[Congressional Record Volume 149, Number 32 (Thursday, February 27, 2003)]
[Senate]
[Pages S2929-S2935]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. THOMAS:
  S. 475. A bill to reform the nation's outdated laws relating to the 
electric industry, improve the operation of our transmission system, 
enhance reliability of our electric grid, increase consumer benefits 
from whole electric competition and restore investor confidence in the 
electric industry; to the Committee on Energy and Natural Resources.
  Mr. THOMAS. Mr. President, I come to the floor to talk about one of 
the things that is so important. Obviously, items connected with 
terrorism, the war in Iraq have to be dealt with. We have to deal with 
heightened homeland security and related issues. Health care is an area 
we need to talk about. Prescription drugs is in the process of this.
  One issue that is particularly important is an energy policy. I don't 
think there has ever been a time when it has been more apparent and 
more important to deal with energy policy. We have an economy, prices 
with gas and energy that are high. We have uncertainty, certainly, in 
the Middle East. We have had a Venezuelan problem. We had a very cold 
winter. We cannot seem to come together to put together a policy that 
will allow us to move forward, an aggressive energy policy. I would 
like to talk briefly about a component of that which I think is very 
important, and that is an electric component.
  I rise today to introduce the Electric Transmission Reliability and 
Enhancement Act of 2003. It is my intention to build on a changing 
wholesale, competitive, open access market and to suggest that we build 
that into a policy. Things have changed in the way energy is generated, 
the way energy is transmitted, the way energy is sold. We need to 
change our policy, as well.
  Very simply, what we have is: In years past, there was a generator 
that generated for their own distribution area. That was pretty simple. 
Prices were controlled. It was a simple technique. Now we have more and 
more merchant generators, people who do not have a constituency or 
distribution system of their own but they sell into the marketplace. 
This is good. There is competition. And we will see more and more of 
that. But to do that, we have to update our laws and we have to update 
the regulations that go with that. My legislation would extend and 
improve open nondiscriminatory access policies. Access to transmission 
would remove antiquated Federal barriers that stand in the way of 
competitive wholesale markets. Wholesale markets that are competitive 
are new. We have to change to meet those needs. We have to encourage 
increased investments in our transmission system and establish 
reliability standards.
  We saw what happened in California 2 years ago. If there is no 
reliability, we cannot depend upon getting that energy to people's 
homes, to businesses, and then we have a very difficult situation.
  Particularly what has changed now is it is interstate. For years we 
grew up with the fact that in your State the State controlled both the 
generation and the distribution, and that worked well. Now we go across 
interstate lines and there needs to be something different.
  Legislatively we have to pare down our wish list so we get to the 
bare essentials and keep those things that are necessary.
  It seems clear, if we are going to have a truly wholesale market, we 
need to ensure that all the industry participants play by the same 
rules. Only Congress can give FERC, the Federal Energy Regulatory 
Commission, the tools it needs to ensure that all participants get 
treated fairly in a competitive marketplace. Under the Federal law, 
currently FERC has no jurisdiction or authority over transmission owned 
by public power agencies, municipals, cooperatives, yet they want to 
participate and need to participate and should participate. Many of 
them--most--are willing to participate.
  These nonregulated utilities represent 52 percent of the total, so we 
do not want to move forward with FERC's so-called market plan. I think 
it goes too far getting into the authority of the States. But there are 
some changes that need to be made, and we would like to do that.
  We also need to protect those cooperatives. I grew up in a area of 
cooperatives and spent much of my life working with cooperatives. So we 
have given that break. Those that sell less than 4 million megawatt 
hours per year are entirely exempt. We think that is as it should be.
  We would repeal the Public Utility Holding Company Act, PUHCA, 
because it needs to be restructured and the deployment of capital in 
this industry needs to go where it is desperately needed. We need to do 
that. There is ample regulation over those investments now in the 
existing business. We want to make it easier for people to be able to 
invest, produce competitively, and go into the marketplace.
  The Department of Justice, Federal Trade Commission, and the State 
commissions would still be able to monitor rates and prevent cross-
subsidies. So my legislation would prospectively eliminate mandatory 
purchase and sales obligations of PURPA, one that was put in a very 
long time ago. Despite the State administering it, it causes favoritism 
to many utilities and changes things.
  Over the years the grid has been protected through voluntary 
standards and that is exactly right. But what we are now faced with is 
to have RTOs, regional transportation organizations, where they can 
make those decisions within the RTO. There would be a Western one, a 
Midwestern one, a New England one, and so on. But then connecting with 
those will be an interstate, like an interstate highway. That has to, 
of course, be organized and controlled by a national group because it 
serves all these different ones.

[[Page S2930]]

  So what we need is to modernize our system so we can accommodate 
things that have changed. Reliability organizations must be run by 
market participants and be overseen by FERC. Reliability organizations 
must be made up of representatives of everyone who is affected: 
residential, commercial, industrial. That can be done, and this 
provides an opportunity to do that.
  During our discussions last year, we were made to address some of the 
more egregious behavior and found a great deal of issues that needed to 
be dealt with--market manipulation, those kinds of things. This is very 
complex. I believe we can address these issues with regulatory 
agencies, things that truly can exist.

