Conferees on the House and Senate energy bills ( H.R. 6 ) met on November 17,2003 and approved a conference report ( H.Rept. 108-375 ). On November 18, 2003, the Houseapproved the Conference report to H.R. 6 by a vote of 246-180. On November 21,2003, a cloture motion to limit debate on H.R. 6 failed in the Senate by a vote of 57-40. In addition to a title on electricity, the conference report included provisions on ethanol, methyltertiary butyl ether (MTBE), energy efficiency, hydroelectricity, renewable energy, oil and gas, coal,Indian energy, nuclear power, research and development, and energy tax incentives. This reportsummarizes the electricity title of H.R. 6 , Title XII. The policy context and/or thecurrent law is provided for selected sections. For additional discussion on these issues, see CRS Report RL32728 , Electric Utility Regulatory Reform: Issues for the 109th Congress , and CRS Report RL32133 , Federal Merger Review Authority and Electric Utility Restructuring. Section 1201. Short title. This title may be citedas the "Electric Reliability Act of 2003." Section 1211. Electric Reliability Standards. This section would require the Federal Energy Regulatory Commission (FERC) to promulgate ruleswithin 180 days of enactment to create a FERC-certified electric reliability organization (ERO). TheERO would develop and enforce reliability standards for the bulk-power system. All ERO standardswould be approved by FERC. Under this title, the ERO could impose penalties on a user, owner,or operator of the bulk-power system that violates any FERC-approved reliability standard. Inaddition, FERC could order compliance with a reliability standard and could impose a penalty ifFERC finds that a user, owner, or operator of the bulk-power system has engaged in or is about toengage in a violation of a reliability standard. This provision would not give an ERO or FERCauthorization to order construction of additional generation or transmission capacity. This provision would also require that FERC establish a regional advisory body if requestedby at least two-thirds of the states within a region that have more than half of their electric loadserved within that region. The advisory body would be composed of one member from eachparticipating state in the region, appointed by the Governor of each state, and could provide adviceto the ERO or FERC on reliability standards, proposed regional entities, proposed fees, and any otherresponsibilities requested by FERC. The entire reliability provision would not apply to Alaska orHawaii. Current Law. The North American Electric ReliabilityCouncil (NERC) has responsibility for reliability of the bulk power system. NERC has establishedreliability guidelines but has no enforcement authority. The Federal Power Act gives FERCjurisdiction over unbundled transmission and was intended to regulate wholesale rates; however, noauthority was provided to regulate reliability. Policy Context. The proposed legislation is intendedto provide federal jurisdiction over activities that are required to support reliability of the UnitedStates bulk power system. Clarifying FERC authority to establish and regulate an ERO is intendedto improve reliability as restructuring of the U.S. bulk power system proceeds. Similar provisionswere included in the House-passed and Senate-passed H.R. 6 . Advocates of giving FERC authority over the ERO contend that central jurisdiction wouldprovide more accountability. FERC would be ultimately responsible for reliability issues. If thepenalties employed by the ERO were not successful, then FERC would have the authority to enforcepenalties for entities that did not comply with reliability standards. Establishing this newrelationship between FERC and the ERO would have the potential to improve coordination betweenmarket functions and reliability functions. Those opposed to giving FERC jurisdiction over bulkpower system reliability contend that FERC has no experience in this area. If FERC is given thisauthority, it would have to rely on NERC for much of its expertise. Placing FERC in this positionmay add to the uncertainty associated with the changes in institutional structure as FERC takes onthis new role. Section 1221. Siting of Interstate ElectricTransmission Facilities. The Secretary of Energy would be required to conduct a study of electrictransmission congestion every three years. Based on the findings, the Secretary of Energy coulddesignate a geographic area as being congested. Under certain conditions, FERC would beauthorized to issue construction permits. Under proposed Federal Power Act (FPA) section 216(d),affected states, federal agencies, Indian tribes, property owners, and other interested parties wouldhave an opportunity to present their views and recommendations with respect to the need for andimpact of a proposed construction permit. However, there is no requirement for a specific commentperiod. New FPA section 216(e) would allow permit holders to petition in U.S. District Court toacquire rights-of-way through the exercise of the right of eminent domain. Any exercise of eminentdomain authority would be considered to be