMING AMENDMENTS.—(1) Section 211(a)
of the Federal Power Act is amended by striking ‘‘for re-
sale’’.
(2) Section 212(a) of the Federal Power Act is
amended by striking ‘‘wholesale’’ each time it appears, ex-
cept the last time.
(d) FOREIGN COMMERCE.—(1) Section 201(c) of the
Federal Power Act (16 U.S.C. 824(c)) is amended by
striking ‘‘thereof:’’ and inserting ‘‘thereof (including con-
sumption in a foreign country),’’.
(2) Section 202(f) of the Federal Power Act is re-
pealed.
SEC. 202. REGIONAL TRANSMISSION ORGANIZATIONS.
Section 202 of the Federal Power Act (16 U.S.C.
824a) is amended by adding the following new subsection
after subsection (g):
‘‘(h) REGIONAL TRANSMISSION ORGANIZATIONS.—
‘‘(1) DUTY TO PARTICIPATE.—The Commission
is authorized and directed to order each transmitting
utility to participate in a fully operational regional
transmission organization not later than 12 months
after enactment of this subsection, subject to the
procedures and minimum standards established
under this subsection. Each transmitting utility that
is not a member of a fully operational regional
transmission organization (hereinafter in this sub-
section referred to as an ‘RTO’) approved by the
Commission (pursuant to the Commission’s Order
No. 2000) on the date of the enactment of this sub-
section shall file with the Commission, within 3
months after such date of enactment, an application
to form or join an RTO. If a transmitting utility
fails to meet this deadline, the Commission, in con-
sultation with affected State regulatory authorities,
is authorized and directed to order such transmit-
ting utility to form or participate in an RTO that
meets the standards set forth in paragraph (6) not
later than 9 months after the deadline. The Commis-
sion shall approve an application submitted under
this subsection if the Commission determines that
the RTO, including any independent transmission
company, proposed in the application meets the min-
imum standards set forth in paragraph (6). If the
Commission finds that the RTO proposed in an ap-
plication does not meet such standards, the Commis-
sion, in consultation with affected State regulatory
authorities, shall propose such modifications or con-
ditions to the application as the Commission deems
necessary for the proposal to meet the minimum
standards. The Commission shall have no authority
to mandate (whether directly or as a condition of re-
ceiving or retaining any other regulatory approval)
the establishment of, participation in, or modifica-
tion to an RTO except as provided in this section.
‘‘(2) EVIDENTIARY HEARING.—At the request
of an applicant, the Commission shall hold an evi-
dentiary hearing to determine whether the modifica-
tions or conditions the Commission would impose on
the applicant are necessary to meet the minimum
standards set forth in paragraph (6). A hearing held
pursuant to this section shall be subject to the pro-
cedural requirements of the Federal Power Act, in-
cluding the requirements of section 308 providing
for interventions by interested parties.
‘‘(3) JUDICIAL
REVIEW.—The applicant shall
have a right of review in the United States Court of
Appeals for the District of Columbia of an order im-
posing modifications or conditions on an application
to form or join an RTO. If the applicant petitions
the court for review, the RTO proceeding shall be
stayed until such time as the reviewing court renders
its decision. In establishing its docket, the Court
shall expedite the review of petitions brought under
this paragraph. If the reviewing court finds, after
considering the evidentiary record as a whole, that
the Commission’s decision is supported by a prepon-
derance of the evidence, the court shall uphold the
Commission’s decision. If the reviewing court finds,
after considering the evidentiary record as a whole,
that the Commission’s decision is not supported by
a preponderance of the evidence, the Commission
shall order the applicant to participate in the RTO
proposed by the applicant pursuant to paragraph
(1), without modification.
‘‘(4) UNIFORM
MARKET
RULES.—The term
‘market rules’ means rules establishing commercial
procedures relating to the provision of transmission
services. The Commission is authorized and directed,
subject to the limitations on its authority under this
subsection, to ensure uniform market rules (includ-
ing establishment and enforcement of appropriate
seams agreements) such as are necessary and appro-
priate to achieve the policy objectives of the Com-
mission’s Order No. 2000. Nothing in this sub-
section shall interfere with the Commission’s author-
ity to ensure uniform market rules through its re-
view of rates, terms and conditions under sections
205 and 206 of this Act. Such rules shall not have
the effect of requiring a transmitting utility to par-
ticipate in a different RTO or modifying the scope,
configuration, or governance structure of an RTO
deemed to meet the standards of paragraph (6). To
implement the requirements of this paragraph, the
Commission shall issue a proposed rule within 3
months after the enactment of this section.
‘‘(5) DIVESTITURE.—Nothing in this Act or
any other Act shall give the Commission authority to
order the divestiture of transmission facilities by any
transmitting utility to a regional transmission orga-
nization.
‘‘(6) STANDARDS
FOR
RTOS.—The standards
for regional transmission organizations are as fol-
lows:
‘‘(A) INDEPENDENCE.—The RTO must be
independent of any market participant, pursu-
ant to rules established by the Commission. The
RTO must include, as part of its demonstration
of independence, a demonstration that it meets
the following:
‘‘(i) The RTO, its employees, and any
nonstakeholder directors must not have fi-
nancial interests in any market partici-
pant.
‘‘(ii) The RTO must have a decision
making process that is independent of con-
trol by any market participant or class of
participants.
‘‘(iii) The RTO must have exclusive
and independent authority under section
205 of this Act to propose rates, terms and
conditions of transmission service provided
over the facilities it operates. In the case
of an RTO that does not own trans-
mission, the transmission owners retain
authority under section 206 to seek recov-
ery from the RTO of the revenue require-
ments associated with the transmission fa-
cilities that they own.
‘‘(B) SCOPE
AND
CONFIGURATION.—The
RTO must serve an appropriate region. The re-
gion must be of sufficient scope and configura-
tion to permit the RTO to maintain reliability,
effectively perform its required functions, and
support efficient and nondiscriminatory power
markets, except that the RTO shall be deemed
to satisfy the requirements of this subpara-
graph if it is structured so that all loads within
the boundaries of the RTO shall take service
under the RTO’s tariff and it complies with ei-
ther the cost and benefit test set forth in clause
(i) or the generation sufficiency test set forth in
clause (ii), respectively, of this paragraph.
‘‘(i) COST AND BENEFIT TEST.—The
proposed RTO complies with the cost and
benefit test if the expected benefits of the
proposed scope and configuration of the
RTO exceed the expected costs of imple-
menting the RTO. The application shall in-
clude a cost and benefit analysis address-
ing the following factors:
‘‘(I) efficient operation of whole-
sale markets;
‘‘(II) effects on retail electricity
rates in each of the affected States;
‘‘(III) effects on attraction of in-
vestment capital to fund new trans-
mission 
capacity 
needed 
for 
the
RTO’s efficient operation;
‘‘(IV) costs previously incurred
by RTO applicants in developing
RTOs conditionally approved by the
Commission prior to enactment of this
Act; and
‘‘(V) other costs and benefits re-
lated to RTO formation and participa-
tion.
The applicant’s cost and benefit analysis
shall be presumed to be sufficient to meet
the requirements of this clause unless the
Commission affirmatively finds by a pre-
ponderance of the evidence that the pro-
posed scope and configuration does not
meet such requirements.
(ii) 
GENERATION
SUFFICIENCY
TEST.—The proposed RTO complies with
the generation sufficiency test if the RTO
satisfies each of the following require-
ments:
‘‘(I) The RTO has sufficient gen-
eration within the RTO’s boundaries
to serve the load within such bound-
aries.
‘‘(II) The RTO is able to manage
a substantial portion of all congestion
of transmission facilities within its
boundaries through market mecha-
nisms without assistance from sur-
rounding RTOs.
‘‘(III) The RTO owns or has
operational control over transmission
facilities that serve at least 50,000
Megawatts of load.
‘‘(C) OPERATIONAL AUTHORITY.—The re-
gional transmission organization shall have
operational authority for all transmission facili-
ties under its control.
‘‘(D) RELIABILITY.—The regional trans-
mission organization shall have the exclusive
authority for maintaining the short-term reli-
ability of the grid it operates.
