I 

109TH CONGRESS 

1ST SESSION H. R. 1834

To provide for various energy efficiency programs and tax incentives, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 26, 2005

Mr. CUNNINGHAM (for himself and Mr. MARKEY) introduced the following bill; 

which was referred to the Committee on Energy and Commerce, and in 

addition to the Committees on Ways and Means and Financial Services, 

for a period to be subsequently determined by the Speaker, in each case 

for consideration of such provisions as fall within the jurisdiction of the 

committee concerned 

A BILL

To provide for various energy efficiency programs and tax 

incentives, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Efficient Energy Through Certified Technologies and 

6 Electricity Reliability (EFFECTER) Act of 2005’’. 

7 (b) TABLE OF CONTENTS.—The table of contents of 

8 this Act is as follows:
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Sec. 1. Short title; table of contents. 

TITLE I—TAX INCENTIVES 

Sec. 101. Energy efficient commercial buildings deduction. 

Sec. 102. Credit for construction of new energy efficient homes. 

Sec. 103. Incentive for certain energy efficient property used in business. 

Sec. 104. Credit for certain nonbusiness energy property. 

Sec. 105. Energy credit for combined heat and power system property. 

TITLE II—ENERGY EFFICIENT PRODUCTS 

Sec. 201. Energy conservation standards for additional products. 

Sec. 202. Energy labeling. 

Sec. 203. Commercial package air conditioning and heating equipment. 

Sec. 204. Commercial refrigerators, freezers, and refrigerator-freezers. 

TITLE III—ENERGY EFFICIENT FEDERAL PROGRAMS 

Sec. 301. Procurement of energy efficient products. 

Sec. 302. Energy savings performance contracts. 

Sec. 303. Federal building performance standards. 

TITLE IV—PUBLIC HOUSING 

Sec. 401. Public housing capital fund. 

Sec. 402. Grants for energy-conserving improvements for assisted housing. 

Sec. 403. Energy-efficient appliances. 

Sec. 404. Energy efficiency standards. 

TITLE V—RELIABILITY STANDARDS 

Sec. 501. Electric reliability standards.

1 TITLE I—TAX INCENTIVES 

2 SEC. 101. ENERGY EFFICIENT COMMERCIAL BUILDINGS DE3 DUCTION. 

4 (a) IN GENERAL.—Part VI of subchapter B of chap5 ter 1 of the Internal Revenue Code of 1986 (relating to 

6 itemized deductions for individuals and corporations) is 

7 amended by inserting after section 179B the following new 

8 section: 
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1 ‘‘SEC. 179C. ENERGY EFFICIENT COMMERCIAL BUILDINGS 

2 DEDUCTION. 

3 ‘‘(a) IN GENERAL.—There shall be allowed as a de4 duction an amount equal to the cost of energy efficient 

5 commercial building property placed in service during the 

6 taxable year. 

7 ‘‘(b) MAXIMUM AMOUNT OF DEDUCTION.—The de8 duction under subsection (a) with respect to any building 

9 for the taxable year and all prior taxable years shall not 

10 exceed an amount equal to the product of—

11 ‘‘(1) $2.25, and 

12 ‘‘(2) the square footage of the building. 

13 ‘‘(c) DEFINITIONS.—For purposes of this section—

14 ‘‘(1) ENERGY EFFICIENT COMMERCIAL BUILD15 ING PROPERTY.—The term ‘energy efficient commer16 cial building property’ means property—

17 ‘‘(A) which is installed on or in any build18 ing located in the United States, 

19 ‘‘(B) which is installed as part of—

20 ‘‘(i) the interior lighting systems, 

21 ‘‘(ii) the heating, cooling, ventilation, 

22 and hot water systems, or 

23 ‘‘(iii) the building envelope, and 

24 ‘‘(C) which is certified in accordance with 

25 subsection (d)(6) as being installed as part of 

26 a plan designed to reduce the total annual en-
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1 ergy and power costs with respect to the inte2 rior lighting systems, heating, cooling, ventila3 tion, and hot water systems of the building by 

4 50 percent or more in comparison to a ref5 erence building which meets the minimum re6 quirements of Standard 90.1–2001 using meth7 ods of calculation under subsection (d)(2). 

8 A building described in subparagraph (A) may in9 clude any residential rental property, including any 

10 low-rise multifamily structure or single family hous11 ing property which is not within the scope of Stand12 ard 90.1–2001, but shall not include any qualified 

13 new energy efficient home (within the meaning of 

14 section 45J(d)(3)) for which a credit under section 

15 45J has been allowed. 

16 ‘‘(2) STANDARD 90.1–2001.—The term ‘Stand17 ard 90.1–2001’ means Standard 90.1–2001 of the 

18 American Society of Heating, Refrigerating, and Air 

19 Conditioning Engineers and the Illuminating Engi20 neering Society of North America (as in effect on 

21 April 2, 2003). 

22 ‘‘(d) SPECIAL RULES.—

23 ‘‘(1) PARTIAL ALLOWANCE.—

24 ‘‘(A) IN GENERAL.—Except as provided in 

25 subsection (f), if—
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1 ‘‘(i) the requirement of subsection 

2 (c)(1)(C) is not met, but 

3 ‘‘(ii) there is a certification in accord4 ance with paragraph (6) that any system 

5 referred to in subsection (c)(1)(B) satisfies 

6 the energy-savings targets established by 

7 the Secretary under subparagraph (B) 

8 with respect to such system, 

9 then the requirement of subsection (c)(1)(C) 

10 shall be treated as met with respect to such sys11 tem, and the deduction under subsection (a) 

12 shall be allowed with respect to energy efficient 

13 commercial building property installed as part 

14 of such system and as part of a plan to meet 

15 such targets, except that subsection (b) shall be 

16 applied to such property by substituting ‘$.75’ 

17 for ‘$2.25’. 

