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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2529 Introduced in House (IH)]

110th CONGRESS
  1st Session
                                H. R. 2529

 To establish efficiency resource standards for retail electricity and 
           natural gas distributors, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 24, 2007

  Mr. Markey introduced the following bill; which was referred to the 
                    Committee on Energy and Commerce

_______________________________________________________________________

                                 A BILL

 
 To establish efficiency resource standards for retail electricity and 
           natural gas distributors, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. RETAIL ELECTRIC AND GAS UTILITY EFFICIENCY POLICIES.

    (a) In General.--The Public Utility Regulatory Policies Act of 1978 
is amended by adding the following after section 609:

``SEC. 610. EFFICIENCY RESOURCE STANDARDS 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 during the most recent calendar year for 
        which information is available.
            ``(2) Combined heat and power system.--The terms `combined 
        heat and power system' and `CHP system' mean a system that--
                    ``(A) uses the same energy source for the 
                simultaneous or sequential generation of electrical 
                power, mechanical power, or both, in combination with 
                the generation of steam or other forms of useful 
                thermal energy (including heating and cooling 
                applications);
                    ``(B) produces at least 20 percent of its total 
                useful energy in the form of thermal energy, and at 
                least 15 percent of its total useful energy in the form 
                of electrical or mechanical power (or a combination 
                thereof);
                    ``(C) except for systems designed for operation on 
                cellulosic biomass fuel, has a marginal net heat rate 
                of no more than 7,500 Btu/kWh, calculated on a higher 
                heating value basis;
                    ``(D) is designed for continuous operation; and
                    ``(E) if generating electricity provides such 
                electricity primarily for use for a facility or group 
                of facilities located near the point where the 
                electricity is generated, and from which net wholesale 
                sales of electricity are not in excess of 50 percent of 
                total annual generation.
            ``(3) Customer facility.--The term `customer facility' 
        means an end-use consumer of electricity or natural gas served 
        by a retail electricity or natural gas distributor.
            ``(4) Deemed savings.--The term `deemed savings' means an 
        estimate of the average per unit savings from installation of 
        specific common energy efficiency measures. Deemed savings 
        estimates shall be based on field studies or billing analyses 
        of savings at a sample of sites where the specific measure is 
        installed.
            ``(5) Electric and natural gas savings corporation.--The 
        term `Electric and Natural Gas Savings Corporation' means the 
        corporation certified pursuant to subsection (d)(7)(C).
            ``(6) Electricity.--(A) The term `electricity savings' 
        means any of the following:
                    ``(i) Reductions in end-use electricity consumption 
                achieved by a customer facility relative to--
                            ``(I) consumption at the same facility in a 
                        base year, as defined in rules issued by the 
                        Secretary;
                            ``(II) in the case of replacement of 
                        equipment at the end of its life or of new 
                        equipment that does not replace existing 
                        equipment, consumption of new equipment of 
                        average efficiency, as defined in rules issued 
                        by the Secretary; or
                            ``(III) in the case of a new facility, 
                        consumption at a reference facility, as defined 
                        in rules issued by the Secretary.
                    ``(ii) Reductions in distribution system losses of 
                electricity achieved by a retail electricity 
                distributor relative to losses attributable to new or 
                replacement distribution system equipment of average 
                efficiency, as defined in rules issued by the 
                Secretary.
                    ``(iii) Any combination of the foregoing.
            ``(B) The reductions referred to in subparagraph (A) may be 
        due to--
                    ``(i) energy efficiency measures, including demand 
                response measures that result in improved energy 
                efficiency;
                    ``(ii) combined heat and power systems as 
                calculated under subparagraph (D);
                    ``(iii) recycled energy; or
                    ``(iv) in the case of distribution system losses, 
                upgraded distribution transformers, upgraded electrical 
                connectors, high temperature superconductors, or other 
                measures to reduce such losses as specified in rules 
                issued by the Secretary.