‘‘(E) TRANSMISSION
SERVICE.—The re-
gional transmission organization shall be the
sole provider of transmission service and the
sole administrator of a tariff for all facilities
under its control, provided that nothing in this
subsection shall preclude a public utility from
filing with the Commission original or amended
rates concerning transmission service on such
utility’s facilities.
‘‘(F) CONGESTION
MANAGEMENT.—The
regional transmission organization shall agree
to develop and maintain market mechanisms to
manage congestion.
‘‘(G) PARALLEL
PATH
FLOW.—The re-
gional transmission organization shall agree to
develop and implement procedures to address
parallel path flows.
‘‘(H) OASIS, ATC AND TTC.—The regional
transmission organization shall operate a single
Open Access Same Time Information System
(OASIS) (as defined by the Commission) for all
transmission facilities under its control, and
shall calculate total transmission capacity
(TTC) and available transmission capacity
(ATC).
‘‘(I) ANCILLARY SERVICES.—The regional
transmission organization must serve as a sup-
plier of last resort for each of the following an-
cillary services:
‘‘(i) Scheduling, System Control, and
Dispatching Services; and
‘‘(ii) Reactive Supply and Voltage
Control from Generation Services. For
purposes of this subparagraph, the terms
‘Scheduling, System Control, and Dis-
patching Services’ and ‘Reactive Supply
and Voltage Control from Generation Serv-
ices’ shall be defined by the Commission.
‘‘(J) MARKET
MONITORING.—The RTO
shall have a market monitoring unit responsible
for monitoring the regional transmission organi-
zation’s performance, compliance with its Com-
mission-approved tariff and submission of mar-
ket data to the Commission for review. The
market monitoring unit shall provide market
participants the opportunity to address any
findings and recommendations.
‘‘(K) PLANNING
AND
EXPANSION.—The
regional transmission organization shall develop
plans for enhancement and expansion of trans-
mission facilities within its area necessary to
serve expected needs. The regional transmission
organization also shall have the authority to re-
view and approve all interconnections to the
transmission system to ensure that such inter-
connections do not threaten the reliability of the
transmission system under the operational con-
trol of the regional transmission organization
and are not determined in a discriminatory
manner.
‘‘(L) COORDINATION.—The regional trans-
mission organization shall have in place provi-
sions for inter-regional coordination, including
seams arrangements with neighboring regional
transmission organizations.
‘‘(6) EXISTING RTOS.—The Commission shall
have no authority under this Act or any other law
to require a modification in the scope, configuration,
corporate structure, governance structure or other
structural element of an RTO finally approved with-
out condition by the Commission (pursuant to the
Commission’s Order No. 2000) before the date of
enactment of this subsection. This paragraph shall
not be construed to limit the Commission’s authority
to ensure uniform market rules under paragraph
(3).
‘‘(7) SUBSEQUENT MODIFICATION OF RTOS AP-
PROVED UNDER THIS SECTION.—If, after final ap-
proval of an RTO under this section, the Commis-
sion finds that the public interest requires a modi-
fication to such RTO, the Commission shall propose
such modification. Such modification shall then be
deemed a modification or condition to that RTO’s
approved application within the meaning of sub-
section (a) of this section and the Commission shall
have authority to mandate such modification only
subject to all procedures and standards of this sec-
tion.
‘‘(8) STATE
AUTHORITY
NOT
AFFECTED.—
Nothing in this section limits the authority of a
State to address transmission facility maintenance,
planning, siting, and other utility functions in a
manner consistent with this Act or Commission ac-
tion under this Act. This subsection shall not apply
to any transmitting utility referred to in section
212(k)(2)(B).’’.
TITLE III—TRANSMISSION
RELIABILITY
SEC. 301. ELECTRIC RELIABILITY.
Part II of the Federal Power Act (16 U.S.C. 824 et
seq.) is amended by inserting the following after section
215 as added by this Act:
‘‘SEC. 216. ELECTRIC RELIABILITY.
‘‘(a) DEFINITIONS.—For purposes of this section—
‘‘(1) ‘bulk-power system’ means the network of
interconnected transmission facilities and generating
facilities;
‘‘(2) ‘electric reliability organization’ means a
self-regulating organization certified by the Commis-
sion under subsection (c) whose purpose is to pro-
mote the reliability of the bulk power system; and
‘‘(3) ‘reliability standard’ means a requirement
to provide for reliable operation of the bulk power
system approved by the Commission under this sec-
tion.
‘‘(b) JURISDICTION AND APPLICABILITY.—The Com-
mission shall have jurisdiction, within the United States,
over an electric reliability organization, any regional enti-
ties, and all users, owners and operators of the bulk power
system, including but not limited to the entities described
in section 201(f), for purposes of approving reliability
standards and enforcing compliance with this section. All
users, owners and operators of the bulk-power system
shall comply with reliability standards that take effect
under this section.
‘‘(c) CERTIFICATION.—
‘‘(1) The Commission shall issue a final rule to
implement the requirements of this section not later
than 180 days after enactment of this section.
‘‘(2) Following the issuance of a Commission
rule under paragraph (1), any person may submit an
application to the Commission for certification as an
electric reliability organization. The Commission
may certify an applicant if the Commission deter-
mines that the applicant—
‘‘(A) has the ability to develop, implement,
and enforce reliability standards that provide
for an adequate level of reliability of the bulk-
power system;
‘‘(B) has established rules that—
‘‘(i) assure its independence of the
users and owners and operators of the bulk
power system; while assuring fair stake-
holder representation in the selection of its
directors and balanced decision-making in
any committee or subordinate organiza-
tional structure;
‘‘(ii) allocate equitably dues, fees, and
other charges among end users;
‘‘(iii) provide fair and impartial proce-
dures for enforcement of reliability stand-
ards through imposition of penalties (in-
cluding limitations on activities, functions,
or operations; or other appropriate sanc-
tions); and
‘‘(iv) provide for reasonable notice and
opportunity for public comment, due proc-
ess, openness, and balance of interests in
developing reliability standards and other-
wise exercising its duties.
‘‘(4) If the Commission receives two or more
timely applications that satisfy the requirements of
this subsection, the Commission shall approve only
the application it concludes will best implement the
provisions of this section.
‘‘(d) RELIABILITY STANDARDS.—
‘‘(1) An electric reliability organization shall file
a proposed reliability standard or modification to a
reliability standard with the Commission.
‘‘(2) The Commission may approve a proposed
reliability standard if it determines that the stand-
ard is just, reasonable, not unduly discriminatory or
preferential, and in the public interest. The Commis-
sion shall give due weight to the technical expertise
of the electric reliability organization with respect to
the content of a proposed standard, but shall not
defer with respect to its effect on competition.
‘‘(3) The electric reliability organization and the
Commission shall rebuttably presume that a pro-
posal from a regional entity for a reliability standard
to be applicable on an Interconnection-wide basis is
just, reasonable, not unduly discriminatory or pref-
erential and in the public interest.
‘‘(4) The Commission shall remand to the elec-
tric reliability organization for further consideration
a proposed reliability standard that the Commission
disapproves in whole or in part.
‘‘(5) The Commission, upon its own motion or
upon complaint, may order an electric reliability or-
ganization to submit to the Commission a proposed
reliability standard or a modification to a reliability
standard that addresses a specific matter if the
Commission considers such a new or modified reli-
ability standard appropriate to carry out this sec-
tion.
‘‘(e) ENFORCEMENT.—
‘‘(1) An electric reliability organization may im-
pose a penalty on a user or owner or operator of the
bulk power system if the electric reliability organiza-
tion, after notice and an opportunity for a hearing—
‘‘(A) finds that the user or owner or oper-
ator of the bulk power system has violated a re-
liability standard approved by the Commission
under subsection (d); and
‘‘(B) filed notice with the Commission,
which shall affirm, set aside or modify the ac-
tion.
‘‘(2) On its own motion or upon complaint, the
Commission may order compliance with a reliability
standard and may impose a penalty against a user
or owner or operator of the bulk power system, if
the Commission finds, after notice and opportunity
for a hearing, that the user or owner or operator of
the bulk power system has violated or threatens to
violate a reliability standard.
