I 
109TH CONGRESS 
1ST SESSION H. R. 1481 
To ensure reliability of electric service to provide for expansion of electricity 
transmission networks in order to support competitive electricity markets 
to modernize regulation, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 5, 2005 
Mr. WYNN (for himself and Mrs. MYRICK) introduced the following bill; which 
was referred to the Committee on Energy and Commerce, and in addition 
to the Committee on Ways and Means, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned 
A BILL 
To ensure reliability of electric service to provide for expan-
sion of electricity transmission networks in order to sup-
port competitive electricity markets to modernize regula-
tion, 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 AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Interstate Transmission Act’’. 
(b) TABLE OF CONTENTS.—The table of contents is 
as follows:
Sec. 1. Short title and table of contents. 
Sec. 2. Findings. 
Sec. 3. Transmission infrastructure investment. 
Sec. 3. Electric reliability standards. 
Sec. 5. Disposition of property. 
Sec. 6. Regional transmission organizations. 
Sec. 7. Siting of interstate electric transmission facilities. 
Sec. 8. Electric transmission property treated as 15-year property. 
SEC. 2. FINDINGS. 
Congress finds as follows: 
(1) The expansion, enhancement, and improve-
ment of transmission facilities are necessary to 
maintain and improve reliability of electric service. 
(2) Transmission networks are the backbone of 
reliable delivery of electric energy, increased inter-
state commerce in electricity, and competitive power 
markets. 
(3) Wholesale electric competition, already in 
effect across the nation, and retail electric competi-
tion, adopted by nearly half of the States, depend on 
adequate transmission networks to benefit electric 
consumers. 
(4) To maintain and improve reliability of elec-
tric service and support competitive power markets, 
the economics of the business of electric trans-
mission and the regulatory structures applicable 
thereto must be improved.
SEC. 3. TRANSMISSION INFRASTRUCTURE INVESTMENT. 
Part II of the Federal Power Act (16 U.S.C. 824 et 
seq.) is amended by adding at the end the following: 
‘‘SEC. 215. TRANSMISSION INFRASTRUCTURE INVESTMENT. 
‘‘(a) RULEMAKING REQUIREMENT.—Within 1 year 
after enactment of this section, the Commission shall es-
tablish, by rule, incentive-based, performance-based, par-
ticipant-funded, and cost-based (including, but not limited 
to performance-based) rate treatments for the trans-
mission of electric energy in interstate commerce by public 
utilities to benefit consumers by ensuring reliability and 
reducing the cost of delivered power by reducing trans-
mission congestion. Such rule shall— 
‘‘(1) promote reliable and economically efficient 
transmission and generation of electricity by pro-
moting capital investment in the enlargement, im-
provement, maintenance and operation of facilities 
for the transmission of electric energy in interstate 
commerce; 
‘‘(2) provide a return on equity that attracts 
new investment in transmission facilities (including 
related transmission technologies); 
‘‘(3) encourage deployment of transmission 
technologies and other measures to increase the ca-
pacity and efficiency of existing transmission facili-
ties and improve the operation of such facilities; and
‘‘(4) allow recovery of all prudently incurred 
costs necessary to comply with mandatory reliability 
standards issued pursuant to section 216 of this 
Act. 
The Commission may, from time to time, revise such rule. 
‘‘(b) TRANSMISSION RATES AND RTO PARTICIPA-
TION.— The Commission shall provide for— 
‘‘(1) recovery of all prudently incurred costs to 
develop and participate in any proposed or approved 
RTO, ISO, or independent transmission company; 
‘‘(2) recovery of all costs previously approved by 
a State commission which exercised jurisdiction over 
the transmission facilities prior to the utility’s par-
ticipation in the RTO or ISO, including costs nec-
essary to honor preexisting transmission service con-
tracts, in a manner which does not reduce the reve-
nues the utility receives for transmission services for 
a reasonable transition period after the utility joins 
the RTO or ISO; 
‘‘(3) recovery as an expense in rates of the 
costs prudently incurred to conduct transmission 
planning and reliability activities, including the costs 
of participating in RTO, ISO and other regional 
planning activities and design, study and other
precertification costs involved in seeking permits and 
approvals for proposed transmission facilities; 
‘‘(4) a current return in rates for construction 
work in progress for transmission facilities and full 
recovery of prudently incurred costs for constructing 
transmission facilities; 
‘‘(5) recovery of all prudently incurred capital, 
operation, and maintenance costs, and other costs 
necessary to operate and maintain transmission 
service, including generation and transmission based 
ancillary services and taxes; 
‘‘(6) various rate structures, including formula 
transmission rates; and 
‘‘(7) a maximum 15 year accelerated book de-
preciation on new transmission facilities for rate 
treatment purposes. 
