< Back to H.R. 2814 (107th Congress, 2001–2002)

Text of the Interstate Transmission Act

This bill was introduced on August 2, 2001, in a previous session of Congress, but was not enacted. The text of the bill below is as of Aug 2, 2001 (Introduced).

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HR 2814 IH

107th CONGRESS

1st Session

H. R. 2814

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.

IN THE HOUSE OF REPRESENTATIVES

August 2, 2001

Mr. SAWYER (for himself and Mr. BURR of North Carolina) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


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.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the ‘Interstate Transmission Act’.

    (b) TABLE OF CONTENTS- The table of contents is as follows:

      Sec. 1. Short title and table of contents.

      Sec. 2. Findings.

      Sec. 3. Economically efficient transmission service and expansion of transmission networks.

      Sec. 4. Electric energy transmission reliability.

      Sec. 5. Disposition of property.

      Sec. 6. Promotion of voluntary development of regional transmission organizations.

      Sec. 7. State and Federal authority to site transmission facilities.

      Sec. 8. Puhca exemption for RTOs.

      Sec. 9. Independent transmission companies.

SEC. 2. FINDINGS.

    Congress finds as follows:

      (1) Transmission networks are the backbone of competitive power markets and increased interstate commerce in electricity.

      (2) Wholesale electric competition, already in effect across the nation, and retail electric competition, adopted by nearly half of the States, depend on adequate transmission networks to benefit electric consumers.

      (3) The expansion, enhancement, and improvement of transmission facilities are necessary to maintain and improve reliability of electric service.

      (4) To support competitive power markets and to maintain and improve reliability of electric service, the regulation of transmission service must be reformed.

SEC. 3. ECONOMICALLY EFFICIENT TRANSMISSION SERVICE AND EXPANSION OF TRANSMISSION NETWORKS.

    Part II of the Federal Power Act is amended by adding at the end thereof the following new section:

‘SEC. 215. STANDARDS FOR ESTABLISHING RATES FOR TRANSMISSION SERVICE.

    ‘(a) CERTAIN REQUIREMENTS- Rates, charges, terms and conditions established for transmission service pursuant to this Part shall--

      ‘(1) promote the economically efficient transmission of electricity, the enlargement of transmission networks, the introduction of new transmission technologies to increase capacity of existing transmission networks, and the provision of transmission services by regional transmission organizations;

      ‘(2) encourage the efficient and reliable operation of transmission facilities and supply of transmission services through performance-based or incentive ratemaking, and other measures;

      ‘(3) provide for a return on equity that--

        ‘(A) assures confidence in the financial soundness of the utility and maintains and supports its credit, taking into consideration risks associated with changes in regulatory or economic circumstances;

        ‘(B) in the case of rates proposed by a regional transmission organization, is commensurate with the financial, operational and other risks of turning facilities over to a regional transmission organization and reflects other changes in the structure of the industry; and

        ‘(C) enables the utility to raise the money necessary for the proper discharge of its public duties and to protect public interests, both existing and foreseeable, in reliable, high-capacity transmission networks; and

      ‘(4) comply with applicable procedural requirements of sections 205 and 206 and the requirement that rates, charges, terms and conditions be just and reasonable and not unduly discriminatory or preferential.

    ‘(b) INNOVATIVE TRANSMISSION PRICING POLICIES GENERALLY- The Commission shall encourage innovative transmission pricing policies for a regional transmission organization, a comparable transmission organization approved by the Commission before the enactment of this Act, a transmitting utility whose facilities are controlled but not owned by either such entity, or an independent transmission company. Such transmission pricing shall--

      ‘(1) provide incentives to transmitting utilities to promote the voluntary participation and formation of regional transmission organizations, without having the effect of forcing transmitting utilities to join regional transmitting organizations and extend such incentives to transmitting utilities that already have formed a regional transmission organization;

      ‘(2) limit separate, additive access charges for transmission service over the transmission facilities operated by the regional transmission organization, except that a reasonable transition mechanism or period may be used before eliminating such separate, additive access charges;

      ‘(3) minimize the shifting of costs among existing customers of the transmitting utilities within the regional transmission organization, including permitting the use of transmission rates based on a single transmitting utility’s costs for transmission services provided within the regional transmission organization;

      ‘(4) encourage the efficient and reliable operation of the transmission grid and supply of transmission services through congestion management,

performance-based or incentive ratemaking, and other measures;

      ‘(5) encourage efficient and adequate investment in and expansion of the transmission facilities owned or controlled by the regional transmission organization; and

      ‘(6) provide enhanced returns on equity for investing in transmission and related facilities that improve the operational reliability of the transmission grid.

    ‘(c) NEGOTIATED RATES- The Commission may permit the charging of negotiated rates for transmission services under this section without regard to costs whenever an individual company or companies are willing to pay such negotiated rates. The costs associated with such negotiated rates shall not be recovered from transmission customers.

    ‘(d) RULEMAKING- Within 180 days of the enactment of this section, the Commission shall establish by rule definitions and standards for implementing subsection (a) and subsection (b). With respect to performance-based rates or incentive rates, the definitions and standards shall include, but not be limited to--

      ‘(1) a method for calculating initial transmission rates (including price caps that would include discounting);

      ‘(2) an index mechanism for adjusting initial rates;

      ‘(3) time periods for redetermining initial rates; and

      ‘(4) costs to be excluded from performance based rates.

