[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1754 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                S. 1754

 To enhance national security by improving the reliability of the U.S. 
   electricity transmission grid, to ensure efficient, reliable and 
    affordable energy to American consumers, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 17, 2003

 Mr. Jeffords (for himself, Mr. Kennedy, and Ms. Cantwell) introduced 
the following bill; which was read twice and referred to the Committee 
                    on Energy and Natural Resources

_______________________________________________________________________

                                 A BILL


 
 To enhance national security by improving the reliability of the U.S. 
   electricity transmission grid, to ensure efficient, reliable and 
    affordable energy to American consumers, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Electric 
Reliability Security Act of 2003''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                          TITLE I--RELIABILITY

Sec. 101. Electric reliability standards.
Sec. 102. Model electric utility workers code.
Sec. 103. Interstate compacts on regional transmission planning.
Sec. 104. Electricity outage investigation.
Sec. 105. Study on reliability of United States energy grid.
                          TITLE II--EFFICIENCY

Sec. 201. System benefits fund.
Sec. 202. Electricity efficiency performance standard.
Sec. 203. Appliance efficiency.
Sec. 204. Loan guarantees.
                     TITLE III--ON-SITE GENERATION

Sec. 301. Net metering.
Sec. 302. Interconnection.
Sec. 303. On-site generation for emergency facilities.

                          TITLE I--RELIABILITY

SEC. 101. ELECTRIC RELIABILITY STANDARDS.

    Part II of the Federal Power Act (16 U.S.C. 824 et seq.) is amended 
by adding at the end the following:

``SEC. 215. ELECTRIC RELIABILITY.

