[Congressional Record Volume 149, Number 146 (Friday, October 17, 2003)]
[Senate]
[Pages S12839-S12845]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS (for himself, Mr. Kennedy, and Ms. Cantwell):
  S. 1754. 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; to the Committee on Energy and Natural Resources.

[[Page S12840]]

  Mr. JEFFORDS. Mr. President, today I am introducing comprehensive 
legislation to ensure the reliable delivery of electric power in the 
United States. I am pleased have the Senior Senator from Massachusetts 
and the Senator from Washington join me as original cosponsors of this 
bill.
  This past August, nearly 50 million people in the Northeast and 
Midwest were affected by a massive power outage. Hurricane Isabel and 
other weather systems left millions more without power. These events 
emphasize the vulnerability of the U.S. electricity grid to human 
error, mechanical failure, and weather-related outages.
  Unfortunately, the electricity provisions now being considered in the 
on-going energy bill conference were written well before these recent 
events. The pending energy bill fails to do all that is necessary to 
protect the grid from devastating interruptions in the future. That is 
why I am introducing this bill today to ensure greater reliability in 
our electricity delivery system.
  My bill, the Electric Reliability Security Act of 2003, will help 
achieve reliability and security of the electricity grid in an 
efficient, cost-effective, and environmentally sound manner. It does so 
by creating mandatory, nationwide electric reliability standards.
  The bill also mandates regional coordination in the siting of 
transmission facilities, and provides $10 billion in loan guarantees to 
finance ``smart grid'' technologies that improve the way the grid 
transmits power.
  While a $10 billion investment may seem to be a large investment, it 
is significantly less than the transmission cost estimates that have 
circulated following the Northeast blackout. In response to the events 
this past August, industry experts estimated that it would cost 
consumers as much as $100 billion to upgrade transmission systems and 
site new lines to meet future reliability needs.
  However, even this hefty price tag does not factor in the costs of 
additional generation, does not consider the rising cost of natural gas 
due to increasing electricity consumption, and does not include the 
environmental and other social costs of continued expansion of our 
presently centralized power system. Power lines are expensive and are 
rarely welcomed by the nearby public. The loan guarantees in the bill 
will help balance the need for new transmission lines by providing 
Federal resources to help improve existing ones.
  In addition to addressing system operation and transmission needs, 
the bill also promotes sound system management. It establishes a 
Federal system benefits fund as a match for State programs.
  Historically, regulated electric utility companies have provided a 
number of energy-related public services beyond simply supplying 
electricity that benefit the system as a whole. Such services have 
included bill payment assistance and energy conservation measures for 
low-income households, energy efficiency programs for residential and 
business customers, and pilot programs to promote renewable energy 
resources. More than 20 States, including my home State of Vermont, 
have public benefits programs. This bill will provide needed Federal 
matching money to States for these programs.
  The Alliance to Save Energy estimates that a Federal program to match 
existing State public benefits programs would save 1.24 trillion 
kilowatt-hours of electricity over 20 years, and cut consumer energy 
bills by about $100 billion. My bill, which has the potential to save 
consumers $100 billion is far preferable to raising consumer 
electricity bills by the $100 billion to raise money for grid 
expansion.
  The bill also establishes energy efficiency performance standards for 
utilities. The United States has experienced tremendous growth in 
electricity consumption over the past decade. Current estimates are 
that electricity consumption is increasing at roughly two percent per 
year.
  Between 1993 and 1999, U.S. summer peak electricity use alone 
increased by 95,000 megawatts. This is the equivalent of adding a new, 
six-State New England to the Nation's electricity demand every fourteen 
months.
  Energy experts estimate that as much as 50 percent of expected new 
demand over the next 20 years can be met through consumer efficiency 
and load management programs. Over the past two decades, utility 
demand-side efficiency programs have avoided the need for more than 100 
300-megawatt power plants. However, with the advent of electricity 
deregulation, utility spending on these efficiency programs has dropped 
by almost half.
  The Federal Government should seek to correct this trend, and this 
bill takes a strong first step in that direction by phasing in a 
requirement that utilities reduce their peak demand for power and their 
customers' power use between 2004 and 2013.
  Finally, the bill enacts standards that enable increased on-site, or 
distributed, generation to reduce pressure on the grid and lessen the 
impact of a blackout should one occur. We have an obligation to ensure 
that the electricity grid is secure. We currently have a giant system 
consisting of almost 200,000 miles of interconnecting lines that 
constantly shift huge amounts of electricity throughout the country.
  Such a giant and complex system, traversing miles of city and 
countryside, is inevitably subject to unforeseen problems. Simply 
making it bigger will never take away all uncertainty, nor can it 
eliminate the vulnerability of the grid to sabotage or terrorist 
attack. We should do all we can to make certain such vulnerabilities 
are reduced.
  In summary, I am introducing this legislation because I feel that we 
should be cautious in our assumptions that the answer to our nation's 
reliability woes lies primarily in building a bigger, more expansive 
grid. Simply building more transmission lines is not the answer.
  Investments in energy efficiency and on-site generation can 
significantly improve the reliability of the nation's electricity grid 
and in most cases will be cheaper, faster to implement and more 
environmentally friendly than large-scale grid expansion. We also must 
fill the regulatory gaps in the system, which my bill does. Congress 
should establish mandatory reliability standards and close other 
regulatory gaps left by state deregulation of the electricity sector. 
In addition, no national reliability program will be effective or 
complete without strong incentives for demand-side management programs, 
for efficiency and for on-site generation.
  We cannot solve today's energy problems with yesterday's solutions. 
My bill is an innovative approach to ensuring electric reliability by 
maximizing energy efficiency, regulatory efficiency, and efficient 
investment. Given the high costs of power outages to our country, we 
cannot afford to do otherwise.
  I invite my colleagues to join me in my efforts to advance energy 
security and reliability in the United States.
  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:

       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;

[[Page S12841]]

       ``(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;
       ``(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 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 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 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 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

[[Page S12842]]

     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 three 
     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 14
       ``(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 15 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 terms ``Fund'' means the System Benefits 
     Trust Fund established by 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

[[Page S12843]]

     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 form 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 or 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    Reductions
                                                 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 it 
     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

[[Page S12844]]

     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% 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 l, 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 29 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 1000 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.

[[Page S12845]]

     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.
                                 ______