18 ‘‘(B) REGULATIONS.—The Secretary, after 

19 consultation with the Secretary of Energy, shall 

20 establish a target for each system described in 

21 subsection (c)(1)(B) which, if such targets were 

22 met for all such systems, the building would 

23 meet the requirements of subsection (c)(1)(C). 

24 ‘‘(2) METHODS OF CALCULATION.—The Sec25 retary, after consultation with the Secretary of En-
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1 ergy, shall promulgate regulations which describe in 

2 detail methods for calculating and verifying energy 

3 and power consumption and cost, based on the pro4 visions of the 2005 California Nonresidential Alter5 native Calculation Method Approval Manual or, in 

6 the case of residential property, the 2005 California 

7 Residential Alternative Calculation Method Approval 

8 Manual. These regulations shall meet the following 

9 requirements: 

10 ‘‘(A) In calculating tradeoffs and energy 

11 performance, the regulations shall prescribe the 

12 costs per unit of energy and power, such as kil13 owatt hour, kilowatt, gallon of fuel oil, and 

14 cubic foot or Btu of natural gas, which may be 

15 dependent on time of usage. If a State has de16 veloped annual energy usage and cost calcula17 tion procedures based on time of usage costs for 

18 use in the performance standards of the State’s 

19 building energy code before the effective date of 

20 this section, the State may use those annual en21 ergy usage and cost calculation procedures in 

22 lieu of those adopted by the Secretary. 

23 ‘‘(B) The calculation methods under this 

24 paragraph need not comply fully with section 

25 11 of Standard 90.1–2001. 
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1 ‘‘(C) The calculation methods shall be fuel 

2 neutral, such that the same energy efficiency 

3 features shall qualify a building for the deduc4 tion under this section regardless of whether 

5 the heating source is a gas or oil furnace or an 

6 electric heat pump. The reference building for 

7 a proposed design which employs electric resist8 ance heating shall be modeled as using a heat 

9 pump. 

10 ‘‘(D) The calculation methods shall provide 

11 appropriate calculated energy savings for design 

12 methods and technologies not otherwise credited 

13 in either Standard 90.1–2001 or in the 2005 

14 California Nonresidential Alternative Calcula15 tion Method Approval Manual, including the 

16 following: 

17 ‘‘(i) Natural ventilation. 

18 ‘‘(ii) Evaporative cooling. 

19 ‘‘(iii) Automatic lighting controls such 

20 as occupancy sensors, photocells, and time21 clocks. 

22 ‘‘(iv) Daylighting. 

23 ‘‘(v) Designs utilizing semi-condi24 tioned spaces which maintain adequate 
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1 comfort conditions without air conditioning 

2 or without heating. 

3 ‘‘(vi) Improved fan system efficiency, 

4 including reductions in static pressure. 

5 ‘‘(vii) Advanced unloading mecha6 nisms for mechanical cooling, such as mul7 tiple or variable speed compressors. 

8 ‘‘(viii) The calculation methods may 

9 take into account the extent of commis10 sioning in the building, and allow the tax11 payer to take into account measured per12 formance which exceeds typical perform13 ance. 

14 ‘‘(ix) On-site generation of electricity, 

15 including combined heat and power sys16 tems, fuel cells, and renewable energy gen17 eration such as solar energy. 

18 ‘‘(x) Wiring with lower energy losses 

19 than wiring satisfying Standard 90.1–2001 

20 requirements for building power distribu21 tion systems. 

22 ‘‘(3) COMPUTER SOFTWARE.—

23 ‘‘(A) IN GENERAL.—Any calculation under 

24 paragraph (2) shall be prepared by qualified 

25 computer software. 
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1 ‘‘(B) QUALIFIED COMPUTER SOFTWARE.—

2 For purposes of this paragraph, the term 

3 ‘qualified computer software’ means software—

4 ‘‘(i) for which the software designer 

5 has certified that the software meets all 

6 procedures and detailed methods for calcu7 lating energy and power consumption and 

8 costs as required by the Secretary, 

9 ‘‘(ii) which provides such forms as re10 quired to be filed by the Secretary in con11 nection with energy efficiency of property 

12 and the deduction allowed under this sec13 tion, and 

14 ‘‘(iii) which provides a notice form 

15 which documents the energy efficiency fea16 tures of the building and its projected an17 nual energy costs. 

18 ‘‘(4) ALLOCATION OF DEDUCTION FOR PUBLIC

19 PROPERTY.—In the case of energy efficient commer20 cial building property installed on or in public prop21 erty, the Secretary shall promulgate a regulation to 

22 allow the allocation of the deduction to the person 

23 primarily responsible for designing the property in 

24 lieu of the public entity which is the owner of such 
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1 property. Such person shall be treated as the tax2 payer for purposes of this section. 

3 ‘‘(5) NOTICE TO OWNER.—Each certification 

4 required under this section shall include an expla5 nation to the building owner regarding the energy 

6 efficiency features of the building and its projected 

7 annual energy costs as provided in the notice under 

8 paragraph (3)(B)(iii). 

9 ‘‘(6) CERTIFICATION.—

10 ‘‘(A) IN GENERAL.—The Secretary shall 

11 prescribe the manner and method for the mak12 ing of certifications under this section. 

13 ‘‘(B) PROCEDURES.—The Secretary shall 

14 include as part of the certification process pro15 cedures for inspection and testing by qualified 

16 individuals described in subparagraph (C) to 

17 ensure compliance of buildings with energy-sav18 ings plans and targets. Such procedures shall 

19 be comparable, given the difference between 

20 commercial and residential buildings, to the re21 quirements in the Mortgage Industry National 

22 Accreditation Procedures for Home Energy 

23 Rating Systems. 

24 ‘‘(C) QUALIFIED INDIVIDUALS.—Individ25 uals qualified to determine compliance shall be 
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1 only those individuals who are recognized by an 

2 organization certified by the Secretary for such 

3 purposes. 