    ‘(c) REPORT- Within 180 days after enactment of the section, and each year thereafter, the Commission shall submit to Congress a report on all policies adopted by the Commission to encourage the economic use and expansion of the transmission network through incentive rates or other similar market-oriented approaches and their effectiveness in doing so.’.

SEC. 4. ELECTRIC ENERGY TRANSMISSION RELIABILITY.

    (a) ELECTRIC RELIABILITY ORGANIZATION AND OVERSIGHT-

      (1) IN GENERAL- The Federal Power Act is amended by inserting at the end thereof the following new section:

‘SEC. 216. ELECTRIC RELIABILITY ORGANIZATION AND OVERSIGHT.

    ‘(a) DEFINITIONS- As used in this section:

      ‘(1) AFFILIATED REGIONAL RELIABILITY ENTITY- The term ‘affiliated regional reliability entity’ means an entity delegated authority under the provisions of subsection (h).

      ‘(2) BULK-POWER SYSTEM- The term ‘bulk-power system’ means all facilities and control systems necessary for operating an interconnected transmission grid (or any portion thereof), including high-voltage transmission lines; substations; control centers; communications; data, and operations planning facilities; and the output of generating units necessary to maintain transmission system reliability.

      ‘(3) ELECTRIC RELIABILITY ORGANIZATION, OR ORGANIZATION- The term ‘Electric Reliability Organization’ or ‘Organization’ means the organization approved by the Commission under subsection (d)(4).

      ‘(4) ENTITY RULE- The term ‘entity rule’ means a rule adopted by an affiliated regional reliability entity for a specific region and designed to implement or enforce 1 or more Organization Standards. An entity rule shall be approved by the organization and once approved, shall be treated as an Organization Standard.

      ‘(5) INDUSTRY SECTOR- The term ‘industry sector’ means a group of users of the bulk power system with substantially similar commercial interests, as determined by the Board of the Electric Reliability Organization.

      ‘(6) INTERCONNECTION- 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 interconnection to maintain safe and reliable operation of the facilities within their control.

      ‘(7) ORGANIZATION STANDARD- The term ‘Organization Standard’ means a policy or standard duly adopted by the Electric Reliability Organization to provide for the reliable operation of a bulk-power system.

      ‘(8) PUBLIC INTEREST GROUP- The term ‘public interest group’ means any nonprofit private or public organization that has an interest in the activities of the Electric Reliability Organization, including, but not limited to, ratepayer advocates, environmental groups, and State and local government organizations that regulate market participants and promulgate government policy.

      ‘(9) VARIANCE- The term ‘variance’ means an exception or variance from the requirements of an Organization Standard (including a proposal for an Organization Standard where there is no Organization Standard) that is adopted by an affiliated regional reliability entity and applicable to all or a part of the region for which the affiliated regional reliability entity is responsible. A variance shall be approved by the organization and once approved, shall be treated as an Organization Standard.

      ‘(10) SYSTEM OPERATOR- The term ‘system operator’ means any entity that operates or is responsible for the operation of a bulk-power system, including but not limited to a control area operator, an independent system operator, a regional transmission organization, a transmission company, a transmission system operator, or a regional security coordinator.

      ‘(11) USER OF THE BULK-POWER SYSTEM- The term ‘user of the bulk-power system’ means any entity that sells, purchases, or transmits electric power over a bulk-power system, or that owns, operates, or maintains facilities or control systems that

are part of a bulk-power system, or that is a system operator.

    ‘(b) COMMISSION AUTHORITY-

      ‘(1) Within the United States, the Commission shall have jurisdiction over the Electric Reliability Organization, all affiliated regional reliability entities, all system operators, and all users of the bulk-power system, for purposes of approving and enforcing compliance with the requirements of this section.

      ‘(2) The Commission may, by rule, define any other term used in this section, provided such definition is consistent with the definitions in, and the purpose and intent of, this Act.

      ‘(3) Not later than 90 days after the date of enactment of this section, the Commission shall issue a proposed rule for implementing the requirements of this section. The Commission shall provide notice and opportunity for comment on the proposed rule. The Commission shall issue a final rule under this subsection within 180 days after the date of enactment of this section.

      ‘(4) Nothing in this section shall be construed as limiting or impairing any authority of the Commission under any other provision of this Act, including its exclusive authority to determine rates, terms, and conditions of transmission services subject to its jurisdiction.

    ‘(c) EXISTING RELIABILITY STANDARDS- Following enactment of this section, and prior to the approval of an organization under subsection (d), any entity, including the North American Electric Reliability Council and its member regional reliability councils, may file any reliability standard, guidance, or practice that such entity would propose to be made mandatory and enforceable. The Commission, after allowing an opportunity to submit comments, may approve any such proposed mandatory standard, guidance, or practice, or any amendment thereto, if it finds that the standard, guidance, or practice, or amendment is just, reasonable, not unduly discriminatory or preferential, and in the public interest. The Commission may, without further proceeding or finding, grant its approval to any standard, guidance, or practice for which no substantive objections are filed in the comment period. Filed standards, guidances, or practices, including any amendments thereto, shall be mandatory and applicable according to their terms following approval by the Commission and shall remain in effect until (1) withdrawn, disapproved, or superseded by an Organization Standard, issued or approved by the Electric Reliability Organization and made effective by the Commission under subsection (e); or (2) disapproved by the Commission if, upon complaint or upon its own motion and after notice and an opportunity for comment, the Commission finds the standard, guidance, or practice unjust, unreasonable, unduly discriminatory, or preferential or not in the public interest. Standards, guidances, or practices in effect pursuant to the provisions of this subsection shall be enforceable by the Commission.