‘‘(3) The Commission shall establish regulations
authorizing the electric reliability organization to
enter into an agreement to delegate authority to a
regional entity for the purpose of enforcing reli-
ability standards if the agreement satisfies applica-
ble provisions of this section and promotes effective
and efficient administration of bulk power system re-
liability, and may modify such delegation. The Com-
mission shall rebuttably presume that a proposal for
delegation to a regional entity organized on an inter-
connection-wide basis promotes effective and effi-
cient administration of bulk power system reliability.
Such regulation may provide that the Commission
may assign the electric reliability organization’s au-
thority to enforce reliability standards directly to a
regional entity consistent with the requirements of
this paragraph.
‘‘(4) The Commission may take such action as
is necessary or appropriate against the electric reli-
ability organization or regional entity to ensure com-
pliance with a reliability standard or any Commis-
sion order affecting the electric reliability organiza-
tion or regional entity.
‘‘(f) CHANGES IN ELECTRICITY RELIABILITY ORGA-
NIZATION RULES.—An electric reliability organization
shall file with the Commission for approval any proposed
rule or proposed rule change, accompanied by an expla-
nation of its basis and purpose. The Commission, upon
its own motion or upon complaint, may propose a change
to the rules of the electric reliability organization. A pro-
posed rule or proposed rule change shall take effect upon
a finding by the Commission, after notice and opportunity
for comment, that the change is just, reasonable, not un-
duly discriminatory or preferential, is in the public inter-
est, and satisfies the requirements of subsection (c)(2).
‘‘(g) COORDINATION WITH CANADA AND MEXICO.—
‘‘(1) The electric reliability organization shall
take all appropriate steps to gain recognition in
Canada and Mexico.
‘‘(2) The President shall use his best efforts to
enter into international agreements with the govern-
ments of Canada and Mexico to provide for effective
compliance with reliability standards and the effec-
tiveness of the electric reliability organization in the
United States and Canada or Mexico.
‘‘(h) RELIABILITY REPORTS.—The electric reliability
organization shall conduct periodic assessments of the reli-
ability and adequacy of the interconnected bulk-power sys-
tem in North America.
‘‘(i) SAVINGS PROVISIONS.—(1) The electric reli-
ability organization shall have authority to develop and en-
force compliance with standards for the reliable operation
of only the bulk-power system.
‘‘(2) This section does not provide the electric reli-
ability organization or the Commission with the authority
to order the construction of additional generation or trans-
mission capacity or to set and enforce compliance with
standards for adequacy or safety of electric facilities or
services.
‘‘(3) Nothing in this section shall be construed to pre-
empt any authority of any State to take action to ensure
the safety, adequacy, and reliability of electric service
within that State, as long as such action is not incon-
sistent with any organization standard.
‘‘(4) Within 90 days of the application of the electric
reliability organization or other affected party, and after
notice and opportunity for comment, the Commission shall
issue a final order determining whether a state action is
inconsistent with an organization standard, taking into
consideration any recommendations of the electric reli-
ability organization.
‘‘(5) The Commission, after consultation with the
electric reliability organization, may stay the effectiveness
of any state action, pending the Commission’s issuance of
a final order.
‘‘(j) APPLICATION OF ANTITRUST LAWS.—
‘‘(1) IN GENERAL.—To the extent undertaken
to develop, implement, or enforce a reliability stand-
ard, each of the following activities shall not, in any
action under the antitrust laws, be deemed illegal
per se:
‘‘(A) activities undertaken by an electric
reliability organization under this section, and
‘‘(B) activities of a user or owner or oper-
ator of the bulk power system undertaken in
good faith under the rules of an electric reli-
ability organization.
‘‘(2) RULE OF REASON.—In any action under
the antitrust laws, an activity described in para-
graph (1) shall be judged on the basis of its reason-
ableness, taking into account all relevant factors af-
fecting competition and reliability.
‘‘(3) DEFINITION.—For purposes of this sub-
section, ‘antitrust laws’ has the meaning given the
term in subsection (a) of the first section of the
Clayton Act (15 U.S.C. 12(a)), except that it in-
cludes section 5 of the Federal Trade Commission
Act (15 U.S.C. 45) to the extent that section 5 ap-
plies to unfair methods of competition.’’.
TITLE IV—TRANSMISSION
INFRASTRUCTURE
SEC. 401. SUSTAINABLE TRANSMISSION NETWORKS RULE-
MAKING.
Part II of the Federal Power Act is amended by add-
ing the following new section after section 215, as added
by this Act:
‘‘SEC. 216. SUSTAINABLE TRANSMISSION NETWORKS RULE-
MAKING.
‘‘(a) RULEMAKING REQUIREMENT.—Within 1 year
after the enactment of this section, the Commission shall
establish, by rule, transmission pricing policies and stand-
ards for promoting the expansion and improvement of
interstate transmission networks through incentive-based
and performance-based rate treatments and other means
the Commission deems necessary or appropriate to ensure
reliability of the electric system, to support interstate
wholesale markets for electric power, and expand trans-
mission capacity needed to sustain the growth of wholesale
competition. Policies and standards established under this
section shall specifically—
‘‘(1) promote economically efficient enlargement
of transmission networks, including the provision of
proper price signals so that new generation and
transmission is built where it provides the lowest
overall cost to consumers;
‘‘(2) ensure consistency of gas pipeline pricing
and transmission pricing so as to ensure the proper
economic signals for generation location, use of al-
ternative energy sources, and for development of dis-
tributed generation;
‘‘(3) encourage deployment of transmission
technologies to increase capacity of existing net-
works, including but not limited to high-capacity
wires, conductor and phase improvements, power
electronics and information technologies, and high
voltage direct current lines;
‘‘(4) encourage deployment of transmission
technologies to reduce line losses;
‘‘(5) provide a return on equity that causes
needed investment in transmission facilities to be
made and reasonably reflects the risks associated
with changes in regulatory or economic cir-
cumstances, including the financial, operational and
other risks of turning facilities over to a regional
transmission organization;
‘‘(6) promote the voluntary participation in and
formation of regional transmission organizations;
‘‘(7) reduce congestion on transmission net-
works;
‘‘(8) allow for accelerated depreciation for
transmission equipment and facilities;
‘‘(9) provide for innovative capital structures;
‘‘(10) promote the implementation of environ-
mentally sound and other low-impact transmission
design techniques and facilities;
‘‘(11) promote the efficient use of transmission
systems on a real-time basis, and
‘‘(12) improve the reliability and security of
transmission networks.
‘‘(b) LIMITATION ON THE AUTHORITY OF THIS SEC-
TION.—In the case of any transmission rate approved by
the Commission on or after the effective date of the rule
established under this section, the rate shall comply
with—
‘‘(1) the policies and standards adopted pursu-
ant to this section; and
‘‘(2) the procedural and other requirements of
this part, including the requirement of sections 205
and 206, that all rates, charges, terms and condi-
tions be just and reasonable and not unduly dis-
criminatory.
‘‘(c) REPORT.—Within 1 year of the issuance of the
rule under this section, the Commission shall submit to
Congress a report on all transmission pricing policies and
standards adopted by the Commission to encourage the
economic use and expansion of the transmission network
through incentive rates or other similar market-oriented
approaches consistent with subsection (a) of this section.
‘‘(d) ANNUAL REPORTS.—Beginning 1 year from en-
actment of this Act, the Commission shall submit annually
a report to the Congress assessing the level of trans-
mission investment in the preceding year and an assess-
ment of the level and sufficiency of the Commission’s al-
lowed financial returns and other transmission pricing
policies promoting economically efficient transmission in-
vestment by electric utilities.’’.
SEC. 402. TRANSMISSION SITING.
Part II of the Federal Power Act (16 U.S.C. 824 et
seq.) is amended by inserting the following new section
after section 216, as added by this Act:
‘‘SEC. 217. FEDERAL TRANSMISSION SITING AUTHORITY.
