[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2814 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 2814

To provide for expansion of electricity transmission networks in order 
 to support competitive electricity markets, to ensure reliability of 
   electric service, to modernize regulation and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             August 2, 2001

Mr. Sawyer (for himself and Mr. Burr of North Carolina) 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 provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
To provide for expansion of electricity transmission networks in order 
 to support competitive electricity markets, to ensure reliability of 
   electric service, to modernize regulation and for other purposes.

    Be it enacted by the Senate and House of Representatives 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. Economically efficient transmission service and expansion of 
                            transmission networks.
Sec. 4. Electric energy transmission reliability.
Sec. 5. Disposition of property.
Sec. 6. Promotion of voluntary development of regional transmission 
                            organizations.
Sec. 7. State and Federal authority to site transmission facilities.
Sec. 8. Puhca exemption for RTOs.
Sec. 9. Independent transmission companies.

SEC. 2. FINDINGS.

    Congress finds as follows:
            (1) Transmission networks are the backbone of competitive 
        power markets and increased interstate commerce in electricity.
            (2) Wholesale electric competition, already in effect 
        across the nation, and retail electric competition, adopted by 
        nearly half of the States, depend on adequate transmission 
        networks to benefit electric consumers.
            (3) The expansion, enhancement, and improvement of 
        transmission facilities are necessary to maintain and improve 
        reliability of electric service.
            (4) To support competitive power markets and to maintain 
        and improve reliability of electric service, the regulation of 
        transmission service must be reformed.

SEC. 3. ECONOMICALLY EFFICIENT TRANSMISSION SERVICE AND EXPANSION OF 
              TRANSMISSION NETWORKS.

    Part II of the Federal Power Act is amended by adding at the end 
thereof the following new section:

``SEC. 215. STANDARDS FOR ESTABLISHING RATES FOR TRANSMISSION SERVICE.

    ``(a) Certain Requirements.--Rates, charges, terms and conditions 
established for transmission service pursuant to this Part shall--
            ``(1) promote the economically efficient transmission of 
        electricity, the enlargement of transmission networks, the 
        introduction of new transmission technologies to increase 
        capacity of existing transmission networks, and the provision 
        of transmission services by regional transmission 
        organizations;
            ``(2) encourage the efficient and reliable operation of 
        transmission facilities and supply of transmission services 
        through performance-based or incentive ratemaking, and other 
        measures;
            ``(3) provide for a return on equity that--
                    ``(A) assures confidence in the financial soundness 
                of the utility and maintains and supports its credit, 
                taking into consideration risks associated with changes 
                in regulatory or economic circumstances;
                    ``(B) in the case of rates proposed by a regional 
                transmission organization, is commensurate with the 
                financial, operational and other risks of turning 
                facilities over to a regional transmission organization 
                and reflects other changes in the structure of the 
                industry; and
                    ``(C) enables the utility to raise the money 
                necessary for the proper discharge of its public duties 
                and to protect public interests, both existing and 
                foreseeable, in reliable, high-capacity transmission 
                networks; and
            ``(4) comply with applicable procedural requirements of 
        sections 205 and 206 and the requirement that rates, charges, 
        terms and conditions be just and reasonable and not unduly 
        discriminatory or preferential.
    ``(b) Innovative Transmission Pricing Policies Generally.--The 
Commission shall encourage innovative transmission pricing policies for 
a regional transmission organization, a comparable transmission 
organization approved by the Commission before the enactment of this 
Act, a transmitting utility whose facilities are controlled but not 
owned by either such entity, or an independent transmission company. 
Such transmission pricing shall--
            ``(1) provide incentives to transmitting utilities to 
        promote the voluntary participation and formation of regional 
        transmission organizations, without having the effect of 
        forcing transmitting utilities to join regional transmitting 
        organizations and extend such incentives to transmitting 
        utilities that already have formed a regional transmission 
        organization;
            ``(2) limit separate, additive access charges for 
        transmission service over the transmission facilities operated 
        by the regional transmission organization, except that a 
        reasonable transition mechanism or period may be used before 
        eliminating such separate, additive access charges;
            ``(3) minimize the shifting of costs among existing 
        customers of the transmitting utilities within the regional 
        transmission organization, including permitting the use of 
        transmission rates based on a single transmitting utility's 
        costs for transmission services provided within the regional 
        transmission organization;
            ``(4) encourage the efficient and reliable operation of the 
        transmission grid and supply of transmission services through 
        congestion management, performance-based or incentive 
ratemaking, and other measures;
            ``(5) encourage efficient and adequate investment in and 
        expansion of the transmission facilities owned or controlled by 
        the regional transmission organization; and
            ``(6) provide enhanced returns on equity for investing in 
        transmission and related facilities that improve the 
        operational reliability of the transmission grid.
    ``(c) Negotiated Rates.--The Commission may permit the charging of 
negotiated rates for transmission services under this section without 
regard to costs whenever an individual company or companies are willing 
to pay such negotiated rates. The costs associated with such negotiated 
rates shall not be recovered from transmission customers.
    ``(d) Rulemaking.--Within 180 days of the enactment of this 
section, the Commission shall establish by rule definitions and 
standards for implementing subsection (a) and subsection (b). With 
respect to performance-based rates or incentive rates, the definitions 
and standards shall include, but not be limited to--
            ``(1) a method for calculating initial transmission rates 
        (including price caps that would include discounting);
            ``(2) an index mechanism for adjusting initial rates;
            ``(3) time periods for redetermining initial rates; and
            ``(4) costs to be excluded from performance based rates.
    ``(c) Report.--Within 180 days after enactment of the section, and 
each year thereafter, the Commission shall submit to Congress a report 
on all policies adopted by the Commission to encourage the economic use 
and expansion of the transmission network through incentive rates or 
other similar market-oriented approaches and their effectiveness in 
doing so.''.

SEC. 4. ELECTRIC ENERGY TRANSMISSION RELIABILITY.

    (a) Electric Reliability Organization and Oversight.--
            (1) In general.--The Federal Power Act is amended by 
        inserting at the end thereof the following new section:

``SEC. 216. ELECTRIC RELIABILITY ORGANIZATION AND OVERSIGHT.

