H.R. 3406

Electric Supply and Transmission Act

Section-by-Section Summary

Title I--Electric Supply

Subtitle A--Interconnection; Metering; Demand Management.

Sec. 101. Interconnection.

Section 101 provides for uniform interconnection standards for interconnection with both distribution and transmission facilities. Section 101(a) amends section 3 of the Federal Power Act (FPA) by adding definitions of "appropriate regulatory authority," "generating facility," "local distribution utility," "non-federal regulatory authority" and "backup power."

Section 101(a) amends section 210 of the FPA to add a new subsection (f) that imposes an obligation on a local distribution utility to interconnect with a generating facility if the generating facility (1) complies with a final rule regarding technical standards to be promulgated by FERC, and (2) pays the costs of interconnecting (which are to be comparable to the costs charged by the local distribution utility for similar interconnections).

The right to interconnect does not (1) relieve the generating facility or the local distribution utility of other federal, state or local requirements, including the recovery of stranded costs, (2) provide the generating facility with transmission or distribution service, or (3) allow the bypass of charges. The local distribution utility is also required to offer to sell backup power to the interconnected generating facility under certain circumstances. Rates, terms and conditions for sales of backup power must be just and reasonable, taking into account incremental costs of supplying such power and standby charges assessed against similarly situated generating facilities, as determined by the appropriate regulatory entity. Technical standards established by FERC for distribution interconnections would be administered by non-federal regulatory authorities.

Section 101(b) amends section 210 of the FPA to add a new subsection (g) that requires a transmitting utility (defined as an entity that owns, controls or operates a transmission facility used for the sale of electric energy and including municipal, cooperative, state and Federal utilities) to interconnect a generating facility if the owner (1) complies with a final rule to be promulgated by FERC regarding technical standards, and (2) pays the costs of interconnecting (which are to be comparable to the costs charged by the transmitting utility for similar interconnections). The right to interconnect does not (1) relieve the generating facility or the transmitting utility of other federal, state or local requirements, including the recovery of stranded costs, (2) provide the generating facility with transmission or distribution service, or (3) permit bypass of charges. The local distribution utility is also required to offer to sell backup power to the interconnected generating facility unless backup power is otherwise available. Rates, terms and conditions for sales of backup power must be just and reasonable, taking into account incremental costs of supplying such power and standby charges.

Section 101(c) provides for transmission interconnection process and procedures. It amends section 210 of the FPA to add a new subsection (h) that requires FERC to issue a rule within 180 days of enactment to establish procedures governing (1) the interconnection of new generating facilities to transmission systems owned/operated by transmitting utilities or Regional Transmission Organizations (RTOs), or (2) the increase in capacity of an existing interconnected generating facility. The rule will establish interconnection procedures and required elements for interconnection agreements and the process by which transmitting utilities or RTOs respond to and resolve interconnection requests. Interconnection procedures are required to be included by the transmitting utility/RTO in its tariffs filed with FERC under section 205 of the FPA. If existing interconnection procedures and agreements that are "substantially comparable" to the new FERC requirements have already been filed with and approved by the Commission, transmitting utilities and RTOs will be exempt from the new requirements.

Section 101(e) makes conforming amendments to section 210 of the FPA.

Sec. 102. Federal standards for State net metering programs.

This section establishes minimum federal standards for net metering programs established by States, non-regulated electric utilities, and Federal power marketing agencies. If a net metering program does not meet the minimum standards within 2 years of enactment of the Act, the Commission is directed to establish a program (in the relevant State or service territory) that meets the standards. The applicable interconnection standards are the standards established under section 101(b) of the Act.

Sec. 103. Demand management.

This section directs the Commission to develop and implement price-responsive demand programs in consultation with the States, RTOs, electric utilities, Federal power marketing agencies, and the Secretary of Energy. Such programs shall be designed to reduce, to the extent practicable, the nation's peak annual electricity demand by 5 percent by 2004 (from a 2001 baseline). Such programs shall advance certain policies, including removal of barriers to demand-side programs, distributed generation, and advanced metering. Such programs shall not preempt or displace existing non-Federal programs.

Subtitle B--Provisions Regarding Public Utility Holding Company Act of 1935.

Sec. 111. Definitions.

This section defines key terms used in Subtitle A.

Sec. 112. Repeal of the Public Utility Holding Company Act of 1935.

The section repeals the Public Utility Holding Company Act of 1935, effective 12 months after the date of enactment.

Sec. 113. Federal access to books and records.

Subsection (a) requires holding companies and associate companies to maintain, and make available to FERC, such books, accounts, memoranda, and other records as FERC determines are necessary to identify costs incurred by a public utility or natural gas company that is an associate company of such holding company and necessary or appropriate for the protection of utility consumers with respect to jurisdictional rates. Subsection (b) requires affiliates and subsidiary companies of holding companies to maintain, and make available to FERC, such books, accounts, memoranda, and other records with respect to any affiliate transaction as FERC determines are necessary to identify costs incurred by a public utility or natural gas company that is an associate company of such holding company and necessary or appropriate for the protection of utility consumers with respect to jurisdictional rates. Subsection (c) authorizes FERC to examine the books, accounts, memoranda, and other records of any company in a holding company system, or any affiliate thereof, as FERC determines are necessary to identify costs incurred by a public utility or natural gas company within such holding company and necessary or appropriate for the protection of utility consumers with respect to jurisdictional rates. Subsection (d) protects the confidentiality of facts and information made available to FERC.

Sec. 114. State access to books and records.

