H. R. 6—363
‘‘(g) REMAND.—In exercising authority under subsection (b)(1), 
the Commission may remand transmission rates to an unregulated 
transmitting utility for review and revision if necessary to meet 
the requirements of subsection (b). 
‘‘(h) OTHER REQUESTS.—The provision of transmission services 
under subsection (b) does not preclude a request for transmission 
services under section 211. 
‘‘(i) LIMITATION.—The Commission may not require a State 
or municipality to take action under this section that would violate 
a private activity bond rule for purposes of section 141 of the 
Internal Revenue Code of 1986. 
‘‘(j) TRANSFER
OF CONTROL
OF TRANSMITTING FACILITIES.—
Nothing in this section authorizes the Commission to require an 
unregulated transmitting utility to transfer control or operational 
control of its transmitting facilities to a Transmission Organization 
that is designated to provide nondiscriminatory transmission 
access.’’. 
SEC. 1232. FEDERAL UTILITY PARTICIPATION IN TRANSMISSION 
ORGANIZATIONS. 
(a) DEFINITIONS.—In this section: 
(1) APPROPRIATE
FEDERAL
REGULATORY
AUTHORITY.—The 
term ‘‘appropriate Federal regulatory authority’’ means— 
(A) in the case of a Federal power marketing agency, 
the Secretary, except that the Secretary may designate 
the Administrator of a Federal power marketing agency 
to act as the appropriate Federal regulatory authority with 
respect to the transmission system of the Federal power 
marketing agency; and 
(B) in the case of the Tennessee Valley Authority, 
the Board of Directors of the Tennessee Valley Authority. 
(2) FEDERAL POWER MARKETING AGENCY.—The term ‘‘Fed-
eral power marketing agency’’ has the meaning given the term 
in section 3 of the Federal Power Act (16 U.S.C. 796). 
(3) FEDERAL UTILITY.—The term ‘‘Federal utility’’ means— 
(A) a Federal power marketing agency; or 
(B) the Tennessee Valley Authority. 
(4) TRANSMISSION ORGANIZATION.—The term ‘‘Transmission 
Organization’’ has the meaning given the term in section 3 
of the Federal Power Act (16 U.S.C. 796). 
(5) 
TRANSMISSION
SYSTEM.—The 
term 
‘‘transmission 
system’’ means an electric transmission facility owned, leased, 
or contracted for by the United States and operated by a 
Federal utility. 
(b) TRANSFER.—The appropriate Federal regulatory authority 
may enter into a contract, agreement, or other arrangement 
transferring control and use of all or part of the transmission 
system of a Federal utility to a Transmission Organization. 
(c) CONTENTS.—The contract, agreement, or arrangement shall 
include— 
(1) performance standards for operation and use of the 
transmission system that the head of the Federal utility deter-
mines are necessary or appropriate, including standards that 
ensure— 
(A) recovery of all of the costs and expenses of the 
Federal utility related to the transmission facilities that
H. R. 6—364
are the subject of the contract, agreement, or other arrange-
ment; 
(B) consistency with existing contracts and third-party 
financing arrangements; and 
(C) consistency with the statutory authorities, obliga-
tions, and limitations of the Federal utility; 
(2) provisions for monitoring and oversight by the Federal 
utility of the Transmission Organization’s terms and conditions 
of the contract, agreement, or other arrangement, including 
a provision for the resolution of disputes through arbitration 
or other means with the Transmission Organization or with 
other participants, notwithstanding the obligations and limita-
tions of any other law regarding arbitration; and 
(3) a provision that allows the Federal utility to withdraw 
from the Transmission Organization and terminate the con-
tract, agreement, or other arrangement in accordance with 
its terms. 
(d) COMMISSION.—Neither this section, actions taken pursuant 
to this section, nor any other transaction of a Federal utility partici-
pating in a Transmission Organization shall confer on the Commis-
sion jurisdiction or authority over— 
(1) the electric generation assets, electric capacity, or 
energy of the Federal utility that the Federal utility is author-
ized by law to market; or 
(2) the power sales activities of the Federal utility. 
(e) EXISTING STATUTORY AND OTHER OBLIGATIONS.— 
(1) SYSTEM OPERATION REQUIREMENTS.—No statutory provi-
sion requiring or authorizing a Federal utility to transmit elec-
tric power or to construct, operate, or maintain the transmission 
system of the Federal utility prohibits a transfer of control 
and use of the transmission system pursuant to, and subject 
to, the requirements of this section. 