    ``(a) Definitions.--As used in this section:
            ``(1) Affiliated regional reliability entity.--The term 
        `affiliated regional reliability entity' means an entity 
        delegated authority under the provisions of subsection (h).
            ``(2) Bulk-power system.--The term `bulk-power system' 
        means all facilities and control systems necessary for 
        operating an interconnected transmission grid (or any portion 
        thereof), including high-voltage transmission lines; 
        substations; control centers; communications; data, and 
        operations planning facilities; and the output of generating 
        units necessary to maintain transmission system reliability.
            ``(3) Electric reliability organization, or organization.--
        The term `Electric Reliability Organization' or `Organization' 
        means the organization approved by the Commission under 
        subsection (d)(4).
            ``(4) Entity rule.--The term `entity rule' means a rule 
        adopted by an affiliated regional reliability entity for a 
        specific region and designed to implement or enforce 1 or more 
        Organization Standards. An entity rule shall be approved by the 
        organization and once approved, shall be treated as an 
        Organization Standard.
            ``(5) Industry sector.--The term `industry sector' means a 
        group of users of the bulk power system with substantially 
        similar commercial interests, as determined by the Board of the 
        Electric Reliability Organization.
            ``(6) Interconnection.--The term `interconnection' means a 
        geographic area in which the operation of bulk-power system 
        components is synchronized such that the failure of 1 or more 
        of such components may adversely affect the ability of the 
        operators of other components within the interconnection to 
        maintain safe and reliable operation of the facilities within 
        their control.
            ``(7) Organization standard.--The term `Organization 
        Standard' means a policy or standard duly adopted by the 
        Electric Reliability Organization to provide for the reliable 
        operation of a bulk-power system.
            ``(8) Public interest group.--The term `public interest 
        group' means any nonprofit private or public organization that 
        has an interest in the activities of the Electric Reliability 
        Organization, including, but not limited to, ratepayer 
        advocates, environmental groups, and State and local government 
        organizations that regulate market participants and promulgate 
        government policy.
            ``(9) Variance.--The term `variance' means an exception or 
        variance from the requirements of an Organization Standard 
        (including a proposal for an Organization Standard where there 
        is no Organization Standard) that is adopted by an affiliated 
        regional reliability entity and applicable to all or a part of 
        the region for which the affiliated regional reliability entity 
        is responsible. A variance shall be approved by the 
        organization and once approved, shall be treated as an 
        Organization Standard.
            ``(10) System operator.--The term `system operator' means 
        any entity that operates or is responsible for the operation of 
        a bulk-power system, including but not limited to a control 
        area operator, an independent system operator, a regional 
        transmission organization, a transmission company, a 
        transmission system operator, or a regional security 
        coordinator.
            ``(11) User of the bulk-power system.--The term `user of 
        the bulk-power system' means any entity that sells, purchases, 
        or transmits electric power over a bulk-power system, or that 
        owns, operates, or maintains facilities or control systems 
that are part of a bulk-power system, or that is a system operator.
    ``(b) Commission Authority.--
            ``(1) Within the United States, the Commission shall have 
        jurisdiction over the Electric Reliability Organization, all 
        affiliated regional reliability entities, all system operators, 
        and all users of the bulk-power system, for purposes of 
        approving and enforcing compliance with the requirements of 
        this section.
            ``(2) The Commission may, by rule, define any other term 
        used in this section, provided such definition is consistent 
        with the definitions in, and the purpose and intent of, this 
        Act.
            ``(3) Not later than 90 days after the date of enactment of 
        this section, the Commission shall issue a proposed rule for 
        implementing the requirements of this section. The Commission 
        shall provide notice and opportunity for comment on the 
        proposed rule. The Commission shall issue a final rule under 
        this subsection within 180 days after the date of enactment of 
        this section.
            ``(4) Nothing in this section shall be construed as 
        limiting or impairing any authority of the Commission under any 
        other provision of this Act, including its exclusive authority 
        to determine rates, terms, and conditions of transmission 
        services subject to its jurisdiction.
    ``(c) Existing Reliability Standards.--Following enactment of this 
section, and prior to the approval of an organization under subsection 
(d), any entity, including the North American Electric Reliability 
Council and its member regional reliability councils, may file any 
reliability standard, guidance, or practice that such entity would 
propose to be made mandatory and enforceable. The Commission, after 
allowing an opportunity to submit comments, may approve any such 
proposed mandatory standard, guidance, or practice, or any amendment 
thereto, if it finds that the standard, guidance, or practice, or 
amendment is just, reasonable, not unduly discriminatory or 
preferential, and in the public interest. The Commission may, without 
further proceeding or finding, grant its approval to any standard, 
guidance, or practice for which no substantive objections are filed in 
the comment period. Filed standards, guidances, or practices, including 
any amendments thereto, shall be mandatory and applicable according to 
their terms following approval by the Commission and shall remain in 
effect until (1) withdrawn, disapproved, or superseded by an 
Organization Standard, issued or approved by the Electric Reliability 
Organization and made effective by the Commission under subsection (e); 
or (2) disapproved by the Commission if, upon complaint or upon its own 
motion and after notice and an opportunity for comment, the Commission 
finds the standard, guidance, or practice unjust, unreasonable, unduly 
discriminatory, or preferential or not in the public interest. 
Standards, guidances, or practices in effect pursuant to the provisions 
of this subsection shall be enforceable by the Commission.
    ``(d) Organization Approval.--
            ``(1) Following the issuance of a final Commission rule 
        under subsection (b)(3), an entity may submit an application to 
        the Commission for approval as the Electric Reliability 
        Organization. The applicant shall specify in its application 
        its governance and procedures, as well as its funding mechanism 
        and initial funding requirements.
            ``(2) The Commission shall provide public notice of the 
        application and afford interested parties an opportunity to 
        comment.
            ``(3) The Commission shall approve the application if the 
        Commission determines that the applicant--
                    ``(A) has the ability to develop, implement, and 
                enforce standards that provide for an adequate level of 
                reliability of the bulk-power system;
                    ``(B) permits voluntary membership to any user of 
                the bulk-power system or public interest group;
                    ``(C) assures fair representation of its members in 
                the selection of its directors and fair management of 
                its affairs, taking into account the need for 
                efficiency and effectiveness in decisionmaking and 
                operations and the requirements for technical 
                competency in the development of Organization Standards 
                and the exercise of oversight of bulk-power system 
                reliability;