Subsection (a) provides that upon the request of a State commission having jurisdiction to regulate a public utility company in a holding company system, and subject to terms and conditions to safeguard against unwarranted disclosure to the public of any trade secrets or sensitive commercial information, a holding company and its associate companies and affiliates shall produce for inspection books, accounts, memoranda, and other records that (1) have been identified in reasonable detail in a State proceeding; (2) the State commission determines are necessary to identify costs incurred by such public utility company; and (3) are necessary for the effective discharge of the responsibilities of the State commission. Subsection (b) provides that nothing in this section preempts applicable State law or limits the rights of any State to obtain books, accounts, memoranda, and other records. Subsection (c) provides U.S. district courts have jurisdiction to enforce this section.

Sec. 115. Exemption authority.

Subsection (a) directs FERC to issue a rule exempting from the requirements of section 513 any person that is a holding company, solely with respect to one or more: (1) qualifying facilities under the Public Utility Regulatory Policies Act of 1978; (2) exempt wholesale generators; or (3) foreign utility companies. Subsection (b) authorizes FERC to exempt other persons or transactions.

Sec. 116. Affiliate transactions.

This section provides that nothing in this subtitle precludes FERC or a State commission from exercising its jurisdiction under otherwise applicable law to determine whether a public utility company, public utility, or natural gas company may recover in rates any costs of any affiliate transaction.

Sec. 117. Applicability.

This section provides no provision of this subtitle shall apply to, or be deemed to include: (1) the United States; (2) a State or any political subdivision of a State; (3) any foreign governmental authority not operating in the United States; (4) any agency, authority, or instrumentality of any of the foregoing; or (5) any officer, agent, or employee of any of the foregoing.

Sec. 118. Effect on other regulations.

This section provides that nothing in this subtitle precludes FERC or a State commission from exercising its jurisdiction under otherwise applicable law to protect utility customers.

Sec. 119. Enforcement.

This section provides FERC has the same powers to enforce the provisions of this subtitle as set forth in sections 306 through 317 of the Federal Power Act.

Sec. 120. Savings provision.

Subsection (a) provides that nothing in this subtitle prohibits a person from engaging in or continuing to engage in activities or transactions in which it is legally engaged or authorized to engage on the date of enactment of this subtitle. Subsection (b) provides that nothing in this subtitle limits FERC's authority under the Federal Power Act or the Natural Gas Act.

Sec. 121. Implementation.

This section provides that not later than 12 months after the date of enactment of this subtitle, FERC shall (1) promulgate such regulations as may be necessary or appropriate to implement this subtitle; (2) submit to Congress detailed recommendations on technical and conforming amendments to Federal law necessary to carry out this subtitle and the amendments made by this subtitle.

Sec. 122. Transfer of resources.

This section provides all books and records that relate primarily to the functions transferred to FERC shall be transferred from the Securities and Exchange Commission.

Sec. 123. Effective date.

This section provides the subtitle takes effect 12 months after date of enactment.

Sec. 124. Conforming amendment to the Federal Power Act.

This section repeals section 318 of the Federal Power Act, which governs conflicts of jurisdiction between the Public Utility Holding Company Act of 1935 and the Federal Power Act.

Subtitle C--Provisions Regarding Public Utility Regulatory Policy Act of 1978

Sec. 131. Findings.

Sec. 132. Prospective repeal.

Subsection (a) provides that no electric utility shall be required to enter into a new contract or obligation to purchase or sell electric energy or capacity pursuant to section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) after date of enactment. Subsection (b) provides that nothing in this section affects the rights or remedies of any party with respect to the purchase or sale of electric energy or capacity from or to a qualifying small power production facility or qualifying cogeneration facility pursuant to contracts or obligations in effect on date of enactment.

Sec. 133. Recovery of costs.

This section directs FERC to promulgate and enforce such regulations as may be required to assure that no utility shall be required directly or indirectly to absorb the costs associated with purchases of electric energy or capacity from a qualifying facility pursuant to any legally enforceable obligation entered into or imposed pursuant to section 210 of PURPA prior to date of enactment.

Sec. 134. Definitions.

This section defines key terms used in Subtitle C.

Subtitle D--Redundant Review of Certain Matters

Sec. 141. Repeal of certain provisions of Federal Power Act regarding disposition of property, consolidation, and purchase of securities.

This section repeals FPA section 203, eliminating FERC review of mergers and certain other dispositions of property.

Sec. 142. Elimination of duplicative antitrust review.

Subtitle D Section 141 would amend the Atomic Energy Act to eliminate the Nuclear Regulatory Commission's antitrust review authority with respect to pending or future initial applications for a license to construct or operate a new nuclear power plant. Existing antitrust license conditions and the Commission's authority to enforce these existing conditions would remain intact. NRC's antitrust reviews are duplicative of other agencies efforts including FERC and DOJ.

Title II--Transmission Operation

Sec. 201. Open access for all transmitting utilities.

Subsection (a) adds a section 206(e) to the Federal Power Act that provides open access to the transmission systems operated by public utilities and transmitting utilities that are not public utilities. Section 206(e)(1) authorizes FERC to issue rules requiring open access transmission service by public utilities on a not unduly discriminatory or preferential basis, such as Order 888. Section 206(e)(1) also authorizes FERC to provide for wholesale stranded cost recovery. Section 206(e)(2) authorizes FERC to issue rules requiring access transmission service by transmitting utilities that are not public utilities (other than Federal power marketing administrations, the Tennessee Valley Authority, and utilities subject to section 212(k)) to provide transmission services at rates that are comparable to those each transmitting utility charges itself and not unduly discriminatory or preferential, and on terms and conditions that are comparable to those required by public utilities. Section 206(e)(2) provides FERC authority over the transmission systems of State and municipal utilities and rural electric cooperatives. Section 206(e)(2) also authorizes FERC to remand transmission rates for review and revision where necessary and provide for wholesale stranded cost recovery. Section 206(e) and Title V, which provides FERC authority over the Federal transmission systems, ensure open access to the entire transmission system.