    ‘(d) ORGANIZATION APPROVAL-

      ‘(1) Following the issuance of a final Commission rule under subsection (b)(3), an entity may submit an application to the Commission for approval as the Electric Reliability Organization. The applicant shall specify in its application its governance and procedures, as well as its funding mechanism and initial funding requirements.

      ‘(2) The Commission shall provide public notice of the application and afford interested parties an opportunity to comment.

      ‘(3) The Commission shall approve the application if the Commission determines that the applicant--

        ‘(A) has the ability to develop, implement, and enforce standards that provide for an adequate level of reliability of the bulk-power system;

        ‘(B) permits voluntary membership to any user of the bulk-power system or public interest group;

        ‘(C) assures fair representation of its members in the selection of its directors and fair management of its affairs, taking into account the need for efficiency and effectiveness in decisionmaking and operations and the requirements for technical competency in the development of Organization Standards and the exercise of oversight of bulk-power system reliability;

        ‘(D) assures that no 2 industry sectors have the ability to control, and no 1 industry sector has the ability to veto, the Electric Reliability Organization’s discharge of its responsibilities (including actions by committees recommending standards to the board or other board actions to implement and enforce standards);

        ‘(E) provides for governance by a board wholly comprised of independent directors;

        ‘(F) provides a funding mechanism and requirements that are just, reasonable, and not unduly discriminatory or preferential and are in the public interest, and which satisfy the requirements of subsection (l);

        ‘(G) establishes procedures for development of Organization Standards that provide reasonable notice and opportunity for public comment, taking into account the need for efficiency and effectiveness in decisionmaking and operations and the requirements for technical competency in the development of Organization Standards, and which standards development process has the following attributes:

          ‘(i) Openness.

          ‘(ii) Balance of interests.

          ‘(iii) Due process, except that the procedures may include alternative procedures for emergencies;

        ‘(H) establishes fair and impartial procedures for implementation and enforcement of Organization Standards, either directly or through delegation to an affiliated regional reliability entity, including the imposition of penalties, limitations on activities, functions, or operations, or other appropriate sanctions;

        ‘(I) establishes procedures for notice and opportunity for public observation of all meetings, except that the procedures for public observation may include alternative procedures for emergencies or for the discussion of information the directors determine should take place in closed session, such as litigation, personnel actions, or commercially sensitive information;

        ‘(J) provides for the consideration of recommendations of States and State commissions; and

        ‘(K) addresses other matters that the Commission may deem necessary or appropriate to ensure that the procedures, governance, and funding of the Electric Reliability Organization are just, reasonable, not unduly discriminatory or preferential, and are in the public interest.

      ‘(4) The Commission shall approve only 1 Electric Reliability Organization. If the Commission receives 2 or more timely applications that satisfy the requirements of this subsection, the Commission shall approve only the application it concludes will best implement the provisions of this section.

    ‘(e) ESTABLISHMENT OF AND MODIFICATIONS TO ORGANIZATION STANDARDS-

      ‘(1) The Electric Reliability Organization shall file with the Commission any new or modified organization standards, including any variances or entity rules, and the Commission shall follow the procedures under paragraph (2) for review of that filing.

      ‘(2) Submissions under paragraph (1) shall include--

        ‘(A) a concise statement of the purpose of the proposal, and

        ‘(B) a record of any proceedings conducted with respect to such proposal.

    The Commission shall provide notice of the filing of such proposal and afford interested entities 30 days to submit comments. The Commission, after taking into consideration any submitted comments, shall approve or disapprove such proposal not later than 60 days after the deadline for the submission of comments, except that the Commission may extend the 60-day period for an additional 90 days for good cause, and except further that if the Commission does not act to approve or disapprove a proposal within the foregoing periods, the proposal shall go into effect subject to its terms, without prejudice to the authority of the Commission thereafter to modify the proposal in accordance with the standards and requirements of this section. Proposals approved by the Commission shall take effect according to their terms but not earlier than 30 days after the effective date of the Commission’s order, except as provided in paragraph (3) of this subsection.

      ‘(3)(A) In the exercise of its review responsibilities under this subsection, the Commission shall give due weight to the technical expertise of the Electric Reliability Organization with respect to the content of a new or modified organization standard, but shall not defer to the organization with respect to the effect of the standard on competition. The Commission shall approve a proposed new or modified organization standard if it determines the proposal to be just, reasonable, not unduly discriminatory or preferential, and in the public interest.

      ‘(B) An existing or proposed organization standard which is disapproved in whole or in part by the Commission shall be remanded to the Electric Reliability Organization for further consideration.

      ‘(C) The Commission, on its own motion or upon complaint, may direct the Electric Reliability Organization to develop an organization standard, including modification to an existing organization standard, addressing a specific matter by a date certain if the Commission considers such new or modified organization standard necessary or appropriate to further the purposes of this section. The Electric Reliability Organization shall file any such new or modified organization standard in accordance with this subsection.