‘‘(a) CONSTRUCTION
PERMIT.—The Commission
shall approve, after notice and opportunity for hearing, a
request of an entity for a permit to construct or modify
transmission facilities if it makes each of the following
findings:
‘‘(1) A finding that—
‘‘(A) the State in which the transmission
facilities are to be constructed or modified is
without authority to approve the siting of the
facilities, or
‘‘(B) a State commission or body in the
State in which the transmission facilities are to
be constructed or modified that has authority to
approve the siting of the facilities has withheld
approval, conditioned its approval in such a
manner that the proposed construction or modi-
fication is not economically feasible, or delayed
final approval for more than one year after the
filing of an application seeking approval.
‘‘(2) A finding that the facilities to be author-
ized by the permit will be used for the transmission
of electric energy in interstate commerce.
‘‘(3) A finding that the proposed construction
or modification is consistent with the public interest.
The Commission may include in a permit issued under this
section conditions consistent with the public interest.
‘‘(b) PERMIT APPLICATIONS.—Permit applications
under subsection (a) shall be made in writing to the Com-
mission and verified under oath. The Commission shall
issue rules setting forth the form of the application, the
information it is to contain, and the manner of service of
notice of the permit application upon interested persons.
‘‘(c) COMMENTS.—In any proceeding before the Com-
mission under subsection (a), 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, and other interested persons, a reason-
able opportunity to present their views and recommenda-
tions with respect to the need for and impact of a facility
covered by the permit.
‘‘(d) RIGHTS-OF-WAY.—If a holder of a permit issued
by the Commission pursuant to subsection (a) cannot ac-
quire by contract, or is unable to agree with the owner
of the property to the compensation to be paid for, the
necessary right-of-way to construct, operate, and maintain
the transmission facility that is the subject of the permit,
it 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 property to be subject
of the right-of-way is located, or in the appropriate court
of the State in which the property is located. The practice
and procedure in any action or proceeding for that pur-
pose in the district court of the United States shall con-
form as nearly as practicable with the practice and proce-
dure in similar action or proceeding in the courts of the
State where the property is situated.
‘‘(e) COST RECOVERY.—All just and reasonable costs
for the construction, operation, and maintenance of trans-
mission facilities developed through a permit issued under
subsection (a) shall be recoverable in rates for trans-
mission services associated with these facilities.
‘‘(f) STATE LAW.—Nothing in this section shall pre-
clude any person from constructing any transmission fa-
cilities pursuant to State law.
‘‘(g) COMPLIANCE WITH OTHER LAWS.—Commis-
sion action under this section shall be subject to the Na-
tional Environmental Policy Act of 1969 (42 U.S.C. 4321
et seq.) and all other applicable Federal laws.’’.
TITLE V—FEDERAL UTILITIES
Subtitle A—Tennessee Valley
Authority
SEC. 501. DEFINITIONS.
For purposes of this subtitle:
(1) The term ‘‘Commission’’ means the Federal
Energy Regulatory Commission.
(2) The term ‘‘distributor’’ means a cooperative
organization, municipal or other publicly owned elec-
tric power system which on December 31, 1997,
purchased all or substantially all of its wholesale
power requirements from the Tennessee Valley Au-
thority pursuant to a long-term power sales agree-
ment.
(3) The term ‘‘distributor service area’’ means
the geographic area within which a distributor is au-
thorized by State law to sell electric power to retail
electric consumers.
(4) The term ‘‘electric utility’’ has the same
meaning as provided by section 3(22) of the Federal
Power Act (16 U.S.C. 796(22)).
(5) The term ‘‘excess electric power’’ means
that portion of the electric power and capacity that
is available to the Tennessee Valley Authority and
which exceeds the Tennessee Valley Authority’s
power supply obligations to—
(A) distributors; and
(B) those Tennessee Valley Authority re-
tail electric consumers (or predecessor in inter-
est) that had a contract for the purchase of
electric power from the Tennessee Valley Au-
thority on the date of enactment of this Act.
(6) The term ‘‘public utility’’ has the same
meaning as provided by section 201(e) of the Fed-
eral Power Act (16 U.S.C. 824(e)(1)).
(7) The term ‘‘retail electric consumer’’ has the
same meaning as provided by section 3 of the Fed-
eral Power Act (16 U.S.C. 796).
(8) The term ‘‘Tennessee Valley Region’’ means
the geographic area in which the Tennessee Valley
Authority or its distributors were the primary source
of electric power on December 31, 1997.
SEC. 502. WHOLESALE COMPETITION IN THE TENNESSEE
VALLEY REGION.
(a) AMENDMENTS TO THE FEDERAL POWER ACT.—
(1) Section 212(f) of the Federal Power Act (16 U.S.C.
824k(f)), relating to interconnection or wheeling orders
that result in the sale or delivery of electric power outside
the Tennessee Valley Region, is repealed.
(2) Section 212(j) of the Federal Power Act (16
U.S.C. 824k(j)), relating to transmission within the Ten-
nessee Valley Region, is repealed.
(b) AMENDMENTS TO THE TENNESSEE VALLEY AU-
THORITY ACT.—(1) The third sentence of the first para-
graph of section 15d(a) of the Tennessee Valley Authority
Act of 1933 (16 U.S.C. 831n–4(a)), limiting the sale or
delivery of electric power outside the area for which the
Tennessee Valley Authority or its distributors were the
primary source of electric power on July 1, 1957, is re-
pealed.
(2) The second and third paragraphs of section
15d(a) of the Tennessee Valley Authority Act of 1933 (16
U.S.C. 831n–4(a)) are repealed.
SEC. 503. TENNESSEE VALLEY AUTHORITY POWER SALES.
(a) LIMIT ON RETAIL SALES BY TENNESSEE VALLEY
AUTHORITY.—Notwithstanding sections 10, 11, and 12 of
the Tennessee Valley Authority Act of 1933 (16 U.S.C.
831i), the Tennessee Valley Authority shall not sell elec-
tric power at retail, except it may sell electric power to—
(1) a retail electric consumer (or predecessor in
interest) that had a contract for the purchase of
electric power from the Tennessee Valley Authority
on the date of enactment of this Act; or
(2) a retail electric consumer who consumes
that electric power within a distributor service area,
if the applicable regulatory authority (other than the
Tennessee Valley Authority) permits any other
power supplier to sell electric power to such retail
electric consumer.
(3) CONSTRUCTION OF RETAIL ELECTRIC SERV-
ICE FACILITIES.—No person shall construct or mod-
ify facilities in the service area of a distributor for
the purpose of serving a retail electric consumer
within the distributor service area without the con-
sent of such distributor, except when such electric
consumer is already being served by such person.
(b) WHOLESALE POWER SALES.—
(1) EXISTING SALES.—Nothing in this subtitle
shall be construed to modify or alter the existing ob-
ligations of the Tennessee Valley Authority under
the first sentence of section 10 of the Tennessee
Valley Authority Act of 1933 (16 U.S.C. 831i) to
sell power to a distributor, except that, with respect
to a distributor which—
(A) has made a prior election under sec-
tion 505(b); and
(B) requests to increase its power pur-
chases from the Tennessee Valley Authority,
this paragraph shall not apply to access by that dis-
tributor to power being supplied by the Tennessee
Valley Authority to another entity under an existing
contract with a term of 1 year or longer.
(2) SALES OF EXCESS ELECTRIC POWER.—Not-
withstanding sections 10, 11, and 12, or any other
provision of the Tennessee Valley Authority Act of
1933 (16 U.S.C. 831 et seq.), the sale of electric
power at wholesale by the Tennessee Valley Author-
ity for use outside the Tennessee Valley Region shall
be limited to excess electric power. The Tennessee
Valley Authority shall not offer excess electric power
under a firm power agreement with a term of 3
years or longer to a new wholesale customer at
rates, terms, and conditions more favorable than
those offered to any distributor for comparable elec-
tric power, taking into account such factors as the
amount of electric power sold, the firmness of such
power, and the length of the contract term, unless
the distributor or distributors that are purchasing
electric power under equivalent firm power contracts
agree to the sale to the new customer. Nothing in
this subsection shall prevent the Tennessee Valley
Authority from making exchange power arrange-
ments with other electric utilities when economically
feasible.