    ``(a) Definitions.--In this section--
            ``(1) `bulk power system' means the network of 
        interconnected transmission facilities and generating 
        facilities;
            ``(2) `electric reliability organization' means a self-
        regulating organization certified by the Commission under 
        subsection (c) whose purpose is to promote the reliability of 
        the bulk power system; and
            ``(3) `reliability standard' means a requirement to provide 
        for reliable operation of the bulk power system approved by the 
        Commission under this section.
    ``(b) Jurisdiction and Applicability.--The Commission shall have 
jurisdiction, within the United States, over an electric reliability 
organization, any regional entities, and all users, owners and 
operators of the bulk power system, including but not limited to the 
entities described in section 201(f), for purposes of approving 
reliability standards and enforcing compliance with this section. All 
users, owners and operators of the bulk power system shall comply with 
reliability standards that take effect under this section.
    ``(c) Certification.--
            ``(1) The Commission shall issue a final rule to implement 
        the requirements of this section not later than 180 days after 
        the date of enactment of this section.
            ``(2) Following the issuance of a Commission rule under 
        paragraph (1), any person may submit an application to the 
        Commission for certification as an electric reliability 
        organization. The Commission may certify an applicant if the 
        Commission determines that the applicant--
                    ``(A) has the ability to develop, and enforce 
                reliability standards that provide for an adequate 
                level of reliability of the bulk power system; and
                    ``(B) has established rules that--
                            ``(i) assure the independence of the 
                        applicant from the users and owners and 
                        operators of the bulk power system while 
                        assuring fair stakeholder representation in the 
                        selection of its directors and balanced 
                        decision making in any committee or subordinate 
                        organizational structure;
                            ``(ii) allocate equitably dues, fees, and 
                        other charges among users for all activities 
                        under this section;
                            ``(iii) provide fair and impartial 
                        procedures for enforcement of reliability 
                        standards through imposition of penalties 
                        (including limitations on activities, 
                        functions, or operations, or other appropriate 
                        sanctions) and
                            ``(iv) provide for reasonable notice and 
                        opportunity for public comment, due process, 
                        openness, and balance of interests in 
                        developing reliability standards and otherwise 
                        exercising its duties.
            ``(3) If the Commission receives 2 or more timely 
        applications that satisfy the requirements of this subsection, 
        the Commission shall approve only the application the 
        Commission concludes will best implement the provisions of this 
        section.
    ``(d) Reliability Standards.--
            ``(1) An electric reliability organization shall file a 
        proposed reliability standard or modification to a reliability 
        standard with the Commission.
            ``(2) The Commission may approve a proposed reliability 
        standard or modification to a reliability standard if it 
        determines that the standard is just, reasonable, not unduly 
        discriminatory or preferential, and in the public interest. The 
        Commission shall give due weight to the technical expertise of 
        the electric reliability organization with respect to the 
        content of a proposed standard or modification to a reliability 
        standard, but shall not defer with respect to its effect on 
        competition.
            ``(3) The electric reliability organization and the 
        Commission shall rebuttably presume that a proposal from a 
        regional entity organized on an interconnection-wide basis for 
        a reliability standard or modification to a reliability 
        standard to be applicable on an interconnection-wide basis is 
        just, reasonable, and not unduly discriminatory or 
        preferential, and in the public interests.
            ``(4) The Commission shall remand to the electric 
        reliability organization for further consideration a proposed 
        reliability standard or a modification to a reliability 
        standard that the Commission disapproves in whole or in part.
            ``(5) The Commission, upon its own motion or upon 
        complaint, may order an electric reliability organization to 
        submit to the Commission a proposed reliability standard or a 
        modification to a reliability standard that addresses a 
        specific matter if the Commission considers such a new or 
        modified reliability standard appropriate to carry out this 
        section.
    ``(e) Enforcement.--
            ``(1) An electric reliability organization may impose a 
        penalty on a user or owner or operator of the bulk power system 
        if the electric reliability organization, after notice and an 
        opportunity for a hearing--
                    ``(A) finds that the user or owner or operator of 
                the bulk power system has violated a reliability 
                standard approved by the Commission under subsection 
                (d); and
                    ``(B) files notice with the Commission, which shall 
                affirm, set aside, or modify the action.
            ``(2) On its own motion or upon complaint, the Commission 
        may order compliance with a reliability standard and may impose 
        a penalty against a user or owner or operator of the bulk power 
        system if the Commission finds, after notice and opportunity 
        for a hearing, that the user or owner or operator of the bulk 
        power system has violated or threatens to violate a reliability 
        standard.
            ``(3) The Commission shall establish regulations 
        authorizing the electric reliability organization to enter into 
        an agreement to delegate authority to a regional entity for the 
        purpose of proposing and enforcing reliability standards 
        (including related activities) if the regional entity satisfies 
        the provisions of subparagraphs (A) and (B) of subsection 
        (c)(2) and the agreement promotes effective and efficient 
        administration of bulk power system reliability. The Commission 
        may modify such delegation. The electric reliability 
        organization and the Commission shall rebuttably presume that a 
        proposal for delegation to a regional entity organized on a 
        interconnection-wide basis promotes effective and efficient 
        administration of bulk power system reliability and should be 
        approved. Such regulation may provide that the Commission may 
        assign the electric reliability organization's authority to 
        enforce reliability standards directly to a regional entity 
        consistent with the requirements of this paragraph.
            ``(4) The Commission may take such action as is necessary 
        or appropriate against the electric reliability organization or 
        a regional entity to ensure compliance with a reliability 
        standard or any Commission order affecting the electric 
        reliability organization or a regional entity.
    ``(f) Changes in Electricity Reliability Organization Rules.--An 
electric reliability organization shall file with the Commission for 
approval any proposed rule or proposed rule change, accompanied by an 
explanation of its basis and purpose. The Commission, upon its own 
motion or complaint, may propose a change to the rules of the electric 
reliability organization. A proposed rule or proposed rule change shall 
take effect upon a finding by the Commission, after notice and 
opportunity for comment, that the change is just, reasonable, not 
unduly discriminatory or preferential, is in the public interest, and 
satisfies the requirements of subsection (c)(2).
    ``(g) Coordination With Canada and Mexico.--
            ``(1) The electric reliability organization shall take all 
        appropriate steps to gain recognition in Canada and Mexico.
            ``(2) The President shall use his best efforts to enter 
        into international agreements with the governments of Canada 
        and Mexico to provide for effective compliance with reliability 
        standards and the effectiveness of the electric reliability 
        organization in the United States and Canada or Mexico.
    ``(h) Reliability Reports.--The electric reliability organization 
shall conduct periodic assessments of the reliability and adequacy of 
the interconnected bulk power system in North America.
    ``(i) Savings Provisions.--
            ``(1) The electric reliability organization shall have 
        authority to develop 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 authority to 
        order the construction of additional generation or transmission 
        capacity or 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 
        reliability standard established under this section.
            ``(4) Not later than 90 days after the date of the 
        application of the electric reliability organization or other 
        affected party, and after notice and opportunity for comment, 
        the Commission shall issue a final order determining whether a 
        State action is inconsistent with a reliability standard, 
        taking into consideration any recommendation 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.
    ``(j) Application of Antitrust Laws.--
            ``(1) To the extent undertaken to develop, implement, or 
        enforce a reliability standard, each of the following 
        activities shall not, in any action under the antitrust laws, 
        be deemed illegal per se:
                    ``(A) Activities undertaken by an electric 
                reliability organization under this section.
                    ``(B) Activities of a user or owner or operator of 
                the bulk power system undertaken in good faith under 
                the rules of an electric reliability organization.
            ``(2) In any action under the antitrust laws, an activity 
        described in paragraph (1) shall be judged on the basis of its 
        reasonableness, taking into account all relevant factors 
        affecting competition and reliability.
            ``(3) For purposes of this subsection, the term `antitrust 
        laws' has the meaning given the term in subsection (a) of the 
        first section of the Clayton Act (15 U.S.C. 12(a)), except that 
        it includes section 5 of the Federal Trade Commission Act (15 
        U.S.C. 45) to the extent that section 5 applies to unfair 
        methods of competition.
    ``(k) Regional Advisory Bodies.--The Commission shall establish a 
regional advisory body on the petition of at least \2/3\ of the States 
within a region that have more than \1/2\ of their electric load served 
within the region. A regional advisory body shall be composed of one 
member from each participating State in the region, appointed by the 
Governor of each state, and may include representatives of agencies, 
States, and provinces outside the United States. A regional advisory 
body may provide advice to the electric reliability organization, a 
regional reliability entity, or the Commission regarding the governance 
of an existing or proposed regional reliability entity within the same 
region, whether a standard proposed to apply within the region is just, 
reasonable, not unduly discriminatory or preferential, and in the 
public interest, whether fees proposed to be assessed within the region 
are just, reasonable, not unduly discriminatory or preferential, and in 
the public interest and any other responsibilities requested by the 
Commission. The Commission may give deference to the advice of any such 
regional advisory body if that body is organized on an interconnection-
wide basis.
    ``(l) Application to Alaska and Hawaii.--The provisions of this 
section apply only to the contiguous 48 states.''.

SEC. 102. MODEL ELECTRIC UTILITY WORKERS CODE.

    Subtitle B of the Public Utility Regulatory Policies Act of 1978 
(16 U.S.C. 2621 et seq.) is amended by adding at the end the following:

``SEC. 118. MODEL CODE FOR ELECTRIC UTILITY WORKERS.

    ``(a) In General.--The Secretary shall develop by rule and 
circulate among the States for their consideration a model code 
containing standards for electric facility workers to ensure electric 
facility safety and reliability.
    ``(b) Consultation.--In developing these standards, the Secretary 
shall consult with all interested parties, including representatives of 
electric facility workers.
    ``(c) Not Affecting Occupational Safety and Health.--In issuing a 
model code under this section, the Secretary shall not, for purposes of 
section 4 of the Occupational Safety and Health Act of 1970 (29 U.S.C. 
653) be deemed to be exercising statutory authority to prescribe or 
enforce standards or regulations affecting occupational safety and 
health.''.

SEC. 103. INTERSTATE COMPACTS ON REGIONAL TRANSMISSION PLANNING.