4 ‘‘(e) BASIS REDUCTION.—For purposes of this sub5 title, if a deduction is allowed under this section with re6 spect to any energy efficient commercial building property, 

7 the basis of such property shall be reduced by the amount 

8 of the deduction so allowed. 

9 ‘‘(f) INTERIM RULES FOR LIGHTING SYSTEMS.—

10 Until such time as the Secretary issues final regulations 

11 under subsection (d)(1)(B) with respect to property which 

12 is part of a lighting system—

13 ‘‘(1) IN GENERAL.—The lighting system target 

14 under subsection (d)(1)(A)(ii) shall be a reduction in 

15 lighting power density of 25 percent (50 percent in 

16 the case of a warehouse) of the minimum require17 ments in Table 9.3.1.1 or Table 9.3.1.2 (not includ18 ing additional interior lighting power allowances) of 

19 Standard 90.1–2001. 

20 ‘‘(2) REDUCTION IN DEDUCTION IF REDUCTION

21 LESS THAN 40 PERCENT.—

22 ‘‘(A) IN GENERAL.—If, with respect to the 

23 lighting system of any building other than a 

24 warehouse, the reduction in lighting power den25 sity of the lighting system is not at least 40 
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1 percent, only the applicable percentage of the 

2 amount of deduction otherwise allowable under 

3 this section with respect to such property shall 

4 be allowed. 

5 ‘‘(B) APPLICABLE PERCENTAGE.—For 

6 purposes of subparagraph (A), the applicable 

7 percentage is the number of percentage points 

8 (not greater than 100) equal to the sum of—

9 ‘‘(i) 50, and 

10 ‘‘(ii) the amount which bears the same 

11 ratio to 50 as the excess of the reduction 

12 of lighting power density of the lighting 

13 system over 25 percentage points bears to 

14 15. 

15 ‘‘(C) EXCEPTIONS.—This subsection shall 

16 not apply to any system—

17 ‘‘(i) the controls and circuiting of 

18 which do not comply fully with the manda19 tory and prescriptive requirements of 

20 Standard 90.1–2001 and which do not in21 clude provision for bilevel switching in all 

22 occupancies except hotel and motel guest 

23 rooms, store rooms, restrooms, and public 

24 lobbies, or 
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1 ‘‘(ii) which does not meet the min2 imum requirements for calculated lighting 

3 levels as set forth in the Illuminating Engi4 neering Society of North America Lighting 

5 Handbook, Performance and Application, 

6 Ninth Edition, 2000. 

7 ‘‘(g) COORDINATION WITH OTHER TAX BENE8 FITS.—

9 ‘‘(1) NO DOUBLE BENEFIT.—No deduction 

10 shall be allowed under subsection (a) with respect to 

11 any building for which a credit under section 45J 

12 has been allowed. 

13 ‘‘(2) SPECIAL RULE WITH RESPECT TO BUILD14 INGS WITH ENERGY EFFICIENT PROPERTY.—In any 

15 case in which a deduction under section 200 or a 

16 credit under section 25C has been allowed with re17 spect to property in connection with a building, the 

18 annual energy and power costs of the reference 

19 building referred to in subsection (c)(1)(C) shall be 

20 determined assuming such reference building con21 tains the property for which such deduction or credit 

22 has been allowed. 

23 ‘‘(h) REGULATIONS.—The Secretary shall promul24 gate such regulations as necessary—
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1 ‘‘(1) to take into account new technologies re2 garding energy efficiency and renewable energy for 

3 purposes of determining energy efficiency and sav4 ings under this section, and 

5 ‘‘(2) to provide for a recapture of the deduction 

6 allowed under this section if the plan described in 

7 subsection (c)(1)(C) or (d)(1)(A) is not fully imple8 mented. 

9 ‘‘(i) TERMINATION.—This section shall not apply 

10 with respect to property placed in service after December 

11 31, 2010.’’. 

12 (b) CONFORMING AMENDMENTS.—

13 (1) Section 1016(a) of the Internal Revenue 

14 Code of 1986 is amended by striking ‘‘and’’ at the 

15 end of paragraph (30), by striking the period at the 

16 end of paragraph (31) and inserting ‘‘, and’’, and by 

17 adding at the end the following new paragraph: 

18 ‘‘(32) to the extent provided in section 

19 179C(e).’’. 

20 (2) Section 1245(a) of such Code is amended 

21 by inserting ‘‘179C,’’ after ‘‘179B,’’ both places it 

22 appears in paragraphs (2)(C) and (3)(C). 

23 (3) Section 1250(b)(3) of such Code is amend24 ed by inserting before the period at the end of the 

25 first sentence ‘‘or by section 179C’’. 
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1 (4) Section 263(a)(1) of such Code is amended 

2 by striking ‘‘or’’ at the end of subparagraph (H), by 

3 striking the period at the end of subparagraph (I) 

4 and inserting ‘‘, or’’, and by inserting after subpara5 graph (I) the following new subparagraph: 

6 ‘‘(J) expenditures for which a deduction is 

7 allowed under section 179C.’’. 

8 (5) Section 312(k)(3)(B) of such Code is 

9 amended by striking ‘‘section 179, 179A, or 179B’’ 

10 each place it appears in the heading and text and in11 serting ‘‘section 179, 179A, 179B, or 179C’’. 

12 (c) CLERICAL AMENDMENT.—The table of sections 

13 for part VI of subchapter B of chapter 1 of the Internal 

14 Revenue Code of 1986 is amended by inserting after sec15 tion 179B the following new item:

‘‘179C. Energy efficient commercial buildings deduction.’’.

