Electric Modernization Act of 2005

TITLE <<NOTE: Electricity Modernization Act of 2005.>> XII--ELECTRICITY

SEC. 1201. <<NOTE: 42 USC 15801 note.>> SHORT TITLE.

This title may be cited as the ``Electricity Modernization Act of

2005''.

Subtitle A--Reliability Standards

SEC. 1211. ELECTRIC RELIABILITY STANDARDS.

(a) In General.--Part II of the Federal Power Act (16 U.S.C. 824 et

seq.) is amended by adding at the end the following:

``SEC. 215. <<NOTE: 16 USC 824o.>> ELECTRIC RELIABILITY.

``(a) Definitions.--For purposes of this section:

``(1) The term `bulk-power system' means--

``(A) facilities and control systems necessary for

operating an interconnected electric energy transmission network (or any portion thereof); and

``(B) electric energy from generation facilities

needed to maintain transmission system reliability.

The term does not include facilities used in the local

distribution of electric energy.

``(2) The terms `Electric Reliability Organization' and

`ERO' mean the organization certified by the Commission under

subsection (c) the purpose of which is to establish and enforce

reliability standards for the bulk-power system, subject to

Commission review.

``(3) The term `reliability standard' means a requirement,

approved by the Commission under this section, to provide for

reliable operation of the bulk-power system. The term includes

requirements for the operation of existing bulk-power system

facilities, including cybersecurity protection, and the design

of planned additions or modifications to such facilities to the

extent necessary to provide for reliable operation of the bulk-

power system, but the term does not include any requirement to

enlarge such facilities or to construct new transmission

capacity or generation capacity.

``(4) The term `reliable operation' means operating the

elements of the bulk-power system within equipment and electric

system thermal, voltage, and stability limits so that

instability, uncontrolled separation, or cascading failures of

such system will not occur as a result of a sudden disturbance,

including a cybersecurity incident, or unanticipated failure of

system elements.

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``(5) The term `Interconnection' means a geographic area in

which the operation of bulk-power system components is

synchronized such that the failure of one or more of such

components may adversely affect the ability of the operators of

other components within the system to maintain reliable

operation of the facilities within their control.

``(6) The term `transmission organization' means a Regional

Transmission Organization, Independent System Operator,

independent transmission provider, or other transmission

organization finally approved by the Commission for the

operation of transmission facilities.

``(7) The term `regional entity' means an entity having

enforcement authority pursuant to subsection (e)(4).

``(8) The term `cybersecurity incident' means a malicious

act or suspicious event that disrupts, or was an attempt to

disrupt, the operation of those programmable electronic devices

and communication networks including hardware, software and data that are essential to the reliable operation of the bulk power

system.

``(b) Jurisdiction and Applicability.--(1) The Commission shall have jurisdiction, within the United States, over the ERO certified by the Commission under subsection (c), any regional entities, and all users, owners and operators of the bulk-power system, including but not limited to the entities described in section 201(f), for purposes of approving reliability standards established under this section and enforcing compliance with this section. All users, owners and operators of the bulk-power system shall comply with reliability standards that take effect under this section.

``(2) <<NOTE: Regulations. Deadline.>> The Commission shall issue a

final rule to implement the requirements of this section not later than

180 days after the date of enactment of this section.

``(c) Certification.--Following the issuance of a Commission rule

under subsection (b)(2), any person may submit an application to the

Commission for certification as the Electric Reliability Organization.

The Commission may certify one such ERO if the Commission determines

that such ERO--

``(1) has the ability to develop and enforce, subject to

subsection (e)(2), reliability standards that provide for an

adequate level of reliability of the bulk-power system; and

``(2) has established rules that--

``(A) assure its independence of the users and

owners and operators of the bulk-power system, while

assuring fair stakeholder representation in the

selection of its directors and balanced decisionmaking

in any ERO committee or subordinate organizational

structure;

``(B) allocate equitably reasonable dues, fees, and

other charges among end users for all activities under

this section;

``(C) provide fair and impartial procedures for

enforcement of reliability standards through the

imposition of penalties in accordance with subsection

(e) (including limitations on activities, functions, or

operations, or other appropriate sanctions);

``(D) provide for reasonable notice and opportunity

for public comment, due process, openness, and balance

of interests in developing reliability standards and

otherwise exercising its duties; and

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``(E) provide for taking, after certification,

appropriate steps to gain recognition in Canada and

Mexico.

