SECTION 1. ENERGY EFFICIENCY RESOURCE STANDARD FOR RETAIL ELECTRICITY 
              AND NATURAL GAS DISTRIBUTORS.

    Title VI of the Public Utility Regulatory Policies Act of 1978 (16 
U.S.C. 2601 et seq.) is amended by adding at the end the following:

``SEC. 610. ENERGY EFFICIENCY RESOURCE STANDARD FOR RETAIL ELECTRICITY 
              AND NATURAL GAS DISTRIBUTORS.

    ``(a) Definitions.--In this section:
            ``(1) Base quantity.--The term `base quantity', with 
        respect to a retail electricity or natural gas distributor, 
        means the total quantity of electric energy or natural gas 
        delivered by the retail electricity or natural gas distributor 
        to retail customers (other than to an electricity distributor 
        for purposes of electric generation) during the most recent 
        calendar year for which information is available.
            ``(2) CHP savings.--
                    ``(A) In general.--The term `CHP savings' means the 
                increment of electric output of a new combined heat and 
                power system that is attributable to the higher 
                efficiency of the combined system (as compared to the 
                efficiency of separate production of the electric and 
                thermal outputs), as determined in accordance with such 
                regulations as the Secretary may promulgate.
                    ``(B) Related definition.--For purposes of 
                subparagraph (A), the term `new combined heat and power 
                system' means a system that uses the same energy source 
                for the generation of electrical or mechanical power 
                and the production of steam or another form of useful 
                thermal energy, if--
                            ``(i) the facility at which the system is 
                        used meets such requirements relating to 
                        efficiency and other operating characteristics 
                        as the Secretary may promulgate by regulation;
                            ``(ii) the net wholesale sales of 
                        electricity by the facility will not exceed 50 
                        percent of total annual electric generation by 
                        the facility; and
                            ``(iii) the facility commences operation 
                        after June 30, 2007.
            ``(3) Customer facility savings.--The term `customer 
        facility savings' means a reduction in end-use electricity or 
        natural gas consumption (including recycled energy savings) at 
        a facility of an end-use consumer of electricity or natural gas 
        served by a retail electricity or natural gas distributor, as 
        compared to--
                    ``(A) consumption at that facility during a base 
                year;
                    ``(B) in the case of new equipment, regardless of 
                whether the new equipment replaces existing equipment 
                at the end of the useful life of the existing 
                equipment, consumption by the new equipment of average 
                efficiency; or
                    ``(C) in the case of a new facility, consumption at 
                a reference facility.
            ``(4) Electricity savings.--The term `electricity savings' 
        means, as determined in accordance with such regulations as the 
        Secretary may promulgate--
                    ``(A) customer facility savings of electricity 
                consumption, adjusted to reflect any associated 
                increase in fuel consumption at the facility;
                    ``(B) reductions in distribution system losses of 
                electricity achieved by a retail electricity 
                distributor, as compared to losses attributable to new 
                or replacement distribution system equipment of average 
                efficiency (as defined in regulations to be promulgated 
                by the Secretary); and
                    ``(C) CHP savings.
            ``(5) Natural gas savings.--The term `natural gas savings' 
        means, as determined in accordance with such regulations as the 
        Secretary may promulgate--
                    ``(A) customer facility savings of natural gas, 
                adjusted to reflect any associated increase in 
                electricity consumption at the facility; and
                    ``(B) reductions in leakage, operational losses, 
                and gas fuel consumption in the operation of a gas 
                distribution system achieved by a retail gas 
                distributor, as compared to similar losses during a 
                base year.
            ``(6) Recycled energy savings.--The term `recycled energy 
        savings' means a reduction in electricity or natural gas 
        consumption that is attributable to electrical or mechanical 
        power (or both), or thermal energy, produced by modifying an 
        industrial or commercial system that was in operation before 
        July 1, 2007, in order to recapture energy that would otherwise 
        be wasted.
            ``(7) Retail electricity or natural gas distributor.--The 
        term `retail electricity or natural gas distributor' means a 
        person or Federal or State agency that--
                    ``(A) owns or operates an electric or natural gas 
                distribution facility; and
                    ``(B) using the facility, delivers to consumers of 
                the energy that are not affiliated with, and that are 
                not lessees or tenants of, the person or agency, during 
                the most recent calendar year for which data are 
                available--
                            ``(i) more than 800,000 megawatt hours of 
                        electricity; or
                            ``(ii) more than 1,000,000,000 cubic feet 
                        of natural gas.
            ``(8) Verified electricity or natural gas savings.--The 
        term `verified electricity or natural gas savings' means 
        electricity savings or natural gas savings that meet the 
        requirements of subsection (c).
    ``(b) Performance Standard.--
            ``(1) In general.--For calendar year 2010, and each 
        calendar year thereafter, each retail electricity or natural 
        gas distributor shall submit to the Secretary, by not later 
        than March 31 of the calendar year after the applicable 
        calendar year, a number of credits issued under subsection (d) 
        equal to the following percentages of the base quantity of the 
        retail electricity or natural gas distributor applicable to the 
        calendar year:


