TITLE II -- ELECTRIC RELIABILITY

Sec. 201. Electric Reliability.

This section adds a new section 217 to the Federal Power Act providing for FERC approval of a self-regulating electric reliability organization (ERO) to develop enforceable reliability standards. Section 217(a) provides definitions of key terms used in the section. Section 217(b) provides FERC has jurisdiction within the United States over an ERO, affiliated regional reliability entities, bulk power system operators, and bulk power system users, for purposes of enforcing compliance with this section. Section 217(c) provides for FERC approval of existing reliability standards. Any such standards approved by FERC shall be mandatory and applicable until (1) withdrawn, disapproved or superseded by an ERO standard; or (2) disapproved or suspended by FERC. Subsection 217(d) directs FERC to issue rules governing approval of the ERO, and directs FERC to approve an application if it determines the applicant meets various criteria designed to ensure the ERO can discharge its responsibilities and will operate in a fair manner. FERC may approve only one ERO.

Section 217(e) provides for development of reliability standards by the ERO and FERC review of such standards. FERC is directed to approve a proposed reliability standard if it determines the standards to be just, reasonable, not unduly discriminatory or preferential, and in the public interest and suspend existing reliability standards that do not meet this standard. In the event FERC disapproves or suspends a reliability standard, it shall remand the standard to the ERO. If FERC suspends a standard, it is directed to establish an interim standard until a new or modified standard is approved. FERC may direct the ERO to develop reliability standards. Affiliated regional reliability entities are authorized to propose a variance or entity rule to the ERO, and may request FERC review of such proposals. FERC may remand variance or rule for further consideration by the ERO or may direct the ERO or the affiliated regional reliability entity to develop a variance or rule. If the ERO determines an emergency exists a proposed reliability standard or amendment shall take effect until suspended or withdrawn by FERC. All bulk power system users are required to comply with reliability standards that take effect under this section.

Section 217(f) directs the ERO to take all appropriate steps to gain recognition in Canada and Mexico and directs the executive branch to use its best efforts to enter into agreements with Canada and Mexico to provide for effective compliance with reliability standards and to provide for the effectiveness of the ERO. Section 217(g) directs the ERO to submit to FERC any proposed changes in its or an affiliated regional reliability entity's procedures, or governance or funding provisions. FERC is authorized to suspend a procedure or provision and establish interim procedures or governance or funding provisions until new procedures or provisions take effect.

Section 217(h) directs the ERO to enter into agreements to delegate authority to implement and enforce compliance with reliability standards in a specified geographic area and submit such agreements for FERC approval. No delegation by the ERO is valid unless approved by FERC. Any such delegation agreements shall specify procedures for an affiliated regional reliability entity to propose entity rules or variances for review by the ERO. The subsection establishes factors for consideration of entity rules and variances proposed by affiliated regional reliability entity by the ERO, with greater deference given to proposals by entities organized on an interconnection-wide basis. An affiliated regional reliability entity may seek relief from FERC if it is unable to reach agreement with the ERO on delegation and FERC is authorized to order the ERO to make such delegation, to propose a modification to a delegation agreement under certain circumstances, and to suspend the affected agreement.

Section 217(i) requires all system operators to be members of the ERO and members of any approved affiliated regional reliability entity. Section 217(j) authorizes the ERO to take disciplinary action against a bulk power system user if it finds the user violated a reliability standard. The sanctioned party may seek modification or rescission of such action from FERC. The ERO is authorized to seek injunctive relief to prevent a serious threat to reliability. FERC is authorized to take disciplinary action against a bulk power system user if it finds the user violated or threatens to violate reliability standards. FERC is authorized to take action against the ERO or affiliated regional reliability entities to assure compliance with reliability standards or any FERC order. Section 217(k) directs the ERO to conduct periodic assessments of the reliability and adequacy of the interconnected bulk power system in North America and report its findings and recommendations for improving reliability and adequacy. Section 217(l) authorizes the ERO and affiliated regional reliability entities to assess the reasonable costs of the ERO and affiliated regional reliability entities.

Section 217(m) provides that the following activities shall not be deemed illegal per se under antitrust laws: (1) activities undertaken by the ERO under this section or affiliated regional reliability entity operating under an agreement; and (2) activities of a ERO member or affiliated regional reliability entity in pursuit of organization objectives under this section undertaken in good faith under the rules of the ERO. These activities shall be judged on the basis of their reasonableness, taking into account all relevant factors affecting competition and reliability.

Section 217(n) preserves the authority of States and local governments to ensure the reliability of local distribution facilities within the State, except where the exercise of such authority unreasonably impairs the reliability of the bulk power system.

Subtitle B -- Public Utility Holding Company Act of 1935

Section 511. Definitions.

This section defines key terms used in Subtitle B.

Section 512. 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.

Section 513. 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.

Section 514. 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.

Section 515. Exemption Authority.

Subsection (a) directs FERC to issue a rule exempting from the requirements of section 514 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.

Section 516. Affiliate Transactions.

This section provides that nothing in this subtitle precludes FERC or a State commission from exercising its jurisdiction under other 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.

Section 517. 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.

Section 518. 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.

Section 519. 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.

Section 520. Savings Provisions.

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.

Section 521. 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.

Section 522. 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.

Section 523. Effective Date.

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

Section 524. 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 -- Public Utility Regulatory Policies Act of 1978

Section 531. 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 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.

Section 532. 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 the Public Utility Regulatory Policies Act of 1978 prior to date of enactment.