      ‘(D) An affiliated regional reliability entity may propose a variance or entity rule to the Electric Reliability Organization. The affiliated regional reliability entity may request that the Electric Reliability Organization expedite consideration of the proposal, and may file a notice of such request with the Commission, if expedited consideration is necessary to provide for bulk-power system reliability. If the Electric Reliability Organization fails to adopt the variance or entity rule, either in whole or in part, the affiliated regional reliability entity may request that the Commission review such action. If the Commission determines, after its review of such a request, that the action of the Electric Reliability Organization did not conform to the applicable standards and procedures approved by the Commission, or if the Commission determines that the variance or entity rule is just, reasonable, not unduly

discriminatory or preferential, and in the public interest, and that the Electric Reliability Organization has unreasonably rejected the proposed variance or entity rule, then the Commission may remand the proposed variance or entity rule for further consideration by the Electric Reliability Organization or may direct the Electric Reliability Organization or the affiliated regional reliability entity to develop a variance or entity rule consistent with that requested by the affiliated regional reliability entity. Any such variance or entity rule proposed by an affiliated regional reliability entity shall be submitted to the Electric Reliability Organization for review and filing with the Commission in accordance with the procedures specified in this subsection.

      ‘(E) Notwithstanding any other provision of this subsection, a proposed organization standard or amendment shall take effect according to its terms if the Electric Reliability Organization determines that an emergency exists requiring that such proposed organization standard or amendment take effect without notice or comment. The Electric Reliability Organization shall notify the Commission immediately following such determination and shall file such emergency organization standard or amendment with the Commission not later than 5 days following such determination and shall include in such filing an explanation of the need for such emergency standard. Subsequently, the Commission shall provide notice of the organization standard or amendment for comment, and shall follow the procedures set out in paragraphs (2) and (3) for review of the new or modified organization standard.

      ‘(4) All users of the bulk-power system shall comply with any organization standard that takes effect under this section.

    ‘(f) COORDINATION WITH CANADA AND MEXICO- The Electric Reliability Organization shall take all appropriate steps to gain recognition in Canada and Mexico. The United States shall use its best efforts to enter into international agreements with the appropriate governments of Canada and Mexico to provide for effective compliance with organization standards and to provide for the effectiveness of the Electric Reliability Organization in carrying out its mission and responsibilities. All actions taken by the Electric Reliability Organization, any affiliated regional reliability entity, and the Commission shall be consistent with the provisions of such international agreements.

    ‘(g) CHANGES IN PROCEDURES, GOVERNANCE, OR FUNDING-

      ‘(1) The Electric Reliability Organization shall file with the Commission any proposed change in its procedures, governance, or funding, or any changes in the affiliated regional reliability entity’s procedures, governance, or funding relating to delegated functions, and shall include with the filing an explanation of the basis and purpose for the change.

      ‘(2) A proposed procedural change may take effect 90 days after filing with the Commission if the change constitutes a statement of policy, practice, or interpretation with respect to the meaning or enforcement of an existing procedure. Otherwise, a proposed procedural change shall take effect only upon a finding by the Commission, after notice and opportunity for comments, that the change is just, reasonable, not unduly discriminatory or preferential, is in the public interest, and satisfies the requirements of subsection (d)(4).

      ‘(3) A change in governance or funding shall not take effect unless the Commission finds that the change is just, reasonable, not unduly discriminatory or preferential, in the public interest, and satisfies the requirements of subsection (d)(4).

      ‘(4) The Commission, upon complaint or upon its own motion, may require the Electric Reliability Organization to amend the procedures, governance, or funding if the Commission determines that the amendment is necessary to meet the requirements of this section. The Electric Reliability Organization shall file the amendment in accordance with paragraph (1) of this subsection.

    ‘(h) DELEGATIONS OF AUTHORITY-

      ‘(1) The Electric Reliability Organization shall, upon request by an entity, enter into an agreement with such entity for the delegation of authority to implement and enforce compliance with organization standards in a specified geographic area if the organization finds that the entity requesting the delegation satisfies the requirements of subparagraphs (A), (B), (C), (D), (F), (J), and (K) of subsection (d)(4), and if the delegation promotes the effective and efficient implementation and administration of bulk-power system reliability. The Electric Reliability Organization may enter into an agreement to delegate to the entity any other authority, except that the Electric Reliability Organization shall reserve the right to set and approve standards for bulk-power system reliability.

      ‘(2) The Electric Reliability Organization shall file with the Commission any agreement entered into under this subsection and any information the Commission requires with respect to the affiliated regional reliability entity to which authority is to be delegated. The Commission shall approve the agreement, following public notice and an opportunity for comment, if it finds that the agreement meets the requirements of paragraph (1), and is just, reasonable, not unduly discriminatory or preferential, and is in the public interest. A proposed delegation agreement with an affiliated regional reliability entity organized on an interconnection-wide basis shall be rebuttably presumed by the Commission to promote the effective and efficient implementation and administration of bulk-power system reliability. No delegation by the Electric Reliability Organization shall be valid unless approved by the Commission.

      ‘(3)(A) A delegation agreement entered into under this subsection shall specify the procedures for an affiliated regional reliability entity to propose entity rules or variances for review by the Electric Reliability Organization. With respect to any such proposal that would apply on an interconnection-wide basis, the Electric Reliability Organization shall presume such proposal valid if made by an interconnection-wide affiliated regional reliability entity unless the Electric Reliability Organization makes a written finding that the proposal--

        ‘(i) was not developed in a fair and open process that provided an opportunity for all interested parties to participate;

        ‘(ii) has a significant adverse impact on reliability or commerce in other interconnections;

        ‘(iii) fails to provide a level of reliability of the bulk-power system within the interconnection such that it would constitute a serious and substantial threat to public health, safety, welfare, or national security; or

        ‘(iv) creates a serious and substantial burden on competitive markets within the interconnection that is not necessary for reliability.