Section 206(e)(2) also directs FERC to exempt State and municipal transmitting utilities and rural electric cooperatives from the requirement to provide comparable transmission access that (1) are small electric utilities that do not own or operate transmission facilities that are part of the bulk power system, or (2) meet other criteria determined by FERC to be in the public interest. FERC is directed to provide such exemptions based on self-certification by the transmitting utility. FERC is authorized to revoke an exemption only upon complaint if it determines the transmitting utility does not satisfy the exemption criteria. In determining whether transmission facilities are part of the bulk power system, FERC is directed to consider any position taken by the electric reliability organization or affiliated regional reliability entity in the region where the transmitting utility is located. A "small electric utility" is defined as an electric utility that sells no more than 4 million megawatt-hours of electric energy per year. The purpose of this change is to exempt small transmission owners from FERC regulation of transmission rates, terms, and conditions.

Section 206(e)(3) directs FERC to provide for recovery of wholesale stranded costs by public utilities and transmitting utilities that occur when retail electric consumers cease to be served by such utilities by reason of establishment of a State or municipal local distribution company. In such cases, FERC is directed to calculate wholesale stranded costs using a reasonable expectation period based on the weighted average remaining useful life of generation assets owned or purchased by the utility and included in wholesale or retail rates on July 9, 1996. FERC is directed to apply this standard to determine the remaining level of wholesale stranded costs established prior to date of enactment.

Subsection (b) amends section 212(h) of the Federal Power Act to clarify FERC authority to order transmission of electric energy to retail electric consumers served by local distribution facilities subject to open access, consistent with State law. Subsection (c) amends sections 211(a) and 212(a) to clarify FERC authority to order transmission of electric energy to retail electric consumers. The revised definition of "transmitting utility" (in bill section 3) includes any entity that owns or operates transmission facilities used for the transmission of electric energy in interstate commerce, regardless of whether the facilities are used for wholesale or retail sales. Regional transmission organizations (RTOs) such as transcos and independent system operators are included in the amended definition. Entities that own transmission facilities that are not used in interstate commerce, such as transmitting utilities in noncontiguous States and territories are not included in the definition.

Subsection (d)(1) amends section 201(c) of the Federal Power Act to provide FERC authority to order transmission service within the U.S. for consumption in a foreign country. Subsection (d)(2) repeals subsection 202(f) of the Federal Power Act, which limits FERC jurisdiction over certain wholesale sales and transmission between the U.S. and foreign countries.

Sec. 202. Regional Transmission Organizations.

This provision authorizes and directs the Commission to order each transmitting utility (including municipal, cooperative, and federal utilities) to form or participate in an operational RTO within 12 months. All transmitting utilities (except those already participating in a FERC-approved RTO - under Order No. 2000 requirements - at time of enactment) must have an RTO application on file at FERC within 3 months. If a transmitting utility fails to file, FERC (in consultation with the States) shall order the non-filer into an RTO of FERC's choosing within 9 months of the missed deadline. FERC must approve an RTO, including an independent transmission company, that meets certain minimum standards (discussed below). FERC shall have no RTO mandate authority other than as provided in this section.

If FERC finds that a proposed RTO does not meet the standards, FERC (in consultation with the States) must propose modifications it deems necessary to meet the minimum standards. At the applicant's request, FERC would be required to hold an evidentiary hearing to determine whether the FERC's proposed modifications are necessary to meet the standards. If the FERC finds against the applicant in the hearing, the applicant can appeal to a federal court (and the FERC's order is stayed pending the court's decision). If the court finds that the FERC's decision is supported by a preponderance of the evidence, the FERC shall order the applicant into the RTO that FERC deems to meet the standards. But if the court finds that the FERC has not supported its decision on a preponderance of the evidence, the FERC must order the applicant to join the RTO originally proposed by the applicant, without modification. The appeals court must give the RTO case expedited consideration in determining its docket.

To ensure that power is traded efficiently and on reasonable terms and conditions across and between neighboring RTOs, FERC is authorized and directed to establish and enforce uniform market rules, including "seams" regulations. FERC must issue a uniform market and seams rules within 3 months of enactment. Seams regulations can provide uniformity without giving FERC authority to force transmitting utilities into onerous RTO structures. In no event shall FERC have authority to require divestiture of transmission assets.

The RTO must meet minimum standards relating to the following: independence, scope and configuration, operational authority, reliability, transmission service, congestion management, parallel path flow, OASIS, ATC and TTC, ancillary services, market monitoring, planning and expansion, and coordination. To meet the scope and configuration standard, the applicant has the option of applying for one of two "safe harbors": (1) a cost and benefit test; or (2) a generation adequacy test.