(2) OTHER OBLIGATIONS.—This subsection does not— 
(A) suspend, or exempt any Federal utility from, any 
provision of Federal law in effect on the date of enactment 
of this Act, including any requirement or direction relating 
to the use of the transmission system of the Federal utility, 
environmental protection, fish and wildlife protection, flood 
control, navigation, water delivery, or recreation; or 
(B) authorize abrogation of any contract or treaty 
obligation. 
(3) CONFORMING AMENDMENT.—Section 311 of the Energy 
and Water Development Appropriations Act, 2001 (16 U.S.C. 
824n) is repealed. 
SEC. 1233. NATIVE LOAD SERVICE OBLIGATION. 
(a) IN GENERAL.—Part II of the Federal Power Act (16 U.S.C. 
824 et seq.) is amended by adding at the end the following: 
‘‘SEC. 217. NATIVE LOAD SERVICE OBLIGATION. 
‘‘(a) DEFINITIONS.—In this section: 
‘‘(1) The term ‘distribution utility’ means an electric utility 
that has a service obligation to end-users or to a State utility 
or electric cooperative that, directly or indirectly, through one 
or more additional State utilities or electric cooperatives, pro-
vides electric service to end-users. 
‘‘(2) The term ‘load-serving entity’ means a distribution 
utility or an electric utility that has a service obligation.
H. R. 6—365
‘‘(3) The term ‘service obligation’ means a requirement 
applicable to, or the exercise of authority granted to, an electric 
utility under Federal, State, or local law or under long-term 
contracts to provide electric service to end-users or to a distribu-
tion utility. 
‘‘(4) The term ‘State utility’ means a State or any political 
subdivision of a State, or any agency, authority, or instrumen-
tality of any one or more of the foregoing, or a corporation 
that is wholly owned, directly or indirectly, by any one or 
more of the foregoing, competent to carry on the business 
of developing, transmitting, utilizing, or distributing power. 
‘‘(b) MEETING SERVICE OBLIGATIONS.—(1) Paragraph (2) applies 
to any load-serving entity that, as of the date of enactment of 
this section— 
‘‘(A) owns generation facilities, markets the output of Fed-
eral generation facilities, or holds rights under one or more 
wholesale contracts to purchase electric energy, for the purpose 
of meeting a service obligation; and 
‘‘(B) by reason of ownership of transmission facilities, or 
one or more contracts or service agreements for firm trans-
mission service, holds firm transmission rights for delivery 
of the output of the generation facilities or the purchased 
energy to meet the service obligation. 
‘‘(2) Any load-serving entity described in paragraph (1) is enti-
tled to use the firm transmission rights, or, equivalent tradable 
or financial transmission rights, in order to deliver the output 
or purchased energy, or the output of other generating facilities 
or purchased energy to the extent deliverable using the rights, 
to the extent required to meet the service obligation of the load-
serving entity. 
‘‘(3)(A) To the extent that all or a portion of the service obliga-
tion covered by the firm transmission rights or equivalent tradable 
or financial transmission rights is transferred to another load-
serving entity, the successor load-serving entity shall be entitled 
to use the firm transmission rights or equivalent tradable or finan-
cial transmission rights associated with the transferred service 
obligation. 
‘‘(B) Subsequent transfers to another load-serving entity, or 
back to the original load-serving entity, shall be entitled to the 
same rights. 
‘‘(4) The Commission shall exercise the authority of the Commis-
sion under this Act in a manner that facilitates the planning 
and expansion of transmission facilities to meet the reasonable 
needs of load-serving entities to satisfy the service obligations of 
the load-serving entities, and enables load-serving entities to secure 
firm transmission rights (or equivalent tradable or financial rights) 
on a long-term basis for long-term power supply arrangements 
made, or planned, to meet such needs. 
‘‘(c) ALLOCATION OF TRANSMISSION RIGHTS.—Nothing in sub-
sections (b)(1), (b)(2), and (b)(3) of this section shall affect any 
existing or future methodology employed by a Transmission 
Organization for allocating or auctioning transmission rights if such 
Transmission Organization was authorized by the Commission to 
allocate or auction financial transmission rights on its system as 
of January 1, 2005, and the Commission determines that any future 
allocation or auction is just, reasonable and not unduly discrimina-
tory or preferential, provided, however, that if such a Transmission