      ‘(B) With respect to any such proposal that would apply only to part of an interconnection, the Electric Reliability Organization shall find such proposal valid if the affiliated regional reliability entity or entities making the proposal demonstrate that it--

        ‘(i) was developed in a fair and open process that provided an opportunity for all interested parties to participate;

        ‘(ii) would not have an adverse impact on commerce that is not necessary for reliability;

        ‘(iii) provides a level of bulk-power system reliability adequate to protect public health, safety, welfare, and national security, and would not have a significant adverse impact on reliability; and

        ‘(iv) in the case of a variance, is based on legitimate differences between regions or between subregions within the affiliated regional reliability entity’s geographic area.

      The Electric Reliability Organization shall approve or disapprove such proposal within 120 days, or the proposal shall be deemed approved. Following approval of any such proposal under this paragraph, the Electric Reliability Organization shall seek Commission approval pursuant to the procedures prescribed under subsection (e)(3). Affiliated regional reliability entities may not make requests for approval directly to the Commission except pursuant to subsection (e)(3)(D).

      ‘(4) If an affiliated regional reliability entity requests, consistent with paragraph (1) of this subsection, that the Electric Reliability Organization delegate authority to it, but is unable within 180 days to reach agreement with the Electric Reliability Organization with respect to such requested delegation, such entity may seek relief from the Commission. If, following notice and opportunity for comment, the Commission determines that a delegation to the entity would meet the requirements of paragraph (1) above, and that the delegation would be just, reasonable, not unduly discriminatory or preferential, and in the public interest, and that the Electric Reliability Organization has unreasonably withheld such delegation, the Commission may, by order, direct the Electric Reliability Organization to make such delegation.

      ‘(5)(A) The Commission may, upon its own motion or upon complaint, and with notice to the appropriate affiliated regional reliability entity or entities, direct the Electric Reliability Organization to propose a modification to an agreement entered into under this subsection if the Commission determines that--

        ‘(i) the affiliated regional reliability entity no longer has the capacity to carry out effectively or efficiently its implementation or enforcement responsibilities under that agreement, has failed to meet its obligations under that agreement, or has violated any provision of this section;

        ‘(ii) the rules, practices, or procedures of the affiliated regional reliability entity no longer provide for fair and impartial discharge of its implementation or enforcement responsibilities under the agreement;

        ‘(iii) the geographic boundary of a transmission entity approved by the Commission is not wholly within the boundary of an affiliated regional reliability entity and such difference is inconsistent with the effective and efficient implementation and administration of bulk-power system reliability; or

        ‘(iv) the agreement is inconsistent with another delegation agreement as a result of actions taken under paragraph (4) of this subsection.

      ‘(B) Following an order of the Commission issued under subparagraph (A), the Commission

may suspend the affected agreement if the Electric Reliability Organization or the affiliated regional reliability entity does not propose an appropriate and timely modification. If the agreement is suspended, the Electric Reliability Organization shall assume the previously delegated responsibilities. The Commission shall allow the Electric Reliability Organization and the affiliated regional reliability entity an opportunity to appeal the suspension.

    ‘(i) ORGANIZATION MEMBERSHIP- Every system operator shall be required to be a member of the Electric Reliability Organization and shall be required also to be a member of any affiliated regional reliability entity operating under an agreement effective pursuant to subsection (h) applicable to the region in which the system operator operates or is responsible for the operation of bulk-power system facilities.

    ‘(j) INJUNCTIONS AND DISCIPLINARY ACTION-

      ‘(1) Consistent with the range of actions approved by the Commission under subsection (d)(4)(H), the Electric Reliability Organization may impose a penalty, limitation of activities, functions, operations, or other disciplinary action the Electric Reliability Organization finds appropriate against a user of the bulk-power system if the Electric Reliability Organization, after notice and an opportunity for interested parties to be heard, issues a finding in writing that the user of the bulk-power system has violated an organization standard. The Electric Reliability Organization shall immediately notify the Commission of any disciplinary action imposed with respect to an act or failure to act of a user of the bulk-power system that affected or threatened to affect bulk-power system facilities located in the United States, and the sanctioned party shall have the right to seek modification or rescission of such disciplinary action by the Commission. If the organization finds it necessary to prevent a serious threat to reliability, the organization may seek injunctive relief in a Federal court in the district in which the affected facilities are located.

      ‘(2) A disciplinary action taken under paragraph (1) may take effect not earlier than the 30th day after the Electric Reliability Organization files with the Commission its written finding and record of proceedings before the Electric Reliability Organization and the Commission posts its written finding, unless the Commission, on its own motion or upon application by the user of the bulk-power system which is the subject of the action, suspends the action. The action shall remain in effect or remain suspended unless and until the Commission, after notice and opportunity for hearing, affirms, sets aside, modifies, or reinstates the action, but the Commission shall conduct such hearing under procedures established to ensure expedited consideration of the action taken.

      ‘(3) The Commission, on its own motion or on complaint, may order compliance with an organization standard and may impose a penalty, limitation of activities, functions, or operations, or take such other disciplinary action as the Commission finds appropriate, against a user of the bulk-power system with respect to actions affecting or threatening to affect bulk-power system facilities located in the United States if the Commission finds, after notice and opportunity for a hearing, that the user of the bulk-power system has violated or threatens to violate an organization standard.

