[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 716 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 716

To amend the Federal Power Act to improve the electricity transmission 
                      system of the United States.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 26, 2003

 Ms. Landrieu introduced the following bill; which was read twice and 
       referred to the Committee on Energy and Natural Resources

_______________________________________________________________________

                                 A BILL


 
To amend the Federal Power Act to improve the electricity transmission 
                      system of the United States.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Power Act Amendments Act of 
2003''.

SEC. 2. CLARIFICATION OF FEDERAL AND STATE JURISDICTION.

    (a) Section 201(a) of the Federal Power Act (16 U.S.C. 824(a)) is 
amended by striking all after the word ``however'' and inserting the 
following: ``shall not extend to those matters which are subject to 
regulation by the States, including the retail sale of electric energy 
and any component service thereof.''.
    (b) Section 201(b)(1) of the Federal Power Act (16 U.S.C. 
824(b)(1)) is amended by inserting in the last sentence, before the 
period the following: ``, nor shall the Commission have jurisdiction 
over bundled retail sales of electric energy, including the 
transmission component of sales of electric energy to retail 
customers''.
    (c) Section 201 of the Federal Power Act (16 U.S.C. 824) is amended 
by inserting a new subsection (h) as follows:
    ``(h) Bundled Retail Sales of Electric Energy.--The term `bundled 
retail sales of electric energy' when used in this subpart means sales 
of electric energy to retail customers where generation, transmission, 
distribution and other services necessary to supply electric energy to 
such customers are sold as a single delivered service by a single 
seller.''.

SEC. 3. VOLUNTARY PARTICIPANT FUNDING.

    (a) Section 205 of the Federal Power Act (16 U.S.C. 824d) is 
amended by inserting after subsection (f) the following:
    ``(g) Transmission Expansion Costs.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Participant-funding.--The term `participant-
                funding' means an investment in the transmission system 
                of any transmitting utility that--
                            ``(i) increases the transfer capability of 
                        the transmission system; and
                            ``(ii) is paid for by an entity that, in 
                        return for payment, receives the tradable 
                        transmission rights created by the investment.
                    ``(B) Tradable transmission right.--The term 
                `tradable transmission right' means the right of the 
                holder of such right to avoid payment of, or have 
                rebated, transmission congestion charges on the 
                transmission system of a regional transmission 
                organization, or the right to use a specified capacity 
                of such transmission system without payment of 
                transmission congestion charges.
            ``(2) Rates for transmission expansion.--Upon the request 
        of a Regional Transmission Organization (`RTO'), or any 
        transmission entity that is authorized by the Commission, the 
        Commission shall authorize the recovery of costs on a 
        participant-funding basis of transmission facilities that 
        increase the transfer capability of the transmission system.
            ``(3) Participant funded investment.--
                    ``(A) Any RTO that is approved by the Commission, 
                or any transmission entity that is authorized by the 
                Commission, that adopts participant funding pursuant to 
                paragraph (2) shall monitor market conditions, 
                including the magnitude and frequency of transmission 
                congestion, requests for transmission service, and 
                secondary market prices for Tradable Transmission 
                Rights. Based on this information, the RTO shall 
                identify, and publicize projects for potential 
                participant funding that have not been otherwise 
                committed to by a market participant which increase the 
                capacity or transfer capability of the transmission 
                system, as well as the projected Tradable Transmission 
                Rights associated with those projects.
                    ``(B) If more than one market participant is 
                interested in developing a project publicized in 
                accordance with these provisions, the RTO may auction 
                participation in the funding of such project to the 
                bidders providing the highest overall value.''.
    (b) Section 3 of the Federal Power Act (16 U.S.C. 796) is amended 
by adding the following definition at the end:
            ``(26) Regional transmission organization.--The term 
        `regional transmission organization' means an entity that 
        controls and/or operates facilities for the transmission of 
        electric energy in interstate commerce and is not a market 
        participant. The term shall encompass independent system 
        operators, independent system administrators, independent 
        transmission providers, and similar organizations.''.

SEC. 4. INTERCONNECTION.