The section clarifies that any RTO finally approved (without condition) by the FERC - as meeting Order No. 2000 requirements - prior to enactment would be not required to change. To date FERC has not approved any RTOs under Order No. 2000. Clarifies that the provision would not undercut State authority over transmission facility maintenance, planning, siting, and other utility functions, where such authority is exercised in a manner consistent with the Act or Commission action under the Act. Clarifies that transmitting utilities in ERCOT would not be subject to the provision, because under the Federal Power Act transmission service within ERCOT is regulated by the Public Utility Commission (PUC) of Texas. Texas law requires the PUC ensure that transmission service within ERCOT is consistent with transmission service that FERC may require in similar circumstances.

Title III--Transmission Reliability

Sec. 301. Electric reliability.

This section incorporates NERC-suggested changes to the October 9 Discussion Draft. It adds a new section 216 to the Federal Power Act providing for FERC certification of an electric reliability organization to develop enforceable reliability standards. Section 216(a) provides definitions of key terms. Section 216(b) provides that FERC has jurisdiction within the United States over an electric reliability organization, any regional entities, and users, owners and operators of the bulk power system, for purposes of approving reliability standards and enforcing compliance with section 216.

Section 216(c)(1) directs FERC to issue a final rule within 180 days to implement the section. Section 216(c)(2) authorizes FERC to certify an applicant as an electric reliability organization if it (A) has the ability to develop, implement, and enforce reliability standards that provide for an adequate level of reliability, (B) has established certain rules. The rules must (i) assure its independence, while assuring fair stakeholder representation in decision-making, (ii) equitably allocate dues, fees, and other charges, (iii) provide for fair and impartial procedures for enforcement of reliability standards through penalties, and (iv) provide for public reasonable notice and opportunity for public comment, due process, openness, and balance of interests in developing reliability standards and otherwise exercising its duties. Subsection (c)(3) (note error in text listing this as paragraph (4)) requires that the FERC only certify one electric reliability organization.

Section 216(d)(1) requires that an electric reliability organization file a proposed reliability standard or modification to a standard with FERC. Section 216(d)(2) authorizes FERC to approve a proposed reliability standard if it determines the standard is just, reasonable, not unduly discriminatory or preferential and is in the public interest. The Commission must give due weight to the technical expertise of the reliability organization but not with respect to the propose standard's effect on competition. Under paragraph (d)(3), standards proposed by regional entities are given a rebuttable presumption that they meet the requirements of (d)(2). Section 216(d)(4) directs FERC to remand disapproved proposed reliability standards to the electric reliability organization. Section 216(d)(5) authorizes FERC to order an electric reliability organization to submit proposed reliability standards that address specific matters.

Section 216(e)(1) authorizes an electric reliability organization to impose a penalty on the user or owner or operator of the bulk power system if (A) it finds, after notice and an opportunity for a hearing, that the user or owner or operator violated a reliability standard and (B) filed notice with the Commission who must affirm, set aside, or modify the action. Section 216(e)(2) authorizes FERC to enforce reliability standards and impose penalties upon its own motion. Section 216(e)(3) authorizes FERC to assign enforcement of reliability standards to regional transmission organizations. Section 216(e)(4) authorizes FERC to take such action as is necessary or appropriate against an electric reliability organization.

Section 216(f) governs changes in electric reliability organization rules. Section 216(g) directs an electric reliability organization whose purpose is to promote reliability of the bulk power system in the United States and Canada or Mexico to take all appropriate steps to gain recognition in Canada and Mexico. The subsection also encourages the President to use his best efforts to enter into international agreements with Canada and Mexico to provide for compliance with reliability standards and the effectiveness of an electric reliability organization whose purpose is to promote reliability of the bulk power system in the United States and Canada or Mexico.

Section 216(h) requires the reliability organization to conduct periodic assessments of the reliability and adequacy of the bulk power system. Subsection 216(i) clarifies that the activities of the reliability organization are limited to the bulk power system, that Commission authority is not expanded outside the provisions of this section, and also contains a state savings clause.

Subsection 216(j) provides anti-trust protection for certain activities undertaken by the reliability organization under this section, as well as good faith actions of bulk-power system users under the rules of the organization.

Title IV--Transmission Infrastructure

Sec. 401. Sustainable transmission networks rulemaking.

This section directs the Commission to conduct a rulemaking to establish incentive rate policies and standards for expansion of transmission networks to ensure reliability, support wholesale markets, and promote expansion of transmission capacity needed to sustain the growth of competitive markets. The section specifically provides that such policies include the following: economically efficient expansion of transmission networks, consistency between gas pipeline pricing and transmission pricing, promotion of new technologies, reduction of line losses, returns on equity that reflect new risks, promotion of voluntary RTO participation, reduced congestion, accelerated depreciation, innovative capital structures, environmentally sound and low-impact transmission facility designs, real-time usage of transmission systems, and improvement of transmission network reliability and security. The section provides that all transmission rates approved on or after the date of enactment by the Commission shall comply with the rule, as well as with the requirements of FPA sections 205 and 206 (including the requirement that all transmission rates be just and reasonable). The Commission is also directed to file a report on its transmission pricing policies and an annual report assessing the adequacy of the Commission's incentive policies in light of actual levels of transmission investment.

Sec. 402. Transmission siting.

Section 402 amends the Federal Power Act by adding a new Section 217 giving the Federal government (FERC) the authority to issue permits to site or modify transmission facilities in instances where States have failed to act. To exercise this power, under 217(a), FERC must make three findings. First, FERC must find that the State in which the transmission facility is to be located lacks authority to approve the siting, or that the State with authority to site the facilities has withheld approval, conditioned its approval in a way that makes the project economically unfeasible, or delayed final approval for more than a year. Second, FERC must find that the facilities to be authorized will be used for the transmission of electric energy in interstate commerce; and third, that the proposed construction or modification is in the public interest. Subsections 217(b) and (c) set out the form for applying for a permit and requires that the FERC, in any proceeding on these matter, afford each affected State, Federal agency, Indian tribe, or other interested person a reasonable opportunity to present their views with respect to the need for and impact of a proposed facility.