(d) APPLICATION OF TENNESSEE VALLEY AUTHOR-
ITY ACT TO SALES OUTSIDE TENNESSEE VALLEY RE-
GION.—The third proviso of section 10 of the Tennessee
Valley Authority Act of 1933 (16 U.S.C. 831i) and the
second and third provisos of section 12 of the Tennessee
Valley Authority Act of 1933 (16 U.S.C. 831k) shall not
apply to any sale of excess electric power by the Tennessee
Valley Authority for use outside the Tennessee Valley Re-
gion.
SEC. 504. TENNESSEE VALLEY AUTHORITY ELECTRIC GEN-
ERATION FACILITIES.
(a) GENERATION FACILITIES.—Section 15d(a) of the
Tennessee Valley Authority Act of 1933 (16 U.S.C. 831n–
4(a)) is amended by striking the period at the end of the
second sentence and inserting the following: ‘‘, if the Cor-
poration determines that the construction, acquisition, en-
largement, improvement, or replacement of any plant or
facility used or to be used for the generation of electric
power is necessary to supply the demands of distributors
(as defined in section 501 of the Electric Supply and
Transmission Act) and, to the extent permitted by section
503(a) of such Act, retail electric consumers of the Cor-
poration.’’.
(b) DISCLOSURE OF INFORMATION.—Commencing on
the date of enactment of this Act, the Tennessee Valley
Authority shall provide distributors and their duly author-
ized representatives on a confidential basis detailed infor-
mation on its projections and plans regarding the potential
acquisition of new electric generating facilities and shall
provide distributors an opportunity to provide comment,
not less than 45 days prior to a decision by the Tennessee
Valley Authority to make such an acquisition. Any law to
the contrary notwithstanding, such confidential informa-
tion shall not be disclosed by distributor to sources other
than the Tennessee Valley Authority, except—
(1) in response to process validly issued by any
court or governmental agency having jurisdiction
thereof;
(2) to any officer, agent, employee, or duly au-
thorized representative of distributor who has agreed
to the same confidentiality and nondisclosure obliga-
tion applicable to distributor;
(3) in any judicial or administrative proceeding
initiated by distributor contesting action by the Ten-
nessee Valley Authority to cause the construction of
new electric generation facilities; or
(4) 3 years following the commercial operating
date of the electric generating facilities.
SEC. 505. RENEGOTIATION OF POWER CONTRACTS.
(a) RENEGOTIATION.—Following the date of enact-
ment of this Act, the Tennessee Valley Authority and the
distributors shall make good faith efforts to renegotiate
their existing power contracts.
(b) DISTRIBUTOR CONTRACT TERMINATION OR RE-
DUCTION RIGHT.—If a distributor and the Tennessee Val-
ley Authority are unable by negotiation to arrive at a mu-
tually acceptable replacement contract to govern the post-
enactment relationship, then the Tennessee Valley Author-
ity shall allow such distributor to give notice, which notice
may be given once each calendar year and only within the
60-day period that follows either the date of enactment
of this Act or any subsequent anniversary of the date of
enactment of this Act—
(1) to terminate the contract to purchase whole-
sale electric energy from the Tennessee Valley Au-
thority that was in effect on the date of enactment,
such termination to be effective 3 years after the
giving of such notice; or
(2) to reduce the quantity of its wholesale
power requirements under the contract to purchase
wholesale electric energy from the Tennessee Valley
Authority that was in effect on the date of enact-
ment by up to 10 percent of its requirements, such
reduction to be effective 2 years after the giving of
such notice, or by more than 10 percent of its re-
quirements, such reduction to be effective 3 years
after the giving of such notice, and to negotiate with
the Tennessee Valley Authority to adapt the con-
tract that was in effect on the date of enactment to
reflect a partial requirements relationship.
(c) PARTIAL REQUIREMENTS NOTICE.—As part of
any notice provided under subsection (b)(2), a distributor
shall identify the annual quantity of electric energy which
it will be acquiring from a source other than the Tennessee
Valley Authority as the result of its election and times of
the day and year that specified amounts of such energy
will be received by the distributor.
(d) NONDISCRIMINATION.—The Tennessee Valley
Authority shall not unduly discriminate against any dis-
tributor as the result of the exercise of notice under either
subsection (b)(1) or subsection (b)(2) by such distributor
or its status as a partial requirements customer.
SEC. 506. REGULATION OF TENNESSEE VALLEY AUTHORITY
TRANSMISSION SYSTEM.
Notwithstanding sections 201(b)(1) and 201(f) of the
Federal Power Act, sections 205, 206, 208, and 210
through 213 and sections 301 through 304, 306, 307 (ex-
cept the last sentence of subsection (c)), 308, 309, 313,
and 317 of the Federal Power Act apply to the trans-
mission and local distribution of electric power by the Ten-
nessee Valley Authority to the same extent and in the
same manner as such provisions apply to the transmission
of electric power in interstate commerce by a public utility
otherwise subject to the jurisdiction of the Commission
under part II of such Act
SEC. 507. REGULATION OF TENNESSEE VALLEY AUTHORITY
DISTRIBUTORS.
(a) ELECTION TO REPEAL TENNESSEE VALLEY AU-
THORITY REGULATION
OF DISTRIBUTORS.—Upon the
election of a distributor, the third proviso of section 10
of the Tennessee Valley Authority Act of 1933 (16 U.S.C.
831i) and the second and third provisos of section 12 of
the Tennessee Valley Authority Act of 1933 (16 U.S.C.
831k) shall not apply to wholesale sales of electric power
by the Tennessee Valley Authority in the Tennessee Valley
Region after the date of enactment of this Act, and the
Tennessee Valley Authority shall not be authorized to reg-
ulate, by means of rules, contract provisions, resale rate
schedules, contract termination rights, or any other meth-
od, any rates, terms, or conditions imposed on the resale
of such electric power by such distributor, or any rates,
terms, or conditions for the use of local distribution facili-
ties.
(b) AUTHORITY
OF GOVERNING BODIES
OF DIS-
TRIBUTORS.—Any regulatory authority exercised by the
Tennessee Valley Authority over any distributor making
an election authorized in subsection (a) shall be exercised
by the governing body of such distributor, in accordance
with the laws of the State in which it is organized. In the
event a distributor does not make the election authorized
in subsection (a), the provisions of the Tennessee Valley
Authority Act specified in that subsection shall continue
to apply for the duration of any wholesale power contract
between the Tennessee Valley Authority and the dis-
tributor, according to its terms.
(c) USE OF FUNDS.—In any contract between the
Tennessee Valley Authority and a distributor for the pur-
chase of at least 70 percent of the distributor’s require-
ments for the sale of electric power, the Tennessee Valley
Authority shall include such terms and conditions as may
be reasonably necessary to assure that the financial bene-
fits of a distributor’s electric system operations are allo-
cated to the distributor’s retail electric consumers.
(d) REMOVAL OF PURPA RATEMAKING AUTHOR-
ITY.—Section 3(17) of the Public Utility Regulatory Poli-
cies Act of 1978 (16 U.S.C. 2602(17)) is amended by
striking ‘‘, and in the case of an electric utility with re-
spect to which the Tennessee Valley Authority has rate-
making authority, such term means the Tennessee Valley
Authority’’. 
SEC. 508. STRANDED COST RECOVERY.
(a) COMMISSION
JURISDICTION.—The Tennessee
Valley Authority may recover any wholesale stranded costs
that may arise from the exercise of rights by a distributor
pursuant to section 505 of this subtitle to the extent au-
thorized by the Commission based on application of the
rules and principles the Commission applies to wholesale
stranded cost recovery by other electric utilities within its
jurisdiction, provided that the Tennessee Valley Authority
shall not be authorized to recover from any distributor any
wholesale stranded costs related to loss of sales revenues
by the Tennessee Valley Authority, or its expectation of
continuing to sell electric energy, for any period after Sep-
tember 30, 2007. The exercise of rights by a distributor
under section 505 of this subtitle shall not affect a claim
by the Tennessee Valley Authority that it may have for
recovery of stranded costs prior to October 1, 2007. This
subsection shall apply notwithstanding the absence of pro-
vision addressing wholesale stranded cost recovery in a
power sales agreement between the Tennessee Valley Au-
thority and a distributor executed after the date of enact-
ment of this Act.