16 (d) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to property placed in service after 

18 the date of the enactment of this Act in taxable years end19 ing after such date. 

20 SEC. 102. CREDIT FOR CONSTRUCTION OF NEW ENERGY EF21 FICIENT HOMES. 

22 (a) IN GENERAL.—Subpart D of part IV of sub23 chapter A of chapter 1 of the Internal Revenue Code of 

24 1986 (relating to business related credits) is amended by 

25 adding at the end the following new section: 
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1 ‘‘SEC. 45J. NEW ENERGY EFFICIENT HOME CREDIT. 

2 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

3 the case of an eligible contractor with respect to a quali4 fied new energy efficient home, the credit determined 

5 under this section for the taxable year with respect to such 

6 home is an amount equal to the aggregate adjusted bases 

7 of all energy efficient property installed in such home dur8 ing construction of such home. 

9 ‘‘(b) LIMITATIONS.—

10 ‘‘(1) MAXIMUM CREDIT.—

11 ‘‘(A) IN GENERAL.—The credit allowed by 

12 this section with respect to a dwelling unit shall 

13 not exceed—

14 ‘‘(i) in the case of a dwelling unit de15 scribed in clause (i) or (iii) of subsection 

16 (c)(3)(C), $1,000, and 

17 ‘‘(ii) in the case of a dwelling unit de18 scribed in clause (ii) or (iv) of subsection 

19 (c)(3)(C), $2,000. 

20 ‘‘(B) PRIOR CREDIT AMOUNTS ON SAME

21 DWELLING UNIT TAKEN INTO ACCOUNT.—If a 

22 credit was allowed under subsection (a) with re23 spect to a dwelling unit in 1 or more prior tax24 able years, the amount of the credit otherwise 

25 allowable for the taxable year with respect to 

26 such dwelling unit shall be reduced by the sum 
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1 of the credits allowed under subsection (a) with 

2 respect to the dwelling unit for all prior taxable 

3 years. 

4 ‘‘(2) COORDINATION WITH CERTAIN CREDITS.—

5 For purposes of this section—

6 ‘‘(A) the basis of any property referred to 

7 in subsection (a) shall be reduced by that por8 tion of the basis of any property which is attrib9 utable to qualified rehabilitation expenditures 

10 (as defined in section 47(c)(2)) or to the energy 

11 percentage of energy property (as determined 

12 under section 48(a)), and 

13 ‘‘(B) expenditures taken into account 

14 under section 47 or 48(a) shall not be taken 

15 into account under this section. 

16 ‘‘(c) DEFINITIONS.—For purposes of this section—

17 ‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi18 ble contractor’ means—

19 ‘‘(A) the person who constructed the quali20 fied new energy efficient home, or 

21 ‘‘(B) in the case of a qualified new energy 

22 efficient home which is a manufactured home, 

23 the manufactured home producer of such home. 

24 If more than 1 person is described in subparagraph 

25 (A) or (B) with respect to any qualified new energy 
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1 efficient home, such term means the person des2 ignated as such by the owner of such home. 

3 ‘‘(2) ENERGY EFFICIENT PROPERTY.—The 

4 term ‘energy efficient property’ means any energy 

5 efficient building envelope component, and any en6 ergy efficient heating or cooling equipment or sys7 tem, which can, individually or in combination with 

8 other components, result in a dwelling unit meeting 

9 the requirements of this section. 

10 ‘‘(3) QUALIFIED NEW ENERGY EFFICIENT

11 HOME.—The term ‘qualified new energy efficient 

12 home’ means a dwelling unit—

13 ‘‘(A) located in the United States, 

14 ‘‘(B) the construction of which is substan15 tially completed after the date of the enactment 

16 of this section, and 

17 ‘‘(C) which is—

18 ‘‘(i) certified to have a level of annual 

19 heating and cooling energy consumption 

20 which is at least 30 percent below the an21 nual level of heating and cooling energy 

22 consumption of a comparable dwelling unit 

23 constructed in accordance with the stand24 ards of chapter 4 of the 2003 International 

25 Energy Conservation Code, as such Code 
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1 (including supplements) is in effect on the 

2 date of the enactment of this section, and 

3 for which the heating and cooling equip4 ment efficiencies correspond to the min5 imum allowed under the regulations estab6 lished by the Department of Energy pursu7 ant to the National Appliance Energy Con8 servation Act of 1987 and in effect at the 

9 time of construction, and to have building 

10 envelope component improvements account 

for at least 1 11 ⁄3 of such 30 percent, 

12 ‘‘(ii) certified to have a level of annual 

13 heating and cooling energy consumption 

14 which is at least 50 percent below such an15 nual level and to have building envelope 

16 component improvements account for at 

least 1 17 ⁄5 of such 50 percent, 

18 ‘‘(iii) a manufactured home which 

19 meets the requirements of clause (i) and 

20 which conforms to Federal Manufactured 

21 Home Construction and Safety Standards 

22 (section 3280 of title 24, Code of Federal 

23 Regulations), or 

24 ‘‘(iv) a manufactured home which 

25 meets the requirements of clause (ii) and 
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1 which conforms to Federal Manufactured 

2 Home Construction and Safety Standards 

3 (section 3280 of title 24, Code of Federal 

4 Regulations). 

5 ‘‘(4) CONSTRUCTION.—The term ‘construction’ 

6 includes substantial reconstruction and rehabilita7 tion. 

8 ‘‘(5) ACQUIRE.—The term ‘acquire’ includes 

9 purchase and, in the case of reconstruction and re10 habilitation, such term includes a binding written 

11 contract for such reconstruction or rehabilitation. 