New Subsection 217(d) gives the holder of a permit issued under subsection (a) the ability to acquire a right-of-way by eminent domain in Federal or State courts if the permit holder is unable to acquire a right-of-way by contract or other compensation agreement with a property owner. Subsection 217(e) allows the transmission owner to recover in their transmission rates all just and reasonable costs for the construction, operation and maintenance of transmission facilities developed through a permit under (a). Subsections (f) and (g) clarify that this section does not preclude any person from constructing transmission pursuant to State laws, and that FERC action under this section is subject to the National Environmental Policy Act and all other applicable Federal laws.

Title V--Federal Utilities

Subtitle A--Tennessee Valley Authority

Section 501. Definitions.

This section defines key terms used in Subtitle A.

Section 502. Wholesale Competition in the Tennessee Valley Region.

Subsection (a) repeals sections 212(f) and 212(j) of the Federal Power Act, which restrict wheeling across the TVA transmission system. Subsection (b) repeals the "fence" provisions of the Tennessee Valley Authority Act of 1933 (TVA Act).

Section 503. Tennessee Valley Authority Power Sales.

Subsection (a) prohibits TVA from selling electric power at retail, with the following exceptions: (1) retail electric consumers that had power purchase contracts on the date of enactment; (2) retail electric consumers served by local distribution companies in the Tennessee Valley Region that purchase 50 percent or less of their wholesale power from TVA; and (3) retail electric consumers served by local distribution companies that consent to such sale.

Subsection (b)(1) establishes regional preference for wholesale power sales by TVA, limiting such sales to the sale of excess electric power. Paragraph (2) prohibits TVA from offering firm excess electric power with a term of at least three years to a new wholesale customer at rates, terms, and conditions more favorable than those offered to a local distribution company in the Tennessee Valley Region without the consent of such companies. TVA's ability to make exchange power arrangements is not affected by this subsection.

Subsection (c) provides that sections 205, 206, 208, 210-213, 301-304, 306, 307 (except the last sentence of paragraph (c)), 308, 309, 313, and 317 of the Federal Power Act apply to wholesale sales of electric power by TVA outside the Tennessee Valley Region to the same extent and in the same manner as such provisions apply to wholesale sales of electric power in interstate commerce by public utilities. Subsection (d) provides that certain provisions of the TVA Act do not apply to wholesale sales of electric power by TVA outside the Tennessee Valley Region.

Section 504. Tennessee Valley Authority Electric Generation Facilities.

This section amends section 15d(a) of the TVA Act to authorize TVA to construct and acquire new electric generation facilities if it determines such facilities are necessary to supply the demands of local distribution companies in the Tennessee Valley Region and retail electric consumers TVA is authorized to sell to under section 603.

Section 505. Renegotiation of All-Requirements Power Contracts.

Subsection (a) directs TVA and the local distribution companies in the Tennessee Valley Region to renegotiate their existing all-requirements power contracts with respect to (1) remaining term, (2) length of termination notice, (3) amount of electric power a local distribution company may purchase from other electric utilities, and (4) stranded cost recovery. Subsection (b) authorizes local distribution companies in the Tennessee Valley Region to terminate their wholesale contracts after three years, if the parties are unable to reach agreement during renegotiation.

Section 506. Regulation of Tennessee Valley Authority Transmission System.

The section provides that sections 202(h), 205, 206, 208, 210-213, 301-304, 306, 307 (except the last sentence of paragraph (c)), 308, 309, 313, and 317 of the Federal Power Act apply to the same extent and in the same manner as such provisions apply to transmission of electric power in interstate commerce by public utilities.

Section 507. Regulation of Tennessee Valley Authority Distributors.

Subsection (a) provides that certain provisions of the TVA Act, which authorize TVA to regulate local distribution companies in the Tennessee Valley Region, do not apply to wholesale power sales by TVA in the region, upon the election of such companies, and that TVA may not regulate retail rates, terms, or conditions imposed by distributors. Subsection (b) provides that any regulatory authority exercised by TVA over local distribution companies in the Tennessee Valley Region shall be exercised by such companies, in accordance with State laws. The subsection also provides that the enumerated provisions of the TVA Act shall continue to apply to wholesale sales to local distribution companies that do not make the election authorized in subsection (a). Subsection (c) directs TVA to include terms and conditions in wholesale sales contracts to local distribution companies that purchase at least 70 percent of their power from TVA assuring that the financial benefits of electric system operations are allocated to the distributor's ratepayers. Subsection (d) amends the definition of "State regulatory authority" in PURPA to exclude TVA.

Section 508. Stranded Cost Recovery.

Subsection (a) directs TVA to make a good faith effort to reach agreement with local distribution companies in the Tennessee Valley Region within six months of date of enactment, or sooner as part of contract renegotiations under section 605, on recovery of TVA's stranded costs. TVA and the companies are directed to submit joint or separate stranded cost recovery plans to FERC for review. FERC is directed to approve, reject, or modify such plan or plans and issue an order providing for recovery of TVA stranded costs within one year of enactment. Such rules shall provide that TVA customers that did not cause stranded costs to be incurred are not obligated to pay such costs. TVA is authorized to recover stranded costs approved by FERC. TVA is barred from recovering stranded costs after September 30, 2007, unless the person against whom such charges are assessed agrees otherwise.