                    ``(D) assures that no 2 industry sectors have the 
                ability to control, and no 1 industry sector has the 
                ability to veto, the Electric Reliability 
                Organization's discharge of its responsibilities 
                (including actions by committees recommending standards 
                to the board or other board actions to implement and 
                enforce standards);
                    ``(E) provides for governance by a board wholly 
                comprised of independent directors;
                    ``(F) provides a funding mechanism and requirements 
                that are just, reasonable, and not unduly 
                discriminatory or preferential and are in the public 
                interest, and which satisfy the requirements of 
                subsection (l);
                    ``(G) establishes procedures for development of 
                Organization Standards that provide reasonable notice 
                and opportunity for public comment, taking into account 
                the need for efficiency and effectiveness in 
                decisionmaking and operations and the requirements for 
                technical competency in the development of Organization 
                Standards, and which standards development process has 
                the following attributes:
                            ``(i) Openness.
                            ``(ii) Balance of interests.
                            ``(iii) Due process, except that the 
                        procedures may include alternative procedures 
                        for emergencies;
                    ``(H) establishes fair and impartial procedures for 
                implementation and enforcement of Organization 
                Standards, either directly or through delegation to an 
                affiliated regional reliability entity, including the 
                imposition of penalties, limitations on activities, 
                functions, or operations, or other appropriate 
                sanctions;
                    ``(I) establishes procedures for notice and 
                opportunity for public observation of all meetings, 
                except that the procedures for public observation may 
                include alternative procedures for emergencies or for 
                the discussion of information the directors determine 
                should take place in closed session, such as 
                litigation, personnel actions, or commercially 
                sensitive information;
                    ``(J) provides for the consideration of 
                recommendations of States and State commissions; and
                    ``(K) addresses other matters that the Commission 
                may deem necessary or appropriate to ensure that the 
                procedures, governance, and funding of the Electric 
                Reliability Organization are just, reasonable, not 
                unduly discriminatory or preferential, and are in the 
                public interest.
            ``(4) The Commission shall approve only 1 Electric 
        Reliability Organization. If the Commission receives 2 or more 
        timely applications that satisfy the requirements of this 
        subsection, the Commission shall approve only the application 
        it concludes will best implement the provisions of this 
        section.
    ``(e) Establishment of and Modifications to Organization 
Standards.--
            ``(1) The Electric Reliability Organization shall file with 
        the Commission any new or modified organization standards, 
        including any variances or entity rules, and the Commission 
        shall follow the procedures under paragraph (2) for review of 
        that filing.
            ``(2) Submissions under paragraph (1) shall include--
                    ``(A) a concise statement of the purpose of the 
                proposal, and
                    ``(B) a record of any proceedings conducted with 
                respect to such proposal.
The Commission shall provide notice of the filing of such proposal and 
afford interested entities 30 days to submit comments. The Commission, 
after taking into consideration any submitted comments, shall approve 
or disapprove such proposal not later than 60 days after the deadline 
for the submission of comments, except that the Commission may extend 
the 60-day period for an additional 90 days for good cause, and except 
further that if the Commission does not act to approve or disapprove a 
proposal within the foregoing periods, the proposal shall go into 
effect subject to its terms, without prejudice to the authority of the 
Commission thereafter to modify the proposal in accordance with the 
standards and requirements of this section. Proposals approved by the 
Commission shall take effect according to their terms but not earlier 
than 30 days after the effective date of the Commission's order, except 
as provided in paragraph (3) of this subsection.
            ``(3)(A) In the exercise of its review responsibilities 
        under this subsection, the Commission shall give due weight to 
        the technical expertise of the Electric Reliability 
        Organization with respect to the content of a new or modified 
        organization standard, but shall not defer to the organization 
        with respect to the effect of the standard on competition. The 
        Commission shall approve a proposed new or modified 
        organization standard if it determines the proposal to be just, 
        reasonable, not unduly discriminatory or preferential, and in 
        the public interest.
            ``(B) An existing or proposed organization standard which 
        is disapproved in whole or in part by the Commission shall be 
        remanded to the Electric Reliability Organization for further 
        consideration.
            ``(C) The Commission, on its own motion or upon complaint, 
        may direct the Electric Reliability Organization to develop an 
        organization standard, including modification to an existing 
        organization standard, addressing a specific matter by a date 
        certain if the Commission considers such new or modified 
        organization standard necessary or appropriate to further the 
        purposes of this section. The Electric Reliability Organization 
        shall file any such new or modified organization standard in 
        accordance with this subsection.
            ``(D) An affiliated regional reliability entity may propose 
        a variance or entity rule to the Electric Reliability 
        Organization. The affiliated regional reliability entity may 
        request that the Electric Reliability Organization expedite 
        consideration of the proposal, and may file a notice of such 
        request with the Commission, if expedited consideration is 
        necessary to provide for bulk-power system reliability. If the 
        Electric Reliability Organization fails to adopt the variance 
        or entity rule, either in whole or in part, the affiliated 
        regional reliability entity may request that the Commission 
        review such action. If the Commission determines, after its 
        review of such a request, that the action of the Electric 
        Reliability Organization did not conform to the applicable 
        standards and procedures approved by the Commission, or if the 
        Commission determines that the variance or entity rule is just, 
        reasonable, not unduly discriminatory or preferential, and in 
the public interest, and that the Electric Reliability Organization has 
unreasonably rejected the proposed variance or entity rule, then the 
Commission may remand the proposed variance or entity rule for further 
consideration by the Electric Reliability Organization or may direct 
the Electric Reliability Organization or the affiliated regional 
reliability entity to develop a variance or entity rule consistent with 
that requested by the affiliated regional reliability entity. Any such 
variance or entity rule proposed by an affiliated regional reliability 
entity shall be submitted to the Electric Reliability Organization for 
review and filing with the Commission in accordance with the procedures 
specified in this subsection.
            ``(E) Notwithstanding any other provision of this 
        subsection, a proposed organization standard or amendment shall 
        take effect according to its terms if the Electric Reliability 
        Organization determines that an emergency exists requiring that 