            ``(C) The reductions in end-use electricity consumption at 
        a customer facility shall be reduced on a Btu basis by the Btu 
        equivalent of any associated increases in fuel consumption at 
        such facility. The conversion of any such fuel consumption 
        increase to an equivalent amount of electricity on a Btu basis 
        shall be determined by the Secretary based on the average heat 
        rate of central station generation in the region (accounting 
        for average transmission and distribution losses in the 
        region), as determined in rules issued by the Secretary.
            ``(D) For a combined heat and power (CHP) system, the 
        electricity savings shall be the electricity and mechanical 
        power generated by the CHP system net of fuel used by the 
        system, where the fuel used is the product of--
                    ``(i) the electricity and mechanical power 
                generated by the CHP system;
                    ``(ii) the net-effective heat rate for the CHP 
                system; and
                    ``(iii) the inverse of the average heat rate of 
                central station generation in the region, taking into 
                consideration avoided transmission and distribution 
                losses resulting from on-site generation as determined 
                under subparagraph (C).
            ``(7) Natural gas savings.--(A) The term `natural gas 
        savings' means--
                    ``(i) reductions in end-use natural gas consumption 
                achieved by a customer facility relative to--
                            ``(I) consumption at the same facility in a 
                        base year, as defined in rules issued by the 
                        Secretary;
                            ``(II) in the case of replacement of 
                        equipment at the end of its life or of new 
                        equipment that does not replace existing 
                        equipment, consumption of new equipment of 
                        average efficiency, as defined in rules issued 
                        by the Secretary; or
                            ``(III) in the case of a new facility, 
                        consumption at a reference facility, as defined 
                        in rules issued by the Secretary;
                    ``(ii) reductions in leakage, operational losses, 
                and gas fuel consumption in the operation of a gas 
                distribution system achieved by a retail gas 
                distributor relative to such losses in a base year, as 
                defined in rules issued by the Secretary; or
                    ``(iii) any combination of the foregoing.
            ``(B) The natural gas savings may be due to--
                    ``(i) energy efficiency measures;
                    ``(ii) recycled energy; or
                    ``(iii) in the case of gas distribution system 
                losses, technologies and practices as specified in 
                rules issued by the Secretary including measures 
                recommended for gas distribution systems by the Natural 
                Gas STAR Program administered by the Environmental 
                Protection Agency.
            ``(C) The reductions in natural gas consumption shall be 
        reduced on a Btu equivalent basis by any associated increases 
        in the consumption of electricity or other substitute fuels by 
        a customer facility or a natural gas distributor, as determined 
        under rules issued by the Secretary. The conversion of any such 
        increase in the consumption of electricity or other fuels to an 
        equivalent amount of natural gas consumption on a Btu basis 
        shall be determined by the Secretary based on the average heat 
        rate of central station electric generation in the region and 
        average transmission and distribution losses in the region, as 
        determined under rules issued by the Secretary.
            ``(8) Net effective heat rate.--The term `net effective 
        heat rate' means a ratio, the numerator of which is the higher 
        heating value of the increment of fuel required by a CHP system 
        to produce electricity and mechanical power, over and above the 
        fuel that would be required to produce the equivalent thermal 
        output of the CHP system by a system without power generation, 
        expressed in British thermal units, and the denominator of 
        which is the power output of the CHP system, expressed in 
        kilowatt-hours.
            ``(9) Performance standard.--The term `performance 
        standard' means the performance standard for energy savings 
        established under subsection (b).