------------------------------------------------------------------------
                                Electricity
             Year               Credits (%)    Natural Gas Credits (%)
------------------------------------------------------------------------
             2010                   0.5                  0.3
------------------------------------------------------------------------
             2011                   1.25                 0.6
------------------------------------------------------------------------
             2012                   2.0                  1.0
------------------------------------------------------------------------
             2013                   3.0                  1.5
------------------------------------------------------------------------
             2014                   4.0                  2.0
------------------------------------------------------------------------
             2015                   5.0                  2.5
------------------------------------------------------------------------
             2016                   6.0                  3.0
------------------------------------------------------------------------
             2017                   7.0                  3.5
------------------------------------------------------------------------
             2018                   8.0                  4.0
------------------------------------------------------------------------
             2019                   9.0                  4.5
------------------------------------------------------------------------
             2020                   10.0                 5.0
------------------------------------------------------------------------

            ``(2) Subsequent calendar years.--For calendar year 2021 
        and each calendar year thereafter, each retail electricity or 
        natural gas distributor shall submit to the Secretary, by not 
        later than March 31 of the calendar year after the applicable 
        calendar year, a number of credits issued under subsection (d) 
        equal to such a percentage of the base quantity of the retail 
        electricity or natural gas distributor as the Secretary may 
        determine, by regulation, but in no case less than the 
        applicable percentage for calendar year 2020.
    ``(c) Measurement and Verification of Savings.--Not later than June 
30, 2009, the Secretary shall promulgate regulations regarding 
measurement and verification of electricity and natural gas savings 
under this section, including--
            ``(1) procedures and standards for defining and measuring 
        electricity savings and natural gas savings that will be 
        eligible to receive credits under subsection (d)(2), which 
        shall--
                    ``(A) specify the types of energy efficiency and 
                energy conservation measures that will be eligible for 
                the credits;
                    ``(B) require that energy consumption estimates for 
                customer facilities or portions of facilities in the 
                applicable base and current years be adjusted, as 
                appropriate, to account for changes in weather, level 
                of production, and building area;
                    ``(C) account for the useful life of electricity 
                savings measures;
                    ``(D) include deemed savings values for specific, 
                commonly-used efficiency measures;
                    ``(E) specify the extent to which electricity 
                savings and natural gas savings attributable to 
                measures carried out before July 1, 2007, are eligible 
                to receive credits under this section; and
                    ``(F) exclude savings that--
                            ``(i) are not properly attributable to 
                        measures carried out by the entity seeking the 
                        credit (or a designated agent of the entity); 
                        or
                            ``(ii) have already been credited under 
                        this section to another entity; and
            ``(2) procedures and standards for third-party verification 
        of reported electricity savings or natural gas savings.
    ``(d) Credit and Trading System.--
            ``(1) Credit regulations.--
                    ``(A) In general.--Not later than June 30, 2009, 
                the Secretary shall promulgate regulations regarding--
                            ``(i) the issuance of credits under this 
                        section;
                            ``(ii) a national credit trading system; 
                        and
                            ``(iii) a system for independent monitoring 
                        of the market for the credits.
                    ``(B) Limitations.--In promulgating regulations 
                under subparagraph (A), the Secretary may establish 
                such limitations as the Secretary determines to be 
                appropriate with respect to the extent to which a 
                retail electricity or natural gas distributor may 
                achieve compliance with subsection (b) by submitting 
                credits issued for electricity or natural gas savings 
                that are not customer facility savings at a facility 
                served by the retail electricity or natural gas 
                distributor.
                    ``(C) Requirement.--In promulgating regulations 
                under subparagraph (A), the Secretary shall provide for 
                the issuance of appropriate credits for the mechanical 
                output of new combined heat and power systems.
            ``(2) Issuance of credits.--In accordance with the 
        regulations promulgated under paragraph (1), the Secretary 
        shall issue credits for--
                    ``(A) verified electricity and natural gas savings 
                achieved by a retail electricity or natural gas 
                distributor in a certain calendar year; and
                    ``(B) verified electricity and natural gas savings 
                achieved by other entities (including State agencies), 
                if--
                            ``(i)(I) no retail electricity or natural 
                        gas distributor paid a substantial portion of 
                        the cost of achieving the savings; or
                            ``(II) if a retail electricity or natural 
                        gas distributor paid a substantial portion of 
                        the cost of achieving the savings, the retail 
                        electricity or natural gas distributor has 
                        waived any entitlement to the credit; and
                            ``(ii) the measures used to achieve the 
                        verified electricity and natural gas savings 
                        were installed or placed in operation by the 