takings of private property for which just compensationis due. New FPA section 216(g) does not state whether property owners will be required toreimburse compensation if the rights-of-way are transferred back to the owner. An applicant for federal authorization to site transmission facilities on federal lands couldrequest that the Department of Energy be the lead agency to coordinate environmental review andother federal authorization. Once a completed application is submitted, all related environmentalreviews would be required to be completed within 1 year unless another federal law makes thatimpossible. FPA section 216(h) would give the Department of Energy (DOE) new authority toprepare environmental documents and appears to give DOE additional decision-making authorityfor rights-of-way and siting on federal lands. This would appear to give DOE input into the decisionprocess for creating rights-of-way. Review under section 503 of the Federal Land Policy andManagement Act could be streamlined by relying on prior analyses. If a federal agency has deniedan authorization required by a transmission or distributions facility, the denial could be appealed bythe applicant or relevant state to the Secretary of Energy. The Secretary of Energy would be requiredto issue a decision within 90 days of the appeal's filing. States could enter into interstate compactsfor the purposes of siting transmission facilities and the Secretary of Energy could provide technicalassistance. This section would not apply to the Electric Reliability Council of Texas (ERCOT). Asimilar provision was included in the House-passed H.R. 6 . Current Law. Regulatory jurisdiction over theelectricity industry is divided between federal and state authorities, with individual states overseeingactivities considered intrastate and with FERC regulating the interstate aspects of electricity andnatural gas commerce. (1) Under the Federal Power Act, siting of transmission lines is the responsibility of the states. Section 1222. Third-Party Finance. The WesternArea Power Administration (WAPA) and the Southwestern Power Administration (SWPA) wouldbe able to either continue to design, develop, construct, operate, maintain, or own transmissionfacilities within their region or participate with other entities for the same purposes if: the Secretaryof Energy designates the area as a National Interest Electric Transmission Corridor and the projectwould reduce congestion, or the project is needed to accommodate projected increases in demandfor transmission capacity. The project would need to be consistent with the needs identified by theappropriate Regional Transmission Organization or Independent System Operator. No more than$100 million from third-party financing may be used during fiscal years 2004 through 2013. Thissection was not included in either the House- or Senate-passed H.R. 6 . Current Law. Enabling statutes for power marketingadministrations may restrict third-party financing, construction, operation, and maintenance oftransmission facilities. (2) Section 1223. Transmission System Monitoring. Within six months of enactment, the Secretary of Energy and the Federal Energy RegulatoryCommission would be required to complete a study and report to Congress on what would berequired to create and implement a transmission monitoring system for the Eastern and Westerninterconnections. The monitoring system would provide all transmission system owners andRegional Transmission Organizations real-time information on the operating status of alltransmission lines. This section was not included in either the House- or Senate-passed H.R. 6 . Section 1224. Advanced TransmissionTechnologies. FERC would be directed to encourage deployment of advanced transmissiontechnologies. This section was not included in either the House- or Senate-passed H.R. 6 . Section 1225. Electric Transmission andDistribution Programs. The Secretary of Energy acting through the Director of the Office of ElectricTransmission and Distribution would be required to implement a program to promote reliability andefficiency of the electric transmission system. Within one year of enactment, the Secretary of Energywould be required to submit to Congress a report detailing the program's five-year plan. Within twoyears of enactment, the Secretary of Energy would be required to submit to Congress a reportdetailing the progress of the program. The Secretary of Energy would be directed to establish aresearch, development, demonstration and commercial application initiative that would focus onhigh-temperature superconductivity. For this project, appropriations would be authorized forFY2004 through FY2008. In part, a similar provision was included in the House-passed H.R. 6 . Section 1226. Advanced Power SystemTechnology Incentive Program. A program would be established to provide incentive payments toowners or operators of advanced power generation systems. Eligible systems would includeadvanced fuel cells, turbines, or hybrid power systems. A total of $140 million would be authorizedfor FY2004 through FY2008. A similar provision was included in the House-passed H.R. 6 .