            ``(10) Recycled energy.--The term `recycled energy' means 
        electrical or mechanical power, or both, or thermal energy 
        produced by modifying an industrial or commercial system that 
        was in place prior to January 1, 2007, such that the modified 
        system--
                    ``(A) recaptures energy that would otherwise be 
                wasted from sources, including--
                            ``(i) waste heat from industrial processes, 
                        natural gas compressor stations, and other 
                        sources;
                            ``(ii) pressure in a fluid or gas system 
                        including but not limited to steam, natural 
                        gas, and water; and
                            ``(iii) blast furnace, coke oven, carbon 
                        black, and petrochemical process waste gas, or 
                        pollution control projects, including thermal 
                        oxidizers and gas flares; and
                    ``(B) uses equipment and technologies including--
                            ``(i) back-pressure turbines in parallel 
                        with existing pressure-reducing valves in 
                        steam, water and gas systems;
                            ``(ii) organic Rankine, Stirling, or Kalina 
                        cycle heat engine systems driven by waste heat; 
                        or
                            ``(iii) heat recovery steam generators with 
                        steam turbine generators that recover waste 
                        heat.
            ``(11) Retail electricity or natural gas distributor.--The 
        term `retail electricity or natural gas distributor' means a 
        person (including a Federal, State, or local entity) that--
                    ``(A) distributes electric energy or natural gas to 
                consumers in the United States for a calendar year, 
                including electricity or natural gas supplied by 
                unregulated suppliers, regardless of whether such 
                suppliers are affiliated or unaffiliated with the 
                distributor; and
                    ``(B) sold not less than 800,000 megawatt-hours of 
                electric energy or 1 billion cubic feet of natural gas 
                to consumers in the United States for purposes other 
                than resale during the preceding calendar year.
        For purposes of this paragraph, electricity or natural gas sold 
        at wholesale to large end-use customers shall be included but 
        natural gas sold to wholesale electric generators to generate 
        electric power for resale shall not be not included.
    ``(b) Performance Standard.--
            ``(1) In general.--Each retail electricity or natural gas 
        distributor shall undertake electricity and natural gas savings 
        measures in each calendar year beginning with 2009 that produce 
        electricity and natural gas savings as a percentage of the 
        distributor's base quantity at the applicable rate specified in 
        paragraph (5).
            ``(2) Savings.--The savings described in paragraph (1) 
        shall represent savings realized in the specified year from 
        measures implemented in that year and all preceding years 
        beginning with 2007.
            ``(3) Limits.--Savings from combined heat and power 
        systems, recycled energy, and electricity or natural gas 
        distribution system measures may be used by a distributor to 
        satisfy no more than 50 percent of the applicable savings 
        specified for any year in the table contained in paragraph (5).
            ``(4) Compliance.--(A) Each retail electricity or natural 
        gas distributor subject to this subsection may use any 
        electricity or natural gas savings measures available to the 
        distributor to achieve compliance with the performance standard 
        established under this section, on the condition that the 
        electricity and natural gas savings achieved by such measures 
        are calculated and verified pursuant to the rules issued under 
        subsection (c).
            ``(B) A retail electricity or natural gas distributor may 
        demonstrate compliance with the performance standard through 
        the accumulation of--
                    ``(i) electricity or natural gas savings credits 
                achieved by such electricity or natural gas distributor 
                and certified under clause (i) of subsection (d)(2)(A);
                    ``(ii) electricity or natural gas savings credits 
                obtained by purchase under subsection (d)(6);
                    ``(iii) electricity or natural gas savings credits 
                borrowed against future years under subsection (d)(7); 
                or
                    ``(iv) any combination of credits described in 
                clauses (i), (ii), and (iii).
            ``(5) Applicable rates.--(A) The applicable rates referred 
        to in paragraph (1) are as follows:

------------------------------------------------------------------------
       ``Year          Electricity Savings (%)   Natural Gas Savings (%)
------------------------------------------------------------------------
         2009                      0.25                      0.20
------------------------------------------------------------------------
         2010                      0.75                      0.50
------------------------------------------------------------------------
         2011                      1.50                      0.80
------------------------------------------------------------------------
         2012                      2.25                      1.15
------------------------------------------------------------------------
         2013                      3.00                      1.50
------------------------------------------------------------------------
         2014                      4.00                      2.00
------------------------------------------------------------------------
         2015                      5.00                      2.50
------------------------------------------------------------------------
         2016                      6.00                      3.00
------------------------------------------------------------------------
         2017                      7.00                      3.50
------------------------------------------------------------------------
         2018                      8.00                      4.00
------------------------------------------------------------------------
         2019                      9.00                      4.50
------------------------------------------------------------------------
         2020                     10.00                      5.00
------------------------------------------------------------------------

            ``(B) At least 2 years before the beginning of any year 
        after 2020, the Secretary, after notice and opportunity for 
        comment, shall set the applicable rate, taking into 
        consideration the economic and environmental benefits of the 
        energy savings and the cost of the savings measures.