      ‘(4) The Commission may take such action as is necessary against the Electric Reliability Organization or an affiliated regional reliability entity to assure compliance with an organization standard, or any Commission order affecting the Electric Reliability Organization or an affiliated regional reliability entity.

    ‘(k) RELIABILITY REPORTS- The Electric Reliability Organization shall conduct periodic assessments of the reliability and adequacy of the interconnected bulk-power system in North America and shall report annually to the Secretary of Energy and the Commission its findings and recommendations for monitoring or improving system reliability and adequacy.

    ‘(l) ASSESSMENT AND RECOVERY OF CERTAIN COSTS- The reasonable costs of the Electric Reliability Organization, and the reasonable costs of each affiliated regional reliability entity that are related to implementation and enforcement of organization standards or other requirements contained in a delegation agreement approved under subsection (h), shall be assessed by the Electric Reliability Organization and each affiliated regional reliability entity, respectively, taking into account the relationship of costs to each region and based on an allocation that reflects an equitable sharing of the costs among all end users. The Commission shall provide by rule for the review of such costs and allocations, pursuant to the standards in this subsection and subsection (d)(4)(F).

    ‘(m) SAVINGS PROVISIONS-

      ‘(1) The Electric Reliability Organization shall have authority to develop, implement 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 the authority 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 Organization Standard.

      ‘(4) Within 90 days of the application of the Electric Reliability Organization or other affected party, the Commission shall issue a final order determining whether a state action is inconsistent with an Organization Standard, after notice and opportunity for comment, taking into consideration any recommendations 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.

    ‘(n) REGIONAL ADVISORY BODIES- The Commission shall establish a regional advisory body on the petition of at least two-thirds of the States within a region that have more than one-half of their electric loan 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, upon execution of an international agreement or agreements described in subsection (f). A regional advisory body may provide advice to the electric reliability organization, an affiliated regional reliability entity, or the Commission regarding the governance of an existing or proposed affiliated regional reliability entity within the same region, whether an organization standard, entity rule, or variance proposed to apply within the region is just, reasonable, not unduly discriminatory or preferential, and in the public interest, and whether fees proposed to be assessed within the region are just, reasonable, not unduly discriminatory or preferential, in the public interest, and consistent with the requirements of subsection (l). The Commission may give deference to the advice of any such regional advisory body if that body is organized on an interconnection-wide basis.

    ‘(o) COORDINATION WITH REGIONAL TRANSMISSION ORGANIZATIONS-

      ‘(1) Each regional transmission organization authorized by the Commission shall be responsible for maintaining the short-term reliability of the bulk-power system that it operates, consistent with organization standards.

      ‘(2) Except as provided in paragraph (5), in connection with a proceeding under subsection (e) to consider a proposed organization standard, each regional transmission organization authorized by the Commission shall report to the Commission, and notify the electric reliability organization and any applicable affiliated regional reliability entity, regarding whether the proposed organization standard hinders or conflicts with that regional transmission organization’s ability to fulfill the requirements of any Commission-accepted, approved, or ordered rule, regulation, order, tariff, rate schedule, or agreement. Where such hindrance or conflict is identified, the Commission shall address such hindrance or conflict, and the need for any changes to such Commission-accepted, approved, or ordered rule, order, tariff, rate schedule, or agreement in its order under subsection (e) regarding the proposed standard. Where such hindrance or conflict is identified between a proposed organization standard and a provision of any rule, order, tariff, rate schedule or agreement accepted, approved or ordered by the Commission applicable to a regional transmission organization, nothing in this section shall require a change in the regional transmission organization’s obligation to comply with such provision unless the Commission orders such a change and the change becomes effective. If the Commission finds that the tariff, rate schedule, or agreement needs to be changed, the regional transmission organization must expeditiously make a section 205 filing to reflect the change. If the Commission finds that the proposed organization standard needs to be changed, it shall remand the proposed organization standard to the electric reliability organization under subsection (e)(3)(B).

      ‘(3) Except as provided in paragraph (5), to the extent hindrances and conflicts arise after approval of a reliability standard under subsection (c) or organization standard under subsection (e), each regional transmission organization authorized by the Commission shall report to the Commission, and notify the electric reliability organization and any applicable affiliated regional reliability entity, regarding any reliability standard approved under subsection (c) or organization standard that hinders or conflicts with that regional transmission organization’s ability to fulfill the requirements of any Commission-accepted, approved, or ordered rule, regulation, order, tariff, rate schedule, or agreement. The Commission shall seek to assure that such hindrances or conflicts are resolved promptly. Where a hindrance or conflict is identified between a reliability standard or an organization standard and a provision of any rule, order, tariff, rate schedule or agreement accepted, approved or ordered by the Commission applicable to a regional transmission organization, nothing in this section shall require a change in the regional transmission organization’s obligation to comply with such provision unless the Commission orders such a change and the change becomes effective. If the Commission finds that the tariff, rate schedule or agreement needs to be changed, the regional transmission organization must expeditiously make a section 205 filing to reflect the change. If the Commission finds that an organization standard needs to be changed, it shall

order the electric reliability organization to develop and submit a modified organization standard under subsection (e)(3)(C).

      ‘(4) An affiliated regional reliability entity and a regional transmission organization operating in the same geographic area shall cooperate to avoid conflicts between implementation and enforcement of organization standards by the affiliated regional reliability entity and implementation and enforcement of Commission-accepted tariffs, rate schedules, and agreements by the regional transmission organization. In areas without an affiliated regional reliability entity, the electric reliability organization shall act as the affiliated regional reliability entity for purposes of this paragraph.

