To lower energy costs to consumers, increase electric system reliability and provide environmental improvements, through the rapid deployment of distributed energy resources, and for other purposes.

Summary: Energy Self-Sufficiency Act for the 21st Century - Requires a utility distribution company to interconnect its local utility distribution facilities with, and provide service to, a distributed generation facility, if the facility owner or operator: (1) complies with a final rule promulgated by the Federal Energy Regulatory Commission (FERC) that establishes safety, reliability, and power quality standards for such a facility; and (2) pays the just, reasonable, and non-discriminatory costs directly related to such interconnection and service.Requires FERC to establish an advisory commission to make recommendations regarding promulgation of such a rule.Amends the Internal Revenue Code to extend the energy tax credit to distributed energy resources property placed in service during the taxable year, including distributed power property and combined heat and power system property.Instructs the Secretary of Energy to implement an accelerated cooperative research and development program to ensure reliability, efficiency, and environmental responsibility of Distributed Energy Resources, including: (1) Advanced Energy Technologies and Systems Development; (2) Advanced Grid Reliability Technologies development; and (3) Technology Transfer and Education.Directs the Secretary to develop and submit to Congress a six-year research and development program plan.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Energy Self-Sufficiency Act for the 
21st Century''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that:
            (1) The greater deployment of distributed energy resources 
        can help alleviate bottlenecks and deficiencies in the nation's 
        energy production and delivery system, and improve power 
        quality and reliability, while bringing more efficient and 
        environmentally responsible energy resources into the 
        mainstream.
            (2) The United States needs to ensure the rapid deployment 
        of new power generation technologies in order to meet the 
        growing demand for electricity in the `new economy,' while at 
        the same time paying careful attention to improving energy 
        efficiency and reducing pollution from energy production.
            (3) The United States is poised to be a world leader in the 
        design and manufacture of distributed energy resources 
        technology.
            (4) The current regulatory environment serves as a 
        disincentive to the deployment of distributed energy resources 
        in many parts of the country, due to the lack of consistent 
        policies and procedures for the interconnection of distributed 
        energy resources to the local electric grid.
            (5) Existing tax treatment of distributed energy resources 
        also creates difficulties for the installation of these 
        technologies.
            (6) The Federal Government needs a more coordinated program 
        for research, development and demonstration of distributed 
        energy resources.
    (b) Purposes.--The purposes of this Act are to lower energy costs 
to consumers, increase electric system reliability, create a more 
diverse and robust energy network, and provide energy efficiency and 
environmental improvements, through the rapid development and 
deployment of distributed energy resources.

       TITLE I--INTERCONNECTION OF LOCAL DISTRIBUTION FACILITIES

SEC. 101. INTERCONNECTION OF LOCAL DISTRIBUTION FACILITIES.

    Section 210 of the Federal Power Act is amended by adding the 
following at the end thereof:
    ``(f) Special Rule for Distributed Generation.--
            ``(1) Definitions.--As used in this subsection:
                    ``(A) Utility distribution company.--The term 
                `utility distribution company' means any entity which 
                owns, controls, or operates, for public use, local 
                utility distribution facilities.
                    ``(B) Local utility distribution facilities.--The 
                term `local utility distribution facilities' means any 
                facilities used for the local distribution of electric 
                energy. Such term does not include any facilities 
                determined by the Commission to be transmission 
                facilities subject to the jurisdiction of the 
                Commission under section 201.
                    ``(C) Distributed generation facility.--The term 
                `distributed generation facility' means an electric 
                power generation facility that is designed to serve 
                retail electric consumers at or near the facility site 
                and interconnect with local utility distribution 
                facilities.
            ``(2) Interconnection.--A utility distribution company 
        shall interconnect its local utility distribution facilities 
        with, and provide service to, a distributed generation 
        facility, if the distributed generation facility owner or 
        operator complies with the final rule promulgated under 
        paragraph (3) and pays the costs directly related to such 
        interconnection and service, as determined by the Commission. 
        The costs, terms and conditions of such interconnection and 
        subsequent service shall be just, reasonable and non-
        discriminatory, as determined by the Commission.
            ``(3) Rules.--Within one year after the date of enactment 
        of this subsection, the Commission shall promulgate a final 
        rule to establish safety, reliability, and power quality 
        standards relating to distributed generation facilities. To the 
        extent feasible, the Commission shall develop the standards 
        through a process involving interested parties. For purposes of 
        developing such standards, the Commission shall establish an 
        advisory committee composed of qualified experts to make 
        recommendations to the Commission.''.

       TITLE II--TAX INCENTIVES FOR DISTRIBUTED ENERGY RESOURCES

SEC. 201. TAX INCENTIVES FOR DISTRIBUTED ENERGY RESOURCES.