  So my legislation would provide a greater price in the transmission 
of availability of information and outlaw the practice of roundtrip 
trading. In the past we found some trading where they went around, got 
it back, made a profit on the sale, and served no one.
  We prohibit the reporting of false information for the purpose of 
manipulating price indices. Again, we go back a little bit to the 
California situation, where there obviously is a great need to do some 
opening up so there is visibility of what is happening. That is what we 
are seeking to do. It would increase civil and criminal penalties for 
the violation of the Federal Power Act and would accelerate the 
effective dates of refunds and so on.
  In the end, it is about consumers, it is about serving consumers, it 
is about competition, it is about reliability, it is about keeping the 
lights on--the part of energy that probably affects more people and 
more businesses than any other. It is my hope that the Electric 
Transmission Reliability Enhancement Act of 2003 will produce a more 
reliable, efficient transmission system, a more dependable and more 
affordable product for the end user, and perhaps more than anything 
else, bring our system and our oversight into the modern time of 
electric generation and transmission.
  Things change. We need to change. Now is the time. We will have an 
energy bill. It needs to have an energy component.
  Mr. President, any comprehensive energy bill must contain an electric 
component. That is why, today, I rise to introduce the ``Electric 
Transmission and Reliability Enhancement Act of 2003.'' It is my 
intention to build on the competitive wholesale open access policies 
adopted by the Congress in the 1992 Energy Policy Act. My legislation 
would extend and improve these open, non-discriminatory access 
policies; remove antiquated federal statutory barriers that stand in 
the way of competitive wholesale markets; encourage increased 
investment in our transmission system and establish enforceable 
reliability standards to help ensure the continued reliability of the 
interstate transmission system.
  The state of the industry is far weaker financially than it has been 
in years. Billions of dollars of shareholder value has evaporated. 
Access to capital is becoming an important issue for large segments of 
the industry that are fighting for survival. In addition, the Federal 
Energy Regulatory Commission, FERC, policy regarding wholesale markets 
seems to be in a state of constant change. The Standard Market Design, 
SMD, Notice of Proposed Rulemaking, NOPR, has divided regulators and 
industry participants in a way that may be unprecedented, threatening 
more years of rulemakings, litigation and regulatory uncertainty.
  If we are to legislate successfully, we will have to par down our 
wish list to the bare essentials, plus those issues necessary for the 
electric industry to attract the capital it needs to keep our lights 
on. Last year, the Enron fallout dominated the debate. By being on the 
defensive most of last year, it was not possible to successfully 
advance those issues most important to consumers and the industry that 
serves them.
  It seems clear that if truly competitive wholesale markets are to 
exist, there is a need to ensure that all industry participants play by 
the same rules. While FERC has tried to ensure this, the Commission's 
tools are limited. Only Congress can give FERC the tools it needs to 
ensure that all industry participants in competitive wholesale markets 
play by the same rules.
  The Wyoming State commissioners wrote that ``under present Federal 
law the FERC has no jurisdiction or authority over transmission 
facilities owned by public power agencies, municipalities and 
cooperatives. In the West these types of entities own a substantial 
portion, perhaps as much as half of the interstate electric 
transmission system.'' As a matter of fact, in the Western Electric 
Coordinating Council, an area that encompasses all or part of 11 
Western States and parts of Canada, non-FERC jurisdictional facilities 
account for 52 percent of transmission miles.
  The Wyoming commissioners claim that, ``without the full 
participation of all of those who own transmission in the West, the 
FERC's wholesale market initiative will fail to provide the full 
spectrum of benefits Congress expected when it created wholesale 
electricity markets. System optimization requires that bulk power be 
able to move freely throughout the interconnected system without regard 
to who owns the facilities over which the power travels. Removing the 
institutional impediments to the free movement of bulk power is also 
requisite to identifying the physical constraints that exist in the 
western system. Proper planning for the relief of such constraints 
depends on properly identifying and quantifying them, absent other 
economic and institutional constraints.''

  They go on to say that such a vision for the future of wholesale 
power markets makes a compelling case for the inclusion of all 
facilities which can be used to move bulk power across the West, 
regardless of ownership. Anything less than 100 percent participation 
by transmission owning entities will simply perpetuate some level of 
inefficiency in the system and will continue to afford those who do not 
participate the ability to favor their own generation resources.
  My legislation would permit FERC to require certain nonregulated 
utilities to offer transmission serviced at comparable rates to those 
they charge themselves, and on terms and conditions comparable to those 
applicable to jurisdictional public utilities. Currently nonregulated 
transmitting utilities would not be subject to the full panoply of FERC 
regulation under this provision. Instead, a ``light handed'' form of 
regulation would apply and small nonregulated entities, such as those 
that sell less than 4,000,000 MW/h per year, would be entirely exempt 
from these nondiscrimination requirements.
  It also seems clear that the Public Utility Holding Company Act 
PUHCA, is hindering necessary restructuring of the industry and the 
deployment of capital into an industry that desperately needs it. 
Investors are deterred simply because they do not want to deal with the 
PUHCA rules and restrictions. If repealed, utility securities will 
continue to be regulated by the Securities and Exchange Commission, 
SEC, FERC and most state commissions. Mergers and acquisitions of 
jurisdictional assets would still require FERC and state commission 
approval and review by Department of Justice, DOJ, and the Federal 
Trade Commission, FTC. FERC and State commissions would still be able 
to monitor rates and prevent cross-subsidies.
  Despite State progress in administering the Public Utility Regulatory 
Policies Act of 1978, PURPA, more in-tune with markets, it is clear 
that PURPA continues to provide special privileges to certain favored 
generators at the expense of utilities and their customers. Like PUHCA, 
PURPA is no longer needed in today's competitive wholesale markets. My 
legislation prospectively eliminates the mandatory purchase and sell 
obligations of PURPA.
  Over the years the grid has been well protected through voluntary 
standards established by the North American Electric Reliability 
Council, NERC, NERC's voluntary reliability standards--which are not 
enforceable--have generally been complied with by the electric power 
industry. But with the opening of the wholesale power market to 
competition, our transmission grid is being used in ways for which it 
was not designed. New system strains are also being created by the 
breakup of vertically integrated utilities and by the emergence of new 
market structures and participants. The results of these changes have 
been an increase in the number and severity of violations of NERC's 
voluntary rules.

