(6) 
ADDITIONAL
PRINCIPLES.—Such 
other
principles as the Joint Board and the States deter-
mine are necessary and appropriate for the protec-
tion of the public interest, convenience, and necessity
and are consistent with this Act.
(c) DEFINITION.—
(1) IN GENERAL.—Universal service is an evolv-
ing level of electric services that the States shall es-
tablish periodically under this section, taking into
account advances in technologies and services. The
Joint Board in recommending, and the States in es-
tablishing, the definition of the services that are sup-
ported by universal service support mechanisms shall
consider the extent to which such services—
(A) are essential to public health or public
safety;
(B) have, through the operation of market
choices by customers, been subscribed to by a
substantial majority of residential customers;
(C) are being deployed in transmission and
distribution systems by electric service provid-
ers; and
(D) are consistent with the public interest,
convenience, and necessity.
(2) ALTERATIONS
AND
MODIFICATIONS.—The
Joint Board may, from time to time, recommend to
the States modifications in the definition of the serv-
ices that are supported by universal service support
mechanisms.
(d) UTILITY CONTRIBUTION.—Every electric utility
that provides interstate electric services shall contribute,
on an equitable and nondiscriminatory basis, to the spe-
cific, predictable, and sufficient mechanisms established
by the States to preserve and advance universal service.
Any State may exempt a utility or class of utilities from
any requirement established by the State consistent with
this subsection if the utility’s activities are limited to such
an extent that the level of such utility’s contribution to
the preservation and advancement of universal service
would be de minimis. Any other provider of electric serv-
ices may be required to contribute to the preservation and
advancement of universal service if the public interest so
requires.
(e) STATE AUTHORITY.—A State may adopt regula-
tions to preserve and advance universal service. Every
electric utility that provides intrastate electric services
shall contribute, on an equitable and nondiscriminatory
basis, in a manner determined by the State to the preser-
vation and advancement of universal service in that State.
A State may adopt regulations to provide for additional
definitions and standards to preserve and advance univer-
sal service within that State.
(f) CONSUMER PROTECTION.—The States should en-
sure that universal service is available at rates that are
just, reasonable, and affordable.
(g) SUBSIDY OF COMPETITIVE SERVICES PROHIB-
ITED.—An electric utility may not use services that are
not competitive to subsidize services that are subject to
competition. The States shall establish any necessary cost
allocation rules, accounting safeguards, and guidelines to
ensure that services included in the definition of universal
service bear no more than a reasonable share of the joint
and common costs of facilities used to provide those serv-
ices.
Subtitle D—General and
Miscellaneous Provisions
SEC. 131. DEFINITIONS.
As used in this title:
(1) The term ‘‘Commission’’ means the Federal
Energy Regulatory Commission, except as otherwise
specifically provided.
(2) The term ‘‘public utility’’ has the meaning
provided by section 201(e) of the Federal Power
Act.
(3) Except as otherwise specifically provided in
this Act, the term ‘‘affiliate’’ means a person that
(directly or indirectly) owns or controls, is owned or
controlled by, or is under common ownership or con-
trol with, another person. For purposes of this para-
graph, the term ‘‘own’’ means to own an equity in-
terest (or the equivalent thereof) of more than 10
percent.
(4) The 
term 
‘‘arm’s-length 
relationship’’
means a relationship between—
(A) those business activities conducted by
a public utility for its transmission service cus-
tomers, distribution service customers, or retail
electric customers; and
(B) any other business activities conducted
by the same corporation or any affiliate or asso-
ciate company, where—
(i) such business activities are con-
ducted in compliance with Commission
rules ensuring that—
(I) no business activity has any
advantage over its competitors due to
its affiliation with a business which
serves transmission service customers,
distribution service customers, or re-
tail electric customers who do not
have the right to choose their own
electric supplier; and
(II) no transmission service cus-
tomer, distribution service customer
or retail electric customer who do not
have the right to choose his own elec-
tric supplier is disadvantaged due to
its affiliation with a competitive enter-
prise; and
(ii) the public utility has certified that
with respect to any resource (whether tan-
gible or intangible) owned, or employees
employed, by a public utility which is an
affiliate or associate of such person, any
cost of which has been recovered from the
captive customers of such public utility (or,
in the case of a registered holding com-
pany, from the captive customers of a pub-
lic utility which is an affiliate or associate
of such public utility), no use of such re-
sources or employees shall be made by
such public utility or any affiliate or asso-
ciate thereof for any purpose other than
serving such native load customers, nor
shall such resources or employees be sold
or transferred to any affiliate or associate
therefore, unless such public utility remits
to such captive customers, through a pro-
cedure found satisfactory by each affected
State commission responsible for setting
the rates for such customers, the higher of
the cost attributable to such use or the
market value of such use.
(5) The term ‘‘diversification’’ refers to the con-
duct of any business activity other than the genera-
tion, transmission, distribution or sale of electric en-
ergy.
(6) The term ‘‘economic risk’’ includes the risk,
in any form, that the cost of a resource borne by the
consumer at any time in the life of the resource will
be below the market value of the resource.
(7) The term ‘‘effective competition’’ refers to
a market in which no profit-maximizing seller could
profitably impose a significant and nontransitory in-
crease in price, as determined by the Commission. In
determining whether an action is inconsistent with
effective competition, the Commission shall take into
account the size of market share and the extent of
any barriers to entry. For purposes of this para-
graph, behavior which is mandated by State law is
not inconsistent with effective competition.
(8) The term ‘‘captive customers’’ means the
group of customers of a pubic utility who do not
have the right to choose their own supplier of elec-
tricity.