        such proposed organization standard or amendment take effect 
        without notice or comment. The Electric Reliability 
        Organization shall notify the Commission immediately following 
        such determination and shall file such emergency organization 
        standard or amendment with the Commission not later than 5 days 
        following such determination and shall include in such filing 
        an explanation of the need for such emergency standard. 
        Subsequently, the Commission shall provide notice of the 
        organization standard or amendment for comment, and shall 
        follow the procedures set out in paragraphs (2) and (3) for 
        review of the new or modified organization standard.
            ``(4) All users of the bulk-power system shall comply with 
        any organization standard that takes effect under this section.
    ``(f) Coordination With Canada and Mexico.--The Electric 
Reliability Organization shall take all appropriate steps to gain 
recognition in Canada and Mexico. The United States shall use its best 
efforts to enter into international agreements with the appropriate 
governments of Canada and Mexico to provide for effective compliance 
with organization standards and to provide for the effectiveness of the 
Electric Reliability Organization in carrying out its mission and 
responsibilities. All actions taken by the Electric Reliability 
Organization, any affiliated regional reliability entity, and the 
Commission shall be consistent with the provisions of such 
international agreements.
    ``(g) Changes in Procedures, Governance, or Funding.--
            ``(1) The Electric Reliability Organization shall file with 
        the Commission any proposed change in its procedures, 
        governance, or funding, or any changes in the affiliated 
        regional reliability entity's procedures, governance, or 
        funding relating to delegated functions, and shall include with 
        the filing an explanation of the basis and purpose for the 
        change.
            ``(2) A proposed procedural change may take effect 90 days 
        after filing with the Commission if the change constitutes a 
        statement of policy, practice, or interpretation with respect 
        to the meaning or enforcement of an existing procedure. 
        Otherwise, a proposed procedural change shall take effect only 
        upon a finding by the Commission, after notice and opportunity 
        for comments, that the change is just, reasonable, not unduly 
        discriminatory or preferential, is in the public interest, and 
        satisfies the requirements of subsection (d)(4).
            ``(3) A change in governance or funding shall not take 
        effect unless the Commission finds that the change is just, 
        reasonable, not unduly discriminatory or preferential, in the 
        public interest, and satisfies the requirements of subsection 
        (d)(4).
            ``(4) The Commission, upon complaint or upon its own 
        motion, may require the Electric Reliability Organization to 
        amend the procedures, governance, or funding if the Commission 
        determines that the amendment is necessary to meet the 
        requirements of this section. The Electric Reliability 
        Organization shall file the amendment in accordance with 
        paragraph (1) of this subsection.
    ``(h) Delegations of Authority.--
            ``(1) The Electric Reliability Organization shall, upon 
        request by an entity, enter into an agreement with such entity 
        for the delegation of authority to implement and enforce 
        compliance with organization standards in a specified 
        geographic area if the organization finds that the entity 
        requesting the delegation satisfies the requirements of 
        subparagraphs (A), (B), (C), (D), (F), (J), and (K) of 
        subsection (d)(4), and if the delegation promotes the effective 
        and efficient implementation and administration of bulk-power 
        system reliability. The Electric Reliability Organization may 
        enter into an agreement to delegate to the entity any other 
        authority, except that the Electric Reliability Organization 
        shall reserve the right to set and approve standards for bulk-
        power system reliability.
            ``(2) The Electric Reliability Organization shall file with 
        the Commission any agreement entered into under this subsection 
        and any information the Commission requires with respect to the 
        affiliated regional reliability entity to which authority is to 
        be delegated. The Commission shall approve the agreement, 
        following public notice and an opportunity for comment, if it 
        finds that the agreement meets the requirements of paragraph 
        (1), and is just, reasonable, not unduly discriminatory or 
        preferential, and is in the public interest. A proposed 
        delegation agreement with an affiliated regional reliability 
        entity organized on an interconnection-wide basis shall be 
        rebuttably presumed by the Commission to promote the effective 
        and efficient implementation and administration of bulk-power 
        system reliability. No delegation by the Electric Reliability 
        Organization shall be valid unless approved by the Commission.
            ``(3)(A) A delegation agreement entered into under this 
        subsection shall specify the procedures for an affiliated 
        regional reliability entity to propose entity rules or 
        variances for review by the Electric Reliability Organization. 
        With respect to any such proposal that would apply on an 
        interconnection-wide basis, the Electric Reliability 
        Organization shall presume such proposal valid if made by an 
        interconnection-wide affiliated regional reliability entity 
        unless the Electric Reliability Organization makes a written 
        finding that the proposal--
                    ``(i) was not developed in a fair and open process 
                that provided an opportunity for all interested parties 
                to participate;
                    ``(ii) has a significant adverse impact on 
                reliability or commerce in other interconnections;
                    ``(iii) fails to provide a level of reliability of 
                the bulk-power system within the interconnection such 
                that it would constitute a serious and substantial 
                threat to public health, safety, welfare, or national 
                security; or
                    ``(iv) creates a serious and substantial burden on 
                competitive markets within the interconnection that is 
                not necessary for reliability.
            ``(B) With respect to any such proposal that would apply 
        only to part of an interconnection, the Electric Reliability 
        Organization shall find such proposal valid if the affiliated 
        regional reliability entity or entities making the proposal 
        demonstrate that it--
                    ``(i) was developed in a fair and open process that 
                provided an opportunity for all interested parties to 
                participate;
                    ``(ii) would not have an adverse impact on commerce 
                that is not necessary for reliability;
                    ``(iii) provides a level of bulk-power system 
                reliability adequate to protect public health, safety, 
                welfare, and national security, and would not have a 
                significant adverse impact on reliability; and
                    ``(iv) in the case of a variance, is based on 
                legitimate differences between regions or between 
                subregions within the affiliated regional reliability 
                entity's geographic area.
        The Electric Reliability Organization shall approve or 
        disapprove such proposal within 120 days, or the proposal shall 
        be deemed approved. Following approval of any such proposal 
        under this paragraph, the Electric Reliability Organization 
        shall seek Commission approval pursuant to the procedures 
        prescribed under subsection (e)(3). Affiliated regional 
        reliability entities may not make requests for approval 
        directly to the Commission except pursuant to subsection 
        (e)(3)(D).
            ``(4) If an affiliated regional reliability entity 
        requests, consistent with paragraph (1) of this subsection, 