[[Page S2931]]

  My legislation converts the existing NERC voluntary reliability 
system into a mandatory reliability system. A nation-wide organization 
would have the authority to establish and enforce reliability 
standards, and take into account regional differences. The new 
reliability organization will be run by market participants, and will 
be overseen by the FERC in the U.S. The reliability organization will 
be made up of representatives of everyone who is affected--residential, 
commercial and industrial consumers; state public utility commissions; 
independent power producers; electric utilities and others. There is no 
question that we need a new system to safeguard the integrity of our 
electric grid. My legislation would do this, using language that was 
effectively agreed upon last fall by House and Senate conferees for the 
energy bill.
  During discussions last year, efforts were made to address some of 
the more egregious behavior and attempted market manipulation through 
legislation. While this area is obviously very complex, I believe that 
we need to address this issue if regulatory gaps truly do exist. I 
realize my attempt might not be perfect, but I wanted to intimate 
discussion on this very important topic if, in fact, regulatory 
agencies do need additional authority to police and monitor the 
industry.
  My legislation will provide greater price and transmission 
availability information, outlaw the practice of round trip trading and 
prohibit reporting of false information for the purpose of manipulating 
price indices. In addition, I've included authority the FERC has 
requested and that would increase civil and criminal penalties for 
violation of the Federal Power Act and accelerate the refund effective 
date to the date of filing of a complaint.
  In the end it's about the consumer. It is my hope and vision that the 
``Electric Transmission and Reliability and Enhancement Act of 2003'' I 
am introducing today will produce a more reliable and efficient 
transmission system and that these improvements will result in a more 
dependable and affordable product for the end user. This legislation is 
the best solution to move forward with a better product for all classes 
of consumers and the industry as a whole.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 475

       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 ``Electric Transmission and 
     Reliability Enhancement Act of 2003''.

                   TITLE I--TRANSMISSION IMPROVEMENT

     SEC. 101. OPEN NON-DISCRIMINATORY ACCESS.

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

          ``open access by unregulated transmitting utilities

       Sec. 211A. (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 Commission rules that require 
     public utilities to offer open access transmission services 
     and that are not unduly discriminatory or preferential.
       ``(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) of 
     subsection (a), the Commission may remand 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 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 (26 U.S.C. 141).
       ``(g) 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. 102. FEDERAL AGENCY COORDINATION.

       The Department of Energy shall be the lead agency for 
     conducting environmental review (for purposes of the National 
     Environmental Policy Act of 1969) of the establishment and 
     modification of electric power transmission corridors across 
     federal lands. The Secretary of Energy shall coordinate with 
     Federal agencies, including Federal land management agencies, 
     to ensure the timely completion of environmental reviews 
     pertaining to such corridors and may set deadlines for the 
     completion of such reviews. For purposes of this section, the 
     term ``Federal land management agencies'' means the Bureau of 
     Land Management, the United States Forest Service, the United 
     States Fish and Wildlife Service, and the Department of 
     Defense. For purposes of this section, ``Federal lands'' 
     means all lands owned by the United States except lands in 
     the National Park System or the national wilderness 
     preservation system, or such other lands as the President may 
     designate.

     SEC. 103. PRIORITY FOR RIGHTS-OF-WAY ACROSS FEDERAL LANDS.

       Section 501 of the Federal Land Policy and Management Act 
     of 1976 (43 U.S.C. 1761) is amended by adding the following 
     new subsection at the end thereof:
       ``(e) In administering the provisions of this title, the 
     Secretary of the Interior and the Secretary of Agriculture 
     shall each shall give a priority to applications for rights 
     of way for electric power transmission corridors.''.

     SEC. 104. ELECTRIC RELIABILITY STANDARDS.