(9) The terms ‘‘public utility company’’, ‘‘elec-
tric utility company’’ and ‘‘gas utility company‘‘
have the meanings provided by section 2(a) of the
Public Utility Holding Company Act of 1935.
(10) The term ‘‘renewable energy’’ means solar
heat, solar light, wind, geothermal energy, and bio-
mass, except for heat from the burning of municipal
solid waste.
TITLE II—RELIABILITY
SEC. 201. ELECTRIC RELIABILITY COUNCILS.
(a) IN GENERAL.—Part II of the Federal Power Act
is amended by adding after section 216 the following new
section:
‘‘SEC. 217. ELECTRIC RELIABILITY COUNCILS.
‘‘(a) DEFINITIONS.—As used in this section:
‘‘(1) The term ‘electric reliability council’ means
a self-regulated organization whose membership is
composed of electric utilities or transmitting utilities
and whose mission to promote the reliability of elec-
tricity supply and system.
‘‘(2) The term ‘electric reliability system’ means
the network of transmission lines and generating
units in a given geographic area, operated collabo-
ratively by or for their owners, in a manner that
promotes the reliability of bulk electric systems.
‘‘(b) MEMBERSHIP.—(1) Each electric utility and
transmitting utility shall become a member of an electric
reliability council.
‘‘(2) An electric reliability council may condition
membership on meeting standards of operation that the
council establishes, and may bar from or suspend the
membership of an electric utility or transmitting utility
that fails to comply with a condition placed on its member-
ship.
‘‘(c) RULES.—An electric reliability council shall es-
tablish rules that—
‘‘(1) permit open access to membership;
‘‘(2) assure fair representation of its members
in the selection of it directors and management of
its affairs;
‘‘(3) allocate equitably dues, fees, and other
charges among its members;
‘‘(4) include standards of utility operation de-
signed to foster reliability of electric reliability sys-
tems; and
‘‘(5) provide a procedure for discipline (includ-
ing fines, suspension, expulsion, or other appropriate
sanctions of members for violation of this section,
rules and regulations issued under this section, and
rules of the council.
‘‘(d) OVERSIGHT OF ELECTRIC RELIABILITY COUN-
CILS.—
‘‘(1) The Commission shall oversee the oper-
ations of an electric reliability council.
‘‘(2) The Commission shall establish procedures
for an electric reliability council to apply for reg-
istration, shall provide public notice of the applica-
tion, and shall afford interested persons the oppor-
tunity to submit views on the application. The Com-
mission shall register an applicant if the Commission
determines that—
‘‘(A) the applicant is so organized and has
the capacity to carry out the purposes of this
section and to comply and enforce compliance
of its members with the provisions of this sec-
tion, the rules and regulations issued under this
section, and the rules of the applicant;
‘‘(B) the applicant’s rules comply with sub-
section (c) of this section; and
‘‘(C) the applicant’s rules do not impose a
burden on effective competition that is not nec-
essary or appropriate to further the purposes of
this section.
‘‘(3) An electric reliability council 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
shall establish procedures, in accordance with part
III of this Act, to consider a proposed rule or pro-
posed rule change. A proposed rule change takes ef-
fect upon Commission approval, except as specified
in paragraphs (4) and (5).
‘‘(4) A proposed rule or proposed rule change
that an electric reliability council designates as—
‘‘(A) a stated policy, practice, or interpre-
tation with respect to the meaning, administra-
tion, or enforcement of an existing rule;
‘‘(B) establishment or changes in dues or
other council charges; or
‘‘(C) concerned solely with administration
of the council takes effect upon filing with the
Commission.
‘‘(5) An electric reliability council may put into
effect summarily a proposed rule or proposed rule
change that is necessary to protect an electric reli-
ability system, subject to subsequent Commission
approval.
‘‘(6) The Commission may amend the rules of
an electric reliability council if the Commission con-
siders amendment necessary or appropriate to en-
sure the fair administration of the council, to con-
form the council rules to the requirements of this
section or rules and regulations issued under this
section, or to further the purposes of this section or
promote effective competition. The Commission shall
establish procedures in accordance with part III of
this Act to implement this paragraph.
‘‘(7) If an electric reliability council imposes a
final disciplinary action on a council member, the
council shall notify the Commission of that action.
The Commission, on its own motion, or upon appli-
cation by the member subject to the action, after no-
tice and opportunity for hearing in accordance with
part III of the Act, may affirm, set aside, or modify
the action.
‘‘(8) The Commission, by order, may suspend
or revoke the registration of an electric reliability
council or limit the activities, functions, or oper-
ations of a council if it determines that action is
necessary or appropriate to protect the electric reli-
ability system. If the Commission responds or re-
vokes the registration of a council, the Commission
shall operate the council until the suspension ex-
pires, the revocation is reversed, or another council
is in place.
‘‘(9) The Commission, by order may suspend or
expel a member from a council, or may remove from
office an officer or director of the council if the
Commission, on the record after notice and oppor-
tunity for hearing in accordance with part III of this
Act finds that action necessary or appropriate to
protect the electric reliability system.
‘‘(10) A violation of this section is subject to
section 316A, but not subject to section 316 of this
Act.’’.
(b) CONFORMING AMENDMENT.—Section 316A of
the Federal Power Act is amended by striking ‘‘or 214’’
and inserting ‘‘214, 215, or 217’’. Section 316A of such
Act is amended by striking ‘‘or 214’’ in each place it ap-
pears subsections (a) and (b) and inserting ‘‘214, 215, or
217’’.
Æ