    (a) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of Internal Revenue Code of 1986.
    (b) In General.--Section 48(a)(3) of the Internal Revenue Code of 
1986 (defining energy property) is amended by inserting before the last 
sentence the following: ``The term `energy property' includes 
distributed power property or combined heat and power system property, 
but only if the requirements of subparagraphs (B) and (C) are met with 
respect to the property.''.
    (c) Definitions.--Subsection (a) of section 48 of the Internal 
Revenue Code of 1986 (related to the energy credit) is amended by 
adding at the end the following new paragraphs:
            ``(6) Distributed power property.--The term `distributed 
        power property' means property--
                    ``(A) which is used in the generation of 
                electricity for primary use--
                            ``(i) in nonresidential real or residential 
                        rental property used in the taxpayer's trade or 
                        business;
                            ``(ii) in the taxpayer's industrial 
                        manufacturing process or plant activity,
                    ``(B) which may also produce usable thermal energy 
                or mechanical power for use in heating or cooling 
                application, but only if at least 40 percent of the 
                total useful energy produced consists of--
                            ``(i) with respect to assets described in 
                        subparagraph (A)(i), electrical power (whether 
                        sold or used by the taxpayer), or
                            ``(ii) with respect to assets described in 
                        subparagraph (A)(ii), electrical power (whether 
                        sold or used by the taxpayer) and thermal or 
                        mechanical energy used in the taxpayer's 
                        industrial manufacturing process or plant 
                        activity,
                    ``(C) which is not used to transport primary fuel 
                to the generating facility or to distribute energy 
                within or outside of the facility, and
                    ``(D) if it is reasonably expected that not more 
                than 50 percent of the produced electricity will be 
                sold to, or used by, unrelated persons.
            ``(7) Combined heat and power system property.--For 
        purposes of this subsection--
                    ``(A) Combined heat and power system property.--The 
                term `combined heat and power system property' means 
                property comprising a system--
                            ``(i) which uses the same energy source for 
                        the simultaneous or sequential generation of 
                        electrical power, mechanical shaft power, or 
                        both, in combination with the generation of 
                        steam or other forms of useful thermal energy 
                        (including heating and cooling applications),
                            ``(ii) which has an electrical capacity of 
                        more than 50 kilowatts or a mechanical energy 
                        capacity of more than 67 horsepower or an 
                        equivalent combination of electrical and 
                        mechanical energy capacities,
                            ``(iii) which produces--
                                    ``(I) at least 20 percent of its 
                                total useful energy in the form of 
                                thermal energy, and
                                    ``(II) at least 20 percent of its 
                                total useful energy in the form of 
                                electrical or mechanical power (or 
                                combination thereof), and
                            ``(iv) the energy efficiency percentage of 
                        which exceeds 60 percent (70 percent in the 
                        case of a system with an electrical capacity in 
                        excess of 50 megawatts or a mechanical energy 
                        capacity in excess of 67,000 horsepower, or an 
                        equivalent combination of electrical and 
                        mechanical energy capacities).
                    ``(B) Special rules.--
                            ``(i) Energy efficiency percentage.--For 
                        purposes of subparagraph (A)(iv), the energy 
                        efficiency percentage of a system is the 
                        fraction--
                                    ``(I) the numerator of which is the 
                                total useful electrical, thermal, and 
                                mechanical power produced by the system 
                                at normal operating rates, and
                                    ``(II) the denominator of which is 
                                the lower heating value of the primary 
                                fuel source for the system.
                            ``(ii) Determinations made on btu basis.--
                        The energy efficiency percentage and the 
                        percentages under subparagraph (A)(iii) shall 
                        be determined on a Btu basis.
                            ``(iii) Input and output property not 
                        included.--The term `combined heat and power 
                        system property' does not include property used 
                        to transport the energy source to the facility 
                        or to distribute energy produced by the 
                        facility.
                            ``(iv) Public utility property.--
                                    ``(I) Accounting rule for public 
                                utility property.--If the combined heat 
                                and power system property is public 
                                utility property (as defined in section 
                                46(f)(5) as in effect on the day before 
                                the date of enactment of the Revenue 
                                Reconciliation Act of 1990), the 
                                taxpayer may only claim the credit 
                                under the subsection if, with respect 
                                to such property, the taxpayer uses a 
                                normalization method of accounting.
                                    ``(II) Certain exception not to 
                                apply.--The matter in paragraph (3) 
                                which follows subparagraph (D) shall 
                                not apply to combined heat and power 
                                system property.''.
    (d) No Carryback of Energy Credit Before Effective Date.--
Subsection (d) of section 39 is amended by adding at the end the 
following new paragraph:
            ``(10) No carryback of energy credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the portion of the energy credit 
        described in paragraph (6) or (7) of section 48(a) may be 
        carried back to a taxable year ending before the date of the 
        enactment of this paragraph.''.
    (e) Depreciation.--Subparagraph (C) of section 168(e)(3) (relating 
to classification of certain property as 7-year property) is amended by 
redesignating clause (ii) as clause (iii) and by inserting after clause 
(i) the following new clause:
                            ``(ii) any distributed power property (as 
                        defined in section 48(a)) or combined heat and 
                        power system property (as defined in such 
                        section), and''.
    (f) Effective Date.--The amendments made by this title shall apply 
to property placed in service after December 31, 2000.