12 ‘‘(6) BUILDING ENVELOPE COMPONENT.—The 

13 term ‘building envelope component’ means—

14 ‘‘(A) any insulation material or system 

15 which is specifically and primarily designed to 

16 reduce the heat loss or gain of a dwelling unit 

17 when installed in or on such dwelling unit, 

18 ‘‘(B) exterior windows (including sky19 lights), 

20 ‘‘(C) exterior doors, and 

21 ‘‘(D) any metal roof installed on a dwelling 

22 unit, but only if such roof has appropriate pig23 mented coatings which—
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1 ‘‘(i) are specifically and primarily de2 signed to reduce the heat gain of such 

3 dwelling unit, and 

4 ‘‘(ii) meet the Energy Star program 

5 requirements. 

6 ‘‘(d) CERTIFICATION.—

7 ‘‘(1) METHOD OF CERTIFICATION.—A certifi8 cation described in subsection (c)(3)(C) shall be de9 termined in accordance with guidance prescribed by 

10 the Secretary, after consultation with the Secretary 

11 of Energy. Such guidance shall specify procedures 

12 and methods for calculating energy and cost savings. 

13 ‘‘(2) FORM.—A certification described in sub14 section (c)(3)(C) shall be made in writing in a man15 ner which specifies in readily verifiable fashion the 

16 energy efficient building envelope components and 

17 energy efficient heating or cooling equipment in18 stalled and their respective rated energy efficiency 

19 performance. 

20 ‘‘(e) BASIS ADJUSTMENT.—For purposes of this sub21 title, if a credit is determined under this section for any 

22 expenditure with respect to any property, the increase in 

23 the basis of such property which would (but for this sub24 section) result from such expenditure shall be reduced by 

25 the amount of the credit so determined. 
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1 ‘‘(f) SPECIAL RULE WITH RESPECT TO BUILDINGS

2 WITH ENERGY EFFICIENT PROPERTY.—In any case in 

3 which a deduction under section 200 or a credit under sec4 tion 25C has been allowed with respect to property in con5 nection with a dwelling unit, the level of annual heating 

6 and cooling energy consumption of the comparable dwell7 ing unit referred to in clauses (i) and (ii) of subsection 

8 (c)(3)(C) shall be determined assuming such comparable 

9 dwelling unit contains the property for which such deduc10 tion or credit has been allowed. 

11 ‘‘(g) APPLICATION OF SECTION.—

12 ‘‘(1) 50 PERCENT HOMES.—In the case of any 

13 dwelling unit described in clause (ii) or (iv) of sub14 section (c)(3)(C), subsection (a) shall apply to quali15 fied new energy efficient homes acquired during the 

16 period beginning on the date of the enactment of 

17 this section, and ending on December 31, 2009. 

18 ‘‘(2) 30 PERCENT HOMES.—In the case of any 

19 dwelling unit described in clause (i) or (iii) of sub20 section (c)(3)(C), subsection (a) shall apply to quali21 fied new energy efficient homes acquired during the 

22 period beginning on the date of the enactment of 

23 this section, and ending on December 31, 2007.’’. 

24 (b) CREDIT MADE PART OF GENERAL BUSINESS

25 CREDIT.—Section 38(b) of the Internal Revenue Code of 
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1 1986 (relating to current year business credit) is amended 

2 by striking ‘‘plus’’ at the end of paragraph (18), by strik3 ing the period at the end of paragraph (19) and inserting 

4 ‘‘, plus’’, and by adding at the end the following new para5 graph: 

6 ‘‘(20) the new energy efficient home credit de7 termined under section 45J(a).’’. 

8 (c) BASIS ADJUSTMENT.—Subsection (a) of section 

9 1016 of the Internal Revenue Code of 1986, as amended 

10 by section 101, is amended by striking ‘‘and’’ at the end 

11 of paragraph (31), by striking the period at the end of 

12 paragraph (32) and inserting ‘‘, and’’, and by adding at 

13 the end the following new paragraph: 

14 ‘‘(33) to the extent provided in section 45J(e), 

15 in the case of amounts with respect to which a credit 

16 has been allowed under section 45J.’’. 

17 (d) DEDUCTION FOR CERTAIN UNUSED BUSINESS

18 CREDITS.—Section 196(c) of the Internal Revenue Code 

19 of 1986 (defining qualified business credits) is amended 

20 by striking ‘‘and’’ at the end of paragraph (11), by strik21 ing the period at the end of paragraph (12) and inserting 

22 ‘‘, and’’, and by adding after paragraph (12) the following 

23 new paragraph: 

24 ‘‘(13) the new energy efficient home credit de25 termined under section 45J(a).’’. 
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1 (e) CLERICAL AMENDMENT.—The table of sections 

2 for subpart D of part IV of subchapter A of chapter 1 

3 of the Internal Revenue Code of 1986 is amended by add4 ing at the end the following new item:

‘‘45J. New energy efficient home credit.’’.

5 (f) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years ending after the 

7 date of the enactment of this Act. 

8 SEC. 103. INCENTIVE FOR CERTAIN ENERGY EFFICIENT 

9 PROPERTY USED IN BUSINESS. 

10 (a) IN GENERAL.—Part VI of subchapter B of chap11 ter 1 of the Internal Revenue Code of 1986 is amended 

12 by adding at the end the following new section: 

13 ‘‘SEC. 200. ENERGY PROPERTY DEDUCTION. 

14 ‘‘(a) IN GENERAL.—There shall be allowed as a de15 duction for the taxable year an amount equal to the sum 

16 of—

17 ‘‘(1) the amount determined under subsection 

18 (b) for each energy property of the taxpayer placed 

19 in service during such taxable year, and 

20 ‘‘(2) the energy efficient residential rental 

21 building property deduction determined under sub22 section (e). 