(b) DEBT.—Stranded costs recovered by the Ten-
nessee Valley Authority under subsection (a) shall be used
to pay down the Tennessee Valley Authority’s debt to the
extent determined by the Tennessee Valley Authority to
be consistent with proper financial management. The Ten-
nessee Valley Authority may not use amounts recovered
to pay for additions to the Tennessee Valley Authority’s
generation capacity.
(c) UNBUNDLING.—Any stranded cost recovery
charge authorized by the Commission to be assessed by
the Tennessee Valley Authority shall be unbundled from
the otherwise applicable rates and charges to such cus-
tomer and separately stated on the bill of such customer.
The Tennessee Valley Authority shall not recover whole-
sale stranded costs from any customer through any other
rate, charge, or mechanism.
(d) REPORT.—Beginning in fiscal year 2001, as part
of the annual management report submitted by the Ten-
nessee Valley Authority to Congress, the Tennessee Valley
Authority shall also specifically report—
(1) the status of the Tennessee Valley
Authority’s long-range financial plans and the
progress toward its goal of competitively priced elec-
tric power, and a general discussion of the Ten-
nessee Valley Authority’s prospects on meeting the
objectives of the Ten Year Business Outlook issued
on July 22, 1997;
(2) any changes in assumptions since the pre-
vious report that may have a material effect on the
Tennessee Valley Authority’s long-range financial
plans;
(3) the source of funds used for any generation
and transmission capacity additions;
(4) the use or other disposition of amounts re-
covered by the Tennessee Valley Authority under the
Tennessee Valley Authority Act and this subtitle;
(5) the amount by which the Tennessee Valley
Authority’s publicly held debt was reduced; and
(6) the projected amount by which the Ten-
nessee Valley Authority’s publicly held debt will be
reduced.
SEC. 509. APPLICATION OF ANTITRUST LAW.
(a) IN GENERAL.—The Tennessee Valley Authority
shall be subject to the antitrust laws of the United States
with respect to the operation of its electric power and
transmission systems. For purposes of this section, the
term ‘‘antitrust laws’’ has the meaning given such term
in subsection (a) of the first section of the Clayton Act
(15 U.S.C. 12(a)), except that such term includes section
5 of the Federal Trade Commission Act (15 U.S.C. 45)
to the extent that such section 5 applies to unfair methods
of competition.
(b) DAMAGES.—No damages, interest on damages,
costs, or attorneys’ fees may be recovered under section
4, 4A, or 4C of the Clayton Act (15 U.S.C. 15, 15a, or
15c) from the Tennessee Valley Authority.
(c) ASSOCIATION FOR ADVOCACY.—Nothing in this
subtitle shall diminish or impair any privileges, immuni-
ties, or exemptions prior to enactment that would have
been accorded any person by virtue of their association
together in advocating their cause and points of view to
the Tennessee Valley Authority or any other agency or
branch of Federal, State, or local government.
SEC. 510. SAVINGS PROVISION.
Nothing in this subtitle shall affect section 15d(b) of
the Tennessee Valley Authority Act of 1933 (16 U.S.C.
831n–4(b)), providing that bonds issued by the Tennessee
Valley Authority shall not be obligations of, nor shall pay-
ment of the principal thereof or interest thereon be guar-
anteed by, the United States.
Subtitle B—Bonneville Power
Authority
SEC. 521. DEFINITIONS.
As used in this subtitle:
(1) The term ‘‘Bonneville Administrator’’
means the Administrator of the Bonneville Power
Administration.
(2) The term ‘‘Bonneville Transmission Sys-
tem’’ means transmission facilities owned or leased
by the United States, acting through the Bonneville
Administrator, and operated by the Bonneville
Power Administration or operated by another entity
under section 523 of this subtitle.
(3) The term ‘‘Commission’’ has the meaning
given that term in section 3 of the Federal Power
Act (16 U.S.C. 796).
(4) The term ‘Pacific Northwest’ has the mean-
ing given that term in section 3(14) of the Pacific
Northwest Electric Power Planning and Conserva-
tion Act (16 U.S.C. 839a(14)).
SEC. 522. REGULATION OF BONNEVILLE TRANSMISSION
SYSTEM.
(a) IN GENERAL.—After September 30, 2002, or the
date the Bonneville Transmission System is participating
in a regional transmission organization, whichever is ear-
lier, notwithstanding section 201(f) of the Federal Power
Act, sections 202(h), 205, 206, 208, 210 through 213,
301 through 304, 306, 307 (except the last sentence of
subsection (c)), 308, 309, 313, and 317 of that Act shall
apply to the Bonneville Transmission System and the
transmission of electric energy over the Bonneville Trans-
mission System.
(b) TRANSITION PROVISION.—The Bonneville Ad-
ministrator’s transmission rates, terms, and conditions
filed with the Commission prior to October 1, 2001, and
approved by the Commission, shall continue in effect until
superseded by rates, terms, and conditions that are filed
with the Commission under this Act to be effective no later
than October 1, 2003.
(c) ADDITIONAL RULES.—Any determination or ap-
proval by the Commission of rates, terms, and conditions
for the transmission of electric energy under subsection
(a) shall be subject to the following rules:
(1) Phasing in changes in transmission rates or
charges that would cause unreasonable cost shifts
among transmission customers if implemented at
once.
(2) Mitigating unreasonable adverse effects on
transmission customers that would otherwise result
from changes in the historical treatment of costs to
acquire transmission to serve customers historically
served by General Transfer Agreements entered into
between the Bonneville Administrator and other util-
ities prior to the enactment of this Act.
(3) No direct assignment of the costs of trans-
mission facilities that were included in the Bonne-
ville Administrator’s rolled-in network transmission
rates in effect on October 1, 2001, or of the costs
for replacement of such facilities.
(4) Assuring the transmission rates and charges
are established sufficient to—
(A) recover in a timely fashion the Federal
investment in the Bonneville Transmission Sys-
tem over a reasonable number of years after
first meeting all the Bonneville Power Adminis-
trator other transmission costs and expenses;
and
(B) produce the revenues necessary to as-
sure timely payment of all transmission-related
costs and expenses.
(5) Costs and revenues shall be allocated to the
Bonneville Transmission System in accordance with
rules to be promulgated by the Commission.
(6) Rules established by the Commission to—
(A) assure transmission access is provided
over the Bonneville Transmission System for
hydroelectric power that must be generated and
transmitted at a particular time in order to re-
duce levels of dissolved nitrogen gas harmful to
fish, with such access to be provided in a man-
ner that displaces the output of other genera-
tion using the Bonneville Transmission System
but does not impair service to loads, require op-
erations that may damage generation facilities,
or alter commercial relationships between the
power supplier whose generation was displaced
and its customer; and
(B) provide methods for compensation be-
tween or among the hydroelectric power mar-
keter and the party or parties affected by the
displacement.
(d) APPLICABILITY.—Subsection (a) shall not apply
to—
(1) the Bonneville Power Administration’s ac-
tivities other than transmission of electric energy
over the Bonneville Transmission System; or
(2) a contract in effect on the date of enact-
ment of this Act, except for transmission rates which
are adjustable by the Bonneville Administrator
100
under the contract; a treaty of the United States; or
a contract concerning the delivery of electric energy
and capacity entered into by entities designated pur-
suant to such a treaty.
(e) PRIORITY OF PAYMENTS.—Nothing in this sec-
tion shall alter or be construed to alter the priority of pay-
ments established in section 13(b) of the Federal Colum-
bia River Transmission System Act (16 U.S.C. 838k(b))
or the requirements of section 11 of that Act (16 U.S.C.
838i).
(f) SECURITY.—(1) Notwithstanding any other law,
any statutory and other authorities in effect on October
1, 1998, of the Bonneville Administrator to establish, and
of the Commission to confirm and approve, a surcharge
on rates or charges for transmission services over the Bon-
neville Transmission System for the recovery of costs
that—
(A) relate to any generation or conservation re-
sources financed by debt issued by a non-Federal
party before October 1, 1998 (and any refundings
and refinancings thereof),
(B) are secured by an obligation of the Bonne-
ville Administrator to make payments or net bill
power and transmission service, and
101
(C) cannot be timely recovered through power
rates and charges and paid in accordance with the
application of revenues and priority of payments
specified by section 13(b) of the Federal Columbia
River Transmission System Act of 1974 (16 U.S.C.