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

     ``SEC. 215. ELECTRIC RELIABILITY

       ``(a) Definitions.--For purposes of this section--
       ``(A) facilities and control systems necessary for 
     operating an interconnected electric energy transmission 
     network (or any portion thereof); and
       ``(B) electric energy from generation facilities needed to 
     maintain transmission system reliability.
       The term does not include facilities used in the local 
     distribution of electric energy.
       ``(2) The terms `Electric Reliability Organization' and 
     `ERO' mean the organization certified by the Commission under 
     subsection (c) the purpose of which is to establish and 
     enforce reliability standards for the bulk-power system, 
     subject to Commission review.
       ``(3) The term `reliability standard' means a requirement, 
     approved by the Commission under this section, to provide for 
     reliable operation of the bulk-power system. The term 
     includes requirements for the operation of existing bulk-
     power system facilities and the design of planned additions 
     or modifications to such facilities to the extent necessary 
     to provide for reliable operation of the bulk-power system, 
     but the term does not include any requirement to enlarge such 
     facilities or to construct new transmission capacity or 
     generation capacity.
       ``(4) The term `reliable operation' means operating the 
     elements of the bulk-power system within equipment and 
     electric system thermal, voltage, and stability limits so 
     that instability, uncontrolled separation, or cascading 
     failures of such system will not occur as a result of a 
     sudden disturbance or unanticipated failure of system 
     elements.
       ``(5) The term `Interconnection' means a geographic area in 
     which the operation of bulk-power system components is 
     synchronized such that the failure of one or more of such 
     components may adversely affect the ability of the operators 
     of other components within the system to maintain reliable 
     operation of the facilities within their control.
       ``(6) The term `transmission organization' means a regional 
     transmission organization, independent system operator, 
     independent transmission provider, or other transmission 
     organization finally approved by the Commission for the 
     operation of transmission facilities.
       ``(7) The term `regional entity' means an entity having 
     enforcement authority pursuant to subsection (e)(4).
       ``(b) Jurisdiction and Applicability.--(1) The Commission 
     shall have jurisdiction, within the United States, over the 
     ERO certified by the Commission under subsection (c), 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 established under this section 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.
       ``(2) 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.
       ``(c) Certification.--Following the issuance of a 
     Commission rule under subsection (b)(2), any person may 
     submit an application to the Commission for certification

[[Page S2932]]

     as the Electric Reliability Organization (ERO). The 
     Commission may certify one such ERO if the Commission 
     determines that such ERO--
       ``(1) has the ability to develop and enforce, subject to 
     subsection (e)(2), reliability standards that provide for an 
     adequate level of reliability of the bulk-power system;
       ``(2) has established rules that--
       ``(A) assure its independence of the users and owners 
     and operators of the bulk-power system, while assuring 
     fair stakeholder representation in the selection of its 
     directors and balanced decisionmaking in any ERO committee 
     or subordinate organizational structure;
       ``(B) allocate equitably reasonable dues, fees, and other 
     charges among end users for all activities under this 
     section;
       ``(C) provide fair and impartial procedures for enforcement 
     of reliability standards through the imposition of penalties 
     in accordance with subsection (e) (including limitations on 
     activities, functions, or operations, or other appropriate 
     sanctions);
       ``(D) 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; and
       ``(E) provide for taking, after certification, appropriate 
     steps to gain recognition in Canada and Mexico.
       ``(d) Reliability Standards.--(1) The Electric Reliability 
     Organization shall file each reliability standard or 
     modification to a reliability standard that it proposes to be 
     made effective under this section with the Commission.
       ``(2) The Commission may approve by rule or order 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 and to the 
     technical expertise of a regional entity organized on an 
     Interconnection-wide basis with respect to a reliability 
     standard to be applicable within that Interconnection, but 
     shall not defer with respect to the effect of a standard on 
     competition. A proposed standard or modification shall take 
     effect upon approval by the Commission.
       ``(3) The Electric Reliability Organization 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 interest.
       ``(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 the 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.
       ``(6) The final rule adopted under subsection (b)(2) shall 
     include fair processes for the identification and timely 
     resolution of any conflict between a reliability standard and 
     any function, rule, order, tariff, rate schedule, or 
     agreement accepted, approved, or ordered by the Commission 
     applicable to a transmission organization. Such transmission 
     organization shall continue to comply with such function, 
     rule, order, tariff, rate schedule or agreement accepted 
     approved, or ordered by the Commission until--
       ``(A) the Commission finds a conflict exists between a 
     reliability standard and any such provision;
       ``(B) the Commission orders a change to such provision 
     pursuant to section 206 of this part; and
       ``(C) the ordered change becomes effective under this part.
       If the Commission determines that a reliability standard 
     needs to be changed as a result of such a conflict, it shall 
     order the ERO to develop and file with the Commission a 
     modified reliability standard under paragraph (4) or (5) of 
     this subsection.
       ``(e) Enforcement.--(1) The ERO may impose, subject to 
     paragraph (2), a penalty on a user or owner or operator of 
     the bulk-power system for a violation of a reliability 
     standard approved by the Commission under subsection (d) if 
     the ERO, after notice and an opportunity for a hearing--
       ``(A) finds that the user or owner or operator has violated 
     a reliability standard approved by the Commission under 
     subsection (d); and
       ``(B) files notice and the record of the proceeding with 
     the Commission.
       ``(2) A penalty imposed under paragraph (1) may take effect 
     not earlier than the 31st day after the Electric Reliability 
     Organization files with the Commission notice of the penalty 
     and the record of proceedings. Such penalty shall be subject 
     to review by the Commission, on its own motion or upon 
     application by the user, owner or operator that is the 
     subject of the penalty filed within 30 days after the date 
     such notice is filed with the Commission. Application to the 
     Commission for review, or the initiation of review by the 
     Commission on its own motion, shall not operate as a stay of 
     such penalty unless the Commission otherwise orders upon its 
     own motion or upon application by the user, owner or operator 
     that is the subject of such penalty. In any proceeding to 
     review a penalty imposed under paragraph (1), the Commission, 
     after notice and opportunity for hearing (which hearing may 
     consist solely of the record before the Electric Reliability 
     Organization and opportunity for the presentation of 
     supporting reasons to affirm, modify, or set aside the 
     penalty), shall by order affirm, set aside, reinstate, or 
     modify the penalty, and, if appropriate, remand to the 
     Electric Reliability Organization for further proceedings. 
     The Commission shall implement expedited procedures for such 
     hearings.
       ``(3) 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 engaged or is about to engage in 
     any acts or practices that constitute or will constitute a 
     violation of a reliability standard.
       ``(4) The Commission shall establish regulations directing 
     the ERO to enter into an agreement to delegate authority to a 
     regional entity for the purpose of proposing reliability 
     standards to the ERO and enforcing reliability 
     standards under paragraph (1) if--
       ``(A) the regional entity is governed by an independent, 
     balanced stakeholder, or combination independent and balanced 
     stakeholder board;
       ``(B) the regional entity otherwise satisfies the 
     provisions of subsection (c)(1) and (2); and
       ``(C) the agreement promotes effective and efficient 
     administration of bulk-power system reliability.
       The Commission may modify such delegation. The ERO and the 
     Commission shall rebuttably presume that a proposal for 
     delegation to a regional entity organized on an 
     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 ERO's authority to enforce reliability standards 
     under paragraph (1) directly to a regional entity consistent 
     with the requirements of this paragraph.
       ``(5) The Commission may take such action as is necessary 
     or appropriate against the ERO or a regional entity to ensure 
     compliance with a reliability standard or any Commission 
     order affecting the ERO or a regional entity.
       ``(6) Any penalty imposed under this section shall bear a 
     reasonable relation to the seriousness of the violation and 
     shall take into consideration the efforts of such user, 
     owner, or operator to remedy the violation in a timely 
     manner.
       ``(f) Changes in Electricity Reliability Organization 
     Rules.--The 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 compliant, 
     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 discriminary or preferential, is in 
     the public interest, and satisfies the requirements of 
     subsection(c).
       ``(g) Reliability Reports.--The Electric Reliability 
     Organization shall conduct periodic assessments of the 
     reliability and adequacy of the bulk-power system in North 
     America.
       ``(h) Coordination With Canada and Mexico.--The President 
     is urged to negotiate 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.
       ``(i) Savings Provisions.--(1) The Electric Reliability 
     Organization shall have authority to develop and enforce 
     compliance with reliability standards for only the bulk-power 
     system.
       ``(2) This section does not authorize the Electric 
     Reliability Organization or the Commission 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.
       ``(4) Within 90 days 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) Regional Advisory Bodies.--The Commission shall 
     establish a regional advisory body on the petition of at 
     least two-