``(d) Reliability Standards.--(1) The Electric Reliability

Organization shall file each reliability standard or modification to a

reliability standard that it proposes to be made effective under this

section with the Commission.

``(2) The Commission may approve, by rule or order, a proposed

reliability standard or modification to a reliability standard if it

determines that the standard is just, reasonable, not unduly

discriminatory or preferential, and in the public interest. The

Commission shall give due weight to the technical expertise of the

Electric Reliability Organization with respect to the content of a

proposed standard or modification to a reliability standard and to the

technical expertise of a regional entity organized on an

Interconnection-wide basis with respect to a reliability standard to be

applicable within that Interconnection, but shall not defer with respect to the effect of a standard on competition. A proposed standard or modification shall take effect upon approval by the Commission.

``(3) The Electric Reliability Organization shall rebuttably presume that a proposal from a regional entity organized on an Interconnection-wide basis for a reliability standard or modification to a reliability standard to be applicable on an Interconnection-wide basis is just, reasonable, and not unduly discriminatory or preferential, and in the public interest.

``(4) The Commission shall remand to the Electric Reliability

Organization for further consideration a proposed reliability standard

or a modification to a reliability standard that the Commission

disapproves in whole or in part.

``(5) The Commission, upon its own motion or upon complaint, may

order the Electric Reliability Organization to submit to the Commission

a proposed reliability standard or a modification to a reliability

standard that addresses a specific matter if the Commission considers

such a new or modified reliability standard appropriate to carry out

this section.

``(6) The final rule adopted under subsection (b)(2) shall include

fair processes for the identification and timely resolution of any

conflict between a reliability standard and any function, rule, order,

tariff, rate schedule, or agreement accepted, approved, or ordered by

the Commission applicable to a transmission organization. Such

transmission organization shall continue to comply with such function,

rule, order, tariff, rate schedule or agreement accepted, approved, or

ordered by the Commission until--

``(A) the Commission finds a conflict exists between a

reliability standard and any such provision;

``(B) the Commission orders a change to such provision

pursuant to section 206 of this part; and

``(C) the ordered change becomes effective under this part.

If the Commission determines that a reliability standard needs to be

changed as a result of such a conflict, it shall order the ERO to

develop and file with the Commission a modified reliability standard

under paragraph (4) or (5) of this subsection.

``(e) Enforcement.--(1) The ERO may impose, subject to paragraph

(2), a penalty on a user or owner or operator of the bulk-power system

for a violation of a reliability standard approved by the Commission

under subsection (d) if the ERO, after notice and an opportunity for a

hearing--

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``(A) finds that the user or owner or operator has violated

a reliability standard approved by the Commission under

subsection (d); and

``(B) files notice and the record of the proceeding with the Commission.

``(2) A penalty imposed under paragraph (1) may take effect not

earlier than the 31st day after the ERO files with the Commission notice of the penalty and the record of proceedings. Such penalty shall be subject to review by the Commission, on its own motion or upon

application by the user, owner or operator that is the subject of the

penalty filed within 30 days after the date such notice is filed with

the Commission. Application to the Commission for review, or the

initiation of review by the Commission on its own motion, shall not

operate as a stay of such penalty unless the Commission otherwise orders upon its own motion or upon application by the user, owner or operator that is the subject of such penalty. In any proceeding to review a penalty imposed under paragraph (1), the Commission, after notice and opportunity for hearing (which hearing may consist solely of the record before the ERO and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the penalty), shall by order affirm, set aside, reinstate, or modify the penalty, and, if

appropriate, remand to the ERO for further proceedings. The Commission

shall implement expedited procedures for such hearings.

``(3) On its own motion or upon complaint, the Commission may order

compliance with a reliability standard and may impose a penalty against

a user or owner or operator of the bulk-power system if the Commission

finds, after notice and opportunity for a hearing, that the user or

owner or operator of the bulk-power system has engaged or is about to

engage in any acts or practices that constitute or will constitute a

violation of a reliability standard.

``(4) <<NOTE: Regulations. Contracts.>> The Commission shall issue

regulations authorizing the ERO to enter into an agreement to delegate

authority to a regional entity for the purpose of proposing reliability

standards to the ERO and enforcing reliability standards under paragraph

(1) if--

``(A) the regional entity is governed by--

``(i) an independent board;

``(ii) a balanced stakeholder board; or

``(iii) a combination independent and balanced

stakeholder board.

``(B) the regional entity otherwise satisfies the provisions of subsection (c)(1) and (2); and

``(C) the agreement promotes effective and efficient

administration of bulk-power system reliability.