The Commission shall ensure that any costs recoverable 
pursuant to this subsection may be recovered by such util-
ity through the transmission rates charged by such utility 
or through the transmission rates charged by the RTO 
or ISO that provides transmission service to such utility. 
‘‘(c) JUST AND REASONABLE RATES.—All rates ap-
proved under the rules adopted pursuant to this section, 
including any revisions to such rules, are subject to the 
requirement of sections 205 and 206 that all rates,
charges, terms, and conditions be just and reasonable and 
not unduly discriminatory or preferential.’’. 
SEC. 4. ELECTRIC RELIABILITY STANDARDS. 
(a) IN GENERAL.—Part II of the Federal Power Act 
(16 U.S.C. 824 et seq.) is amended by adding the fol-
lowing new section at the end thereof: 
‘‘SEC. 216. ELECTRIC RELIABILITY. 
‘‘(a) DEFINITIONS.—For purposes of this section— 
‘‘(1) The term ‘bulk-power system’ means— 
‘‘(A) facilities and control systems nec-
essary for operating an interconnected electric 
energy transmission network (or any portion 
thereof); and 
‘‘(B) electric energy from generation facili-
ties needed to maintain transmission system re-
liability. 
The term does not include facilities used in the local 
distribution of electric energy. 
‘‘(2) The terms ‘Electric Reliability Organiza-
tion’ and ‘ERO’ mean the organization certified by 
‘‘(3) The term ‘reliability standard’ means a re-
quirement, approved by the Commission under this 
section, to provide for reliable operation of the bulk- 
power system. The term includes requirements for 
the operation of existing bulk-power system facilities
and the design of planned additions or modifications 
to such facilities to the extent necessary to provide 
for reliable operation of the bulk-power system, but 
the term does not include any requirement to en-
large such facilities or to construct new transmission 
capacity or generation capacity. 
‘‘(4) The term ‘reliable operation’ means oper-
ating the elements of the bulk-power system within 
equipment and electric system thermal, voltage, and 
stability limits so that instability, uncontrolled sepa-
ration, or cascading failures of such system will not 
occur as a result of a sudden disturbance or unan-
ticipated failure of system elements. 
‘‘(5) The term ‘Interconnection’ means a geo-
graphic area in which the operation of bulk-power 
system components is synchronized such that the 
failure of one or more of such components may ad-
versely affect the ability of the operators of other 
components within the system to maintain reliable 
operation of the facilities within their control. 
‘‘(6) The term ‘transmission organization’ 
means a regional transmission organization, inde-
pendent system operator, independent transmission 
provider, or other transmission organization finally
approved by the Commission for the operation of 
transmission facilities. 
‘‘(7) The term ‘regional entity’ means an entity 
having enforcement authority pursuant to subsection 
(e)(4). 
the Commission under subsection (c) the purpose of which 
is to establish and enforce reliability standards for the 
bulk-power system, subject to Commission review. 
‘‘(b) JURISDICTION AND APPLICABILITY.—(1) The 
Commission shall have jurisdiction, within the United 
States, over the ERO certified by the Commission under 
subsection (c), any regional entities, and all users, owners, 
and operators of the bulk-power system, including but not 
limited to the entities described in section 201(f), for pur-
poses of approving reliability standards established under 
this section 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. 
‘‘(2) The Commission shall issue a final rule to imple-
ment the requirements of this section not later than 180 
days after the date of enactment of this section. 
‘‘(c) CERTIFICATION.—Following the issuance of a 
Commission rule under subsection (b)(2), any person may 
submit an application to the Commission for certification
as the Electric Reliability Organization (ERO). The Com-
mission may certify one such ERO if the Commission de-
termines that such ERO— 
‘‘(1) has the ability to develop and enforce, sub-
ject to subsection (e)(2), reliability standards that 
provide for an adequate level of reliability of the 
bulk-power system; and 
‘‘(2) has established rules that— 
‘‘(A) assure its independence of the users 
and owners and operators of the bulk-power 
system, while assuring fair stakeholder rep-
resentation in the selection of its directors and 
balanced decisionmaking in any ERO com-
mittee or subordinate organizational structure; 
‘‘(B) allocate equitably reasonable dues, 
fees, and other charges among end users for all 
activities under this section; 
‘‘(C) provide fair and impartial procedures 
for enforcement of reliability standards through 
the imposition of penalties in accordance with 
subsection (e) (including limitations on activi-
ties, functions, or operations, or other appro-
priate sanctions); 
‘‘(D) provide for reasonable notice and op-
portunity for public comment, due process,
openness, and balance of interests in developing 
reliability standards and otherwise exercising its 
duties; and 
‘‘(E) provide for taking, after certification, 
appropriate steps to gain recognition in Canada 
and Mexico. 