[[Page S2933]]

     thirds of the States within a region that have more than one-
     half 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 entity, or the 
     Commission regarding the governance of an existing or 
     proposed regional 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.
       ``(k) Application to Alaska and Hawaii.--The provisions of 
     this section do not apply to Alaska or Hawaii.''.

             TITLE II--ELIMINATION OF COMPETITIVE BARRIERS

Subtitle A--Provisions Regarding the Public Utility Holding Company Act 
                                of 1935

     SEC. 201. DEFINITIONS.

       For the purpose of this subtitle:
       (1) The term ``affiliate'' of a company means any company 5 
     percent or more of the outstanding voting securities of which 
     are owned, controlled, or held with power to vote, directly 
     or indirectly, by such company.
       (2) The term ``associate company'' of a company means any 
     company in the same holding company system with such company.
       (3) The term ``Commission'' means the Federal Energy 
     Regulatory Commission.
       (4) the term ``company'' means a corporation, partnership, 
     association, joint stock company, business rust, or any 
     organized group of persons, whether incorporated or not, or a 
     receiver, trustee, or other liquidating agent of any of the 
     foregoing.
       (5) The term ``electric utility company'' means any company 
     that owns or operates facilities used for the generation, 
     transmission, or distribution of electric energy for sale.
       (6) The term ``exempt wholesale generator'' and ``foreign 
     utility company'' have the same meanings as in sections 32 
     and 33, respectively, of the Public Utility Holding Company 
     Act of 1935 (15 U.S.C. 79z-5, 79z-5b), as those sections 
     existed on the day before the effective date of this 
     subtitle.
       (7) The term ``gas utility company'' means any company that 
     owns or operates facilities used for distribution at retail 
     (other than the distribution only in enclosed portable 
     containers or distribution to tenants or employees of the 
     company operating such facilities for their own use and not 
     for resale) of natural or manufactured gas for heat, light, 
     or power.
       (8) the term ``holding company'' means--
       (A) any company that directly or indirectly owns, controls, 
     or holds, with power to vote, 10 percent or more of the 
     outstanding voting securities of a public utility company or 
     of a holding company of any public utility company; and
       (B) any person, determined by the Commission, after notice 
     and opportunity for hearing, to exercise directly or 
     indirectly (either alone or pursuant to an arrangement or 
     understanding with one or more persons) such a controlling 
     influence over the management or policies of any public 
     utility company or holding company as to make it necessary or 
     appropriate for the rate protection of utility customers with 
     respect to rates that such persons be subject to the 
     obligations, duties, and liabilities imposed by this subtitle 
     upon holding companies.
       (9) The term ``holding company system'' means a holding 
     company, together with its subsidiary companies.
       (10) The term ``jurisdictional rates'' means rates 
     established by the Commission for the transmission of 
     electric energy in interstate commerce, the sale of electric 
     energy at wholesale in interstate commerce, the 
     transportation of natural gas in interstate commerce, and the 
     sale in interstate commerce of natural gas for resale for 
     ultimate public consumption for domestic, commercial, 
     industrial, or any other use.
       (11) The term ``natural gas company'' means a person 
     engaged in the transportation of natural gas in interstate 
     commerce or the sale of such gas in interstate commerce for 
     resale.
       (12) The term ``person'' means an individual or company.
       (13) The term ``public utility'' means any person who owns 
     or operates facilities used for transmission of electric 
     energy in interstate commerce or sales of electric energy in 
     interstate commerce or sales of electric energy at wholesale 
     in interstate commerce.
       (14) The term ``public utility company'' means an electric 
     utility company or a gas utility company.
       (15) The term ``State commission'' means any commission, 
     board, agency, or officer, by whatever name designated, of a 
     State, municipality, or other political subdivision of a 
     State that, under the laws of such State, has jurisdiction to 
     regulate public utility companies.
       (16) The term ``subsidiary company'' of a holding company 
     means--
       (A) any company, 10 percent or more of the outstanding 
     voting securities of which are directly or indirectly owned, 
     controlled, or held with power to vote, by such holding 
     company; and
       (B) any person, the management or policies of which the 
     Commission, after notice and opportunity for hearing, 
     determines to be subject to a controlling influence, directly 
     or indirectly, by such holding company (either alone or 
     pursuant to an arrangement or understanding with one or more 
     other persons) so as to make it necessary for the rate 
     protection of utility customers with respect to rates that 
     such person be subject to the obligations, duties, and 
     liabilities imposed by this subtitle upon subsidiary 
     companies of holding companies.
       (17) The term ``voting security'' means any security 
     presently entitling the owner or holder thereof to vote in 
     the direction or management of the affairs of a company.

