‘‘(e) PUBLIC UTILITY CERTIFICATION.—Each public
utility which is an affiliate of a person referred to in sub-
section (c) shall certify to the Commission both of the fol-
lowing:
‘‘(1) Where the merger involves an acquisition
premium, it will not seek to recover such premium,
either directly or indirectly (such as by failing to re-
duce rates by an amount equal to the full amount
by which costs have been reduced as a result of the
merger), in rates charged for any service for which
there is not effective competition, to the extent such
premium exceeds the amount which the Commission
has determined is necessary to minimize the cost of
providing such service.
‘‘(2) Each State commission with jurisdiction
over any public utility which is an affiliate of any
party to the acquisition has found that it has the au-
thority and resources to prevent the acquisition from
having an adverse effect on the rates charged to any
retail customer of any public utility which is an affil-
iate of any party to the acquisition, including but
not limited to the authority to order the public util-
ity to cease being an affiliate of such party.
‘‘(f) CONDITIONS.—The Commission may establish
conditions on any transaction described in subsection (c)
as appropriate or necessary to ensure the continuing accu-
racy of all findings made under subsection (d) and certifi-
cations made under subsection (e).
‘‘(g) REGULATIONS.—The Commission shall promul-
gate regulations concerning the form of certification re-
quired by subsection (e), the criteria for establishing an
arm’s-length relationship, the definition of ‘‘effective com-
petition’’ and any other matter necessary to implement its
duties under this section.
‘‘(h) DEFINTIONS.—For purposes of this section:
‘‘(1) The term ‘acquire a substantial interest’
means acquire, merge with, or be a recipient of a
merger.
‘‘(2) The term ‘substantial interest in a public
utility’ means any interest, whether in voting stock,
nonvoting stock, securities, partnership share, or any
evidence of indebtedness, where the value of the in-
terest equals 10 percent or more of the book value
of the public utility.’’.
SEC. 5. MARKET CONCENTRATION AND AFFILIATE RELA-
TIONSHIPS.
Section 318 of the Federal Power Act is amended to
read as follows:
‘‘SEC. 318. MARKET CONCENTRATION AND AFFILIATE RELA-
TIONSHIPS.
‘‘(a) IN GENERAL.—No public utility, or any affiliate
thereof, shall use its ownership or control of any resource
to create or maintain a situation inconsistent with effec-
tive competition in any market in which competition would
benefit consumers.
‘‘(b) COMMISSION ACTIONS.—Upon a finding that a
public utility, or any affiliate thereof, has violated or is
capable of violating subsection (a), the Commission shall
order such public utility to take that action, authorized
by subsection (c), necessary to eliminate such violation.
‘‘(c) AUTHORIZED ACTIONS.—The Commission may
order a public utility to take any or all of the following
actions:
‘‘(1) Sell assets to a nonaffiliated company.
‘‘(2) Sell assets to an affiliated company, cou-
pled with establishment of arm’s-length relations.
‘‘(3) Share access to assets on a nondiscrim-
inatory basis at rates which are just and reasonable,
and not unduly discriminatory or preferential.
‘‘(d) IN GENERAL.—The Commission shall establish
regulations which ensure that with respect to diversifica-
tion by any public utility or affiliate thereof—
‘‘(1) the diversification has no adverse impact
on electric consumers of any utility;
‘‘(2) there is an arm’s-length relationship be-
tween—
‘‘(A) the transmission service activities,
distribution service activities, and retail sales
activities of the public utility; and
‘‘(B) any other business activities of the
public utility or any affiliate thereof,
‘‘(3) such diversification is prohibited unless
each State commission that has ratemaking author-
ity over such utility or any affiliate thereof has cer-
tified to the Federal Energy Regulatory Commission
that it has the authority and resources to prevent
such diversification from having an adverse effect on
retail customers of such public utility or any affiliate
thereof; and
‘‘(4) the Commission and all affected State
commissions have such access to books and records
of the public utility and all affiliates thereof as is
necessary to ensure that the foregoing conditions are
met and continue to be met.