    Part II of the Federal Power Act (16 U.S.C. 824 et seq.) (as 
amended by section 101) is amended by adding at the end the following:

``SEC. 216. INTERSTATE COMPACTS ON REGIONAL TRANSMISSION PLANNING.

    ``(a) Consent of Congress.--The consent of Congress is given for an 
agreement to establish a regional transmission planning agency if the 
Commission determines that the agreement would--
            ``(1) facilitate coordination among the States within a 
        particular region with regard to the planning of future 
        transmission, generation, and distribution facilities;
            ``(2) carry out State electric facility siting 
        responsibilities more effectively;
            ``(3) meet the other requirements of this section and rules 
        prescribed by the Commission under this section; and
            ``(4) otherwise be consistent with the public interest.
    ``(b) Authority To Carry Out Agreement.--
            ``(1) If the Commission determines that an agreement meets 
        the requirements of subsection (a), the agency established 
        under the agreement has the authority necessary or appropriate 
        to carry out the agreement. This includes authority with 
        respect to matters otherwise within the jurisdiction of the 
        Commission, if expressly provided for in the agreement and 
        approved by the Commission.
            ``(2) The Commission's determination under this section may 
        be subject to any terms or conditions the Commission determines 
        are necessary to ensure that the agreement is in the public 
        interest.
    ``(c) Criteria.--
            ``(1) The Commission shall prescribe--
                    ``(A) criteria for determining whether a regional 
                transmission planning agreement meets subsection (a); 
                and
                    ``(B) standards for the administration of a 
                regional transmission planning agency established under 
                the agreement.
            ``(2) The criteria shall provide that, in order to meet 
        subsection (a)--
                    ``(A) a regional transmission planning agency must 
                operate within a region that includes all tribal 
                governments and all States and that are a party to the 
                agreement;
                    ``(B) a regional transmission planning agency must 
                be composed of one or more members from each State and 
                tribal government that is a party to the agreement;
                    ``(C) each participating State and tribal 
                government must vest in the regional transmission 
                planning agency the authority necessary to carry out 
                the agreement and this section; and
                    ``(D) the agency must follow workable and fair 
                procedures in making its respect to matters covered by 
                this agreement, including a requirement that all 
                decisions of the agency be made by majority vote (or 
                majority weighted votes) of the members present and 
                voting.
            ``(3) The criteria may include any other requirement for 
        meeting subsection (a) that the Commission determines is 
        necessary to ensure that the regional transmission planning 
        agency's organization, practices, and procedures are sufficient 
        to carry out this section and the rules issued under it.
    ``(d) Termination of Approval.--The Commission, after notice and 
opportunity for comment, may terminate the approval of an agreement 
under this section at any time if it determines that the regional 
transmission planning agency fails to comply with this section or 
Commission prescriptions under subsection (c) or that the agreement is 
contrary to the public interest.
    ``(e) Review.--Section 313 applies to a rehearing before a regional 
transmission planning agency and judicial review of any action of a 
regional transmission planning agency. For this purpose, when section 
313 refers to `Commission' substitute `regional transmission planning 
agency' and when section 313(b) refers to `licensee or public utility' 
substitute `entity'.''.

SEC. 104. ELECTRICITY OUTAGE INVESTIGATION.

    Part III of the Federal Power Act (16 U.S.C. 824) is amended--
            (1) by redesignating sections 320 and 321 (16 U.S.C. 825r, 
        791a) as 321 and 322 respectively; and
            (2) by inserting after section 319 (16 U.S.C. 825q) the 
        following:

``SEC. 320. ELECTRICITY OUTAGE INVESTIGATION BOARD.

    ``(a) Establishment.--There is established an Electricity Outage 
Investigation Board that shall be an independent establishment within 
the Executive Branch.
    ``(b) Membership.--The Board shall consist of 7 members and shall 
include--
            ``(1) the Secretary of Energy or his or her designee;
            ``(2) the Chairman of the Federal Regulatory Commission or 
        his or her designee;
            ``(3) a representative of the National Academy of Sciences 
        appointed by the President; a representative appointed by the 
        majority leader of the Senate; a representative appointed by 
        the minority leader of the Senate; a representative appointed 
        by the majority leader of the House of Representatives; and a 
        representative appointed by the minority leader of the House of 
        Representatives. Each such appointee shall demonstrate relevant 
        expertise in the field of electricity generation, transmission 
        and distribution, and such other expertise as will best assist 
        in carrying out the duties of the Board.
    ``(c) Terms.--The Secretary of Energy and the Chairman of the 
Federal Regulatory Commission shall be permanent members. The remaining 
members shall each serve for a term of 3 years.
    ``(d) Duties.--The Board shall--
            ``(1) upon request by Congress or by the President 
        investigate a major bulk-power system failure in the United 
        States to determine the causes of the failure;
            ``(2) report expeditiously to the Congress and to the 
        President the results of the investigation; and
            ``(3) recommend to the Congress and the President actions 
        to minimize the possibility of future bulk-power system 
        failure.
    ``(e) Compensation.--Each member of the Board shall be paid at the 
rate payable for level III of the Executive Schedule for each day 
(including travel time) such member is engaged in the work of the 
Board. Each member of the Board may receive travel expenses, including 
per diem in lieu of subsistence, in the same manner as is permitted 
under section 5702 and 5703 of title 5, United States Code.''.

SEC. 105. STUDY ON RELIABILITY OF U.S. ELECTRICITY GRID.

    (a) Study on Reliability.--Within 45 days after enactment of this 
Act, the Secretary of Energy shall contract with the National Academy 
of Sciences to conduct a study on the reliability of the U.S. 
electricity grid. The study shall examine the effectiveness of the 
current U.S. electricity transmission and distribution system at 
providing efficient, secure and affordable power to U.S. consumers.
    (b) Contents.--The study shall include an analysis of--
            (1) vulnerability of the transmission and distribution 
        system to disruption by natural, mechanical or human causes 
        including sabotage;
            (2) the most efficient and cost-effective solutions for 
        dealing with vulnerabilities or other problems of the U.S. 
        electricity transmission and distribution system, including a 
        comparison of investments in--
                    (A) efficiency;
                    (B) distributed generation;
                    (C) technical advances in software and other 
                devices to improve the efficiency and reliability of 
                the grid;
                    (D) new power line construction; and
                    (E) any other relevant matters.
    (c) Report.--The contract shall provide that within six months of 
entering into the contract, the National Academy of Sciences shall 
submit a report to the President and Congress detailing findings and 
recommendations of the study.