23 ‘‘(b) AMOUNT FOR ENERGY PROPERTY.—

24 ‘‘(1) IN GENERAL.—The amount determined 

25 under this subsection for the taxable year for each 
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1 item of energy property shall equal the amount spec2 ified for such property in the following table:

Description of property: Allowable amount is:

Elected solar hot water property ..................................... $1.00 per each 

kwh/year of savings

Photovoltaic property ....................................................... $4.50 per peak 

watt

Advanced main air circulating fan or a Tier 1 natural 

gas, propane, or oil water heater.

$150

Tier 2 energy-efficient building property ......................... $900

Tier 1 energy-efficient building property (other than an 

advanced main air circulating fan or a natural gas, 

propane, or oil water heater).

$450. 

3 ‘‘(2) ELECTED SOLAR HOT WATER PROP4 ERTY.—In the case of elected solar hot water prop5 erty, the taxpayer may elect to substitute ‘$21 per 

6 annual Therm of natural gas savings’ for ‘$1.00 per 

7 each kwh/year of savings’ in the table contained in 

8 paragraph (1). 

9 ‘‘(c) ENERGY PROPERTY DEFINED.—

10 ‘‘(1) IN GENERAL.—For purposes of this part, 

11 the term ‘energy property’ means any property—

12 ‘‘(A) which is—

13 ‘‘(i) solar energy property, 

14 ‘‘(ii) Tier 2 energy-efficient building 

15 property, 

16 ‘‘(iii) Tier 1 energy-efficient building 

17 property, or 

18 ‘‘(iv) an advanced main air circulating 

19 fan, 
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1 ‘‘(B)(i) the construction, reconstruction, or 

2 erection of which is completed by the taxpayer, 

3 or 

4 ‘‘(ii) which is acquired by the taxpayer if 

5 the original use of such property commences 

6 with the taxpayer, 

7 ‘‘(C) with respect to which depreciation (or 

8 amortization in lieu of depreciation) is allow9 able, and 

10 ‘‘(D) which meets the performance and 

11 quality standards, and the certification require12 ments (if any), which—

13 ‘‘(i) have been prescribed by the Sec14 retary by regulations (after consultation 

15 with the Secretary of Energy or the Ad16 ministrator of the Environmental Protec17 tion Agency, as appropriate), 

18 ‘‘(ii) in the case of the energy effi19 ciency ratio (EER) for central air condi20 tioners and electric heat pumps—

21 ‘‘(I) require measurements to be 

22 based on published data which is test23 ed by manufacturers at 95 degrees 

24 Fahrenheit, and 
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•HR 1834 IH 

1 ‘‘(II) may be based on the cer2 tified data of the Air Conditioning 

3 and Refrigeration Institute that are 

4 prepared in partnership with the Con5 sortium for Energy Efficiency, 

6 ‘‘(iii) in the case of geothermal heat 

7 pumps—

8 ‘‘(I) shall be based on testing 

9 under the conditions of ARI/ISO 

10 Standard 13256–1 for Water Source 

11 Heat Pumps or ARI 870 for Direct 

12 Expansion GeoExchange Heat Pumps 

13 (DX), as appropriate, and 

14 ‘‘(II) shall include evidence that 

15 water heating services have been pro16 vided through a desuperheater or inte17 grated water heating system con18 nected to the storage water heater 

19 tank, and 

20 ‘‘(iv) are in effect at the time of the 

21 acquisition of the property. 

22 ‘‘(2) SOLAR ENERGY PROPERTY.—In the case 

23 of—

24 ‘‘(A) elected solar hot water property, the 

25 regulations under paragraph (1)(D) shall be 
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•HR 1834 IH 

1 based on the OG–300 Standard for the Annual 

2 Performance of OG–300 Certified Systems of 

3 the Solar Rating and Certification Corporation, 

4 and 

5 ‘‘(B) photovoltaics, such regulations shall 

6 be based on the ASTM Standard E 1036 and 

7 E 1036M–96 Standard Test Method for Elec8 tric Performance of Nonconcentrator Terres9 trial Photovoltaic Modules and Arrays Using 

10 Reference Cells, 

11 to the extent the Secretary determines such stand12 ards carry out the purposes of this section. 

13 ‘‘(3) EXCEPTION.—Such term shall not include 

14 any property which is public utility property (as de15 fined in section 46(f)(5) as in effect on the day be16 fore the date of the enactment of the Revenue Rec17 onciliation Act of 1990). 

18 ‘‘(d) DEFINITIONS RELATING TO TYPES OF ENERGY

19 PROPERTY.—For purposes of this section—

20 ‘‘(1) SOLAR ENERGY PROPERTY.—

21 ‘‘(A) IN GENERAL.—The term ‘solar en22 ergy property’ means equipment which uses 

23 solar energy—

24 ‘‘(i) to generate electricity, or 
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•HR 1834 IH 

1 ‘‘(ii) to provide hot water for use in a 

2 structure. 

3 ‘‘(B) ELECTED SOLAR HOT WATER PROP4 ERTY.—

5 ‘‘(i) IN GENERAL.—The term ‘elected 

6 solar hot water property’ means property 

7 which is solar energy property by reason of 

8 subparagraph (A)(ii) and for which an 

9 election under this subparagraph is in ef10 fect. 

11 ‘‘(ii) ELECTION.—For purposes of 

12 clause (i), a taxpayer may elect to treat 

13 property described in clause (i) as elected 

14 solar hot water property. 

15 ‘‘(C) PHOTOVOLTAIC PROPERTY.—The 

16 term ‘photovoltaic property’ means solar energy 

17 property which uses a solar photovoltaic process 

18 to generate electricity. 