    ``(c) Determination of Compliance Rules.--Not later than 1 year 
after the date of enactment of this section, the Secretary shall issue 
rules that describe the means to be used to calculate and verify 
compliance with the performance standard that include each of the 
following:
            ``(1) Procedures and standards for defining and measuring 
        electricity savings and natural gas savings from customer 
        facility end-uses and from utility distribution systems that 
        occur in a calendar year (including measures implemented in 
        previous calendar years beginning in 2007). At a minimum, these 
        procedures and standards shall--
                    ``(A) specify the types and categories of 
                efficiency measures that will be eligible for 
                certification under subsection (d)(2);
                    ``(B) require that energy consumption estimates for 
                customer facilities or portions thereof in the base and 
                current years be adjusted, when appropriate, to account 
                for changes in weather, level of production, and 
                building area;
                    ``(C) allow energy consumption estimates from 
                discrete processes and equipment within industrial 
                facilities in the base and current years to be adjusted 
                for factors identified by rule that may be responsible 
                for significant year-to-year changes;
                    ``(D) allow energy consumption estimates from 
                discrete processes and equipment within industrial 
                facilities in the base and current years to be adjusted 
                for factors identified by rule that may be responsible 
                for significant year-to-year changes;
                    ``(E) account for the useful life of energy saving 
                measures;
                    ``(F) include deemed savings values for commonly-
                used efficiency measures and make provision for such 
                values to be periodically reviewed and revised;
                    ``(G) minimize the chances that more than one 
                entity will claim credit for the same savings; and
                    ``(H) exclude savings that--
                            ``(i) are attributable to measures or 
                        systems installed before January 1, 2007, or to 
                        modifications of processes or systems 
                        undertaken prior to January 1, 2007;
                            ``(ii) are otherwise required by Federal, 
                        State, local, or Indian tribal law or 
                        regulation;
                            ``(iii) are achieved without the 
                        intervention of the electricity or natural gas 
                        distributor or of any other entity seeking 
                        credits under paragraph (2)(A)(ii) of this Act, 
                        except as provided under subsection (e);
                            ``(iv) are attributable to Federal, State, 
                        or local tax incentives, grants, loans, or 
                        other public financial support for energy 
                        efficiency measures; or
                            ``(v) have already been credited under this 
                        section to another entity.
            ``(2) Procedures and standards for verification of 
        electricity or natural gas savings reported by retail 
        electricity and natural gas distributors. At a minimum, such 
        procedures and standards shall--
                    ``(A) provide for periodic spot checks on a sample 
                of sites to verify that measures are in place and 
                functioning;
                    ``(B) provide that savings estimates are calibrated 
                with billing analysis or end-use metering on a sample 
                of sites where technically feasible and economically 
                justified; and
                    ``(C) provide for the protection of customers' 
                proprietary information against unwarranted disclosure.
            ``(3) Requirements for the content and format of a biennial 
        report from each retail electricity or natural gas distributor 
        demonstrating the compliance of the distributor with the 
        performance standard, including a detailed description of the 
        calculation of electricity and natural gas savings to enable 
        the appropriate regulatory authority to verify and enforce 
        compliance with the requirements of this section (including 
        regulations issued under this section).
            ``(4) Provision for reviewing and revising the electricity 
        and natural gas consumption of reference facilities and of new 
        equipment of average efficiency at intervals of not greater 
        than 4 years.