838k(b)), shall continue in full force and effect for
the purposes of such recovery.
Recovery of such costs shall be allowed only to the extent
that it would have been allowed under laws applicable to
the Bonneville Administrator as of October 1, 1998. In
reviewing the Administrator’s filing of a surcharge under
this paragraph, the Commission shall apply the standard
of review applicable as of October 1, 1998.
(2) Any amount recovered through any transmission
surcharge under paragraph (1) shall be treated as a loan
to the Bonneville Power Administration’s power function
from the transmission function and shall bear interest at
a rate determined appropriate by the Commission. The
Bonneville Power Administration’s power function shall
repay the loans as soon as reasonably possible after the
Bonneville Administrator determines that power revenues
are sufficient to meet the Administrator’s other power cost
recovery and Treasury repayment obligations on an an-
nual basis. To the extent reasonably practicable, the Ad-
ministrator shall refund all or a portion of the surcharge
102
collected from transmission customers with a higher pri-
ority of payment accorded those transmission customers
that purchased no or a lesser amount of power from the
Bonneville Power Administration in the 5 years prior to
the effective date of the surcharge as directed and deter-
mined appropriate by the Commission.
(g) HEARINGS.—Any proceeding to approve or fix
transmission rates and charges pursuant to this part shall
be conducted in the Pacific Northwest.
SEC. 523. AUTHORITY OF ADMINISTRATOR TO PARTICI-
PATE IN REGIONAL TRANSMISSION ORGANI-
ZATION.
Notwithstanding any other provision of law, the Bon-
neville Administrator is authorized to make contractual
and other arrangements for the transfer of control and
use of the Bonneville Transmission System to a regional
transmission organization comprised of all or part of the
geographic areas specified in FERC Docket RTO–35–
000, filed on October 15, 2000, that meets or proposes
to meet the minimum characteristics and functions of a
regional transmission organization required by the Com-
mission. The Administrator’s contracts and other arrange-
ments for participation shall set forth terms and condi-
tions the Administrator determines are necessary or ap-
propriate, and shall include terms that assure the recovery
103
of all the Administrator’s transmission costs and expenses,
and consistency with the Administrator’s existing con-
tracts and existing third-party financing obligations. The
contracts for participation may provide for the resolution
of disputes through arbitration or other means with the
entity or with other participants. The Bonneville Adminis-
trator shall maintain effective oversight of the regional
transmission organization’s fulfillment of the contractual
and other terms and conditions required by the Adminis-
trator, and shall maintain the ability to terminate the
Bonneville Transmission System’s participation in the re-
gional transmission organization if the organization fails
to materially satisfy those terms and conditions. The stat-
utory authorities and duties of the Secretary of Energy
and the Bonneville Administrator with respect to the Bon-
neville Transmission System shall be suspended for the pe-
riod of the contract of participation, including extensions
or renewals thereof, insofar as they are to be accomplished
through the Administrator’s contracts and other arrange-
ments for participation, and except for those matters that
the Administrator determines are not to be fulfilled by the
regional transmission organization.
SEC. 524. LIMITATION ON RETAIL SERVICES.
Notwithstanding section 5(a) of the Bonneville
Project Act (16 U.S.C. 823d(a)), the Administrator shall
104
not sell electric energy or capacity to any consumer, except
for any consumer that did have a contract for purchase
of electric energy from the Bonneville Power Administra-
tion for use at specific facilities on October 1, 2001. This
restriction shall not apply to sales to a Federal agency
or to an assignee, subsidiary, affiliate, or successor in in-
terest, whether through sale, transfer or otherwise, of a
consumer that did have a contract for purchase of electric
energy from the Bonneville Power Administration for use
at specific facilities on October 1, 2001. For purposes of
this section, the term ‘‘consumer’’ has the meaning given
such term in section 3(5) of the Pacific Northwest Electric
Power Planning and Conservation Act (16 U.S.C.
839a(5)).
SEC. 525. DIRECT SERVICE INDUSTRIES.
The Administrator of the Bonneville Power Adminis-
tration shall negotiate power sales contracts with all will-
ing Northwest aluminum direct service industrial cus-
tomers beyond the term of currently effective BPA power
supply contracts. The Secretary of Energy or his designee
within the Department of Energy shall review the terms
of such negotiated contracts and ensure that they provide
for continued access to a reasonable level of federal firm
power, at a rate established under 16 U.S.C. 839e(c), that
will enable such customers to operate their facilities in the
105
Pacific Northwest in an economic manner for the long
term.
SEC. 526. CONFORMING AMENDMENTS.
(a) FEDERAL POWER ACT.—(1) Section 212(i) of the
Federal Power Act (16 U.S.C. 824(i)) is repealed.
(2) Section 306 of the Federal Power Act is amended
by inserting ‘‘agency or instrumentality of the United
States,’’ after ‘‘person’’ in the first sentence.
(3) Section 313 of the Federal Power Act is amended
by inserting ‘‘agency or instrumentality of the United
States,’’ after ‘‘person,’’ in the first sentence.
(b) FEDERAL COLUMBIA RIVER TRANSMISSION SYS-
TEM ACT.—(1) Section 3(c) of the Federal Columbia
River Transmission System Act (16 U.S.C. 838a(c)) is
amended by inserting ‘‘, and transmission facilities with
an estimated capital cost exceeding $50,000,000 in 1998
dollars, adjusted using the United States Gross Domestic
Product Implicit Price Deflator Index’’, after ‘‘own facili-
ties’’.
(2) Section 6 of the Federal Columbia River Trans-
mission System Act (16 U.S.C. 838d) is repealed.
(3) Section 9 of the Federal Columbia River Trans-
mission System Act (16 U.S.C. 838g) is amended to read
as follows:
106
‘‘SEC. 9. RATES AND CHARGES.
‘‘Schedules of rates and charges for the sale, includ-
ing dispositions to Federal agencies, of all electric power
made available to the Administrator pursuant to section
8 of this Act or otherwise acquired shall be established—
‘‘(1) with a view to encouraging the widest pos-
sible diversified use of electric power at the lowest
possible rates to consumers consistent with sound
business principles;
‘‘(2) having regard to the recovery (upon the
basis of the application of such rate schedules to the
capacity of the electric facilities of the projects) of
the cost of producing such electric power, including
the amortization of the capital investment allocated
to power over a reasonable period of years and pay-
ments provided for in section 11(b)(9) of this Act;
and
‘‘(3) at levels to produce such additional power
revenues as may be required, in the aggregate with
all other power revenues of the Administrator, to
pay when due—
‘‘(A) the principal of, premiums, discounts,
and expenses in connection with the issuance of
and interest on all bonds issued and out-
standing pursuant to this Act for all actions
other than the construction, acquisition, and re-
107
placement of the Federal transmission system;
and
‘‘(B) amounts required to establish and
maintain reserve and other funds and accounts
established in connection therewith.
Electric power rates under this section shall be established
by the Administrator in accordance with section 7 of the
Pacific Northwest Electric Power Planning and Conserva-
tion Act.’’.
(4) Section 10 of the Federal Columbia River Trans-
mission System Act (16 U.S.C. 838h) is repealed.
(c) REGIONAL PREFERENCE ACT.—Section 6 of Pub-
lic Law 88–552 (16 U.S.C. 837e), commonly known as
the ‘‘Regional Preference Act’’, is amended by striking
‘‘Federal energy or’’ in the first sentence and by striking
the second sentence.