Subsection (b) provides that any stranded costs recovered by TVA be used to pay down TVA's debt to the extent determined by TVA Board to be consistent with the proper financial management, and prohibits TVA from using any amounts recovered to pay for additions to TVA's generation capacity. Subsection (c) provides that any stranded cost recovery charges be unbundled from the retail or wholesale rate otherwise applicable to that customer and stated as a separate charge. Subsection (d) directs TVA to report to Congress, as part of its annual management report, on (1) the status of TVA's long-range financial plans, progress towards its goal of competitively priced electric power, and the prospects of meeting the objectives of the TVA Ten Year Business Outlook; (2) any changes in assumptions since the previous report that have a material effect on TVA's long-range financial plans; (3) the source of funds used to pay for any capacity additions; (4) the use or disposition of amounts recovered by TVA under this bill; (5) the amount of TVA's debt; and (6) the projected reduction in TVA debt.

Section 509. Application of Antitrust Law.

Subsection (a) provides that TVA is subject to the antitrust laws with respect to its sale of electric energy and capacity and operation of its transmission system. Subsection (b) provides no damages, interest on damages, costs, or attorney's fees may be recovered from TVA.

Section 510. Savings Provision.

The section provides that nothing in the subtitle affects section 15d(b) of the TVA Act, which provides TVA debts are not debts of the U.S.

Subtitle B -- Bonneville Power Administration

Section 521. Definitions.

This section defines key terms used in Subtitle B.

Section 522. Regulation of the Bonneville Transmission System.

Subsection (a) provides that sections 202(h), 205, 206, 208, 210-213, 301-304, 306, 307 (except the last sentence of paragraph (c)), 308, 309, 313, and 317 of the Federal Power Act apply to the Bonneville Transmission System and transmission of electric energy over the Bonneville Transmission System.

Subsection (b) provides for transition to FERC approved transmission rates by requiring that rates in effect prior to October 1, 2001 shall remain in effect until superceded by Commission approved rates, but no later than October 1, 2003.

Subsection (c) provides that any FERC determination of transmission rates, terms, and conditions shall be subject to (1) phasing in changes in transmission rates or charges that would cause unreasonable cost shifts among transmission customers of the Bonneville Transmission System; (2) mitigating unreasonable adverse effects on transmission customers in the region that would otherwise result from changes in the historic treatment of costs to acquire transmission to serve customers served by General Transfer Agreements entered into prior to date of enactment (this rule is not applicable if the Bonneville Transmission System is operated by an RTO approved by FERC); (3) no direct assignment of the costs of transmission facilities included in BPA transmission rates in effect on October 1, 2001, or costs for replacement of such facilities; (4) assuring BPA's transmission rates and charges are sufficient to recover Federal investment in the Bonneville Transmission System over a reasonable period of years, after first meeting all BPA's other transmission costs, and produce the revenues necessary to assure timely payment of all transmission-related costs and expenses; (5) FERC rules to allocate the costs and revenues to the Bonneville Transmission system; and (6) (a) FERC rules to assure transmission access is provided over the Bonneville Transmission System for hydroelectric power that must be generated and transmitted at a particular time in order to reduce levels of dissolved nitrogen gas harmful to fish, with such access to be provided in a manner that displaces other electric energy using the transmission system, but does not impair service to loads, require operations that may damage generation facilities, or alter commercial relationships, and (b) provide methods of compensation the electric utility that sold the hydroelectric power and the parties affected by any such displacement of electric energy.

Subsection (d) provides subsection (a) shall not apply to (1) BPA activities other than transmission over the Bonneville Transmission System, or (2) an existing contract (except for rates which are adjustable by BPA), a treaty of the United States, or a contract concerning the delivery of electric energy and capacity entered into by entities designated pursuant to such a treaty.

Subsection (e) provides that nothing in this section shall alter the priority of payments established in section 13(b) of the Federal Columbia River Transmission System Act or the requirements of section 11 of that Act.

Subsection (f)(1) requires that surcharges imposed by the BPA administrator on rates for transmission services over the Bonneville Transmission System shall remain in effect, to the extent that such charges (A) relate to generation or conservation debt issued by a non-Federal party before October 1, 1998, (B) are secured by BPA obligations to make payments or net bill power and transmission service, and (C) cannot be timely recovered through power rates charges and paid in accordance with revenues and priority of payments specified by section 13(b) of the Federal Columbia River Transmission System Act of 1974. FERC need only allow such surcharges to the extent they would have been allowed under laws applicable to the Bonneville Administrator as of October 1, 1998. FERC, when reviewing such surcharges, must apply the standard of review applicable as of October 1, 1998. Under Subsection f(2), any amount recovered through surcharges under f(1) shall be treated as a loan to the BPA's power function from the transmission function and shall bear interest at a rate determined by the Commission. The BPA power function must repay the loans as soon as reasonably possible. To the extent reasonably practicable, the Administrator shall refund all or a portion of the surcharge with a higher priority of payment accorded those customers that purchased at least as much power from BPA at that time as they did in the 5 years prior to the surcharge effective date.

Subsection (g) provides that any proceeding to approve or fix transmission rates or charges shall be conducted in the Pacific Northwest.

Section 523. Authority of Administrator to participate in RTO.