19 ‘‘(D) SWIMMING POOLS, ETC., USED AS

20 STORAGE MEDIUM.—The term ‘solar energy 

21 property’ shall not include a swimming pool, 

22 hot tub, or any other energy storage medium 

23 which has a function other than the function of 

24 such storage. 
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•HR 1834 IH 

1 ‘‘(E) SOLAR PANELS.—No solar panel or 

2 other property installed as a roof (or portion 

3 thereof) shall fail to be treated as solar energy 

4 property solely because it constitutes a struc5 tural component of the structure on which it is 

6 installed. 

7 ‘‘(2) TIER 2 ENERGY-EFFICIENT BUILDING

8 PROPERTY.—The term ‘Tier 2 energy-efficient build9 ing property’ means—

10 ‘‘(A) an electric heat pump water heater 

11 which yields an energy factor of at least 2.0 in 

12 the standard Department of Energy test proce13 dure, 

14 ‘‘(B) an electric heat pump which has a 

15 heating seasonal performance factor (HSPF) of 

16 at least 9, a seasonal energy efficiency ratio 

17 (SEER) of at least 15, and an energy efficiency 

18 ratio (EER) of at least 13, 

19 ‘‘(C) a geothermal heat pump which—

20 ‘‘(i) in the case of a closed loop prod21 uct, has an energy efficiency ratio (EER) 

22 of at least 14.1 and a heating coefficient of 

23 performance (COP) of at least 3.3, 

24 ‘‘(ii) in the case of an open loop prod25 uct, has an energy efficiency ratio (EER) 
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•HR 1834 IH 

1 of at least 16.2 and a heating coefficient of 

2 performance (COP) of at least 3.6, and 

3 ‘‘(iii) in the case of a direct expansion 

4 (DX) product, has an energy efficiency 

5 ratio (EER) of at least 15 and a heating 

6 coefficient of performance (COP) of at 

7 least 3.5, 

8 ‘‘(D) a central air conditioner which has a 

9 seasonal energy efficiency ratio (SEER) of at 

10 least 15 and an energy efficiency ratio (EER) 

11 of at least 13, and 

12 ‘‘(E) a natural gas, propane, or oil water 

13 heater which has an energy factor of at least 

14 0.80. 

15 ‘‘(3) TIER 1 ENERGY-EFFICIENT BUILDING

16 PROPERTY.—The term ‘Tier 1 energy-efficient build17 ing property’ means—

18 ‘‘(A) an electric heat pump which has a 

19 heating system performance factor (HSPF) of 

20 at least 8.5, a cooling seasonal energy efficiency 

21 ratio (SEER) of at least 14, and an energy effi22 ciency ratio (EER) of at least 12, 

23 ‘‘(B) a central air conditioner which has a 

24 cooling seasonal energy efficiency ratio (SEER) 
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•HR 1834 IH 

1 of at least 14 and an energy efficiency ratio 

2 (EER) of at least 12, 

3 ‘‘(C) a natural gas, propane, or oil water 

4 heater which has an energy factor of at least 

5 0.65, and 

6 ‘‘(D) an oil, natural gas, or propane fur7 nace or hot water boiler which achieves at least 

8 95 percent annual fuel utilization efficiency 

9 (AFUE). 

10 ‘‘(4) ADVANCED MAIN AIR CIRCULATING FAN.—

11 The term ‘advanced main air circulating fan’ means 

12 a fan used in a natural gas, propane, or oil furnace 

13 originally placed in service by the taxpayer during 

14 the taxable year, including a fan which uses a 

15 brushless permanent magnet motor or another type 

16 of motor which achieves similar or higher efficiency 

17 at full and half speed, as determined by the Sec18 retary. 

19 ‘‘(e) ENERGY EFFICIENT RESIDENTIAL RENTAL

20 BUILDING PROPERTY DEDUCTION.—

21 ‘‘(1) DEDUCTION ALLOWED.—For purposes of 

22 subsection (a)—

23 ‘‘(A) IN GENERAL.—The energy efficient 

24 residential rental building property deduction 

25 determined under this subsection is an amount 
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•HR 1834 IH 

1 equal to energy efficient residential rental build2 ing property expenditures made by a taxpayer 

3 for the taxable year. 

4 ‘‘(B) MAXIMUM AMOUNT OF DEDUC5 TION.—The amount of energy efficient residen6 tial rental building property expenditures taken 

7 into account under subparagraph (A) with re8 spect to each dwelling unit shall not exceed—

9 ‘‘(i) $6,000 in the case of a percent10 age reduction of 50 percent as determined 

11 under paragraph (2)(B), and 

12 ‘‘(ii) $12,000 times the percentage re13 duction in the case of a percentage reduc14 tion of less than 50 percent as determined 

15 under paragraph (2)(B). 

16 ‘‘(C) YEAR DEDUCTION ALLOWED.—The 

17 deduction under subparagraph (A) shall be al18 lowed in the taxable year in which the construc19 tion, reconstruction, erection, or rehabilitation 

20 of the property is completed. 

21 ‘‘(2) ENERGY EFFICIENT RESIDENTIAL RENTAL

22 BUILDING PROPERTY EXPENDITURES.—For pur23 poses of this subsection—

24 ‘‘(A) IN GENERAL.—The term ‘energy effi25 cient residential rental building property ex-
34

•HR 1834 IH 

1 penditures’ means an amount paid or incurred 

2 in connection with construction, reconstruction, 

3 erection, or rehabilitation of energy efficient 

4 residential rental building property—

5 ‘‘(i) for which depreciation is allow6 able under section 167, 

7 ‘‘(ii) which is located in the United 

8 States, and 

9 ‘‘(iii) the construction, reconstruction, 

10 erection, or rehabilitation of which is com11 pleted by the taxpayer. 

12 Such term includes expenditures for labor costs 

13 properly allocable to the onsite preparation, as14 sembly, or original installation of the property. 