    Section 210 of the Federal Power Act (16 U.S.C. 824i) is amended to 
read as follows:

                ``transmission interconnection authority

    ``Sec. 210. (a)(1) The Commission shall, by rule, establish 
technical standards and procedures for the interconnection of 
facilities used for the transmission of electric energy in interstate 
commerce with facilities used for the generation of electric energy. 
The rule shall provide criteria to ensure that an interconnection will 
not unreasonably impair the reliability of the transmission system.
    ``(2) The rule promulgated pursuant to paragraph (1) shall provide 
that the person seeking the interconnection shall--
            ``(A) pay the necessary and reasonable costs of the 
        interconnection;
            ``(B) pay, in accordance with section 205, the necessary 
        and reasonable costs to upgrade system facilities made 
        necessary by the interconnection and that would not have been 
        made absent the interconnection; and
            ``(C) not be entitled to transmission service credits as a 
        result of payments under subparagraphs (A) and (B) of this 
        section, except for tradable transmission rights for facilities 
        that are participant funded pursuant to section 205(g); and
            ``(D) either--
                    ``(i) make the payments required under this section 
                in advance of the costs being incurred by the 
                transmitting utility; or
                    ``(ii) provide and maintain in effect an 
                irrevocable letter of credit or other form of security 
                acceptable to the transmitting utility until all 
                payments contemplated under this section are made in 
                full.
    ``(3) The rule required by this section shall apply to all 
interconnection agreements made pursuant to any tariff ever approved by 
the Commission that provided that the person seeking the 
interconnection pay for the necessary and reasonable costs to upgrade 
system facilities made necessary by the interconnection and that would 
not have been made absent the interconnection and to all cases in which 
a final, nonappealable order has not been issued by the Commission or a 
court.
    ``(4) Notwithstanding section 201(f), a transmitting utility shall 
interconnect its transmission facilities with the generation facilities 
of a power producer upon the application of the power producer if the 
power producer complies with the requirements of the rule.
    ``(b) Upon the application of a power producer the Commission may, 
after giving notice and an opportunity for a hearing to any entity 
whose interest may be affected, and subject to the requirements of 
sections 205(g) and 212, issue an order requiring--
            ``(1) the physical connection of facilities used for the 
        generation of electric energy with facilities used for the 
        transmission of electric energy in interstate commerce;
            ``(2) such action as may be necessary to make effective any 
        such physical connection; or
            ``(3) such increase in transmission capacity as may be 
        necessary to carry out the purposes of such order.
    ``(c) As used in this section, the term `power producer' means an 
entity that owns or operates a facility used for the generation of 
electric energy.''.

SEC. 5. ENCOURAGING TRANSMISSION INFRASTRUCTURE EXPANSION.

    (a) Section 205 of the Federal Power Act (16 U.S.C. 824d) is 
amended as follows:
            (1) by adding ``(1)'' after ``(a)''.
            (2) by adding the following at the end of subsection 
        (a)(1):
    ``(2) In setting rates for transmission services, the Commission 
shall ensure that all jurisdictional uses of transmission facilities 
bear an allocation of the embedded costs of the facilities, as well as 
the costs of any other services that are ancillary to the transmission 
of electric energy.
    ``(3) In addition to the charges required by paragraph (2), the 
Commission shall ensure that when new facilities are required to 
provide jurisdictional transmission service and would not have been 
required absent such service, the requestor of such transmission 
service pay for any such facilities.
    ``(4) The requestor of transmission service shall not be entitled 
to transmission service credits as a result of payments made under 
paragraphs (2) and (3), but will receive tradable transmission rights 
for facilities that are participant funded pursuant to subsection (g).
    ``(5) The requestor of transmission service shall either--
                    ``(A) make the payments contemplated under 
                subsection (3) of this section in advance of the costs 
                being incurred by the transmitting utility or;
                    ``(B) provide and maintain in effect an irrevocable 
                letter of credit or other form of security acceptable 
                to the transmitting utility until all payments 
                contemplated under paragraph (3) are made in full.
    ``(6) Nothing in this section shall preclude the Commission from 
authorizing rolled-in pricing of new jurisdictional transmission 
facilities upon request of a Regional Transmission Organization or any 
transmission entity that is authorized by the Commission, provided that 
the Commission complies with otherwise applicable laws in making such a 
determination.''.
    (b) Part II of the Federal Power Act is amended by adding the 
following after section 214:

``SEC. 215. SUSTAINABLE TRANSMISSION NETWORKS RULEMAKING.