        that the Electric Reliability Organization delegate authority 
        to it, but is unable within 180 days to reach agreement with 
        the Electric Reliability Organization with respect to such 
        requested delegation, such entity may seek relief from the 
        Commission. If, following notice and opportunity for comment, 
        the Commission determines that a delegation to the entity would 
        meet the requirements of paragraph (1) above, and that the 
        delegation would be just, reasonable, not unduly discriminatory 
        or preferential, and in the public interest, and that the 
        Electric Reliability Organization has unreasonably withheld 
        such delegation, the Commission may, by order, direct the 
        Electric Reliability Organization to make such delegation.
            ``(5)(A) The Commission may, upon its own motion or upon 
        complaint, and with notice to the appropriate affiliated 
        regional reliability entity or entities, direct the Electric 
        Reliability Organization to propose a modification to an 
        agreement entered into under this subsection if the Commission 
        determines that--
                    ``(i) the affiliated regional reliability entity no 
                longer has the capacity to carry out effectively or 
                efficiently its implementation or enforcement 
                responsibilities under that agreement, has failed to 
                meet its obligations under that agreement, or has 
                violated any provision of this section;
                    ``(ii) the rules, practices, or procedures of the 
                affiliated regional reliability entity no longer 
                provide for fair and impartial discharge of its 
                implementation or enforcement responsibilities under 
                the agreement;
                    ``(iii) the geographic boundary of a transmission 
                entity approved by the Commission is not wholly within 
                the boundary of an affiliated regional reliability 
                entity and such difference is inconsistent with the 
                effective and efficient implementation and 
                administration of bulk-power system reliability; or
                    ``(iv) the agreement is inconsistent with another 
                delegation agreement as a result of actions taken under 
                paragraph (4) of this subsection.
            ``(B) Following an order of the Commission issued under 
        subparagraph (A), the Commission may suspend the affected 
agreement if the Electric Reliability Organization or the affiliated 
regional reliability entity does not propose an appropriate and timely 
modification. If the agreement is suspended, the Electric Reliability 
Organization shall assume the previously delegated responsibilities. 
The Commission shall allow the Electric Reliability Organization and 
the affiliated regional reliability entity an opportunity to appeal the 
suspension.
    ``(i) Organization Membership.--Every system operator shall be 
required to be a member of the Electric Reliability Organization and 
shall be required also to be a member of any affiliated regional 
reliability entity operating under an agreement effective pursuant to 
subsection (h) applicable to the region in which the system operator 
operates or is responsible for the operation of bulk-power system 
facilities.
    ``(j) Injunctions and Disciplinary Action.--
            ``(1) Consistent with the range of actions approved by the 
        Commission under subsection (d)(4)(H), the Electric Reliability 
        Organization may impose a penalty, limitation of activities, 
        functions, operations, or other disciplinary action the 
        Electric Reliability Organization finds appropriate against a 
        user of the bulk-power system if the Electric Reliability 
        Organization, after notice and an opportunity for interested 
        parties to be heard, issues a finding in writing that the user 
        of the bulk-power system has violated an organization standard. 
        The Electric Reliability Organization shall immediately notify 
        the Commission of any disciplinary action imposed with respect 
        to an act or failure to act of a user of the bulk-power system 
        that affected or threatened to affect bulk-power system 
        facilities located in the United States, and the sanctioned 
        party shall have the right to seek modification or rescission 
        of such disciplinary action by the Commission. If the 
        organization finds it necessary to prevent a serious threat to 
        reliability, the organization may seek injunctive relief in a 
        Federal court in the district in which the affected facilities 
        are located.
            ``(2) A disciplinary action taken under paragraph (1) may 
        take effect not earlier than the 30th day after the Electric 
        Reliability Organization files with the Commission its written 
        finding and record of proceedings before the Electric 
        Reliability Organization and the Commission posts its written 
        finding, unless the Commission, on its own motion or upon 
        application by the user of the bulk-power system which is the 
        subject of the action, suspends the action. The action shall 
        remain in effect or remain suspended unless and until the 
        Commission, after notice and opportunity for hearing, affirms, 
        sets aside, modifies, or reinstates the action, but the 
        Commission shall conduct such hearing under procedures 
        established to ensure expedited consideration of the action 
        taken.
            ``(3) The Commission, on its own motion or on complaint, 
        may order compliance with an organization standard and may 
        impose a penalty, limitation of activities, functions, or 
        operations, or take such other disciplinary action as the 
        Commission finds appropriate, against a user of the bulk-power 
        system with respect to actions affecting or threatening to 
        affect bulk-power system facilities located in the United 
        States if the Commission finds, after notice and opportunity 
        for a hearing, that the user of the bulk-power system has 
        violated or threatens to violate an organization standard.
            ``(4) The Commission may take such action as is necessary 
        against the Electric Reliability Organization or an affiliated 
        regional reliability entity to assure compliance with an 
        organization standard, or any Commission order affecting the 
        Electric Reliability Organization or an affiliated regional 
        reliability entity.
    ``(k) Reliability Reports.--The Electric Reliability Organization 
shall conduct periodic assessments of the reliability and adequacy of 
the interconnected bulk-power system in North America and shall report 
annually to the Secretary of Energy and the Commission its findings and 
recommendations for monitoring or improving system reliability and 
adequacy.
    ``(l) Assessment and Recovery of Certain Costs.--The reasonable 
costs of the Electric Reliability Organization, and the reasonable 
costs of each affiliated regional reliability entity that are related 
to implementation and enforcement of organization standards or other 
requirements contained in a delegation agreement approved under 
subsection (h), shall be assessed by the Electric Reliability 
Organization and each affiliated regional reliability entity, 
respectively, taking into account the relationship of costs to each 
region and based on an allocation that reflects an equitable sharing of 
the costs among all end users. The Commission shall provide by rule for 
the review of such costs and allocations, pursuant to the standards in 
this subsection and subsection (d)(4)(F).
    ``(m) Savings Provisions.--
            ``(1) The Electric Reliability Organization shall have 
        authority to develop, implement and enforce compliance with 
        standards for the reliable operation of only the Bulk Power 
        System.
            ``(2) This section does not provide the Electric 
        Reliability Organization or the Commission with the authority 
        to set and enforce compliance with standards for adequacy or 
        safety of electric facilities or services.
            ``(3) Nothing in this section shall be construed to preempt 
        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 inconsistent with any 
        Organization Standard.
            ``(4) Within 90 days of the application of the Electric 