                          TITLE II--EFFICIENCY

SEC. 201. SYSTEM BENEFITS FUND.

    (a) Definitions.--In this section:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Environmental Protection Agency.
            (2) Board.--The term ``Board'' means the Board established 
        under subsection (b).
            (3) Commission.--The term ``Commission'' means the Federal 
        Energy Regulatory Commission.
            (4) Fund.--The term ``Fund'' means the System Benefits 
        Trust Fund established under subsection (c).
            (5) Renewable Energy.--The term ``renewable energy'' means 
        electricity generated from wind, ocean energy, organic waste 
        (excluding incinerated municipal solid waste), or biomass 
        (including anaerobic digestion from farm systems and landfill 
        gas recovery) or a geothermal, solar thermal, or photovoltaic 
        source. For purposes of this paragraph, a farm system is an 
        electric generating facility that generates electric energy 
        from the anaerobic digestion of agricultural waste produced by 
        farming that is located on the farm where substantially all of 
        the waste used is produced.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
    (b) Board.--
            (1) Establishment.--The Secretary shall establish a System 
        Benefits Trust Fund Board to carry out the functions and 
        responsibilities described in this section.
            (2) Membership.--The Board shall be composed of--
                    (A) 1 representative of the Federal Energy 
                Regulatory Commission appointed by the Federal Energy 
                Regulatory Commission;
                    (B) 2 representatives of the Secretary of Energy 
                appointed by the Secretary;
                    (C) 2 persons nominated by the National Association 
                of Regulatory Utility Commissioners and appointed by 
                the Secretary;
                    (D) 1 person nominated by the National Association 
                of State Utility Consumer Advocates and appointed by 
                the Secretary;
                    (E) 1 person nominated by the National Association 
                of State Energy Officials and appointed by the 
                Secretary;
                    (F) 1 person nominated by the National Energy 
                Assistance Directors' Association and appointed by the 
                Secretary; and
                    (G) 1 representative of the Environmental 
                Protection Agency appointed by the Administrator of the 
                Environmental Protection Agency.
            (3) Chairperson.--The Secretary shall select a member of 
        the Board to serve as Chairperson of the Board.
    (c) Establishment of Fund.--
            (1) In general.--The Board shall establish an account or 
        accounts at one or more financial institutions, which account 
        or accounts shall be known as the System Benefits Trust Fund 
        consisting of amounts deposited in the fund under subsection 
        (e).
            (2) Status of fund.--The wires charges collected under 
        subsection (e) and deposited in the Fund--
                    (A) shall not constitute funds of the United 
                States;
                    (B) shall be held in trust by the Board solely for 
                the purposes stated in subsection (d); and
                    (C) shall not be available to meet any obligations 
                of the United States.
    (d) Use of Fund.--
            (1) Funding of state programs.--Amounts in the Fund shall 
        be used by the Board to provide matching funds to States and 
        Indian tribes for the support of State or tribal public 
        benefits programs relating to--
                    (A) energy conservation and efficiency;
                    (B) renewable energy sources;
                    (C) assisting low-income households in meeting 
                their home energy needs; or
                    (D) research and development in areas described in 
                subparagraphs (A) through (C).
            (2) Distribution.--
                    (A) In general.--Except for amounts needed to pay 
                costs of the Board in carrying out its duties under 
                this section, the Board shall distribute all amounts in 
                the Fund to States or Indian tribes to fund public 
                benefits programs under paragraph (1).
                    (B) Fund share.--
                            (i) In general.--Subject to clause (iii), 
                        the Fund share of a public benefits program 
                        funded under paragraph (1) shall be 50 percent.
                            (ii) Proportionate reduction.--To the 
                        extent that the amount of matching funds 
                        requested by States and Indian tribes exceeds 
                        the maximum projected revenues of the Fund, the 
                        matching funds distributed to the States and 
                        Indian tribes shall be reduced by an amount 
                        that is proportionate to each State's annual 
                        consumption of electricity compared to the 
                        Nation's aggregate annual consumption of 
                        electricity.
                            (iii) Additional state or indian tribe 
                        funding.--A State or Indian tribe may apply 
                        funds to public benefits programs in addition 
                        to the amount of funds applied for the purpose 
                        of matching the Fund share.
            (3) Program criteria.--The Board shall recommend 
        eligibility criteria for public benefits programs funded under 
        this section for approval by the Secretary.
            (4) Application.--Not later than August 1 of each year 
        beginning in 2004, a State or Indian tribe seeking matching 
        funds for the following fiscal year shall file with the Board, 
        in such forms as the Board may require, an application--
                    (A) certifying that the funds will be used for an 
                eligible public benefits program;
                    (B) stating the amount of State or Indian tribe 
                funds earmarked for the program; and
                    (C) summarizing how System Benefit Trust Fund funds 
                from the previous calendar year (if any) were spent by 
                the State and what the State accomplished as a result 
                of these expenditures.
    (e) Wires Charge.--
            (1) Determination of needed funding.--Not later than 
        September 1 of each year, the Board shall determine and inform 
        the Commission of the aggregate amount of wires charges that 
        will be necessary to be paid into the Fund to pay matching 
        funds to States and Indian tribes and pay the operating costs 
        of the Board in the following fiscal year.
            (2) Imposition of wires charge.--
                    (A) In general.--Not later than December 15 of each 
                year, the Commission shall impose a nonbypassable, 
                competitively neutral wires charge, to be paid directly 
                into the Fund by the operator of the wire, on 
                electricity carried through the wire (measured as the 
                electricity exits at the busbar at a generation 
                facility, or, for electricity generated outside the 
                United States, at the point of delivery to the wire 
                operator's system) in interstate commerce.
                    (B) Amount.--The wires charge shall be set at a 
                rate equal to the lesser of--
                            (i) 1.0 mills per kilowatt hour; or
                            (ii) a rate that is estimated to result in 
                        the collection of an amount of wires charges 
                        that is as nearly as possible equal to the 
                        amount of needed funding determined under 
                        paragraph (1).
            (3) Deposit in the fund.--The wires charge shall be paid by 
        the operator of the wire directly into the Fund at the end of 
        each month during the calendar year for distribution by the 
        Board under subsection (c).
            (4) Penalties.--The Commission may assess against a wire 
        operator that fails to pay a wires charge as required by this 
        subsection a civil penalty in an amount equal to not more than 
        the amount of the unpaid wires charge.
    (f) Auditing.--
            (1) In general.--The Fund shall be audited annually by a 
        firm of independent certified public accountants in accordance 
        with generally accepted auditing standards.
            (2) Access to records.--Representatives of the Secretary 
        and the Commission shall have access to all books, accounts, 
        reports, files, and other records pertaining to the Fund as 
        necessary to facilitate and verify the audit.
            (3) Reports.--
                    (A) In general.--A report on each audit shall be 
                submitted to the Secretary, the Commission, and the 
                Secretary of the Treasury, who shall submit the report 
                to the President and Congress not later than 180 days 
                after the close of the fiscal year.
                    (B) Requirements.--An audit report shall--
                            (i) set forth the scope of the audit; and
                            (ii) include--
                                    (I) a statement of assets and 
                                liabilities, capital, and surplus or 
                                deficit;
                                    (II) a surplus of deficit analysis;
                                    (III) a statement of income and 
                                expenses;
                                    (IV) any other information that may 
                                be considered necessary to keep the 
                                President and Congress informed of the 
                                operations and financial condition of 
                                the Fund; and
                                    (V) any recommendations with 
                                respect to the Fund that the Secretary 
                                or the Commission may have.