                        entity seeking certification (or a designated 
                        agent of the entity).
            ``(3) Value of credits.--A credit issued by the Secretary 
        under this subsection shall have a value of--
                    ``(A) 1,000 kilowatt-hours, in the case of an 
                electricity savings credit; or
                    ``(B) 10 therms, in the case of a natural gas 
                savings credit.
            ``(4) Fee.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall charge the recipient of a credit under 
                this section a fee in an amount equal to, as determined 
                by the Secretary, the administrative costs of issuing, 
                recording, monitoring the sale or exchange of, and 
                receiving the credit.
                    ``(B) Maximum amount.--Notwithstanding subparagraph 
                (A), the amount of a fee under this paragraph shall be 
                not more than, as applicable--
                            ``(i) $1 for a electric credit; or
                            ``(ii) $0.10 for a natural gas credit.
                    ``(C) Use of funds.--The Secretary shall use fees 
                received under this paragraph for the administrative 
                costs of carrying out this subsection.
            ``(5) Credit sale and use.--In accordance with regulations 
        promulgated under paragraph (1), any entity that receives a 
        credit under this section may--
                    ``(A) sell or transfer the credit to any other 
                entity; or
                    ``(B) use the credit to achieve compliance with the 
                performance standard under subsection (b).
    ``(e) Buyout Option.--In lieu of submitting credits to achieve 
compliance with an applicable performance standard under subsection (b) 
for a calendar year, a retail electricity or natural gas distributor 
may pay to the Secretary, by not later than March 31 of the following 
calendar year, a buyout fee in an amount equal to, as adjusted for 
inflation in accordance with such regulations as the Secretary may 
promulgate--
            ``(1) $20 for each electricity savings credit otherwise 
        required to be submitted by the retail electricity or natural 
        gas distributor; or
            ``(2) $2 for each natural gas savings credit otherwise 
        required to be submitted by the retail electricity or natural 
        gas distributor.
    ``(f) State Administration.--On receipt of an application from the 
Governor of a State, the Secretary may authorize the State to 
administer and enforce an energy efficiency program in the State in 
lieu of the program under this section, if the Secretary determines 
that the State program will achieve electricity savings and natural gas 
savings at least equivalent to the electricity savings and natural gas 
savings that would be required to be achieved by electricity and 
natural gas distributors in the State under this section.
    ``(g) Information and Reports.--In accordance with section 13 of 
the Federal Energy Administration Act of 1974 (15 U.S.C. 774), the 
Secretary may require any retail electricity or natural gas distributor 
or other entity that receives a credit under this section, and any 
other entity as the Secretary determines to be necessary, to provide 
such information and reports, and access to any records or facility of 
the entity, as the Secretary determines to be appropriate to carry out 
this section.
    ``(h) Enforcement.--
            ``(1) Failure to submit credits.--Except in a case in which 
        a State program is carried out in lieu of the program under 
        this section under subsection (f), if a retail electricity or 
        natural gas distributor fails to submit to the Secretary any 
        credit required for compliance with the applicable performance 
        standard under subsection (b), or to pay to the Secretary an 
        applicable buyout payment under subsection (e), the Secretary 
        shall assess against the retail electricity or natural gas 
        distributor a civil penalty for each such failure in an amount 
        equal to, as adjusted for inflation in accordance with such 
        regulations as the Secretary may promulgate--
                    ``(A) $100 for each electricity savings credit or 
                buyout payment failed to be made by the retail 
                electricity or natural gas distributor; or
                    ``(B) $10 for each natural gas savings credit or 
                buyout payment failed to be made by the retail 
                electricity or natural gas distributor.
            ``(2) Procedure.--The procedures under section 31(c) of the 
        Federal Power Act (16 U.S.C. 823b(c)) shall apply to a civil 
        penalty assessed under paragraph (1).
    ``(i) State Law.--Nothing in this section supersedes or otherwise 
affects any State or local law (including regulations) relating to 
electricity savings or natural gas savings, to the extent that the 
State or local law requires equal or greater electricity savings or 
natural gas saving than the savings required by this section.''.
Amends the Public Utility Regulatory Policies Act of 1978 to require the Secretary of Energy to promulgate regulations regarding: (1) the issuance of credits for electricity and natural gas savings; (2) a national credit trading system; and (3) a system for independent monitoring of the market for such credits.

Requires retail electricity or natural gas distributors to submit annually to the Secretary: (1) for each of calendar years 2010-2020 a number of credits equal to specified percentages of the base quantity of electricity or natural gas they delivered to retail customers in the most recent year; and (2) for 2021 and thereafter a number of credits equal to a percentage of such base quantity as the Secretary may determine, but in no case less than the percentage for 2020.

Requires the Secretary to: (1) promulgate regulations regarding measurement and verification of electricity and natural gas savings under this Act; and (2) issue credits for verified savings by such distributors and by other entities. Establishes credit values of: (1) 1,000 kilowatt-hours of electricity; and (2) 10 therms of natural gas.



Authorizes any entity that receives a credit to: (1) sell or transfer the credit to any other entity; or (2) use the credit to achieve compliance with submission requirements under this Act. Authorizes a distributor to pay the Secretary a buyout fee of $20 for each electricity savings credit or $2 for each natural gas savings credit in lieu of submitting credits.

Provides for: (1) state energy efficiency programs in lieu of the program under this Act; and (2) civil penalties for failure to comply with credit submission or buyout requirements.
A bill to amend the Public Utility Regulatory Policies Act of 1978 to establish an energy efficiency resource standard for retail electricity and natural gas distributors.