‘‘(d) RELIABILITY STANDARDS.—(1) The Electric 
Reliability Organization shall file each reliability standard 
or modification to a reliability standard that it proposes 
to be made effective under this section with the Commis-
sion. 
‘‘(2) The Commission may approve by rule or order 
a proposed reliability standard or modification to a reli-
ability standard if it determines that the standard is just, 
reasonable, not unduly discriminatory or preferential, and 
in the public interest. The Commission shall give due 
weight to the technical expertise of the Electric Reliability 
Organization with respect to the content of a proposed 
standard or modification to a reliability standard and to 
the technical expertise of a regional entity organized on 
an Interconnection-wide basis with respect to a reliability 
standard to be applicable within that Interconnection, but 
shall not defer with respect to the effect of a standard 
on competition. A proposed standard or modification shall 
take effect upon approval by the Commission.
‘‘(3) The Electric Reliability Organization shall 
rebuttably presume that a proposal from a regional entity 
organized on an Interconnection-wide basis for a reliability 
standard or modification to a reliability standard to be ap-
plicable on an Interconnection-wide basis is just, reason-
able, and not unduly discriminatory or preferential, and 
in the public interest. 
‘‘(4) The Commission shall remand to the Electric 
Reliability Organization for further consideration a pro-
posed reliability standard or a modification to a reliability 
standard that the Commission disapproves in whole or in 
part. 
‘‘(5) The Commission, upon its own motion or upon 
complaint, may order the Electric Reliability Organization 
to submit to the Commission a proposed reliability stand-
ard or a modification to a reliability standard that ad-
dresses a specific matter if the Commission considers such 
a new or modified reliability standard appropriate to carry 
out this section. 
‘‘(6) The final rule adopted under subsection (b)(2) 
shall include fair processes for the identification and time-
ly resolution of any conflict between a reliability standard 
and any function, rule, order, tariff, rate schedule, or 
agreement accepted, approved, or ordered by the Commis-
sion applicable to a transmission organization. Such trans-
mission organization shall continue to comply with such 
function, rule, order, tariff, rate schedule, or agreement 
accepted, approved, or ordered by the Commission until— 
‘‘(A) the Commission finds a conflict exists be-
tween a reliability standard and any such provision; 
‘‘(B) the Commission orders a change to such 
provision pursuant to section 206 of this part; and 
‘‘(C) the ordered change becomes effective 
under this part. 
If the Commission determines that a reliability standard 
needs to be changed as a result of such a conflict, it shall 
order the ERO to develop and file with the Commission 
a modified reliability standard under paragraph (4) or (5) 
of this subsection. 
‘‘(e) ENFORCEMENT.—(1) The ERO may impose, 
subject to paragraph (2), a penalty on a user or owner 
or operator of the bulk-power system for a violation of a 
reliability standard approved by the Commission under 
subsection (d) if the ERO, after notice and an opportunity 
for a hearing— 
‘‘(A) finds that the user or owner or operator 
has violated a reliability standard approved by the 
Commission under subsection (d); and 
‘‘(B) files notice and the record of the pro-
ceeding with the Commission.
‘‘(2) A penalty imposed under paragraph (1) may 
take effect not earlier than the 31st day after the electric 
reliability organization files with the Commission notice of 
the penalty and the record of proceedings. Such penalty 
shall be subject to review by the Commission, on its own 
motion or upon application by the user, owner, or operator 
that is the subject of the penalty filed within 30 days after 
the date such notice is filed with the Commission. Applica-
tion to the Commission for review, or the initiation of re-
view by the Commission on its own motion, shall not oper-
ate as a stay of such penalty unless the Commission other-
wise orders upon its own motion or upon application by 
the user, owner, or operator that is the subject of such 
penalty. In any proceeding to review a penalty imposed 
under paragraph (1), the Commission, after notice and op-
portunity for hearing (which hearing may consist solely 
of the record before the electric reliability organization and 
opportunity for the presentation of supporting reasons to 
affirm, modify, or set aside the penalty), shall by order 
affirm, set aside, reinstate, or modify the penalty, and, 
if appropriate, remand to the electric reliability organiza-
tion for further proceedings. The Commission shall imple-
ment expedited procedures for such hearings. 