        Reliability Organization or other affected party, the 
        Commission shall issue a final order determining whether a 
        state action is inconsistent with an Organization Standard, 
        after notice and opportunity for comment, taking into 
        consideration any recommendations of the Electric Reliability 
        Organization.
            ``(5) The Commission, after consultation with the Electric 
        Reliability Organization, may stay the effectiveness of any 
state action, pending the Commission's issuance of a final order.
    ``(n) Regional Advisory Bodies.--The Commission 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 
loan served within the region. A regional advisory body shall be 
composed of 1 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, upon execution of an international agreement or agreements 
described in subsection (f). A regional advisory body may provide 
advice to the electric reliability organization, an affiliated regional 
reliability entity, or the Commission regarding the governance of an 
existing or proposed affiliated regional reliability entity within the 
same region, whether an organization standard, entity rule, or variance 
proposed to apply within the region is just, reasonable, not unduly 
discriminatory or preferential, and in the public interest, and whether 
fees proposed to be assessed within the region are just, reasonable, 
not unduly discriminatory or preferential, in the public interest, and 
consistent with the requirements of subsection (l). The Commission may 
give deference to the advice of any such regional advisory body if that 
body is organized on an interconnection-wide basis.
    ``(o) Coordination With Regional Transmission Organizations.--
            ``(1) Each regional transmission organization authorized by 
        the Commission shall be responsible for maintaining the short-
        term reliability of the bulk-power system that it operates, 
        consistent with organization standards.
            ``(2) Except as provided in paragraph (5), in connection 
        with a proceeding under subsection (e) to consider a proposed 
        organization standard, each regional transmission organization 
        authorized by the Commission shall report to the Commission, 
        and notify the electric reliability organization and any 
        applicable affiliated regional reliability entity, regarding 
        whether the proposed organization standard hinders or conflicts 
        with that regional transmission organization's ability to 
        fulfill the requirements of any Commission-accepted, approved, 
        or ordered rule, regulation, order, tariff, rate schedule, or 
        agreement. Where such hindrance or conflict is identified, the 
        Commission shall address such hindrance or conflict, and the 
        need for any changes to such Commission-accepted, approved, or 
        ordered rule, order, tariff, rate schedule, or agreement in its 
        order under subsection (e) regarding the proposed standard. 
        Where such hindrance or conflict is identified between a 
        proposed organization standard and a provision of any rule, 
        order, tariff, rate schedule or agreement accepted, approved or 
        ordered by the Commission applicable to a regional transmission 
        organization, nothing in this section shall require a change in 
        the regional transmission organization's obligation to comply 
        with such provision unless the Commission orders such a change 
        and the change becomes effective. If the Commission finds that 
        the tariff, rate schedule, or agreement needs to be changed, 
        the regional transmission organization must expeditiously make 
        a section 205 filing to reflect the change. If the Commission 
        finds that the proposed organization standard needs to be 
        changed, it shall remand the proposed organization standard to 
        the electric reliability organization under subsection 
        (e)(3)(B).
            ``(3) Except as provided in paragraph (5), to the extent 
        hindrances and conflicts arise after approval of a reliability 
        standard under subsection (c) or organization standard under 
        subsection (e), each regional transmission organization 
        authorized by the Commission shall report to the Commission, 
        and notify the electric reliability organization and any 
        applicable affiliated regional reliability entity, regarding 
        any reliability standard approved under subsection (c) or 
        organization standard that hinders or conflicts with that 
        regional transmission organization's ability to fulfill the 
        requirements of any Commission-accepted, approved, or ordered 
        rule, regulation, order, tariff, rate schedule, or agreement. 
        The Commission shall seek to assure that such hindrances or 
        conflicts are resolved promptly. Where a hindrance or conflict 
        is identified between a reliability standard or an organization 
        standard and a provision of any rule, order, tariff, rate 
        schedule or agreement accepted, approved or ordered by the 
        Commission applicable to a regional transmission organization, 
        nothing in this section shall require a change in the regional 
        transmission organization's obligation to comply with such 
        provision unless the Commission orders such a change and the 
        change becomes effective. If the Commission finds that the 
        tariff, rate schedule or agreement needs to be changed, the 
        regional transmission organization must expeditiously make a 
        section 205 filing to reflect the change. If the Commission 
        finds that an organization standard needs to be changed, it 
        shall order the electric reliability organization to develop 
and submit a modified organization standard under subsection (e)(3)(C).
            ``(4) An affiliated regional reliability entity and a 
        regional transmission organization operating in the same 
        geographic area shall cooperate to avoid conflicts between 
        implementation and enforcement of organization standards by the 
        affiliated regional reliability entity and implementation and 
        enforcement of Commission-accepted tariffs, rate schedules, and 
        agreements by the regional transmission organization. In areas 
        without an affiliated regional reliability entity, the electric 
        reliability organization shall act as the affiliated regional 
        reliability entity for purposes of this paragraph.
            ``(5) Until 6 months after approval of applicable 
        subsection (h)(3) procedures, any reliability standard, 
        guidance, or practice contained in Commission-accepted tariffs, 
        rate schedules, or agreements in effect of any Commission-
        authorized independent system operator or regional transmission 
        organization shall continue to apply unless the Commission 
        accepts an amendment thereto by the applicable operator or 
        organization, or upon complaint finds them to be unjust, 
        unreasonable, unduly discriminatory or preferential, or not in 
        the public interest. At the conclusion of such transition 
        period, any such reliability standard, guidance, practice, or 
        amendment thereto that the Commission determines is 
        inconsistent with organization standards shall no longer 
        apply.''.
            (2) Enforcement.--Sections 316 and 316A of the Federal 
        Power Act are each amended by striking ``or 214'' each place it 
        appears and inserting ``214, or 215''.
    (b) Application of Antitrust Laws.--Notwithstanding any other 
provision of law, each of the following activities are rebuttably 
presumed to be in compliance with the antitrust laws of the United 
States:
            (1) Activities undertaken by the Electric Reliability 
        Organization under section 215 of the Federal Power Act or 
        affiliated regional reliability entity operating under an 
        agreement in effect under section 215(h) of such Act.
            (2) Activities of a member of the Electric Reliability 
        Organization or affiliated regional reliability entity in 
        pursuit of organization objectives under section 215 of the 
        Federal Power Act undertaken in good faith under the rules of 
        the organization.
Primary jurisdiction, and immunities and other affirmative defenses, 
shall be available to the extent otherwise applicable.