‘‘(e) VIOLATIONS.—Upon a finding that any of the
conditions listed in subsection (e) have been violated, the
Commission shall take any action listed in subsection (g)
that it finds necessary or appropriate to remedy such vio-
lation and prevent future violations.
‘‘(f) CONTRACTS WITH AFFILIATES.—No contract
between any public utility and an affiliate, having a total
value of $1,000,000 or more, shall be valid unless each
State commission having authority over retail sales of elec-
tricity by such public utility has found that—
‘‘(1) such contract will have no adverse effect
on consumers; and
‘‘(2) such State commission has the authority
and resources to prevent any such adverse effect.
‘‘(g) COSTS AND REVENUES.—No Federal law shall
be interpreted to prevent a State commission or the Com-
mission, when establishing rates for any type of electric
service subject to the jurisdiction of such State commis-
sion or the Commission, from disallowing any costs unrea-
sonably incurred, or imputing any revenues unreasonably
foregone, including costs incurred or revenues foregone as
a result of an interaffiliate transaction. The previous sen-
tence shall not apply to any cost incurred or revenues fore-
gone prior to July 11, 1996, whether or not subject to
refund or adjustment.
‘‘(h) REGULATIONS.—The Commission shall promul-
gate regulations concerning the criteria for establishing an
arm’s-length relationship, the definition of ‘effective com-
petition’ and any other matter necessary to implement its
duties under this section.’’.
SEC. 6. TRANSMISSION ACCESS.
Section 211 of the Federal Power Act is amended by
adding the following at the end thereof:
‘‘(f) TRANSMISSION ACCESS.—The Commission shall
promulgate rules establish tariffs applicable in the largest
feasible regions within which a single schedule of trans-
mission rates is available for use by buyers or sellers of
generation, where such buyers and sellers are located with-
in such region. Such tariffs shall be designed to—
‘‘(1) ensure the economical use of existing gen-
erating facilities, and the economical location and
use of future generating facilities;
‘‘(2) ensure the full recovery by owners of
transmission facilities of all prudent transmission
costs; and
‘‘(3) prevent multiple charges for transmission
service based on the number of transmission owners
rather than the actual transmission cost.’’.
SEC. 7. ACCESS TO BOOKS AND RECORDS.
(a) STATE COMMISSIONS.—Section 201(g)(1) of the
Federal Power Act is amended by adding the following at
the end thereof: ‘‘A public utility, and each affiliate or as-
sociate thereof, shall produce for examination such person-
nel, books, accounts, memoranda, contracts, records, and
any other materials upon an order of any State commis-
sion finding that production of such materials will assist
the State commission in carrying out its responsibilities.
The cost of any audit ordered by a State commission
under either this section or under State law, shall be borne
by the public utility and its affiliates.’’.
(b) FERC.—Section 301 is amended by adding the
following at the end thereof:
‘‘(d) A public utility, and each affiliate or associate
thereof, shall produce for examination such personnel,
books, accounts, memoranda, contracts, records, and any
other materials upon an order of the Commission finding
that production of such materials will assist the Commis-
sion in carrying out its responsibilities. The cost of any
audit ordered by the Commission under this section, shall
be borne by the public utility and its affiliates.’’.
SEC. 8. DEFINITIONS.
Section 3 of the Federal Power Act is amended by
adding the following at the end thereof:
‘‘(26) 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 inter-
est (or the equivalent thereof) of more than 10 per-
cent.
‘‘(27) 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 con-
ducted by the same corporation or any affiliate
or associate 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 made worse off due to
its affiliation with a competitive enter-
prise; and
‘‘(ii) the public utility has certified
that with respect to any resource (whether
tangible 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.
‘‘(27) The term ‘diversification’ refers to the
conduct of any business activity other than the gen-
eration, transmission, distribution or sale of electric
energy.
‘‘(28) 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 re-
source will be below the market value of the re-
source.
‘‘(29) The term ‘effective competition’ refers to
a market in which no profit-maximizing seller could
impose a significant and nontransitory increase in
price. In determining whether an action is inconsist-
ent 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
definition, behavior which is mandated by State law
is not inconsistent with effective competition.
‘‘(30) 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.’’.
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