‘‘(3) On its own motion or upon complaint, the Com-
mission may order compliance with a reliability standard
and may impose a penalty against a user or owner or oper-
ator 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 en-
gaged or is about to engage in any acts or practices that 
constitute or will constitute a violation of a reliability 
standard. 
‘‘(4) The Commission shall establish regulations au-
thorizing the ERO to enter into an agreement to delegate 
authority to a regional entity for the purpose of proposing 
reliability standards to the ERO and enforcing reliability 
standards under paragraph (1) if— 
‘‘(A) the regional entity is governed by— 
‘‘(i) an independent board; 
‘‘(ii) a balanced stakeholder board; or 
‘‘(iii) a combination independent and bal-
anced stakeholder board; 
‘‘(B) the regional entity otherwise satisfies the 
provisions of subsection (c)(1) and (2); and 
‘‘(C) the agreement promotes effective and effi-
cient administration of bulk-power system reliability. 
The Commission may modify such delegation. The ERO 
and the Commission shall rebuttably presume that a pro-
posal for delegation to a regional entity organized on an 
Interconnection-wide basis promotes effective and efficient
administration of bulk-power system reliability and should 
be approved. Such regulation may provide that the Com-
mission may assign the ERO’s authority to enforce reli-
ability standards under paragraph (1) directly to a re-
gional entity consistent with the requirements of this para-
graph. 
‘‘(5) The Commission may take such action as is nec-
essary or appropriate against the ERO or a regional entity 
to ensure compliance with a reliability standard or any 
Commission order affecting the ERO or a regional entity. 
‘‘(6) Any penalty imposed under this section shall 
bear a reasonable relation to the seriousness of the viola-
tion and shall take into consideration the efforts of such 
user, owner, or operator to remedy the violation in a time-
ly manner. 
‘‘(f) CHANGES IN ELECTRICITY RELIABILITY ORGA-
NIZATION RULES.—The 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 complaint, may propose a change to the 
rules of the Electric Reliability Organization. A proposed 
rule or proposed rule change shall take effect upon a find-
ing by the Commission, after notice and opportunity for 
comment, that the change is just, reasonable, not unduly
discriminatory or preferential, is in the public interest, and 
satisfies the requirements of subsection (c). 
‘‘(g) RELIABILITY REPORTS.—The Electric Reli-
ability Organization shall conduct periodic assessments of 
the reliability and adequacy of the bulk-power system in 
North America. 
‘‘(h) COORDINATION WITH CANADA AND MEXICO.— 
The President is urged to negotiate international agree-
ments with the governments of Canada and Mexico to pro-
vide for effective compliance with reliability standards and 
the effectiveness of the Electric Reliability Organization 
in the United States and Canada or Mexico. 
‘‘(i) SAVINGS PROVISIONS.—(1) The Electric Reli-
ability Organization shall have authority to develop and 
enforce compliance with reliability standards for only the 
bulk-power system. 
‘‘(2) This section does not authorize the Electric Reli-
ability Organization or the Commission to order the con-
struction of additional generation or transmission capacity 
or to set and enforce compliance with standards for ade-
quacy 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 reliability standard, except that the State 
of New York may establish rules that result in greater 
reliability within that State, as long as such action does 
not result in lesser reliability outside the State than that 
provided by the reliability standards. 
‘‘(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 a reliability standard, taking into consid-
eration any recommendation of the Electric Reliability Or-
ganization. 
‘‘(5) The Commission, after consultation with the 
Electric Reliability Organization and the State taking ac-
tion, may stay the effectiveness of any State action, pend-
ing the Commission’s issuance of a final order. 
‘‘(j) REGIONAL ADVISORY BODIES.—The Commis-
sion shall establish a regional advisory body on the petition 
of at least two-thirds of the States within a region that 
have more than one-half of their electric load served within 
the region. A regional advisory body shall be composed of 
one member from each participating State in the region, 
appointed by the Governor of each State, and may include 
representatives of agencies, States, and provinces outside 
the United States. A regional advisory body may provide
advice to the Electric Reliability Organization, a regional 
entity, or the Commission regarding the governance of an 
existing or proposed regional entity within the same re-
gion, whether a standard proposed to apply within the re-
gion is just, reasonable, not unduly discriminatory or pref-
erential, and in the public interest, whether fees proposed 
to be assessed within the region are just, reasonable, not 
unduly discriminatory or preferential, and in the public 
interest and any other responsibilities requested by the 
Commission. The Commission may give deference to the 
advice of any such regional advisory body if that body is 
organized on an Interconnection-wide basis. 