TITLE III--RESEARCH AND DEVELOPMENT OF NEW DISTRIBUTED ENERGY RESOURCE 
                              TECHNOLOGIES

SEC. 301. RESEARCH AND DEVELOPMENT OF NEW DISTRIBUTED ENERGY RESOURCE 
              TECHNOLOGIES.

    (a) In General.--The Secretary of Energy shall develop and 
implement an accelerated comprehensive and cooperative program of 
research and development to ensure the reliability, efficiency and 
environmental responsibility of Distributed Energy Resources (hereafter 
in this section referred to as ``DER''). This research and development 
program shall include Advanced Energy Technologies Development, 
Advanced Energy Systems Development, Advanced Grid Reliability 
Technologies development and Technology Transfer and Education.
    (b) Purposes.--The cooperative research program shall promote and 
accelerate research and development for the following purposes:
            (1) Ensure long-term safety, reliability, and service for 
        DER.
            (2) Expand the capability of DER to be safely, reliably, 
        and with integrity connected to the distribution electric grid.
            (3) Improve the non-renewable technologies ability to 
        reduce fossil fuel consumption.
            (4) Minimize the environmental impact of DER technologies.
            (5) Provide highly secure interface systems for command, 
        control, and communication of DER technologies with the 
        electrical grid.
            (6) Develop technologies that advance and enhance the 
        electrical transmission and distribution grid.
            (7) Develop integration techniques and methodologies that 
        enhance the electric grid's performance.
    (c) Areas.--(1) In carrying out this act, the Secretary of Energy 
shall consider research and development on DER, Advanced Systems 
Development, and Advanced Electrical Grid reliability for each of the 
following:
            (A) Significant advancement in efficiency for Distributed 
        Power Prime Movers.
            (B) Significant advancement in efficiency for thermally 
        activated technologies.
            (C) Significant advancement in reduction of environmental 
        impact deploying pollution prevention enabling technologies
    (2) The program should include the following areas:
            (A) Interconnection standards, protocols, and equipment.
            (B) Microturbines.
            (C) Fuel cells.
            (D) Combined heat and power systems.
            (E) Advanced internal combustion engine generators.
            (F) Advanced natural gas turbines.
            (G) Energy storage devices.
            (H) Ancillary equipment for dispatch and control.
    (d) Points of Contact.--
            (1) In general.--To coordinate and implement the research 
        and development programs and activities authorized under this 
        Act--
                    (A) the Secretary of Energy shall designate, as the 
                point of contact for the Department of Energy, an 
                officer of the Department of Energy who has been 
                appointed by the President and confirmed by the Senate; 
                and
                    (B) the Administrator of the Environmental 
                Protection Agency shall designate, as the point of 
                contact for the Environmental Protection Agency, an 
                officer of the Environmental Protection Agency.
            (2) Duties.--The point of contact for the Department of 
        Energy shall have the primary responsibility for coordinating 
        and overseeing the implementation of the research, development, 
        and field evaluation program plan. The point of contact for the 
        Environment Protection Agency shall have the responsibility for 
        coordinating the Environmental Protection Agency's input to the 
        research, development and field evaluation of those elements of 
        the program that impact the directive of the Agency under the 
        Clean Air Act. The primary point of contact shall be 
        responsible in arranging cooperative agreements for research, 
        development and Field evaluation involving respective 
        departments, national laboratories, universities, industry 
        research organizations and industry.
            (3) Research and development program plan.--Within 120 days 
        after the date of enactment of this Act, the Secretary of 
        Energy shall prepare and submit to Congress a 6-year program 
        plan to guide activities under this Act. In preparing the 
        program plan, the Secretary shall consult with appropriate 
        representatives of the DER industry to select and prioritize 
        appropriate project proposals. The Secretary may also seek the 
        advice of utilities, energy services providers, manufacturers, 
        institutions of higher learning, Federal agencies, national 
        laboratories, State energy officials, State regulatory 
        officials, environmental organizations, and professional and 
        technical societies. In order to ensure that technologies are 
        readily adopted by private entities, the Secretary shall create 
        cost-sharing programs with private entities.
    (e) Implementation.--
            (1) Report to congress.--Two years after the enactment of 
        this Act and at two year intervals thereafter, the Secretary, 
        jointly with the Administrator of the Environmental Protection 
        Agency, shall submit a report to Congress describing the 
        progress made to achieve the purposes of this Act and 
        identifying any additional resources needed to continue the 
        rapid development and deployment of DER.
            (2) Authorization of appropriations.--
                    (A) There are authorized to be appropriated to the 
                Secretary of Energy for carrying out this Act 
                $236,000,000, for each of the fiscal years 2002 through 
                2007.
                    (B) There are authorized to be appropriated to the 
                Administrator of the Environmental Protection Agency 
                for carrying out this Act such sums as may be necessary 
                for each of the fiscal years 2002 through 2007.