SEC. 5. DISPOSITION OF PROPERTY.

    Section 203 of the Federal Power Act (16 U.S.C. 824b) is repealed.

SEC. 6. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL TRANSMISSION 
              ORGANIZATIONS.

    Part II of the Federal Power Act is amended by inserting at the end 
thereof the following new section:

``SEC. 217. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL TRANSMISSION 
              ORGANIZATIONS.

    ``(a) In General.--The Commission may approve and may encourage the 
formation of regional transmission organizations for the purpose of 
enhancing the transmission of electric energy in interstate commerce. 
Among options for the formation of regional transmission organizations, 
the Commission shall prefer those in which--
            ``(1) participation in the regional transmission 
        organization by transmitting utilities is voluntary;
            ``(2) the form, structure, and operating entity of the 
        regional transmission organization are approved of by 
        participating transmitting utilities; and
            ``(3) market incentives exist to promote investment for 
        expansion of transmission facilities and for the introduction 
        of new transmission technologies within the territory of the 
        regional transmission organization.
    ``(b) Conditions.--No order issued under this Act shall be 
conditioned upon or require a transmitting utility to transfer 
operational control of jurisdictional facilities to an independent 
system operator or other regional transmission organization.
    ``(c) Complaint.--In addition to any other rights or remedies it 
may have under this Act, any entity serving electric load that is 
denied services by a regional transmission organization that the 
regional transmission organization makes available to other load 
serving entities shall be entitled to file a complaint with the 
Commission concerning the denial of such services. If the Commission 
shall find, after an evidentiary hearing on the record, that the denial 
of services complained of was unjust, unreasonable, unduly 
discriminatory or preferential, or contrary to the public interest, the 
Commission may order the provision of such services at rates and on 
terms and conditions that shall be in accordance with section 215 of 
this Act.''.

SEC. 7. STATE AND FEDERAL AUTHORITY TO SITE TRANSMISSION FACILITIES.

    Part II of the Federal Power Act is amended by inserting at the end 
thereof the following new section:

``SEC. 218. STATE AND FEDERAL AUTHORITY TO SITE TRANSMISSION 
              FACILITIES.

    ``(a) In order to ensure the availability of adequate capacity to 
provide for reliable, economic transmission of electric energy in 
interstate commerce, upon enactment of this section, and after notice 
and opportunity for comment, the Commission shall publish a report, 
which it shall revise each year thereafter, describing areas where 
additional facilities are necessary to increase electric transmission 
capacity. The report shall include information from the regional 
transmission organization planning processes explaining the feasibility 
of providing additional transmission capacity through existing 
transmission rights of way, and shall assess efforts to promote 
adequate and economically efficient transmission of electricity through 
the introduction of new transmission technologies, and to encourage 
investment in new and existing transmission facilities. The Commission 
shall rely upon information provided by regional transmission 
organizations developed in conjunction with States through regional 
transmission organization planning processes, information provided by 
State public utility commissions, and such other information about 
transmission constraints, reliability, and prices of electric energy as 
the Commission deems appropriate. In the report, the Commission shall 
review the status of facilities for which an application has been 
submitted pursuant to subsection (b).
    ``(b) A regional transmission organization which has submitted an 
application to a State or local agency for approval of transmission 
facilities to provide additional transmission capacity in an area 
identified in the report required by subsection (a) shall notify the 
Commission by providing a copy of the application, including a 
description of the facilities and the proposed route. The regional 
transmission organization shall submit to the Commission with a copy of 
the application a statement assessing the feasibility of upgrading 
existing transmission facilities to provide additional capacity in an 
area identified in the report required by subsection (a).
    ``(c) If a regional transmission organization has not received 
approval of its application to the State to construct transmission 
facilities in an area identified in the report required by subsection 
(a) within one year of the notice to the Commission pursuant to 
subsection (b), or within two years of such notice has not received all 
permits and approvals required to construct the facilities, the 
Commission may, after considering the feasibility of upgrading existing 
facilities to increase electric transmission capacity, upon its own 
motion or upon request, and after notice and opportunity for hearing, 
issue a certificate of public convenience and necessity to construct a 
proposed transmission facility if it finds the facilities to be 
authorized by the certificate are or will be required by public 
convenience and necessity.
    ``(d) The Commission shall have the power to attach to the issuance 
of such certificate and to the exercise of the rights granted 
thereunder such reasonable terms and conditions related to the 
construction of such facility as the public convenience and necessity 
may require; provided, that the Commission shall have no authority to 
compel the construction, enlargement or modification of transmission 
facilities directly or indirectly, including as a condition of the 
receipt of any other approval from the Commission.
    ``(e) The Commission shall issue its final decision in the 
certificate proceeding within 180 days after the filing of a request 
for a certificate or the initiation of proceedings on its own motion.
    ``(f) When any holder of a certificate of public convenience and 
necessity for electric transmission facilities issued by the Commission 
pursuant to subsection (c) cannot acquire by contract, or is unable to 
agree with the owner of the property to the compensation to be paid for 
the necessary rights-of-way to construct, operate and maintain such 
transmission facility, it may acquire the same by the exercise of the 
right of eminent domain in the district court of the United States for 
the district in which such property may be located, or in the State 
courts.''.