‘‘(k) APPLICATION TO ALASKA AND HAWAII.—The 
provisions of this section do not apply to Alaska or Ha-
waii.’’. 
(b) STATUS OF ERO.—The Electric Reliability Orga-
nization certified by the Federal Energy Regulatory Com-
mission under section 215(c) of the Federal Power Act 
and any regional entity delegated enforcement authority 
pursuant to section 215(e)(4) of that Act are not depart-
ments, agencies, or instrumentalities of the United States 
Government. 
SEC. 5. DISPOSITION OF PROPERTY. 
Section 203 of the Federal Power Act (16 U.S.C. 
824b) is repealed.
SEC. 6. REGIONAL TRANSMISSION ORGANIZATIONS. 
Part II of the Federal Power Act (16 U.S.C. 824 et 
seq.) is amended by adding at the end thereof the fol-
lowing new section: 
‘‘SEC. 217. REGIONAL TRANSMISSION ORGANIZATIONS. 
‘‘(a) IN GENERAL.—Among options for the formation 
of a transmission organization, the Commission shall pre-
fer those in which— 
‘‘(1) participation in the organization by trans-
mitting utilities is voluntary; 
‘‘(2) the form, structure, and operating entity 
of the organization are approved of by participating 
transmitting utilities; and 
‘‘(3) market incentives exist to promote invest-
ment for expansion of transmission facilities and for 
the introduction of new transmission technologies 
within the territory of the organization. 
‘‘(b) CONDITIONS.—No order issued under this Act 
shall require or shall be conditioned upon a requirement 
that a transmitting utility transfer control of jurisdictional 
facilities to a regional transmission organization.’’. 
SEC. 7. SITING OF INTERSTATE ELECTRIC TRANSMISSION 
FACILITIES. 
(a) AMENDMENT OF FEDERAL POWER ACT.—Part 
II of the Federal Power Act is amended by adding at the 
end the following:
‘‘SEC. 218. SITING OF INTERSTATE ELECTRIC TRANS-
MISSION FACILITIES. 
‘‘(a) DESIGNATION OF NATIONAL INTEREST ELEC-
TRIC TRANSMISSION CORRIDORS.— 
‘‘(1) TRANSMISSION
CONGESTION
STUDY.— 
Within 1 year after the enactment of this section, 
and no less frequently than every 3 years thereafter, 
the Secretary of Energy, in consultation with af-
fected States, shall conduct a study of electric trans-
mission congestion. After considering alternatives 
and recommendations from interested parties, in-
cluding an opportunity for comment from affected 
States, the Secretary shall issue a report, based on 
such study, which may designate any geographic 
area experiencing or likely to experience electric en-
ergy transmission capacity constraints or congestion 
that adversely affects consumers as a national inter-
est electric transmission corridor. The Secretary 
shall rely upon information provided by regional 
transmission organizations developed in conjunction 
with States through regional transmission organiza-
tion planning processes, information provided by 
State public utility commissions, and such other in-
formation about transmission constraints, reliability, 
and prices for electric energy as the Secretary deems 
appropriate.
‘‘(2) CONSIDERATIONS.—In determining wheth-
er to designate a national interest electric trans-
mission corridor referred to in paragraph (1) under 
this section, the Secretary shall consider, among 
other factors, the effect of additional transmission 
capacity on reliability, energy markets, economic 
growth, and national security. 
‘‘(b) CONSTRUCTION PERMIT.—Except as provided 
in subsection (i), the Commission is authorized, upon its 
own motion or upon request, after notice and an oppor-
tunity for hearing, to issue a permit or permits for the 
construction or modification of electric transmission facili-
ties in a national interest electric transmission corridor 
designated by the secretary under subsection (a) if the 
Commission finds thatl 
‘‘(1)(A) a State in which the transmission fa-
cilities are to be constructed or modified is without 
authority to— 
‘‘(i) approve the siting of the facilities; or 
‘‘(ii) consider the interstate benefits ex-
pected to be achieved by the proposed construc-
tion or modification of transmission facilities in 
the State; 
‘‘(B) the applicant for a permit is a transmit-
ting utility under this Act but does not qualify to