SEC. 202. ELECTRICITY EFFICIENCY PERFORMANCE STANDARD.

    Title VI of the Public Utility Regulatory Policies Act of 1978 (16 
U.S.C. 2621 note) is amended by adding at the end the following:

``SEC. 609. FEDERAL ELECTRICITY EFFICIENCY PERFORMANCE STANDARD.

    ``(a) In General.--Each electric retail supplier shall implement 
energy efficiency and load reduction programs and measures to achieve 
verified improvements in energy efficiency and peak load reduction in 
retail customer facilities and the distribution systems that serve 
them.
    ``(b) Power Savings.--Such programs shall produce savings in total 
peak power demand and total electricity use by retail customers by an 
amount that is equal to or greater than the following percentages 
relative to the peak demand and electricity used in that year by the 
retail electric supplier's customers:

 
------------------------------------------------------------------------
                                                 Reduction    Reduction
                                                 in demand      in use
------------------------------------------------------------------------
In calendar year 2004.........................           1%         .75%
In calendar year 2005.........................           2%         1.5%
In calendar year 2007.........................           4%         3.0%
In calendar year 2009.........................           6%         4.5%
In calendar year 2011.........................           8%         6.0%
In calendar year 2013.........................          10%         7.5%
------------------------------------------------------------------------

    ``(c) Beginning Date.--For purposes of this section, savings shall 
be counted only for measures installed after January 1, 2003.
    ``(d) Rulemaking.--The Secretary of Energy is directed to 
establish, by rule, procedures and standards for counting and 
independently verifying energy and demand savings for purposes of 
enforcing the energy efficiency performance standards imposed by this 
section. Such rule shall also include procedures and a schedule for 
reporting findings to the Department of Energy and for making such 
reports available to the public. The Secretary shall consult with the 
association representing the nation's public utility regulators, and 
with the association representing the nation's state energy officials 
in developing these procedures and standards. This rulemaking shall be 
completed no later than June 30, 2004.
    ``(e) Reporting.--By June 30, 2006, and every two years thereafter, 
each retail electric supplier shall file with the state public 
utilities commission in each state in which its supplies service to 
retail customers, a report demonstrating that it has taken action to 
comply with the energy efficiency performance standards of this 
section. These reports shall include independent verification of the 
estimated savings pursuant to standards established by the Secretary. A 
state public utilities commission may accept such report as filed, or 
may review and investigate the accuracy of the report. Each state 
public utilities commission shall make findings on any deficiencies 
relative to the requirements in section 2, and shall create a remedial 
order for the correction of any deficiencies that are found.
    ``(f) Utilities Outside State Jurisdiction.--Electric retail 
suppliers not subject to the jurisdiction of state public utilities 
commissions shall report to their governing bodies. Such reports shall 
include independent verification of the estimated savings pursuant to 
standards established by the Secretary.
    ``(g) Program Participation.--Electric retail suppliers may 
demonstrate satisfaction of this standard, in whole or part, by savings 
achieved through participation in statewide, regional, or national 
programs that can be demonstrated to significantly improve the 
efficiency of electric distribution and use. Verified efficiency 
savings resulting from such programs may be assigned to each 
participating retail supplier based upon their degree of participation 
in such programs. Electric retail suppliers may also purchase rights to 
extra savings achieved by other electric retail suppliers, provided 
that the selling supplier or another electric retail supplier does not 
also take credit for those savings.
    ``(h) Remedies for Failure To Comply.--In the event that any retail 
electric supplier fails to achieve its energy savings and/or load 
reduction target for a specific year, any aggrieved party may enter 
suit and seek prompt remedial action before a state public utilities 
commission or an appropriate governing body in the case of electric 
retail suppliers not subject to state public utility commission 
jurisdiction. The state public utilities commission or other 
appropriate governing body shall have a maximum of one year to craft a 
remedy. However, if a state public utilities commission or other 
governing body certifies that it has inadequate resources or authority 
to promptly resolve enforcement actions under this section, or fails to 
take action within the time period specified above, enforcement may be 
sought in Federal district court. If a commission or court determines 
that energy savings and/or load reduction targets for a specific year 
have not been achieved, the commission or court shall determine the 
amount of the deficit and shall fashion an equitable remedy to restore 
the lost savings as soon as practicable. Such remedies may include a 
refund to retail electric customers of an amount equal to the retail 
cost of the electricity consumed due to the failure to reach the 
target, and the appointment of a special master to administer a bidding 
system to procure the energy and demand savings equal to 125 percent of 
the deficit.