    ``(a) Within 6 months of the date of enactment of this section, the 
Commission shall establish, by rule, transmission pricing policies and 
standards for promoting the expansion and improvement of interstate 
transmission networks through incentive-based, performance-based, 
participant-funded and cost of service-based rate treatments to ensure 
reliability of the electric system, to support interstate wholesale 
markets for electric power, and expand transmission transfer capacity 
needed to sustain wholesale competition. Policies and standards 
established under this section shall--
            ``(1) be applicable to all public utilities;
            ``(2) be consistent with section 205; and
            ``(3) shall specifically--
                    ``(A) promote capital investment in the 
                economically efficient enlargement of transmission 
                networks to reduce congestion on transmission networks 
                and provide assurance that new generation and 
                transmission is built where it provides the lowest 
                overall cost to consumers;
                    ``(B) encourage improved operation of transmission 
                facilities and deployment of transmission technologies 
                to increase capacity and efficiency of existing 
                networks and reduce line losses, including but not 
limited to high-capacity wires (including high-temperature 
superconducting cables), power electronics and information technologies 
(including flexible alternating current transmission system 
technologies), and high-voltage, direct current lines;
                    ``(C) provide a return on equity that attracts 
                investment in new transmission facilities and 
                reasonably reflects the financial, operational, and 
                other risks taken by public utilities in restructuring 
                transmission assets; and
                    ``(D) reward improved quality of transmission 
                service.
    ``(b) Limitation on Authority.--In the case of any transmission 
rate approved by the Commission on or after the effective date of the 
rule established under this section, the rate shall comply with--
            ``(1) the policies and standards adopted pursuant to this 
        section as necessary or appropriate to implement the 
        requirements of section 205(a) of this Act; and
            ``(2) the procedural and other requirements of this part, 
        including the requirement of sections 205 and 206, that all 
        rates, charges, terms, and conditions be just and reasonable 
        and not unduly discriminatory.''.

SEC. 6. REGIONAL CONSIDERATION OF COMPETITIVE WHOLESALE MARKETS.

    (a) Within 3 months of enactment of this Act, the Commission shall 
convene regional discussions with State and other retail regulatory 
commissions for the purpose of addressing whether wholesale electric 
markets in each region are working effectively to provide reliable 
service to electric consumers in the region at the lowest reasonable 
cost. Priority should be given to discussions in regions that do not 
have, as of the date of enactment of this Act, a regional transmission 
organization or organizations in place and approved by the Commission. 
The regional discussions shall address the following issues:
            (1) the need for an independent regional transmission 
        organization or organizations in the region to provide 
        nondiscriminatory transmission access and generation 
        interconnection;
            (2) a process for regional planning of transmission 
        facilities with State and other retail regulatory commission 
        participation and for consideration of multistate projects;
            (3) a means for ensuring that native load customers within 
        the region maintain their ability to use the existing 
        transmission system without incurring additional costs;
            (4) a means to provide transparent price signals to ensure 
        efficient expansion of the electric system and efficiently 
        manage congestion;
            (5) eliminating in a reasonable manner, consistent with 
        applicable State and Federal law, multiple transmission system 
        rates for transactions within the region;
            (6) resolution of seams issues with neighboring regions and 
        interregional coordination;
            (7) a means of providing information electronically to 
        potential users of the transmission system;
            (8) implementation of a market monitor for the region with 
        State and other retail regulatory commission and Commission 
        oversight and establishment of rules and procedures that ensure 
        that State and other retail regulatory commissions are provided 
        access to market information and that provides for expedited 
        consideration by the Commission of any complaints concerning 
        exercise of market power and the operation of wholesale 
        markets; and
            (9) a timetable to meet the objectives of this section.
    (b) Within 12 months of enactment of this Act, the Commission shall 
report to Congress on the progress made in addressing the issues in 
subsection (a) of this section in discussions with the States.
    (c) The following entities are authorized to participate in 
regional transmission organizations after conducting a public process 
to receive comments: the Tennessee Valley Authority, the Bonneville 
Power Administration, the Southwestern Power Administration, and the 
Western Power Administration. Notwithstanding any other law, 
participation may include delegation of operation and control of the 
transmission facilities to a regional transmission organization or 
other method of participation, under terms and conditions the entity 
determines necessary or appropriate, including being bound by 
operational and other orders of the regional transmission organization 
and by the results of arbitration with the organization or with other 
participants.
    (d) Nothing in this section shall affect any discussions between 
the Commission and State or other retail regulatory commissions that 
are ongoing prior to enactment of this Act.

