[Congressional Record Volume 151, Number 22 (Wednesday, March 2, 2005)]
[Senate]
[Pages S1946-S1950]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BURR (for himself, Ms. Landrieu, and Mr. Lott):
  S. 498. A bill to provide for expansion of electricity transmission 
networks in order to support competitive electricity markets, to ensure 
reliability of electric service, to modernize regulation and for other 
purposes; to the Committee on Energy and Natural Resources.
  Mr. BURR. Mr. President, 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. 498

       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 ``Interstate 
     Transmission Act of 2005''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.

       TITLE I--RELIABLE AND ECONOMIC TRANSMISSION INFRASTRUCTURE

Sec. 101. Transmission infrastructure investment.
Sec. 102. Open nondiscriminatory access.
Sec. 103. Electric transmission property treated as 15-year property.
Sec. 104. Disposition of property.
Sec. 105. Electric reliability standards.

                 TITLE II--PROTECTING RETAIL CONSUMERS

Sec. 201. Native load service obligation.
Sec. 202. Voluntary transmission pricing plans.

[[Page S1947]]

      TITLE III--VOLUNTARY PARTICIPATION IN REGIONAL TRANSMISSION 
                             ORGANIZATIONS

Sec. 301. Promotion of voluntary development of regional transmission 
              organizations, independent transmission providers, and 
              similar organizations.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) transmission networks are the backbone of reliable 
     delivery of electric energy and competitive wholesale power 
     markets;
       (2) the expansion, enhancement, and improvement of 
     transmission facilities, and rules of the road for using the 
     facilities, are necessary to maintain and improve the 
     reliability of electric service and to enhance competitive 
     wholesale markets across the United States and competitive 
     retail markets that have been adopted by nearly the States;
       (3) to ensure reliable and efficient expansion, 
     enhancement, and improvement of transmission facilities, the 
     economics of the business of electric transmission and the 
     Federal regulatory structures applicable to the facilities 
     must be improved;
       (4) Federal electricity regulatory policy should benefit 
     consumers by providing incentives for infrastructure 
     improvement and by removing barriers to efficient 
     competition, and not be dictated by the imposition of market 
     structures or costly mandates;
       (5) slow, burdensome, or duplicative reviews of utility 
     mergers are a disincentive to the efficient disposition of 
     utility assets needed to ensure a reliable and efficient 
     infrastructure;
       (6) since efficient competition requires accurate price 
     signals that reflect cost causation, parties that benefit 
     from transmission upgrades should be required to pay for the 
     upgrades;
       (7) Federal regulation should not override the interests of 
     local consumers or State laws that ensure reliable service 
     and adequate transmission capacity to serve consumers;
       (8) in regions where the formation of regional transmission 
     organizations or similar entities have been formed 
     voluntarily with oversight or approval by States, the Federal 
     Energy Regulatory Commission should have clear authority to 
     approve applications for the organizations that are 
     consistent with the Federal Power Act (16 U.S.C. 791a et 
     seq.);
       (9) the States and electricity consumers in each region of 
     the United States, and not the Federal Government, are in the 
     best position to determine how the electric power systems 
     serving their regions should be structured, including whether 
     Regional Transmission Organization formation, traditional 
     vertical integration, or other structures are cost effective 
     for their region; and
       (10) mandatory reliability rules, developed and enforced by 
     a self-regulating electric reliability organization, are a 
     vital component of a comprehensive policy to ensure a robust 
     and reliable electricity grid.

       TITLE I--RELIABLE AND ECONOMIC TRANSMISSION INFRASTRUCTURE

     SEC. 101. TRANSMISSION INFRASTRUCTURE INVESTMENT.

       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. TRANSMISSION INFRASTRUCTURE INVESTMENT.