    ``(d) Credit and Trading System.--
            ``(1) Establishment.--Not later than one year after the 
        date of enactment of this section, and after consultation with 
        the Administrator of the Environmental Protection Agency, the 
        Secretary shall issue rules establishing a nationwide credit 
        and credit trading system for electricity and natural gas 
        savings.
            ``(2) Credits.--
                    ``(A) In general.--In accordance with the rules 
                issued under paragraph (1), the Secretary--
                            ``(i) shall certify as credits, electricity 
                        and natural gas savings achieved by a retail 
                        electricity or natural gas distributor in a 
                        given calendar year if the savings comply with 
                        the rules issued under subsection (c)(1);
                            ``(ii) shall certify as credits, customer 
                        electricity and natural gas savings undertaken 
                        by State agencies and other entities if--
                                    ``(I) a retail electricity or 
                                natural gas distributor did not help 
                                finance measures to achieve these 
                                savings; and
                                    ``(II) the savings comply with the 
                                rules issued under subsection (c); and
                            ``(iii) shall not award credits to any 
                        retail electricity or natural gas distributor 
                        subject to State administration and enforcement 
                        under subsection (g) unless the Secretary has 
                        determined that the administration and 
                        enforcement are at least equivalent to 
                        administration and enforcement by the 
                        Secretary.
                    ``(B) Amount of credits.--A credit certified by the 
                Secretary under this subsection--
                            ``(i) shall equal 1,000 kilowatt-hours, in 
                        the case of an electricity savings credit; or
                            ``(ii) shall equal 10 therms, in the case 
                        of a natural gas savings credit.
            ``(3) Treatment of credits.--
                    ``(A) Use of credits.--A credit may be counted 
                toward compliance with the performance standard only 
                once.
                    ``(B) Property rights.--An electricity or natural 
                gas savings credit certified under this subsection 
                shall not be considered to be a property right.
                    ``(C) Reduction and termination of credits.--
                Nothing in this section or any other provision of the 
                law limits the authority of the United States to reduce 
                or terminate a credit certified under this subsection.
            ``(4) Fee.--
                    ``(A) In general.--To receive certification of an 
                electricity or natural gas savings credit under this 
                section, the recipient of the credit shall pay a fee, 
                calculated by the Secretary, in an amount that is equal 
                to the lesser of the following:
                            ``(i) The administrative costs of issuing, 
                        recording, monitoring the sale or exchange, and 
                        tracking, of the credit.
                            ``(ii) For the years 2009 and 2010, 5 
                        percent of the fair market value of the credit, 
                        as determined by the Secretary, and for the 
                        years 2011 and thereafter, 3 percent of the 
                        fair market value of the credit, as determined 
                        by the Secretary.
                    ``(B) Use of fees by secretary.--Subject to annual 
                appropriation, the Secretary shall use amounts 
                equivalent to the fees paid under this paragraph to pay 
                administrative costs described in subparagraph (A)(i). 
                If receipts exceed the administrative costs incurred by 
                the Secretary in any two consecutive fiscal years, the 
                Secretary shall, not later than January 1 of the first 
                fiscal year thereafter, reduce the fee accordingly.
            ``(5) Credit sale and use.--
                    ``(A) Sale.--A retail electric or natural gas 
                distributor may sell a credit certified under this 
                subsection to any other entity, and other entities may 
                sell such credit to a retail electric or natural gas 
                distributor or any other entity, in accordance with 
                accounting and verification procedures contained in 
                rules issued by the Secretary under paragraph (1).
                    ``(B) Use.--A credit certified under this 
                subsection and sold under subparagraph (A) may be used 
                by a purchasing retail electricity or natural gas 
                distributor for purposes of complying with the 
                performance standard.
                    ``(C) Duration of validity.--A credit certified 
                under this subsection may only be used for compliance 
                with this section for 3 years from the date issued.