(d) NORTHWEST POWER ACT.—(1) Section 7(a)(1)
of the Pacific Northwest Electric Power Planning and
Conservation Act (16 U.S.C. 839e(a)(1)) is amended to
read as follows:
‘‘(1) The Administrator shall establish, and periodi-
cally review and revise, rates for the sale and disposition
of electric power and shall periodically review and, if nec-
essary, propose revisions to rates for the transmission of
electric power. Rates for the sale and disposition of electric
108
power shall be established and, as appropriate, revised to
recover, in accordance with sound business principles, the
costs associated with the acquisition and conservation of
electric power, including the amortization of the Federal
investment in the Federal Columbia River Power System
that is allocable to electric power rates (including irriga-
tion costs required to be repaid out of electric power reve-
nues) over a reasonable period of years and the other costs
and expenses incurred by the Administrator pursuant to
this Act and other provisions of law. Rates for the sale
and disposition of electric power shall be established in
accordance with section 9 of the Federal Columbia River
Transmission System Act (16 U.S.C. 838g), section 5 of
the Flood Control Act of 1944 (16 U.S.C. 825s), and this
Act.’’.
(2) Section 7(a)(2) of the Pacific Northwest Electric
Power Planning and Conservation Act (16 U.S.C.
839e(a)(2)) is amended as follows:
(A) By striking ‘‘Rates’’ and inserting ‘‘Power
rates’’.
(B) By inserting ‘‘and’’ after the comma in
subparagraph (A).
(C) By striking ‘‘, and’’ and inserting a period
at the end of subparagraph (B).
(D) By striking subparagraph (C).
109
(3) Section 7(i) of the Pacific Northwest Electric
Power Planning and Conservation Act (16 U.S.C. 839e(i))
is amended by inserting ‘‘power’’ after ‘‘establishing’’ in
the first sentence.
(4) Section 9(d) of the Pacific Northwest Electric
Power Planning and Conservation Act (16 U.S.C.
839f(d)) is amended by striking ‘‘transmission access,’’
and inserting ‘‘power’’ before ‘‘services’’ in the second sen-
tence.
(5) Section 9(i)(3) of the Pacific Northwest Electric
Power Planning and Conservation Act (16 U.S.C.
839f(i)(3)) is amended by inserting ‘‘power’’ before ‘‘serv-
ices’’ each place it appears, and by striking ‘‘trans-
mission,’’ in the first sentence.
(e) BONNEVILLE PROJECT ACT.—Section 2(e) of the
Bonneville Project Act (16 U.S.C. 832a(e)) is amended
by striking the colon and all that follows and inserting
a period.
Subtitle C—Other Federal Power
Marketing Administrations
SEC. 531. DEFINITIONS.
For purposes of this subtitle:
(1) The term ‘‘Administrator’’ means the ad-
ministrator of a Federal power marketing adminis-
tration.
110
(2) The term ‘‘Commission’’ means the Federal
Energy Regulatory Commission.
(3) The term ‘‘Federal power marketing admin-
istrations’’ means the Western Area Power Adminis-
tration, Southwestern Power Administration, and
Southeastern Power Administration.
(4) The term ‘‘power generating agencies’’
means the Bureau of Reclamation, the Army Corps
of Engineers, and the International Boundary and
Water Commission.
(5) The term ‘‘public utility’’ means a public
utility as defined in section 201(e) of the Federal
Power Act.
SEC. 532. WHOLESALE POWER SALES BY FEDERAL POWER
MARKETING ADMINISTRATIONS.
(a) RATES, TERMS, AND CONDITIONS.—(1) All rates
and charges made, demanded, or received for the sale of
electric energy and capacity by each Federal power mar-
keting administration to its electric energy customers shall
be the lowest possible rates and charges that will recover
from such customers over a reasonable period of years,
in accordance with sound business principles, all costs in-
curred by the United States for the production of electric
energy sold by such Federal power marketing administra-
tion, including repayment of the capital investment allo-
111
cated to power and costs assigned by Acts of Congress
to power for repayment.
(2) The Commission may modify proposed rates sub-
mitted by any Federal power marketing administration
and establish terms and conditions consistent with this
subsection. In its determination of rates, terms, and condi-
tions for the sale of electric energy and capacity by the
Federal power marketing administrations the Commission
shall not review policy judgments and interpretations of
laws and regulations made by the power generating agen-
cies.
(b) EXISTING RATES.—All rates, terms, and condi-
tions for the sale of electric energy and capacity by the
Federal power marketing administrations placed into ef-
fect on a final basis prior to the date of enactment of this
Act shall remain in full force and effect unless the Com-
mission determines, after a hearing held upon its own mo-
tion or upon complaint, that the rates, terms, and condi-
tions are inconsistent with subsection (a)(1) and estab-
lishes new rates, terms, and conditions.
(c) PERIODIC REVIEW.—The Administrators shall
periodically review the rates and charges made, demanded,
or received by each Federal power marketing administra-
tion for the sale of electric energy and capacity. In the
event the rates and charges made, demanded, or received
112
by any Federal power marketing administration are incon-
sistent with subsection (a)(1), the Administrator of that
administration shall propose revised rates. Such rates
shall be established in accordance with this section, section
5 of the Flood Control Act of 1944 (16 U.S.C. 825s), sec-
tion 9(c) of the Reclamation Project Act of 1939 (43
U.S.C. 485h(c)), and the Acts specifically applicable to in-
dividual projects of the power systems of the power gener-
ating agencies.
SEC. 533. REGULATION OF FEDERAL POWER MARKETING
ADMINISTRATION TRANSMISSION SYSTEMS.
Notwithstanding section 201(f) of the Federal Power
Act, sections 202(h), 205, 206, 208, and 210 through 213
and sections 301 through 304, 306, 307 (except the last
sentence of paragraph (c)), 308, 309, 313, and 317 of the
Federal Power Act apply to the transmission of electric
energy by the Federal power marketing administrations
to the same extent and in the same manner as such provi-
sions apply to the transmission of electric energy in inter-
state commerce by a public utility otherwise subject to the
jurisdiction of the Commission under part II of such Act.
SEC. 534. ACCOUNTING.
Not later than six months after the date of enactment
of this Act, the Commission shall promulgate rules con-
taining each of the following:
113
(1) ACCOUNTING
PRINCIPLES
AND
REQUIRE-
MENTS.—Procedures to ensure that the Federal
power marketing administrations utilize the same
accounting principles and requirements as are appli-
cable to public utilities pursuant to parts II and III
of the Federal Power Act (16 U.S.C. 792 and fol-
lowing) with respect to accounting for revenue, ex-
penses, investments, and depreciation.
(2) COMPLIANCE.—Procedures for the filing of
complaints with the Commission by interested per-
sons seeking to ensure compliance with the proce-
dures of this section.
(3) ADMINISTRATIVE RECONCILIATION.—Proce-
dures to ensure that the power generating agencies
and the Administrators maintain a consistent set of
books and records for purposes of repayment obliga-
tions.
SEC. 535. APPLICATION OF ANTITRUST LAW.
(a) IN GENERAL.—Each Federal power marketing
administration shall be subject to the antitrust laws of the
United States with respect to its sale of electric energy
and capacity and the operation of its transmission system.
For purposes of this section, the term ‘‘antitrust laws’’
has the meaning given such term in subsection (a) of the
first section of the Clayton Act (15 U.S.C. 12(a)), except
114
that such term includes section 5 of the Federal Trade
Commission Act (15 U.S.C. 45) to the extent that such
section 5 applies to unfair methods of competition.
(b) DAMAGES.—No damages, interest on damages,
costs, or attorney’s fees may be recovered under section
4, 4A, or 4C of the Clayton Act (15 U.S.C. 15, 15a, or
15c) from a Federal power marketing administration.
TITLE VI—CONSUMER
PROTECTIONS
SEC. 601. ELECTRIC SUPPLY UNFAIR TRADE PRACTICES.
(a) SLAMMING.—(1) The Federal Trade Commission
may promulgate rules in accordance with section 553 of
title 5 of the United States Code for the submittal and
verification of a retail electric consumer’s selection or
change in selection of a retail electric supplier and for the
assessment of penalties for violation of these rules.
(2) A person shall not submit or change the selection
made by a retail electric consumer if prohibited by law
or Federal Trade Commission rules established under
paragraph (1).
(3) It shall be unlawful for any person to change the
retail electric supplier without the consent of the retail
electric consumer.
(b) CRAMMING.—(1) The Federal Trade Commission
may promulgate rules in accordance with section 553 of