       ``(a) Rulemaking Requirement.--Within 1 year after the 
     enactment of this section, the Commission shall establish, by 
     rule, incentive-based (including, but not limited to 
     performance-based) rate treatments for the transmission of 
     electric energy in interstate commerce by any public utility 
     for the purpose of benefitting consumers by ensuring 
     reliability and reducing the cost of delivered power by 
     reducing transmission congestion. Such rule shall--
       ``(1) promote reliable and economically efficient 
     transmission and generation of electricity by promoting 
     capital investment in the enlargement, improvement, 
     maintenance and operation of facilities for the transmission 
     of electric energy in interstate commerce;
       ``(2) provide a return on equity, determined using a 
     variety of reasonable valuation methodologies, that attracts 
     new investment in transmission facilities (including related 
     transmission technologies);
       ``(3) encourage deployment of transmission technologies and 
     other measures to increase the capacity and efficiency of 
     existing transmission facilities and improve the operation of 
     such facilities;
       ``(4) allow recovery of all prudently incurred costs 
     necessary to comply with mandatory reliability standards 
     issued pursuant to section 216 of this Act;
       ``(5) allow a current return in rates for construction work 
     in progress for transmission facilities and full recovery of 
     prudently incurred costs for constructing transmission 
     facilities;
       ``(6) allow the use of formula transmission rates;
       ``(7) allow rates of return that do not vary with capital 
     structure; and
       ``(8) allow a maximum 15-year accelerated depreciation on 
     new transmission facilities for rate treatment purposes.
       ``(b) Additional Incentives for RTO Participation.--In the 
     rule issued under this section, the Commission shall, to the 
     extent within its jurisdiction, provide for incentives to 
     each transmitting utility or electric utility that joins a 
     Regional Transmission Organization or Independent System 
     Operator. Incentives provided by the Commission pursuant to 
     such rule shall include--
       ``(1) recovery of all prudently incurred costs to develop 
     and participate in any proposed or approved RTO, ISO, or 
     independent transmission company;
       ``(2) recovery of all costs previously approved by a State 
     commission which exercised jurisdiction over the transmission 
     facilities prior to the utility's participation in the RTO or 
     ISO, including costs necessary to honor preexisting 
     transmission service contracts, in a manner which does not 
     reduce the revenues the utility receives for transmission 
     services for a reasonable transition period after the utility 
     joins the RTO or ISO; and
       ``(3) recovery as an expense in rates of the costs 
     prudently incurred to conduct transmission planning and 
     reliability activities, including the costs of participating 
     in RTO, ISO and other regional planning activities and 
     design, study and other precertification costs involved in 
     seeking permits and approvals for proposed transmission 
     facilities.

     The Commission shall ensure that any costs recoverable 
     pursuant to this subsection may be recovered by such utility 
     through the transmission rates charged by such utility or 
     through the transmission rates charged by the RTO or ISO that 
     provides transmission service to such utility.
       ``(c) Just and Reasonable Rates.--All rates approved under 
     the rules adopted pursuant to this section, including any 
     revisions to such rules, are subject to the requirement of 
     sections 205 and 206 that all rates, charges, terms, and 
     conditions be just and reasonable and not unduly 
     discriminatory or preferential.''.

     SEC. 102. OPEN NONDISCRIMINATORY ACCESS.

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

     ``SEC. 211A. OPEN ACCESS BY UNREGULATED TRANSMITTING 
                   UTILITIES.

       ``(a) Transmission Services.--Subject to section 212(h), 
     the Commission may, by rule or order, require an unregulated 
     transmitting utility to provide transmission services--
       ``(1) at rates that are comparable to those that the 
     unregulated transmitting utility charges itself; and
       ``(2) on terms and conditions (not relating to rates) that 
     are comparable to those under which such unregulated 
     transmitting utility provides transmission services to itself 
     and that are not unduly discriminatory or preferential.
       ``(b) Exemption.--The Commission shall exempt from any rule 
     or order under this section any unregulated transmitting 
     utility that--
       ``(1) sells no more than 4,000,000 megawatt hours of 
     electricity per year; or
       ``(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) Local Distribution Facilities.--The requirements of 
     subsection (a) shall not apply to facilities used in local 
     distribution.
       ``(d) Exemption Termination.--Whenever the Commission, 
     after an evidentiary hearing held upon a complaint and after 
     giving consideration to reliability standards established 
     under section 216, finds on the basis of a preponderance of 
     the evidence that any exemption granted pursuant to 
     subsection (b) unreasonably impairs the continued reliability 
     of an interconnected transmission system, it shall revoke the 
     exemption granted to that transmitting utility.
       ``(e) Application to Unregulated Transmitting Utilities.--
     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.
       ``(f) Remand.--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).
       ``(g) Other Requests.--The provision of transmission 
     services under subsection (a) does not preclude a request for 
     transmission services under section 211.
       ``(h) Limitation.--The Commission may not require a State 
     or municipality to take action under this section that would 
     violate a private activity bond rule for purposes of section 
     141 of the Internal Revenue Code of 1986 (26 U.S.C. 141).
       ``(i) Transfer of Control of Transmitting Facilities.--
     Nothing in this section authorizes the Commission to require 
     an unregulated transmitting utility to transfer control or 
     operational control of its transmitting facilities to an RTO 
     or any other Commission-approved independent transmission 
     organization designated to provide nondiscriminatory 
     transmission access.
       ``(j) Definition.--For purposes of this section, 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 an entity described in section 201(f).''.