      ‘(5) Until 6 months after approval of applicable subsection (h)(3) procedures, any reliability standard, guidance, or practice contained in Commission-accepted tariffs, rate schedules, or agreements in effect of any Commission-authorized independent system operator or regional transmission organization shall continue to apply unless the Commission accepts an amendment thereto by the applicable operator or organization, or upon complaint finds them to be unjust, unreasonable, unduly discriminatory or preferential, or not in the public interest. At the conclusion of such transition period, any such reliability standard, guidance, practice, or amendment thereto that the Commission determines is inconsistent with organization standards shall no longer apply.’.

      (2) ENFORCEMENT- Sections 316 and 316A of the Federal Power Act are each amended by striking ‘or 214’ each place it appears and inserting ‘214, or 215’.

    (b) APPLICATION OF ANTITRUST LAWS- Notwithstanding any other provision of law, each of the following activities are rebuttably presumed to be in compliance with the antitrust laws of the United States:

      (1) Activities undertaken by the Electric Reliability Organization under section 215 of the Federal Power Act or affiliated regional reliability entity operating under an agreement in effect under section 215(h) of such Act.

      (2) Activities of a member of the Electric Reliability Organization or affiliated regional reliability entity in pursuit of organization objectives under section 215 of the Federal Power Act undertaken in good faith under the rules of the organization.

    Primary jurisdiction, and immunities and other affirmative defenses, shall be available to the extent otherwise applicable.

SEC. 5. DISPOSITION OF PROPERTY.

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

SEC. 6. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL TRANSMISSION ORGANIZATIONS.

    Part II of the Federal Power Act is amended by inserting at the end thereof the following new section:

‘SEC. 217. PROMOTION OF VOLUNTARY DEVELOPMENT OF REGIONAL TRANSMISSION ORGANIZATIONS.

    ‘(a) IN GENERAL- The Commission may approve and may encourage the formation of regional transmission organizations for the purpose of enhancing the transmission of electric energy in interstate commerce. Among options for the formation of regional transmission organizations, the Commission shall prefer those in which--

      ‘(1) participation in the regional transmission organization by transmitting utilities is voluntary;

      ‘(2) the form, structure, and operating entity of the regional transmission 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 regional transmission 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 regional 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 regional transmission organization that the regional 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 section 215 of this Act.’.

SEC. 7. STATE AND FEDERAL AUTHORITY TO SITE TRANSMISSION FACILITIES.

    Part II of the Federal Power Act is amended by inserting at the end thereof the following new section:

‘SEC. 218. STATE AND FEDERAL AUTHORITY TO SITE TRANSMISSION FACILITIES.

    ‘(a) In order to ensure the availability of adequate capacity to provide for reliable, economic transmission of electric energy in interstate commerce, upon enactment of this section, and after notice and opportunity for comment, the Commission shall publish a report, which it shall revise each year thereafter, describing areas where additional facilities are necessary to increase electric transmission capacity. The report shall include information from the regional transmission organization planning processes explaining the feasibility of providing additional transmission capacity through existing transmission rights of way, and shall assess efforts to promote adequate and economically efficient transmission of electricity through the introduction of new transmission technologies, and to encourage investment in new and existing transmission facilities. The Commission shall rely upon information provided by regional transmission organizations developed in conjunction with States through regional transmission organization planning processes, information provided by State public utility commissions, and such other information about transmission constraints, reliability, and prices of electric energy as the Commission deems appropriate. In the report, the Commission shall review the status of

facilities for which an application has been submitted pursuant to subsection (b).

    ‘(b) A regional transmission organization which has submitted an application to a State or local agency for approval of transmission facilities to provide additional transmission capacity in an area identified in the report required by subsection (a) shall notify the Commission by providing a copy of the application, including a description of the facilities and the proposed route. The regional transmission organization shall submit to the Commission with a copy of the application a statement assessing the feasibility of upgrading existing transmission facilities to provide additional capacity in an area identified in the report required by subsection (a).

    ‘(c) If a regional transmission organization has not received approval of its application to the State to construct transmission facilities in an area identified in the report required by subsection (a) within one year of the notice to the Commission pursuant to subsection (b), or within two years of such notice has not received all permits and approvals required to construct the facilities, the Commission may, after considering the feasibility of upgrading existing facilities to increase electric transmission capacity, upon its own motion or upon request, and after notice and opportunity for hearing, issue a certificate of public convenience and necessity to construct a proposed transmission facility if it finds the facilities to be authorized by the certificate are or will be required by public convenience and necessity.

    ‘(d) The Commission shall have the power to attach to the issuance of such certificate and to the exercise of the rights granted thereunder such reasonable terms and conditions related to the construction of such facility as the public convenience and necessity may require; provided, that the Commission shall have no authority to compel the construction, enlargement or modification of transmission facilities directly or indirectly, including as a condition of the receipt of any other approval from the Commission.

    ‘(e) The Commission shall issue its final decision in the certificate proceeding within 180 days after the filing of a request for a certificate or the initiation of proceedings on its own motion.

    ‘(f) When any holder of a certificate of public convenience and necessity for electric transmission facilities issued by the Commission pursuant to subsection (c) cannot acquire by contract, or is unable to agree with the owner of the property to the compensation to be paid for the necessary rights-of-way to construct, operate and maintain such transmission facility, it may acquire the same by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts.’.