SEC. 203. APPLIANCE EFFICIENCY.

    Section 325(d)(3) of the Energy Policy and Conservation Act (42 
U.S.C. 6295(d)(3)) is amended by striking subparagraph (B) and 
inserting instead:
    ``(B) The Secretary shall publish a final rule no later than 
January 1, 2007, to determine whether the standards in effect for 
central air conditioners and central air conditioning heat pumps should 
be amended. Such rule shall address both system annual energy use and 
peak electric demand and may include more than one efficiency 
descriptor. Such rule shall apply to products manufactured on or after 
January 1, 2010.''.

SEC. 204. LOAN GUARANTEES.

    (a) Authority.--The Secretary may guarantee not more than 50 
percent of the principal of any loan made to a qualifying entity for 
eligible activities under this section.
    (b) Conditions.--
            (1) The Secretary shall not guarantee a loan under this 
        section unless--
                    (A) the guarantee is a qualifying entity;
                    (B) the guarantee has filed an application with the 
                Secretary;
                    (C) the project, activity, program or system for 
                which the loan is made is an eligible activity; and
                    (D) the project, activity, program or system for 
                which the loan is made will significantly enhance the 
                reliability, security, efficiency and cost-
                effectiveness of electricity generation, transmission 
                or distribution.
            (2) The Secretary shall give priority to guaranteed loans 
        under this section for eligible activities which accomplish the 
        objectives of this section in the most environmentally 
        beneficial manner.
            (3) A loan guaranteed under this section shall be made by a 
        financial institution subject to the examination of the 
        Secretary.
    (c) Rules.--Not later than 1 year after enactment of this section, 
the Secretary shall publish a final rule establishing guidelines for 
loan requirements under this section. The rules shall establish--
            (1) criteria for determining which entities shall be 
        considered qualifying entities eligible for loan guarantees 
        under this section;
            (2) criteria for determining which projects, activities, 
        programs or systems shall be considered eligible activities 
        eligible for loan guarantees in accordance with the purposes of 
        this section;
            (3) loan requirements including term, maximum size, 
        collateral requirements; and
            (4) any other relevant features.
    (d) Limitation on Size.--The Secretary may make commitments to 
guarantee loans only to the extent that the total principal, any part 
of which is guaranteed, will not exceed $10,000,000,000.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary such sums as may be necessary to cover 
the cost of loan guarantees as defined by section 502(5) of the Federal 
Credit Reform Act of 1990 (2. U.S.C. 661a(5)).
    (f) Definitions.--In this section:
            (1) The term ``eligible activity'' means--
                    (A) advanced technologies for high-efficiency 
                electricity transmission control and operation, 
                including high-efficiency power electronics 
                technologies (including software-controlled computer 
                chips and sensors to diagnose trouble spots and re-
                route power into appropriate areas), high-efficiency 
                electricity storage systems, and high-efficiency 
                transmission wire or transmission cable system;
                    (B) distributed generation systems fueled solely 
                by--
                            (i) solar, wind, biomass, geothermal, or 
                        ocean energy;
                            (ii) landfill gas;
                            (iii) natural gas systems utilizing best 
                        available control technology;
                            (iv) fuel cells; or
                            (v) any combination of the above;
                    (C) combined heat and power systems; and
                    (D) energy efficiency systems producing 
                demonstrable electricity savings.
            (2) The term ``qualifying entity'' means an individual, 
        corporation, partnership, joint venture, trust or other entity 
        identified by the Secretary of Energy under subsection (c)(1) 
        as eligible for a guaranteed loan under this section.
            (3) The term ``Secretary'' means the Secretary of Energy.

                     TITLE III--ON-SITE GENERATION

SEC. 301. NET METERING.