     SEC. 103. ELECTRIC TRANSMISSION PROPERTY TREATED AS 15-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (E) of section 168(e)(3) of 
     the Internal Revenue Code of

[[Page S1948]]

     1986 (relating to classification of certain property) is 
     amended by striking ``and'' at the end of clause (v), by 
     striking the period at the end of clause (vi) and by 
     inserting ``, and'', and by adding at the end the following 
     new clause:
       ``(vii) any section 1245 property (as defined in section 
     1245(a)(3)) used in the transmission at 69 or more kilovolts 
     of electricity for sale the original use of which commences 
     with the taxpayer after the date of the enactment of this 
     clause.''.
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B) of the Internal Revenue Code of 1986 (relating 
     to special rule for certain property assigned to classes) is 
     amended by inserting after the item relating to subparagraph 
     (E)(vi) the following:

``(E)(vii)........................................................30''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act, in taxable years ending after such 
     date.

     SEC. 104. DISPOSITION OF PROPERTY.

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

     SEC. 105. ELECTRIC RELIABILITY STANDARDS.

       (a) In General.--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. ELECTRIC RELIABILITY.

       ``(a) Definitions.--For purposes of this section:
       ``(1) The term `bulk-power system' means--
       ``(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 1 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 as 
     the Electric Reliability Organization. The Commission may 
     certify 1 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; and
       ``(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 ERO 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 ERO 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 ERO for further proceedings. The Commission shall 
     implement expedited procedures for such hearings.

[[Page S1949]]

       ``(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 issue regulations authorizing 
     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--
       ``(i) an independent board;
       ``(ii) a balanced stakeholder board; or
       ``(iii) a 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 Electric 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 complaint, 
     may propose a change to the rules of the ERO. 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).
       ``(g) Reliability Reports.--The ERO 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 ERO in the United States and Canada or Mexico.
       ``(i) Savings Provisions.--(1) The ERO shall have authority 
     to develop and enforce compliance with reliability standards 
     for only the bulk-power system.
       ``(2) This section does not authorize the ERO 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 ERO.
       ``(5) The Commission, after consultation with the ERO and 
     the State taking action, 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 \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 1 member from 
     each participating State in the region, appointed by the 
     Governor of each State, and may include representatives of 
     agencies, States, and provinces outside the United States. 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) Alaska and Hawaii.--The provisions of this section do 
     not apply to Alaska or Hawaii.''.
       (b) Status of ERO.--The Electric Reliability Organization 
     certified by the Federal Energy Regulatory Commission under 
     section 216(c) of the Federal Power Act and any regional 
     entity delegated enforcement authority pursuant to section 
     216(e)(4) of that Act are not departments, agencies, or 
     instrumentalities of the United States Government.

                 TITLE II--PROTECTING RETAIL CONSUMERS

     SEC. 201. NATIVE LOAD SERVICE OBLIGATION.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) 
     (as amended by section 105(a)) is amended by adding at the 
     end the following:

     ``SEC. 217. NATIVE LOAD SERVICE OBLIGATION.