SEC. 8. PUBLIC UTILITY HOLDING COMPANY ACT EXEMPTION FOR RTOS.

    The Public Utility Holding Company Act is amended as follows:

      (1) After section 35, insert the following:

‘SEC. 36. SAVINGS CLAUSE.

    ‘This Act shall not apply to regional transmission organizations, as described in Federal Energy Regulatory Commission Order No. 2000 and 2000A, or to any action to form, modify, finance, sell, purchase, operate, or otherwise affect such an organization.’.

      (2) Renumber existing section 36 as section 37.

SEC. 9. INDEPENDENT TRANSMISSION COMPANIES.

    (a) IN GENERAL- Section 1033 of the Internal Revenue Code of 1986 (relating to involuntary conversions) is amended by redesignating subsection (k) as subsection (l) and by inserting after subsection (j) the following new subsection:

    ‘(k) SALES OR DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY-

      ‘(1) IN GENERAL- For purposes of this subtitle, if a taxpayer elects the application of this subsection to a qualifying electric transmission transaction--

        ‘(A) such transaction shall be treated as an involuntary conversion to which this section applies, and

        ‘(B) exempt utility property shall be treated as property which is similar or related in service or use to the property disposed of in such transaction.

      ‘(2) EXTENSION OF REPLACEMENT PERIOD- In the case of any involuntary conversion described in paragraph (1), subsection (a)(2)(B) shall be applied by substituting ‘4 years’ for ‘2 years’ in clause (i) thereof.

      ‘(3) QUALIFYING ELECTRIC TRANSMISSION TRANSACTION- For purposes of this subsection, the term ‘qualifying electric transmission transaction’ means any sale or other disposition before January 1, 2009, of--

        ‘(A) property used in the trade or business of providing electric transmission services, or

        ‘(B) any stock or partnership interest in a corporation or partnership, as the case may be, whose principal trade or business consists of providing electric transmission services,

      but only if such sale or disposition is to an independent transmission company.

      ‘(4) INDEPENDENT TRANSMISSION COMPANY- For purposes of this subsection, the term ‘independent transmission company’ means--

        ‘(A) a regional transmission organization approved by the Federal Energy Regulatory Commission,

        ‘(B) a person--

          ‘(i) who the Federal Energy Regulatory Commission determines in its authorization of the transaction under section 203 of the Federal Power Act (16 U.S.C. 823b) is not a market participant within the meaning of such Commission’s rules applicable to regional transmission organizations, and

          ‘(ii) whose transmission facilities to which the election under this subsection applies are under the operational control of a Federal Energy Regulatory Commission-approved regional transmission organization before the close of the period specified

in such authorization, but not later than the close of the period applicable under subsection (a)(2)(B) as extended under paragraph (2), or

        ‘(C) in the case of facilities subject to the exclusive jurisdiction of the Public Utility Commission of Texas, a person which is approved by that Commission as consistent with Texas State law regarding an independent transmission organization.

      ‘(5) EXEMPT UTILITY PROPERTY- For purposes of this subsection--

        ‘(A) IN GENERAL- The term ‘exempt utility property’ means property used in the trade or business of--

          ‘(i) generating, transmitting, distributing, or selling electricity, or

          ‘(ii) producing, transmitting, distributing, or selling natural gas.

        ‘(B) NONRECOGNITION OF GAIN BY REASON OF ACQUISITION OF STOCK- Acquisition of control of a corporation shall be taken into account under this section with respect to a qualifying electric transmission transaction only if the principal trade or business of such corporation is a trade or business referred to in subparagraph (A).

      ‘(6) SPECIAL RULE FOR CONSOLIDATED GROUPS- In the case of a corporation which is a member of an affiliated group filing a consolidated return, such corporation shall be treated as satisfying the purchase requirement of subsection (a)(2) with respect to any qualifying electric transmission transaction engaged in by such corporation to the extent such requirement is satisfied by another member of such group.

      ‘(7) ELECTION- An election under paragraph (1), once made, shall be irrevocable.’

    (b) EXCEPTION FROM GAIN RECOGNITION UNDER SECTION 1245- Subsection (b) of section 1245 of such Code is amended by adding at the end the following new paragraph:

      ‘(9) DISPOSITIONS TO IMPLEMENT FEDERAL ENERGY REGULATORY COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY- At the election of the taxpayer, the amount of gain which would (but for this paragraph) be recognized under this section on any qualified electric transmission transaction (as defined in section 1033(k)) for which an election under section 1033 is made shall be reduced by the aggregate reduction in the basis of section 1245 property held by the taxpayer or, if insufficient, by a member of an affiliated group which includes the taxpayer at any time during the taxable year in which such transaction occurred. The manner and amount of such reduction shall be determined under regulations prescribed by the Secretary.’

    (c) EFFECTIVE DATE- The amendments made by subsections (a) and (b) of this section shall apply to transactions occurring after the date of the enactment of this Act.

    (d) DISTRIBUTIONS OF STOCK TO IMPLEMENT FEDERAL ENERGY REGULATORY COMMISSION OR STATE ELECTRIC RESTRUCTURING POLICY-

      (1) IN GENERAL- Subparagraph (A) of section 355(e)(3) of such Code (relating to special rules relating to acquisitions) is amended by inserting after clause (iv) the following new clause:

          ‘(v) The acquisition of stock in any controlled corporation in a qualifying electric transmission transaction (as defined in section 1033(k)).’.

      (2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to distributions after the date of the enactment of this Act.