     SEC. 202. REPEAL OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 
                   1935.

       The Public Utility Holding Company Act of 1935 (15 U.S.C. 
     79a and following) is repealed, effective 12 months after the 
     date of enactment of this Act.

     SEC. 203. FEDERAL ACCESS TO BOOKS AND RECORDS.

       (a) In General.--Each holding company and each associate 
     company thereof shall maintain, and shall make available to 
     the Commission, such books, accounts, memoranda, and other 
     records as the Commission determines are relevant to costs 
     incurred by a public utility or natural gas company that is 
     an associate company of such holding company and necessary or 
     appropriate for the protection of utility customers with 
     respect to jurisdictional rates.
       (b) Affiliate Companies.--Each affiliate of a holding 
     company or of any subsidiary company of a holding company 
     shall maintain, and make available to the Commission, such 
     books, accounts, memoranda, and other records with respect to 
     any transaction with another affiliate, as the Commission 
     determines are relevant to costs incurred by a public utility 
     or natural gas company that is an associate company of such 
     holding company and necessary or appropriate for the 
     protection of utility customers with respect to 
     jurisdictional rates.
       (c) Holding Company Systems.--The Commission may examine 
     the books, accounts, memoranda, and other records of any 
     company in a holding company system, or any affiliate 
     thereof, as the Commission determines are relevant to costs 
     incurred by a public utility or natural gas company within 
     such holding company system and necessary or appropriate for 
     the protection of utility customers with respect to 
     jurisdictional rates.
       (d) Confidentiality.--No member, officer, or employee of 
     the Commission shall divulge any fact or information that may 
     come to his or her knowledge during the course of examination 
     of books, accounts, memoranda, or other records as provided 
     in this section, except as may be directed by the Commission 
     or by a court of competent jurisdiction.

     SEC. 204. STATE ACCESS TO BOOKS AND RECORDS.

       (a) In General.--Upon the written request of a State 
     commission having jurisdiction to regulate a public utility 
     company in a holding company system, and subject to such 
     terms and conditions as may be necessary and appropriate to 
     safeguard against unwarranted disclosure to the public of any 
     trade secrets or sensitive commercial information, a holding 
     company or any associate company or affiliate thereof, 
     wherever located, shall produce for inspection books, 
     accounts, memoranda, and other records that--
       (1) have been identified in reasonable detail in a 
     proceeding before the State commission;
       (2) the State commission determines are relevant to costs 
     incurred by such public utility company; and
       (3) are necessary for the effective discharge of the 
     responsibilities of the State commission with respect to such 
     proceeding.
       (b) Effect on State Law.--Nothing in this section shall 
     preempt applicable State law concerning the provision of 
     books, accounts, memoranda, or other records, or in any way 
     limit the rights of any State to obtain books, accounts, 
     memoranda, or other records, under federal law, contract, or 
     otherwise.
       (c) Court Jurisdiction.--Any United States district court 
     located in the State in which the State commission referred 
     to in subsection (a) is located shall have jurisdiction to 
     enforce compliance with this section.

     SEC. 205. EXEMPTION AUTHORITY.

       (a) Rulemaking.--Not later 90 days after the date of 
     enactment of this Act, the Commission shall promulgate a 
     final rule to exempt from the requirements of section 203 any 
     person that is a holding company, solely with respect to one 
     or more--
       (1) qualifying facilities under the Public Utility 
     Regulatory Policies Act of 1978;
       (2) exempt wholesale generators; or
       (3) foreign utility companies.
       (b) Other Authority.--If, upon application or upon its own 
     motion, the Commission finds that the books, accounts, 
     memoranda, and other records of any person are not relevant 
     to the jurisdictional rates of a public utility company or 
     natural gas company, or if the Commission finds that any 
     class of transactions is not relevant to the jurisdictional 
     rates of a public utility company, the Commission shall 
     exempt such person or transaction from the requirements of 
     section 203.

[[Page S2934]]

     SEC. 206. AFFILIATE TRANSACTIONS.