       ``(a) Meeting Service Obligations.--(1) Any load-serving 
     entity that, as of the date of enactment of this section--
       ``(A) owns generation facilities, markets the output of 
     Federal generation facilities, or holds rights under 1 or 
     more wholesale contracts to purchase electric energy, for the 
     purpose of meeting a service obligation, and
       ``(B) by reason of ownership of transmission facilities, or 
     1 or more contracts or service agreements for firm 
     transmission service, holds firm transmission rights for 
     delivery of the output of such generation facilities or such 
     purchased energy to meet such service obligation, is entitled 
     to use such firm transmission rights, or, equivalent tradable 
     or financial transmission rights, in order to deliver such 
     output or purchased energy, or the output of other generating 
     facilities or purchased energy to the extent deliverable 
     using such rights, to the extent required to meet its service 
     obligation.
       ``(2) To the extent that all or a portion of the service 
     obligation covered by such firm transmission rights or 
     equivalent tradable or financial transmission rights is 
     transferred to another load-serving entity, the successor 
     load-serving entity shall be entitled to use the firm 
     transmission rights or equivalent tradable or financial 
     transmission rights associated with the transferred service 
     obligation. Subsequent transfers to another load-serving 
     entity, or back to the original load-serving entity, shall be 
     entitled to the same rights.
       ``(3) The Commission shall exercise its authority under 
     this Act in a manner that facilitates the planning and 
     expansion of transmission facilities to meet the reasonable 
     needs of load-serving entities to satisfy their service 
     obligations.
       ``(b) Allocation of Transmission Rights.--Nothing in this 
     section shall affect any methodology approved by the 
     Commission prior to September 15, 2003, for the allocation of 
     transmission rights by an RTO or ISO that has been authorized 
     by the Commission to allocate transmission rights.
       ``(c) Certain Transmission Rights.--The Commission may 
     exercise authority under this Act to make transmission rights 
     not used to meet an obligation covered by subsection (a) 
     available to other entities in a manner determined by the 
     Commission to be just, reasonable, and not unduly 
     discriminatory or preferential.
       ``(d) Obligation To Build.--Nothing in this Act shall 
     relieve a load-serving entity from any obligation under State 
     or local law to build transmission or distribution facilities 
     adequate to meet its service obligations.
       ``(e) Contracts.--Nothing in this section shall provide a 
     basis for abrogating any contract or service agreement for 
     firm transmission service or rights in effect as of the date 
     of the enactment of this subsection.
       ``(f) Water Pumping Facilities.--The Commission shall 
     ensure that any entity described in section 201(f) that owns 
     transmission facilities used predominately to support its own 
     water pumping facilities shall have, with respect to such 
     facilities, protections for transmission service comparable 
     to those provided to load-serving entities pursuant to this 
     section.
       ``(g) ERCOT.--This section shall not apply within the area 
     referred to in section 212(k)(2)(A).
       ``(h) Jurisdiction.--This section does not authorize the 
     Commission to take any action not otherwise within its 
     jurisdiction.
       ``(i) Effect of Exercising Rights.--An entity that lawfully 
     exercises rights granted under subsection (a) shall not be 
     considered by such action as engaging in undue discrimination 
     or preference under this Act.
       ``(j) Definitions.--For purposes of this section:
       ``(1) The term `distribution utility' means an electric 
     utility that has a service obligation to end-users or to a 
     State utility or electric cooperative that, directly or 
     indirectly, through 1 or more additional State utilities or 
     electric cooperatives, provides electric service to end-
     users.
       ``(2) The term `load-serving entity' means a distribution 
     utility or an electric utility that has a service obligation.
       ``(3) The term `service obligation' means a requirement 
     applicable to, or the exercise of authority granted to, an 
     electric utility under Federal, State or local law or under 
     long-term contracts to provide electric service to end-users 
     or to a distribution utility.
       ``(4) The term `State utility' means a State or any 
     political subdivision of a State, or

[[Page S1950]]

     any agency, authority, or instrumentality of any 1 or more of 
     the foregoing, or a corporation which is wholly owned, 
     directly or indirectly, by any 1 or more of the foregoing, 
     competent to carry on the business of developing, 
     transmitting, utilizing or distributing power.''.

     SEC. 202. VOLUNTARY TRANSMISSION PRICING PLANS.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) 
     (as amended by section 201) is amended by adding at the end 
     the following:

     ``SEC. 218. VOLUNTARY TRANSMISSION PRICING PLANS.