SEC. 7. EFFECT ON STATE LAW.

    Section 206 of the Federal Power Act (16 U.S.C. 824e) is amended by 
adding at the end the following:
    ``(e) A transmitting utility reserving transmission capacity (or 
reserving the equivalent amount of tradable transmission rights) to 
meet any legal or contractual obligation to serve customers, to deliver 
reserves in an emergency, or to serve retail customers at bundled rates 
set by a State commission or a local regulatory authority, shall not be 
considered as engaging in undue discrimination or preference under this 
Act.''.

SEC. 8. OPEN ACCESS TRANSMISSION BY CERTAIN UTILITIES.

    Title II of the Federal Power Act is amended by inserting after 
section 211 (16 U.S.C. 824j) the following:

``SEC. 211A. OPEN ACCESS TRANSMISSION BY CERTAIN UTILITIES.

    ``(a) Subject to section 212(h), the Commission may, by rule or 
order, require an unregulated transmitting utility to provide 
transmission services--
            ``(1) at rates that are comparable to those that the 
        unregulated transmitting utility charges itself; and
            ``(2) on terms and conditions (not relating to rates) that 
        are comparable to those under which such utility provides 
        service to itself.
    ``(b) The Commission shall exempt from any rule or order under this 
subsection any unregulated transmitting utility that--
            ``(1) sells no more than 4,000,000 megawatt hours of 
        electricity per year;
            ``(2) does not own or operate any transmission facilities 
        that are necessary for operating an interconnected transmission 
        system (or any portion thereof); or
            ``(3) meets other criteria the Commission determines to be 
        in the public interest.
    ``(c) The rate changing procedures applicable to public utilities 
under subsections (c) and (d) of section 205 are applicable to 
unregulated transmitting utilities for purposes of this section.
    ``(d) In exercising its authority under paragraph (1), the 
Commission shall remand unregulated transmitting means an entity that 
utility transmission rates to an unregulated transmitting utility for 
review and revision where necessary to meet the requirements of 
subsection (a).
    ``(e) The provision of transmission services under subsection (a) 
does not preclude a request for transmission services under section 
211.
    ``(f) The Commission may not require a State or municipality to 
take action under this section that constitutes a private business use 
for purposes of section 141 of the Internal Revenue Code of 1986.
    ``(g) The Commission may not require any transmitting utility to 
make available to third parties transmission capacity necessary to 
fulfill its obligation to serve its wholesale, retail, or transmission 
customers under Federal, State, or local law, or under contracts in 
effect on the date of enactment of this section.
    ``(h) For purposes of this subsection, the term `unregulated 
transmitting utility' means an entity that--
            ``(1) owns or operates facilities used for the transmission 
        of electric energy in interstate commerce; and
            ``(2) is either an entity described in section 201(f) or a 
        rural electric cooperative.''.

SEC. 9. SAVINGS CLAUSE.

    Nothing in this Act shall affect or modify otherwise applicable law 
governing the recovery by an electric utility in retail rates of costs 
incurred under any tariff, rate schedules, or agreements subject to the 
Commission's jurisdiction.
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