       Nothing in this subtitle shall preclude the Commissioner or 
     a State commission from exercising its jurisdiction under 
     otherwise applicable law to determine whether a public 
     utility company, public utility, or natural gas company may 
     recover in rates any costs of an activity performed by an 
     associate company, or any costs of goods or services acquired 
     by such public utility company, public utility, or natural 
     gas company from an associate company.

     SEC. 207. APPLICABILITY.

       No provision of this subtitle shall apply to, or be deemed 
     to include--
       (1) the United States;
       (2) a State or any political subdivision of a State;
       (3) any foreign governmental authority not operating in the 
     United States;
       (4) any agency, authority, or instrumentality of any entity 
     referred to in paragraph (1), (2), or (3); or
       (5) any officer, agent, or employee of any entity referred 
     to in paragraph (1), (2), or (3) acting as such in the course 
     of such officer, agent, or employee's official duty.

     SEC. 208. EFFECT ON OTHER REGULATIONS.

       Nothing in this subtitle precludes the Commission or a 
     State commission from exercising its jurisdiction under 
     otherwise applicable law to protect utility customers.

     SEC. 209. ENFORCEMENT.

       The Commission shall have the same powers as set forth in 
     sections 306 through 317 of the Federal Power Act (16 U.S.C. 
     825e-825p) to enforce the provisions of this subtitle.

     SEC. 210. SAVINGS PROVISIONS.

       (a) In General.--Nothing in this subtitle prohibits a 
     person from engaging in or continuing to engage in activities 
     or transactions in which it is legally engaged or authorized 
     to engage on the date of enactment of this Act, if that 
     person continues to comply with the terms of any such 
     authorization, whether by rule or by order.
       (b) Effect on Other Commission Authority.--Nothing in this 
     subtitle limits the authority of the Commission under the 
     Federal Power Act (16 U.S.C. 791a and following) (including 
     section 301 of that Act) or the Natural Gas Act (15 U.S.C. 
     717 and following) (including section 8 of that Act).

     SEC. 211. IMPLEMENTATION.

       Not later than 12 months after the date of enactment of 
     this Act, the Commission shall--
       (1) promulgate such regulations as may be necessary or 
     appropriate to implements this subtitle; and
       (2) submit to Congress detailed recommendations on 
     technical and conforming amendments to Federal law necessary 
     to carry out this subtitle and the amendments made by this 
     subtitle.

     SEC. 212. TRANSFER OR RESOURCES.

       All books and records that relate primarily to the 
     functions transferred to the Commission under this subtitle 
     shall be transferred from the Securities and Exchange 
     Commission to the Commission.

     SEC. 213. EFFECTIVE DATE.

       This subtitle shall take effect 12 months after the date of 
     enactment of this Act.

     SEC. 214. CONFORMING AMENDMENT TO THE FEDERAL POWER ACT.

       Section 318 of the Federal Power Act (16 U.S.C. 825q) is 
     repealed.

Subtitle B--Provisions Regarding The Public Utility Regulatory Policies 
                              Act of 1978

     SEC. 215. PROSPECTIVE REPEAL OF SECTION 210.

       (a) New Contracts.--After the date of enactment of this 
     Act, no electric utility shall be required to enter into a 
     new contract or obligation to purchase or to sell electric 
     energy or capacity pursuant to section 210 of the Public 
     Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a-3).
       (b) Existing Rights and Remedies Not Affected.--Nothing in 
     this Act affects the rights or remedies of any party with 
     respect to the purchase or sale of electric energy or 
     capacity from or to a facility determined to be a qualifying 
     small power production facility or a qualifying cogeneration 
     facility under section 210 of the Public Utility Regulatory 
     Policies Act of 1978 pursuant to any contract or obligation 
     to purchase or to sell electric energy or capacity in effect 
     on the date of enactment of this Act, including the right to 
     recover the costs of purchasing such electric energy or 
     capacity.

     SEC. 216. RECOVERY OF COSTS.

       In order to assure recovery by electric utilities 
     purchasing electric energy or capacity from a qualifying 
     facility pursuant to any legally enforceable obligation 
     entered into or imposed pursuant to section 210 of the Public 
     Utility Regulatory Policies Act of 1978 prior to the date of 
     enactment of this Act, of all costs associated with such 
     purchases, the Commission shall promulgate and enforce such 
     regulations as may be required to assure that no such 
     electric utility shall be required directly or indirectly to 
     absorb the costs associated with such purchases from a 
     qualifying facility. Such regulations shall be treated as a 
     rule enforceable under the Federal Power Act (16 U.S.C. 791a-
     825r).

     SEC. 217. DEFINITIONS.

       For purposes of this subtitle, the terms ``Commission'', 
     ``electric utility'', ``qualifying cogeneration facility'', 
     and ``qualifying small power production facility'', shall 
     have the same meanings as provided in the Public Utility 
     Regulatory Policies Act of 1978, and the term ``qualifying 
     facility'' shall mean either a qualifying small production 
     facility or a qualifying cogeneration facility as defined 
     in such Act.

    TITLE III--MARKET TRANSPARENCY, ANTIMANIPULATION AND ENFORCEMENT

   Subtitle A--Market Transparency, Anti-Manipulation and Enforcement

     SEC. 301. MARKET TRANSPARENCY RULES.

       Part II of the Federal Power Act is amended by adding after 
     section 215 as added by this Act the following:


                 ``sec. 216. market transparency rules.