The Administrator is authorized to transfer control of the Bonneville transmission system to a regional transmission organization (RTO) that meets the characteristics and functions required by the Commission. Terms shall assure recovery of transmission costs and expenses and be consistent with existing contracts and third party financing obligations. Administrator shall maintain effective oversight and the ability to terminate Bonneville's participation. BPA's statutory authorities and duties are suspended, except for matters not fulfilled by the RTO.

Section 524. Limitation on Retail Services.

Section 524 limits future BPA retail sales of electric energy or capacity to consumer who had a contract for purchase of electric energy from the BPA on October 1, 2001. This restriction shall not apply to sales to a Federal agency or to an assignee, subsidiary, affiliate, or successor in interest, whether through sale, transfer or otherwise, of a consumer that did have a contract for purchase of electric energy as of that date.

Section 525. Direct service industries.

Section 525 directs BPA to negotiate power sales contracts with willing Northwest aluminum direct service industrial customers beyond term of current contracts. Provides for DOE review of such negotiated contracts.

Section 526. Conforming Amendments.

Generally, these provisions amend Bonneville's statutes to make them consistent with Federal Power Act application to BPA's transmission system. Subsection 526(a) (Federal Power Act) repeals section 212(i) of the FPA. This is the Energy Policy Act of 1992 section that applied only to BPA.

Subsection 526(b) makes changes to the Federal Columbia River Transmission System Act. Subsection (b)(1) amends the Act to require congressional review and authorization of transmission facilities costing more than $50million in '98 dollars. Currently, congressional authorization is only required for transmission facilities that are built outside the Pacific Northwest or provide service not presently provided by BPA. Subsection 526(b)(2) repeals Transmission System Act section 6 dealing with transfer of electric power in excess of Federal power needs. Subsection 526(b)(3) amends section 9 of the Transmission System Act to delete references to transmission ratemaking. Subsection 526(b)(4) repeals section 10 of the Transmission System Act dealing with transmission rate standards. Subsection 526(c) amends section 6 of the Regional Preference Act to delete references to transmission rate standards and a Federal transmission priority.

Subsection 526(d) makes changes to the Northwest Power Act. Subsection (d)(1) amends section 7(a)(1) of the Northwest Power Act to delete transmission ratemaking standards. Like section 9 of the Transmission System Act, this section now applies to just power rates, though there is a continuing requirement expressed that the Administrator periodically review and, if necessary, propose revisions to transmission rates. Subsection 526(d)(2) amends section 7(a)(2) of the Northwest Power Act to delete references to FERC review of transmission rates under the Northwest Power Act. Review will now be fully under the FPA. Subsection 526(d)(3) amends section 7(i) of the Northwest Power Act to delete references to hearings on proposed transmission rates. Subsection 526(d)(4) amends section 9(d) of the Northwest Power Act to delete references to transmission access for non-Federal resources. Subsection 526(d)(5) amends section 9(i)(3) of the Northwest Power Act to delete references to transmission as a service that may be provided if it does not cause substantial interference with the Administrator's power marketing program.

Subsection 526(e) amends section 2(e) of the Bonneville Project Act to delete references to Presidential approval of the Administrator's sale, lease or disposition of real property or transmission lines.

Subtitle C--Other Power Marketing Authorities

Section 531. Definitions.

This section defines key terms used in Subtitle C.

Section 532. Wholesale Power Sales by Federal Power Marketing Administrations.

Subsection (a)(1) provides that all rates and charges for the sale of electric energy and capacity by PMAs shall be the lowest possible rates and charges that will recover from such customers over a reasonable period of years, in accordance with sound business principles, all costs incurred by the United States for the production of electric energy sold by such PMA, including repayment of the capital investment allocated to power and costs assigned by Acts of Congress to power for repayment. This cost-based standard is based on the standard in the Flood Control Act of 1944. Subsection (a)(2) authorizes FERC to modify power rates submitted by the PMAs and establish terms and conditions. Paragraph (2) prohibits FERC from reviewing the policy judgments and interpretations of laws and regulations made by the power generating agencies.

This subsection corrects an error Congress made in 1980 when it enacted the DOE Organization Act. That law inadvertently transferred the statutory authority of FERC's predecessor agency, the Federal Power Commission, to approve proposed PMA wholesale rates to DOE. DOE transferred this authority back to FERC under its authority to delegate functions to other agencies. This subsection corrects the mistake and grants FERC statutory authority to approve PMA wholesale rates, rather than continue to rely on a delegation from DOE. FERC is also given the authority to modify proposed rates, not just approve or disapprove them, to guarantee full cost recovery.

Subsection (b) provides that existing power rates shall remain in full force and effect unless FERC determines that the rates, terms, and conditions and inconsistent with subsection (a)(1) and establishes new rates, terms, and conditions.

Subsection (c) directs the PMAs to periodically review their rates and charges for the sale of electric energy and capacity. The PMAs are directed to propose revised rates in the event their rates and charges are inconsistent with subsection (a)(1). Such proposed rates are required to be established in accordance with this section, section 5 of the Flood Control Act of 1944, section 9 of the Reclamation Project Act of 1939, and the Acts specifically applicable to individual projects of the power systems of the power generating agencies.

Section 533. Regulation of Federal Power Marketing Administration Transmission Systems.

This section provides that sections 202(h), 205, 206, 208, 210-213, 301-304, 306, 307 (except the last sentence of paragraph (c)), 308, 309, 313, and 317 of the Federal Power Act apply to the transmission of electric energy by PMAs to the same extent and in the same manner as such provisions apply to transmission of electric energy in interstate commerce by public utilities.

Section 534. Accounting.