            ``(6) Credit borrowing.--(A) During the first year covered 
        by the performance standard, a retail electricity or natural 
        gas distributor that has reason to believe that the distributor 
        will not have sufficient electricity or natural gas savings 
        credits to comply with the performance standard may--
                            ``(i) submit a plan to the Secretary 
                        demonstrating that the retail electricity or 
                        natural gas distributor will earn or acquire 
                        sufficient credits within the subsequent 2 
                        calendar years that would enable the retail 
                        electricity or natural gas distributor to meet 
                        the performance standard for all three calendar 
                        years; and
                            ``(ii) upon the approval of the plan by the 
                        Secretary, apply credits expected to be earned 
                        or acquired within the subsequent 2 calendar 
                        years to meet the performance standard for the 
                        applicable calendar year.
            ``(B) Any retail electricity or natural gas distributor 
        that has submitted such a plan shall, by March 31 of the fourth 
        calendar year, submit to the Secretary the credits necessary to 
        repay all credits borrowed.
            ``(7) Buyout option.--
                    ``(A) In general.--An electricity or natural gas 
                distributor may elect to comply with this section for 
                any calendar year by paying to the certified Electric 
                and Natural Gas Savings Corporation not later than 
                March 31 of the following year, a fee of 5 cents per 
                kilowatt-hour or 50 cents per therm, for any portion of 
                the electricity or natural gas savings credit the 
                distributor would otherwise be obligated to achieve for 
                the year.
                    ``(B) Use of buyout fees.--The Electric and Natural 
                Gas Savings Corporation shall--
                            ``(i) deposit fees received under 
                        subparagraph (A) in an escrow account 
                        established by the Corporation; and
                            ``(ii) periodically distribute amounts in 
                        the escrow account to States requesting such 
                        funds for use in creating electricity or 
                        natural gas savings at customer facilities.
                States requesting funds from the account established by 
                the Corporation shall submit specific program 
                proposals, including funds requested, estimated savings 
                and measure lifetime(s), and estimated cost per kWh or 
                therm saved. The Corporation shall develop guidelines 
                for these submissions. The Corporation shall distribute 
                funds based on the following criteria: Estimated 
                savings per dollar of funds provided from the escrow 
                account, maximizing consumer opportunities to 
                participate across all States, and, beginning in year 
                3, past history of each State in meeting energy savings 
                and cost-effectiveness targets.
                    ``(C) Electric and natural gas savings 
                corporation.--
                            ``(i) Establishment and certification.--Any 
                        person may submit an application to the 
                        Secretary for the establishment and 
                        certification of a not-for-profit corporation, 
                        to be known as the Electric and Natural Gas 
                        Savings Corporation, to carry out this 
                        paragraph. The Secretary shall certify the 
                        corporation if the Secretary determines that 
                        the corporation has submitted the most 
                        qualified application indicating capability to 
                        carry out this paragraph. The Secretary may 
                        revoke such certification at any time for good 
                        cause, and in any such case, the Secretary may 
                        accept applications from other persons and 
                        certify another person as the Electric and 
                        Natural Gas Savings Corporation.
                            ``(ii) Authority of corporation.--No person 
                        may distribute more than 800,000 megawatt-hours 
                        of electric energy or more than 1 billion cubic 
                        feet of natural gas to consumers in the United 
                        States for purposes other than resale in any 
                        calendar year, including electricity or natural 
                        gas supplied by unregulated suppliers, 
                        regardless of whether such suppliers are 
                        affiliated or unaffiliated with the distributor 
                        unless such person complies with requirements 
                        established by the Corporation for the payment 
                        of fees under this paragraph.
                            ``(iii) Status of corporation.--The 
                        Corporation shall not be treated as a 
                        department, agency, or instrumentality of the 
                        United States for any purpose.
                            ``(iv) Books and records.--The books and 
                        records of the Corporation shall be available 
                        to the public at reasonable hours and under 
                        reasonable conditions, without charge.