       ``(a) Commission Rules.--Not later than 180 days after the 
     date of enactment of this section, the Commission shall issue 
     rules establishing an electronic information system to 
     provide the Commission and the public with access to such 
     information as is necessary or appropriate to facilitate 
     price transparency and participation in markets subject to 
     the Commission's jurisdiction. Such systems shall provide 
     statistical information about the availability and market 
     price of wholesale electric energy and transmission services 
     to the Commission, State commissioners, buyers and sellers of 
     wholesale electric energy, users of transmission services, 
     and the public on a timely basis.
       ``(b) Information Required.--The Commission shall require--
       ``(1) each regional transmission organization or, where no 
     regional transmission organization is operating, each 
     transmitting utility to provide information about the 
     available capacity of transmission facilities operated by the 
     organization or transmitting utility; and
       ``(2) each regional transmission organization or broker or 
     exchange to provide aggregate information about the amount 
     and price of physical sales of electric energy at wholesale 
     in interstate commerce it transacts.
       ``(c) Definition.--For purposes of this section, the term 
     `broker or exchange' means an entity that matches offers to 
     sell and offers to buy physical sales of wholesale electric 
     energy in interstate commerce.
       ``(d) Protection of Sensitive Information.--The Commission 
     shall exempt from disclosure information it determines would, 
     if disclosed, be detrimental to the operation of an effective 
     market.''.

     SEC. 302. MARKET MANIPULATION.

       (a) Part II of the Federal Power Act is amended by adding 
     after section 216 as added by this Act the following:

     ``SEC. 217. PROHIBITION ON FILING FALSE INFORMATION.

       ``It shall be a violation of this Act for any person 
     willfully and knowingly to report any information relating to 
     the price of electricity sold at wholesale, which information 
     the person knew to be false at the time of the reporting, to 
     any governmental or non-governmental entity and with the 
     intent to manipulate the date being compiled by such 
     entity.''.

     ``SEC. 218. PROHIBITION ON ROUND TRIP TRADING.

       ``(a) Prohibition.--It shall be a violation of this Act for 
     any person willfully and knowingly to enter into any contract 
     or other arrangement to execute a ``round-trip trade'' for 
     the purchase or sale of electric energy at wholesale.
       ``(b) Definition of Round-Trip Trade.--For the purposes of 
     this section, the term `round trip trade' means a 
     transaction, or combination of transactions, in which a 
     person or other entity--
       ``(1) enters into a contract or other arrangement to 
     purchase from, or sell to, any other person or other entity 
     electric energy at wholesale;
       ``(2) simultaneously with entering into the contract or 
     arrangement described in paragraph (1), arranges a 
     financially offsetting trade with such other person or entity 
     for the same such electric energy, at the same location, 
     price, quantity and terms so that, collectively, the purchase 
     and sale transactions in themselves result in no financial 
     gain or loss; and
       ``(3) enters into the contract or arrangement with the 
     intent to deceptively affect reported revenues, trading 
     volumes, or prices.''.

     SEC. 303. ENFORCEMENT.

       (a) Complaints.--Section 306 of the Federal Power Act (16 
     U.S.C. 825e) is amended by--
       (1) inserting ``electric utility,'' after ``Any person,''; 
     and
       (2) inserting ``transmitting utility,'' after ``license'' 
     each place it appears.
       (b) Investigations--Section 307(a) of the Federal Power Act 
     (16 U.S.C. 825f((a)) is amended by inserting ``or 
     transmitting utility'' after ``any person'' in the first 
     sentence.
       (c) Review of Commission Orders.--Section 313(a) of the 
     Federal Power Act (16 U.S.C. 8251) is amended by inserting 
     ``electric utility,'' after ``Any person,'' in the first 
     sentence.
       (d) Criminal Penalties--Section 316 of the Federal Power 
     Act (16 U.S.C. 825o) is amended--
       (1) in subsection (a), by striking ``$5,000'' and inserting 
     ``$1,000,000'', and by striking ``two years'' and inserting 
     ``five years'';
       (2) in subsection (b), by striking ``$500'' and inserting 
     ``$25,000''; and
       (3) by striking subsection (c).
       (e) Civil Penalties.--Section 316A of the Federal Power Act 
     (16 U.S.C. 825o-1 is amended--
       (1) in subsections (a) and (b), by striking ``section 211, 
     212, 213, or 214'' each place it appears and inserting ``Part 
     II''; and
       (2) in subsection (b), by striking ``$10,000'' and 
     inserting ``$1,000,000''.

[[Page S2935]]

                   Subtitle B--Refund Effective Date

     SEC. 304. REFUND EFFECTIVE DATE.

       Section 206(b) of the Federal Power Act (16 U.S.C. 824e(b)) 
     is amended by--
       (1) striking ``the date 60 days after the filing of such 
     complaint nor later than 5 months after the expiration of 
     such 60-day period'' in the second sentence and inserting 
     ``the date of the filing of such complaint nor later than 5 
     months after the filing of such complaint'';
       (2) striking ``60 days after'' in the third sentence and 
     inserting ``of'';
       (3) striking ``expiration of such 60-day period'' in the 
     third sentence and inserting ``publication date''; and
       (4) striking the fifth sentence and inserting in lieu 
     thereof; ``If no final decision is rendered by the conclusion 
     of the 180-day period commencing upon initiation of a 
     proceeding pursuant to this section, the Commission shall 
     state the reasons why it has failed to do so and shall state 
     its best estimate as to when it reasonably expects to make 
     such decision.''.
                                 ______