    (a) Adoption of Standard.--Section 111(d) of the Public Utility 
Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is amended by 
adding at the end the following:
    ``(13) Net metering.--
            ``(A) Each electric utility shall make available upon 
        request net metering service to any electric consumer that the 
        electric utility serves.
            ``(B) For purposes of implementing this paragraph, any 
        reference contained in this section to the date of enactment of 
        this Act shall be deemed to be a reference to the date of 
        enactment of this paragraph.''.
    (b) Special Rules for Net Metering.--Section 115 of the Public 
Utility Regulatory Policies Act of 1978 (16 U.S.C. 2625) is amended by 
adding at the end the following:
    ``(i) Net Metering.--In undertaking the consideration and making 
the determination concerning net metering established by section 
111(d)(13), the following shall apply:
            ``(1) Rates and charges.--An electric utility--
                    ``(A) shall charge the owner or operator of an on-
                site generating facility rates and charges that are 
                identical to those that would be charged other electric 
                consumers of the electric utility in the same rate 
                class; and
                    ``(B) shall not charge the owner or operator of an 
                on-site generating facility any additional standby, 
                capacity, interconnection, or other rate or charge.
            ``(2) Measurement.--An electric utility that sells electric 
        energy to the owner or operator of an on-site generating 
        facility shall measure the quantity of electric energy produced 
        by the on-site facility and the quantity of electricity 
        consumed by the owner or operator of an on-site generating 
        facility during a billing period in accordance with normal 
        metering practices.
            ``(3) Electric energy supplied exceeding electric energy 
        generated.--If the quantity of electric energy sold by the 
        electric utility to an on-site generating facility exceeds the 
        quantity of electric energy supplied by the on-site generating 
        facility to the electric utility during the billing period, the 
        electric utility may bill the owner or operator for the net 
        quantity of electric energy sold, in accordance with normal 
        metering practices.
            ``(4) Electric energy generated exceeding electric energy 
        supplied.--If the quantity of electric energy supplied by the 
        on-site generating facility to the electric utility exceeds the 
        quantity of electric energy sold by the electric utility to the 
        on-site generating facility during the billing period--
                    ``(A) the electric utility may bill the owner or 
                operator of the on-site generating facility for the 
                appropriate charges for the billing period in 
                accordance with paragraph (2); and
                    ``(B) the owner or operator of the on-site 
                generating facility shall be credited for the excess 
                kilowatt-hours generated during the billing period, 
                with the kilowatt-hour credit appearing on the bill for 
                the following billing period.
            ``(5) Safety and performance standards.--An eligible on-
        site generating facility and net metering system used by an 
        electric consumer shall meet all applicable safety, 
        performance, reliability and interconnection standards 
        established by the National Electrical Code, the Institute of 
        Electrical and Electronics Engineers, and Underwriters 
        Laboratories.
            ``(6) Additional control and testing requirements.--The 
        Commission, after consultation with State regulatory 
        authorities and nonregulated electric utilities and after 
        notice and opportunity for comment, may adopt, by rule, 
        additional control and testing requirements for on-site 
        generating facilities and net metering systems that the 
        Commission determines are necessary to protect public safety 
        and system reliability.
            ``(7) Definitions.--For purposes of this subsection:
                    ``(A) The term `eligible on-site generating 
                facility' means--
                            ``(i) a facility on the site of a 
                        residential electric consumer with a maximum 
                        generating capacity of 25 kilowatts or less; or
                            ``(ii) a facility on the site of a 
                        commercial electric consumer with a maximum 
                        generating capacity of 1,000 kilowatts or 
                        less--
                that is fueled solely by a renewable energy resource.
                    ``(B) The term `renewable energy resource' means 
                solar, wind, biomass, geothermal or wave energy; 
                landfill gas; fuel cells; or a combined heat and power 
                system.
                    ``(C) The term `net metering service' means service 
                to an electric consumer under which electric energy 
                generated by that electric consumer from an eligible 
                on-site generating facility and delivered to the local 
                distribution facilities may be used to offset electric 
                energy provided by the electric utility to the electric 
                consumer during the applicable billing period.
            ``(8) State authority.--An electric utility must provide 
        net metering services to electric consumers until the 
        cumulative generating capacity of net metering systems equals 
        1.0 percent of the utility's peak demand during the most recent 
        calendar year. This subsection does not preclude a state from 
        imposing additional requirements regarding the amount of net 
        metering available within a state consistent with the 
        requirements in this section.''.

SEC. 302. INTERCONNECTION.