The Commission may modify such delegation. The ERO and the Commission

shall rebuttably presume that a proposal for delegation to a regional

entity organized on an Interconnection-wide basis promotes effective and efficient administration of bulk-power system reliability and should be approved. Such regulation may provide that the Commission may assign the ERO's authority to enforce reliability standards under paragraph (1) directly to a regional entity consistent with the requirements of this paragraph.

``(5) The Commission may take such action as is necessary or

appropriate against the ERO or a regional entity to ensure compliance

with a reliability standard or any Commission order affecting the ERO or a regional entity.

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``(6) Any penalty imposed under this section shall bear a reasonable relation to the seriousness of the violation and shall take into consideration the efforts of such user, owner, or operator to remedy the violation in a timely manner.

``(f) Changes in Electric Reliability Organization Rules.--The

Electric Reliability Organization shall file with the Commission for

approval any proposed rule or proposed rule change, accompanied by an

explanation of its basis and purpose. The Commission, upon its own

motion or complaint, may propose a change to the rules of the ERO. A

proposed rule or proposed rule change shall take effect upon a finding

by the Commission, after notice and opportunity for comment, that the

change is just, reasonable, not unduly discriminatory or preferential,

is in the public interest, and satisfies the requirements of subsection

(c).

``(g) Reliability Reports.--The ERO shall conduct periodic

assessments of the reliability and adequacy of the bulk-power system in

North America.

``(h) Coordination With Canada and Mexico.--The President is urged

to negotiate international agreements with the governments of Canada and Mexico to provide for effective compliance with reliability standards and the effectiveness of the ERO in the United States and Canada or Mexico.

``(i) Savings Provisions.--(1) The ERO shall have authority to

develop and enforce compliance with reliability standards for only the

bulk-power system.

``(2) This section does not authorize the ERO or the Commission to

order the construction of additional generation or transmission capacity or to set and enforce compliance with standards for adequacy or safety of electric facilities or services.

``(3) Nothing in this section shall be construed to preempt any

authority of any State to take action to ensure the safety, adequacy,

and reliability of electric service within that State, as long as such

action is not inconsistent with any reliability standard, except that

the State of New York may establish rules that result in greater

reliability within that State, as long as such action does not result in lesser reliability outside the State than that provided by the

reliability standards.

``(4) <<NOTE: Deadline. Standards.>> Within 90 days of the

application of the Electric Reliability Organization or other affected

party, and after notice and opportunity for comment, the Commission

shall issue a final order determining whether a State action is

inconsistent with a reliability standard, taking into consideration any

recommendation of the ERO.

``(5) The Commission, after consultation with the ERO and the State

taking action, may stay the effectiveness of any State action, pending

the Commission's issuance of a final order.

``(j) <<NOTE: Establishment.>> 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 load served within the region. A regional

advisory body shall be composed of one member from each participating

State in the region, appointed by the Governor of each State, and may

include representatives of agencies, States, and provinces outside the

United States. A regional advisory body may provide advice to the

Electric Reliability Organization, a regional entity, or the Commission

regarding the governance of an existing or proposed regional entity

within the same region, whether a standard

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proposed to apply within the region is just, reasonable, not unduly

discriminatory or preferential, and in the public interest, whether fees proposed to be assessed within the region are just, reasonable, not unduly discriminatory or preferential, and in the public interest and any other responsibilities requested by the Commission. The Commission may give deference to the advice of any such regional advisory body if that body is organized on an Interconnection-wide basis.

``(k) Alaska and Hawaii.--The provisions of this section do not

apply to Alaska or Hawaii.''.

(b) <<NOTE: 16 USC 824o note.>> Status of ERO.--The Electric

Reliability Organization certified by the Federal Energy Regulatory

Commission under section 215(c) of the Federal Power Act and any

regional entity delegated enforcement authority pursuant to section

215(e)(4) of that Act are not departments, agencies, or

instrumentalities of the United States Government.

(c) <<NOTE: 16 USC 824o note.>> Access Approvals by Federal

Agencies.--Federal agencies responsible for approving access to electric transmission or distribution facilities located on lands within the United States shall, in accordance with applicable law, expedite any Federal agency approvals that are necessary to allow the owners or operators of such facilities to comply with any reliability standard, approved by the Commission under section 215 of the Federal Power Act, that pertains to vegetation management, electric service restoration, or resolution of situations that imminently endanger the reliability or safety of the facilities.