This section directs FERC to issue rules to ensure PMAs utilize the same accounting principles and requirements as are applicable to public utilities, procedures for the filing of complaints with FERC to parties seeking to ensure compliance, and procedures to ensure the power generating agencies and PMAs maintain a consistent set of books and records for purposes of debt repayment.

Section 535. Application of Antitrust Law.

Subsection (a) provides that PMAs are subject to the antitrust laws with respect to their sale of electric energy and capacity and operation of their transmission systems. Subsection (b) provides no damages, interest on damages, costs, or attorney's fees may be recovered from PMAs.

Title VI--Consumer Protection

Sec. 601. Electric supply unfair trade practices.

This section makes "slamming" and "cramming" illegal. "Slamming" is a generic term for changing a person's retail electricity provider without their consent. "Cramming" is adding unnecessary fees and services to a consumer's bill. Subsection (a)(1) prohibits "slamming" by authorizing FTC to promulgate rules for the submittal and verification of a retail electric consumer's selection or change in selection of a retail electric supplier and for assessment of penalties for violation of these rules. Subsection (a)(2) prohibits a person from submitting or changing the selection made by a retail electric consumer if prohibited by law or FTC rules. Subsection (a)(3) makes it unlawful to change a consumers electric supplier without the consumers consent.

Subsection (b)(1) prohibits "cramming" by authorizing the FTC to promulgate rules for obtaining the consent of a retail electric consumer and for assessing penalties for violation of the rules. Subsection (b)(2) prohibits a person from charging a retail electric consumer for a particular good or service if such charges are prohibited by law or FTC rules; (b)(3) makes such "cramming" unlawful. Subsection (c) provides for enforcement of FTC rules promulgated under this section. Subsection (d) grandfathers State programs deemed by the FTC to be consistent with the FTC regulations adopted under this section. Subsection (e) clarifies that remedies provided for under this section are in addition to other remedies available by law. Subsection (f) gives states the authority to enforce FTC regulations regarding "slamming" and "cramming" similar to provisions in the Telecommunications Act.

Sec. 602. Consumer Privacy.

Subsection (a) allows FTC to promulgate rules regarding disclosure of consumer information in connection with the sale or delivery of electric energy to retail electric consumers. Subsection (b) provides the FTC rules shall permit use, disclosure, or access to consumer information for certain enumerated purposes. Subsection (c) provides the FTC rule shall authorize persons to use, disclosure, or permit access to aggregate consumer information and require local distribution companies to make such information available. Subsection (d) provides that violation of the FTC rule shall be treated as a violation of a rule under section 18 of the FTC Act regarding unfair and deceptive acts or practices, while preserving other enforcement powers of the FTC. Subsection (e) grandfathers State programs deemed by the FTC to provide equivalent or greater protection compared to the FTC regulations adopted under this section. Subsection (f) provides definitions of key terms used in this section.

Sec. 603. Aggregation.

This section authorizes retail electric consumers to designate entities to aggregate purchases of electric energy on their behalf if the consumers are served by local distribution companies whose local distribution facilities are subject to open access, ensuring consumers may not be aggregated without their consent. The section also bars States from prohibiting any political subdivision of a State or any cooperative from serving as an entity that aggregates consumers if such entity provides open access to any local distribution facilities that it may own or operate.

Sec. 604. State public purpose charges.

This section clarifies that nothing in the Act shall affect the authority of a State or municipality to require a public benefits charge on delivery of electricity to consumers. The section further clarifies that the section does not require a State or municipality to impose any such charge.

Sec. 605. State authority to order retail electric competition.

This section clarifies that nothing in the Act shall affect the authority of a State or municipality to require retail electric competition or unbundling of retail transmission.

Sec. 606. Universal and affordable service.

This section expresses the sense of Congress that every retail electric consumer should have access to electric energy at reasonable and affordable rates, and States should ensure retail electric competition does not result in loss of service to rural, residential, or low-income consumers.

Title VII--Investigation and Correction of Anti-Competitive Conduct

Sec. 701. Uniform FERC investigation authority.

This section expands the scope of the Commission's investigative authority under FPA section 307(a) to include the power to investigate any person, electric utility, or transmitting utility for the purpose of obtaining information about the sale of electric energy at wholesale in interstate commerce and the transmission of electric energy in interstate commerce.

Sec. 702. Uniform FERC refund authority.

This section would give the Commission authority to order refunds from sellers of electricity and transmission that are normally unregulated whenever they engage in sales of wholesale electricity or transmission to regulated utilities. This provision assures they are subject to refund orders to the same extent as regulated utilities when they operate in competitive wholesale and transmission markets, but does not apply to any transactions between unregulated utilities. Thus, FERC would continue to have no authority to regulate transactions between public power entities. The amendment would modify only Section 206, which is the provision authorizing FERC to initiate complaints to order refunds. Thus, public utilities would not be required to file rates ahead of time for FERC approval.

Sec. 703. Criminal and civil penalties.

This section increased criminal and civil penalties for violations of the FPA as follows. FPA section 316(a) (criminal penalties for violation of FPA provisions) is modified to increase maximum fines from $5,000 per violation to $1,000,000 per violation, and maximum jail time from 2 years to 5 years. Section 316(b) (criminal penalties for violation of Commission regulations) is modified to increase the maximum fine from $500 per day to $25,000 per day. Section 316A (civil penalties for violations of certain FPA provisions) expands the scope of the Commission's civil penalty authority to include violations of all provisions of FPA Part II, including provisions relating to wholesale wheeling and sales by exempt wholesale generators.