    (a) Definitions.--Section 3 of the Federal Power Act (16 U.S.C. 
796) is amended--
            (1) by striking paragraph 23 and inserting the following:
            ``(23) Transmitting utility.--The term `transmitting 
        utility' means any entity (notwithstanding section 201(f)) that 
        owns, controls or operates an electric power transmission 
        facility that is used for the sale of electric energy.''; and
            (2) by adding at the end the following:
            ``(26) Appropriate regulatory authority.--The term 
        `appropriate regulatory authority' means--
                    ``(A) the Commission;
                    ``(B) a State commission;
                    ``(C) a municipality; or
                    ``(D) a cooperative that is self-regulating under 
                State law and is not a public utility.
            ``(27) Generating facility.--The term `generating facility' 
        means a facility that generates electric energy.
            ``(28) Local distribution utility.--The term `local 
        distribution facility' means an entity that owns, controls or 
        operates an electric power distribution facility that is used 
        for the sale of electric energy.
            ``(29) Non-federal regulatory authority.--The term `non-
        Federal regulatory authority' means an appropriate regulatory 
        authority other than the Commission.''.
    (b) Interconnection to Distribution Facilities.--Section 210 of the 
Federal Power Act (16 U.S.C. 824i) is amended--
            (1) by redesignating subsection (e) as subsection (g); and
            (2) by inserting after subsection (d) the following:
    ``(e) Interconnection to Distribution Facilities.--
            ``(1) Interconnection.--
                    ``(A) A local distribution utility shall 
                interconnect a generating facility with the 
                distribution facilities of the local distribution 
                utility if the owner of the generating facility--
                            ``(i) complies with the final rule 
                        promulgated under paragraph (2); and
                            ``(ii) pays the costs of the 
                        interconnection.
                    ``(B) The costs of the interconnection--
                            ``(i) shall be just and reasonable, and not 
                        unduly discriminatory or preferential, as 
                        determined by the appropriate regulatory 
                        authority; and
                            ``(ii) shall be comparable to the costs 
                        charged by the local distribution utility for 
                        interconnection by any similarly situated 
                        generating facility to the distribution 
                        facilities of the local distribution utility.
                    ``(C) The right of a generating facility to 
                interconnect under subparagraph (A) does not relieve 
                the generating facility or the local distribution 
                utility of other Federal, State, or local requirements.
            ``(2) Rule.--Not later than six months after the date of 
        enactment of this subparagraph, the Commission shall promulgate 
        final rules establishing reasonable and appropriate technical 
        standards for the interconnection of a generating facility with 
        the distribution facilities of a local distribution utility.
            ``(3) Right to backup power.--
                    ``(A) In accordance with subparagraph (B) a local 
                distribution utility shall offer to sell backup power 
                to a generating facility that has interconnected with 
                the local distribution utility to the extent that the 
                local distribution utility--
                            ``(i) is not subject to an order of a non-
                        Federal regulatory authority to provide open 
                        access to the distribution facilities of the 
                        local distribution utility;
                            ``(ii) has not offered to provide open 
                        access to the distribution facilities of the 
                        local distribution utility; or
                            ``(iii) does not allow a generating 
                        facility to purchase backup power from another 
                        entity using the distribution facilities of the 
                        local distribution utility.
                    ``(B) A sale of backup power under subparagraph (A) 
                shall be at such a rate, and under such terms and 
                conditions as are just and reasonable and not unduly 
                discriminatory or preferential, taking into account the 
                actual incremental cost, whenever incurred by the local 
                distribution utility, to supply such backup power 
                service during the period in which the backup power 
                service is provided, as determined by the appropriate 
                regulatory authority.
                    ``(C) A local distribution utility shall not be 
                required to offer backup power for resale to any entity 
                other than the entity for which the backup power is 
                purchased.
                    ``(D) To the extent backup power is used to serve a 
                new or expanded load on the distribution system, the 
                generating facility shall pay any reasonable cost 
                associated with any transmission, distribution, or 
                generating upgrade required to provide such service.''.
    (c) Interconnection to Transmission Facilities.--Section 210 of the 
Federal Power Act (16 U.S.C. 824i) (as amended by subsection (b)) is 
amended by inserting after subsection (e) the following:
    ``(f) Interconnection to Transmission Facilities.--
            ``(1) Interconnection.--
                    ``(A) Notwithstanding subsections (a) and (c), a 
                transmitting utility shall interconnect a generating 
                facility with the transmission facilities of the 
                transmitting utility if the owner of the generating 
                facility--
                            ``(i) complies with the final rules 
                        promulgated under paragraph (2); and
                            ``(ii) pays the costs of interconnection.
                    ``(B) Subject to subparagraph (C), the costs of 
                interconnection--
                            ``(i) shall be just and reasonable and not 
                        unduly discriminatory or preferential; and
                            ``(ii) shall be comparable to the costs 
                        charged by the transmitting utility for 
                        interconnection by any similarly situated 
                        generating facility to the transmitting 
                        facilities of the transmitting utility.
                    ``(C) A non-Federal regulatory authority that is 
                authorized under Federal law to determine the rates for 
                transmission service shall be authorized to determine 
                the costs of any interconnection under this 
                subparagraph.
                    ``(D) The right of a generating facility to 
                interconnect under subparagraph (A) does not relieve 
                the generating facility or the transmitting utility of 
                other Federal, State or local requirements.
            ``(2) Rule.--Not later than six months after the date of 
        enactment of this subparagraph, the Commission shall promulgate 
        rules establishing reasonable and appropriate technical 
        standards for the interconnection of a generating facility with 
        the transmission facilities of a transmitting utility.
            ``(3) Right to backup power.--
                    ``(A) In accordance with subparagraph (B), a 
                transmitting utility shall offer to sell backup power 
                to a generating facility that has interconnected with 
                the transmitting utility unless--
                            ``(i) Federal or State law allows a 
                        generating facility to purchase backup power 
                        from an entity other than the transmitting 
                        utility; or
                            ``(ii) a transmitting utility allows a 
                        generating facility to purchase backup power 
                        from an entity other than the transmitting 
                        utility using the transmission facilities of 
                        the transmitting utility and the transmission 
                        facilities of any other transmitting utility.
                    ``(B) A sale of backup power under subparagraph (A) 
                shall be at such a rate and under such terms and 
                conditions as are just and reasonable and not unduly 
                discriminatory or preferential, taking into account the 
                actual incremental cost, whenever incurred by the local 
                distribution utility, to supply such backup power 
                service during the period in which the backup power 
                service is provided, as determined by the appropriate 
                regulatory authority.
                    ``(C) A transmitting utility shall not be required 
                to offer backup power for resale to any entity other 
                than the entity for which the backup power is 
                purchased.
                    ``(D) To the extent backup power is used to serve a 
                new or expanded load on the transmission system, the 
                generating facility shall pay any reasonable costs 
                associated with any transmission, distribution or 
                generation upgrade required to provide such service.''.
    (d) Conforming Amendments.--Section 210 of the Federal Power Act 
(16 U.S.C. 824i) is amended--
            (1) in subsection (a)(1)--
                    (A) by inserting ``transmitting utility, local 
                distribution utility,'' after ``electric utility,''; 
                and
                    (B) in subparagraph (A) by inserting ``any 
                transmitting utility,'' after ``small power production 
                facility,'';
            (2) in subsection (b)(2) by striking `` an evidentiary 
        hearing'' and inserting ``a hearing'';
            (3) in subsection (c)(2)--
                    (A) in subparagraph (B) by striking ``or'' at the 
                end;
                    (B) in subparagraph (C) by striking ``and'' at the 
                end and inserting ``or''; and
                    (C) by adding at the end the following:
                    ``(D) promote competition in electricity markets, 
                and''; and
            (4) in subsection (d) by striking the last sentence.

SEC. 303. ON-SITE GENERATION FOR EMERGENCY FACILITIES.

    (a) Demonstration and Technology Transfer Program.--The Secretary 
shall establish a demonstration program for the implementation of 
innovative technologies for renewable uninterruptible power supply 
systems located in eligible buildings and for the dissemination of 
information on such systems to interested parties.
    (b) Limit on Federal Funding.--The Secretary shall provide no more 
than 40 percent of the costs of projects funded under this section.
    (c) Authorization of Appropriations.--There is hereby authorized to 
be appropriated $30,000,000 for each of the fiscal years 2004 through 
2007 to carry out this section.
    (d) Definitions.--For purposes of this section:
            (1) The term ``eligible facility'' means a building owned 
        or operated by a State or local government that is used for 
        critical governmental dispatch and communication; police, fire 
        or emergency services; traffic control systems; or public water 
        or sewer systems.
            (2) The term ``Secretary'' means the Secretary of Energy;
            (3) The term ``renewable uninterruptible power supply 
        system'' means a system designed to maintain electrical power 
        to critical loads in a public facility in the event of a loss 
        or disruption in conventional grid electricity, where such 
        system derives its energy production or storage capacity solely 
        from solar, wind, biomass, geothermal or ocean energy, natural 
        gas; landfill gas; a fuel cell device; or from a combination of 
        the above.
                                 <all>