SEC. 8. PUBLIC UTILITY HOLDING COMPANY ACT EXEMPTION FOR RTOS.

    The Public Utility Holding Company Act is amended as follows:
            (1) After section 35, insert the following:

``SEC. 36. SAVINGS CLAUSE.

    ``This Act shall not apply to regional transmission organizations, 
as described in Federal Energy Regulatory Commission Order No. 2000 and 
2000A, or to any action to form, modify, finance, sell, purchase, 
operate, or otherwise affect such an organization.''.
            (2) Renumber existing section 36 as section 37.

SEC. 9. INDEPENDENT TRANSMISSION COMPANIES.

    (a) In General.--Section 1033 of the Internal Revenue Code of 1986 
(relating to involuntary conversions) is amended by redesignating 
subsection (k) as subsection (l) and by inserting after subsection (j) 
the following new subsection:
    ``(k) Sales or Dispositions To Implement Federal Energy Regulatory 
Commission or State Electric Restructuring Policy.--
            ``(1) In general.--For purposes of this subtitle, if a 
        taxpayer elects the application of this subsection to a 
        qualifying electric transmission transaction--
                    ``(A) such transaction shall be treated as an 
                involuntary conversion to which this section applies, 
                and
                    ``(B) exempt utility property shall be treated as 
                property which is similar or related in service or use 
                to the property disposed of in such transaction.
            ``(2) Extension of replacement period.--In the case of any 
        involuntary conversion described in paragraph (1), subsection 
        (a)(2)(B) shall be applied by substituting `4 years' for `2 
        years' in clause (i) thereof.
            ``(3) Qualifying electric transmission transaction.--For 
        purposes of this subsection, the term `qualifying electric 
        transmission transaction' means any sale or other disposition 
        before January 1, 2009, of--
                    ``(A) property used in the trade or business of 
                providing electric transmission services, or
                    ``(B) any stock or partnership interest in a 
                corporation or partnership, as the case may be, whose 
                principal trade or business consists of providing 
                electric transmission services,
        but only if such sale or disposition is to an independent 
        transmission company.
            ``(4) Independent transmission company.--For purposes of 
        this subsection, the term `independent transmission company' 
        means--
                    ``(A) a regional transmission organization approved 
                by the Federal Energy Regulatory Commission,
                    ``(B) a person--
                            ``(i) who the Federal Energy Regulatory 
                        Commission determines in its authorization of 
                        the transaction under section 203 of the 
                        Federal Power Act (16 U.S.C. 823b) is not a 
                        market participant within the meaning of such 
                        Commission's rules applicable to regional 
                        transmission organizations, and
                            ``(ii) whose transmission facilities to 
                        which the election under this subsection 
                        applies are under the operational control of a 
                        Federal Energy Regulatory Commission-approved 
                        regional transmission organization before the 
                        close of the period specified in such 
authorization, but not later than the close of the period applicable 
under subsection (a)(2)(B) as extended under paragraph (2), or
                    ``(C) in the case of facilities subject to the 
                exclusive jurisdiction of the Public Utility Commission 
                of Texas, a person which is approved by that Commission 
                as consistent with Texas State law regarding an 
                independent transmission organization.
            ``(5) Exempt utility property.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `exempt utility 
                property' means property used in the trade or business 
                of--
                            ``(i) generating, transmitting, 
                        distributing, or selling electricity, or
                            ``(ii) producing, transmitting, 
                        distributing, or selling natural gas.
                    ``(B) Nonrecognition of gain by reason of 
                acquisition of stock.--Acquisition of control of a 
                corporation shall be taken into account under this 
                section with respect to a qualifying electric 
                transmission transaction only if the principal trade or 
                business of such corporation is a trade or business 
                referred to in subparagraph (A).
            ``(6) Special rule for consolidated groups.--In the case of 
        a corporation which is a member of an affiliated group filing a 
        consolidated return, such corporation shall be treated as 
        satisfying the purchase requirement of subsection (a)(2) with 
        respect to any qualifying electric transmission transaction 
        engaged in by such corporation to the extent such requirement 
        is satisfied by another member of such group.
            ``(7) Election.--An election under paragraph (1), once 
        made, shall be irrevocable.''
    (b) Exception From Gain Recognition Under Section 1245.--Subsection 
(b) of section 1245 of such Code is amended by adding at the end the 
following new paragraph:
            ``(9) Dispositions to implement federal energy regulatory 
        commission or state electric restructuring policy.--At the 
        election of the taxpayer, the amount of gain which would (but 
        for this paragraph) be recognized under this section on any 
        qualified electric transmission transaction (as defined in 
        section 1033(k)) for which an election under section 1033 is 
        made shall be reduced by the aggregate reduction in the basis 
        of section 1245 property held by the taxpayer or, if 
        insufficient, by a member of an affiliated group which includes 
        the taxpayer at any time during the taxable year in which such 
        transaction occurred. The manner and amount of such reduction 
        shall be determined under regulations prescribed by the 
        Secretary.''
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
of this section shall apply to transactions occurring after the date of 
the enactment of this Act.
    (d) Distributions of Stock To Implement Federal Energy Regulatory 
Commission or State Electric Restructuring Policy.--
            (1) In general.--Subparagraph (A) of section 355(e)(3) of 
        such Code (relating to special rules relating to acquisitions) 
        is amended by inserting after clause (iv) the following new 
        clause:
                            ``(v) The acquisition of stock in any 
                        controlled corporation in a qualifying electric 
                        transmission transaction (as defined in section 
                        1033(k)).''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to distributions after the date of the enactment of 
        this Act.
                                 <all>