       ``(a) In General.--Any transmission provider, including an 
     RTO or ISO, may submit to the Commission a plan or plans 
     under section 205 containing the criteria for determining the 
     person or persons that will be required to pay for any 
     construction of new transmission facilities or expansion, 
     modification or upgrade of transmission facilities (in this 
     section referred to as `transmission service related 
     expansion') or new generator interconnection.
       ``(b) Voluntary Transmission Pricing Plans.--(1) Any plan 
     or plans submitted under subsection (a) shall specify the 
     method or methods by which costs may be allocated or 
     assigned. Such methods may include, but are not limited to:
       ``(A) directly assigned;
       ``(B) participant funded; or
       ``(C) rolled into regional or sub-regional rates.
       ``(2) FERC shall approve a plan or plans submitted under 
     subparagraph (B) of paragraph (1) if such plan or plans--
       ``(A) result in rates that are just and reasonable and not 
     unduly discriminatory or preferential consistent with section 
     205; and
       ``(B) ensure that the costs of any transmission service 
     related expansion or new generator interconnection not 
     required to meet applicable reliability standards established 
     under section 216 are assigned in a fair manner, meaning that 
     those who benefit from the transmission service related 
     expansion or new generator interconnection pay an appropriate 
     share of the associated costs, provided that--
       ``(i) costs may not be assigned or allocated to an electric 
     utility if the native load customers of that utility would 
     not have required such transmission service related expansion 
     or new generator interconnection absent the request for 
     transmission service related expansion or new generator 
     interconnection that necessitated the investment;
       ``(ii) the party requesting such transmission service 
     related expansion or new generator interconnection shall not 
     be required to pay for both--
       ``(I) the assigned cost of the upgrade; and
       ``(II) the difference between--

       ``(aa) the embedded cost paid for transmission services 
     (including the cost of the requested upgrade); and
       ``(bb) the embedded cost that would have been paid absent 
     the upgrade; and

       ``(iii) the party or parties who pay for facilities 
     necessary for the transmission service related expansion or 
     new generator interconnection receives full compensation for 
     its costs for the participant funded facilities in the form 
     of--
       ``(I) monetary credit equal to the cost of the participant 
     funded facilities (accounting for the time value of money at 
     the Gross Domestic Product deflator), which credit shall be 
     pro-rated in equal installments over a period of not more 
     than 30 years and shall not exceed in total the amount of the 
     initial investment, against the transmission charges that the 
     funding entity or its assignee is otherwise assessed by the 
     transmission provider;
       ``(II) appropriate financial or physical rights; or
       ``(III) any other method of cost recovery or compensation 
     approved by the Commission.
       ``(3) A plan submitted under this section shall apply only 
     to--
       ``(A) a contract or interconnection agreement executed or 
     filed with the Commission after the date of enactment of this 
     section; or
       ``(B) an interconnection agreement pending rehearing as of 
     November 1, 2003.
       ``(4) Nothing in this section diminishes or alters the 
     rights of individual members of an RTO or ISO under this Act.
       ``(5) Nothing in this section shall affect the allocation 
     of costs or the cost methodology employed by an RTO or ISO 
     authorized by the Commission to allocate costs (including 
     costs for transmission service related expansion or new 
     generator interconnection) prior to the date of enactment of 
     this section.
       ``(6) This section shall not apply within the area referred 
     to in section 212(k)(2)(A).
       ``(7) The term `transmission provider' means a public 
     utility that owns or operates facilities that provide 
     interconnection or transmission service in interstate 
     commerce.''.

      TITLE III--VOLUNTARY PARTICIPATION IN REGIONAL TRANSMISSION 
                             ORGANIZATIONS

     SEC. 301. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL 
                   TRANSMISSION ORGANIZATIONS, INDEPENDENT 
                   TRANSMISSION PROVIDERS, AND SIMILAR 
                   ORGANIZATIONS.

       Part II of the Federal Power Act (16 U.S.C. 824 et seq.) 
     (as amended by section 202) is amended by adding at the end 
     thereof the following new section:

     ``SEC. 219. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL 
                   TRANSMISSION ORGANIZATIONS, INDEPENDENT 
                   TRANSMISSION PROVIDERS, AND SIMILAR 
                   ORGANIZATIONS.

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