                            ``(v) Penalty.--Any person who violates 
                        clause (ii) of this subparagraph shall be 
                        subject to a civil penalty to be assessed and 
                        collected by the Secretary in the amount equal 
                        to three times the total of the fees which are 
                        due and payable to the corporation under this 
                        paragraph.
    ``(e) Enforcement of Compliance.--
            ``(1) In general.--If a State regulatory authority with 
        jurisdiction over a retail electricity or natural gas 
        distributor notifies the Secretary that the State regulatory 
        authority will enforce compliance by the distributor with the 
        performance standard under this section, the State regulatory 
        authority shall have the authority to administer and enforce 
        the performance standard for the distributor under State law.
            ``(2) Authority of secretary.--The Secretary shall 
        administer and enforce the performance standard for all 
        electricity and natural gas distributors for which a State 
        regulatory authority described in paragraph (1) has not 
        notified the Secretary as described in that paragraph.
            ``(3) Compliance report.--Not later that July 1, 2010, and 
        every 2 years thereafter, each retail electricity and natural 
        gas distributor shall submit a compliance report conforming to 
        the provisions of the rule described in subsection (c)(3) to 
        either--
                    ``(A) the appropriate State regulatory authority, 
                if the authority has notified the Secretary as 
                described in paragraph (1); or
                    ``(B) the Secretary.
            ``(4) Failure to comply.--
                    ``(A) In general.--In the case of any retail 
                electricity or natural gas distributor for which the 
                Secretary is enforcing compliance with the standards 
                under this section, if the distributor fails to comply 
                with the performance standard for more than one 
                calendar year, the Secretary shall--
                            ``(i) determine the number of kilowatt-
                        hours of electricity savings, or therms of 
                        natural gas savings, by which the distributor 
                        has fallen short of meeting the performance 
                        standard; and
                            ``(ii) by order, require the distributor, 
                        after notice and opportunity for hearing, to 
                        deposit in the escrow account established under 
                        paragraph (8)(B) of subsection (e) an amount 
                        equal to 6.0 cents per kilowatt-hour for each 
                        such kilowatt hour, and 60 cents per therm for 
                        each such therm.
                    ``(B) Judicial review of orders.--
                            ``(i) In general.--A retail electricity or 
                        natural gas distributor ordered to make a 
                        payment under subparagraph (A)(ii) may, not 
                        later than 60 days after the date of issuance 
                        of the order, bring a civil action in the 
                        United States Court of Appeals for the District 
                        of Columbia for judicial review of the order.
                            ``(ii) Remedies.--The court specified in 
                        clause (i) shall have jurisdiction to enter a 
                        judgment affirming, modifying, or setting aside 
                        an order that is the subject of a civil action 
                        brought under that clause, or remanding the 
                        order, in whole or in part, to the Secretary.
    ``(f) Information Collection.--The Secretary may collect any 
information necessary to verify and audit each of the following:
            ``(1) The annual electric energy sales, natural gas sales, 
        electricity savings, and natural gas savings of any entity 
        applying for electricity or natural gas savings credits under 
        this section.
            ``(2) The validity of electricity or natural gas savings 
        credits submitted by a retail electricity or natural gas 
        distributor to the Secretary.
            ``(3) The quantity of electricity and natural gas sales of 
        all retail electricity and natural gas distributors.
    ``(g) State Law.--
            ``(1) In general.--Nothing in this section supersedes or 
        otherwise affects any State or local law or regulation 
        requiring or otherwise relating to electricity or natural gas 
        savings to the extent that the State or local law or regulation 
        contains more stringent savings requirements or has different 
        procedures for buyout or penalties than those contained in this 
        section.
            ``(2) Site-specific savings.--A State may require the 
        performance standard for electricity or natural gas savings of 
        any distributor within its jurisdiction to be achieved by 
        measures undertaken--
                    ``(A) within the State;
                    ``(B) within the service territory of any regional 
                transmission organization serving the State;
                    ``(C) within any group of States participating in a 
                regional program for the control of green house gas 
                emissions; or
                    ``(D) within any airshed designated by the State.
            ``(3) Treatment under state law.--A retail electricity or 
        natural gas distributor that achieves electricity or natural 
        gas savings under this section in accordance with any State or 
        local savings requirement specifically applicable to such 
        distributor shall be entitled to full credit under this section 
        for the savings to the extent that the savings meet the 
        requirements of this section (including regulations issued 
        under this section), including measurement, verification, and 
        monitoring requirements.
    ``(h) Development of Model Provisions.--Not later than 18 months 
after the date of enactment of this section, the Federal Energy 
Regulatory Commission shall, following public notice and comment, 
develop and publish model provisions for adoption by State utility 
regulatory commissions regarding each of the following:
            ``(1) Revenue stability and incentives for distributors.--
        Policies for rate-setting and return on investment for State-
        regulated electricity and natural gas distributors that 
        participate in successful, cost-effective energy efficiency 
        programs. Such model language shall include provisions for 
        decoupling the earnings of such regulated entities from full 
        dependence on the volume of electricity or natural gas 
        distributed by them to customer facilities. Such model language 
        shall also include provisions for policies for cost recovery 
        and other financial incentives, such that electric and gas 
        utility investors are rewarded similarly for similar levels of 
        investment in customer energy efficiency and in conventional 
        utility assets and that regulated utilities are encouraged to 
        include end-use efficiency measures and utility-owned, 
        customer-owned, or third party-owned CHP systems in electric 
        capacity and transmission and distribution plans.
            ``(2) Nondiscriminatory identification of cost-effective 
        savings opportunities.--Establishing a public, 
        nondiscriminatory bidding process open to customers and demand 
        side management service providers to identify cost-effective 
        electricity or natural gas savings opportunities within a 
        retail electricity or natural gas distributor's service area. 
        The model bidding plan shall provide for a distributor to 
        procure all or a portion of its proposed savings measures, 
        including measures proposed by the distributor or its 
        affiliates, in cost-effective rank order. The model plan shall 
        also address the process that will be used by the distributor 
        to identify and obtain further electricity or natural gas 
        savings in the event that insufficient savings are procured 
        through the bid process.
            ``(3) Development of model language on revenue decoupling 
        and shareholder incentives in ratemaking policies.--Rate-
        setting and earnings for State-regulated electricity and 
        natural gas distributors that participate in successful, cost-
        effective energy efficiency programs. Such model language shall 
        include, but not be limited to, recommendations for decoupling 
        the earnings of such regulated entities from full dependence on 
        the volume of electricity or natural gas distributed by them to 
        customer facilities. Such model language shall also include 
        recommendations for policies for cost recovery and shareholder 
        incentives, such that electric and gas utility investors are 
        rewarded similarly for similar levels of investment in customer 
        energy efficiency and in conventional utility assets.
    ``(i) State Adoption of FERC Model Provisions.--Each State utility 
regulatory authority shall adopt the model provisions referred to in 
subsection (h) in the same manner and subject to the same rules and 
review as apply in the case of standards referred to in section 113(b) 
and 303(b). For purposes of any provision of title I or III of this 
Act, the model provisions referred to in subsection (h) shall be 
treated as standards under section 113(b) (in the case of State 
regulated electricity distributors) or 303(b) (in the case of natural 
gas distributors), except that in the case of such model provisions, 
any reference contained in this Act to the date of enactment of this 
Act shall be deemed to be a reference to the date of enactment of this 
section. Each such State utility regulatory authority shall shall adopt 
the model provisions not later than 24 months after the date of 
enactment of this section in the case of paragraphs (1) and (2) of 
subsection (h) or 42 months after such date of enactment in the case of 
paragraph (3) of subsection (h).''.
    (b) Table of Contents.--The table of contents for title VI of such 
Act is amended by adding the following new items at the end thereof:

``Sec. 609. Rural and remote communities electrification grants.
``Sec. 610. Efficiency resource standard for retail electricity and 
                            natural gas distributors.''.
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