15 ‘‘(B) ENERGY EFFICIENT RESIDENTIAL

16 RENTAL BUILDING PROPERTY.—

17 ‘‘(i) IN GENERAL.—The term ‘energy 

18 efficient residential rental building prop19 erty’ means any property which reduces 

20 total annual energy and power costs with 

21 respect to heating and cooling of the build22 ing by a percentage certified according to 

23 clause (ii). 

24 ‘‘(ii) PROCEDURES.—
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•HR 1834 IH 

1 ‘‘(I) IN GENERAL.—For purposes 

2 of clause (i), energy usage and costs 

3 shall be demonstrated by perform4 ance-based compliance. 

5 ‘‘(II) PERFORMANCE-BASED COM6 PLIANCE.—Performance-based compli7 ance shall be demonstrated by calcu8 lating the percent energy cost savings 

9 for heating and cooling, as applicable, 

10 with respect to a dwelling unit when 

11 compared to the original condition of 

12 the dwelling unit. 

13 ‘‘(III) COMPUTER SOFTWARE.—

14 Computer software shall be used in 

15 support of performance-based compli16 ance under subclause (II) and such 

17 software shall meet all of the proce18 dures and methods for calculating en19 ergy savings reductions which are pro20 mulgated by the Secretary of Energy. 

21 Such regulations on the specifications 

22 for software and verification protocols 

23 shall be based on the 2005 California 

24 Residential Alternative Calculation 

25 Method Approval Manual. 
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•HR 1834 IH 

1 ‘‘(IV) CALCULATION REQUIRE2 MENTS.—In calculating tradeoffs and 

3 energy performance, the regulations 

4 prescribed under this clause shall pre5 scribe for the taxable year the costs 

6 per unit of energy and power, such as 

7 kilowatt hour, kilowatt, gallon of fuel 

8 oil, and cubic foot or Btu of natural 

9 gas, which may be dependent on time 

10 of usage. Where a State has developed 

11 annual energy usage and cost calcula12 tion procedures based on time of 

13 usage costs for use in the performance 

14 standards of the State’s building en15 ergy code prior to the effective date of 

16 this section, the State may use those 

17 annual energy usage and cost calcula18 tion procedures in lieu of those adopt19 ed by the Secretary. 

20 ‘‘(V) APPROVAL OF SOFTWARE

21 SUBMISSIONS.—The Secretary shall 

22 approve software submissions which 

23 comply with the requirements of sub24 clause (III). 
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•HR 1834 IH 

1 ‘‘(VI) PROCEDURES FOR INSPEC2 TION AND TESTING OF HOMES.—The 

3 Secretary shall ensure that procedures 

4 for the inspection and testing for com5 pliance comply with the calculation re6 quirements under subclause (IV) of 

7 this clause and clause (iv). 

8 ‘‘(iii) DETERMINATIONS OF COMPLI9 ANCE.—A determination of compliance 

10 with respect to energy efficient residential 

11 rental building property made for the pur12 poses of this subparagraph shall be filed 

13 with the Secretary not later than 1 year 

14 after the date of such determination and 

15 shall include the TIN of the certifier, the 

16 address of the building in compliance, and 

17 the identity of the person for whom such 

18 determination was performed. Determina19 tions of compliance filed with the Secretary 

20 shall be available for inspection by the Sec21 retary of Energy. 

22 ‘‘(iv) COMPLIANCE.—

23 ‘‘(I) IN GENERAL.—The Sec24 retary, after consultation with the 

25 Secretary of Energy, shall establish 
38

•HR 1834 IH 

1 requirements for certification and 

2 compliance procedures after exam3 ining the requirements for energy con4 sultants and home energy ratings pro5 viders specified by the Mortgage In6 dustry National Home Energy Rating 

7 Standards. 

8 ‘‘(II) INDIVIDUALS QUALIFIED

9 TO DETERMINE COMPLIANCE.—The 

10 determination of compliance may be 

11 provided by a local building regulatory 

12 authority, a utility, a manufactured 

13 home production inspection primary 

14 inspection agency (IPIA), or an ac15 credited home energy rating system 

16 provider. All providers shall be accred17 ited, or otherwise authorized to use 

18 approved energy performance meas19 urement methods, by the Residential 

20 Energy Services Network (RESNET). 

21 ‘‘(C) ALLOCATION OF DEDUCTION FOR

22 PUBLIC PROPERTY.—In the case of energy effi23 cient residential rental building property which 

24 is public property, the Secretary shall promul25 gate a regulation to allow the allocation of the 
39

•HR 1834 IH 

1 deduction to the person primarily responsible 

2 for designing the improvements to the property 

3 in lieu of the public entity which is the owner 

4 of such property. Such person shall be treated 

5 as the taxpayer for purposes of this subsection. 

6 ‘‘(f) SPECIAL RULES.—For purposes of this sec7 tion—

8 ‘‘(1) BASIS REDUCTION.—For purposes of this 

9 subtitle, if a deduction is allowed under this section 

10 with respect to any property, the basis of such prop11 erty shall be reduced by the amount of the deduction 

12 so allowed. 

13 ‘‘(2) DOUBLE BENEFIT.—Property which 

14 would, but for this paragraph, be eligible for a de15 duction under more than one provision of this sec16 tion shall be eligible only under one such provision, 

17 the provision specified by the taxpayer. 

18 ‘‘(g) REGULATIONS.—The Secretary shall promul19 gate such regulations as necessary to take into account 

20 new technologies regarding energy efficiency and renew21 able energy for purposes of determining energy efficiency 

22 and savings under this section. 

23 ‘‘(h) TERMINATION.—This section shall not apply 

24 with respect to—
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•HR 1834 IH 

1 ‘‘(1) any energy property placed in service after 

2 December 31, 2009 (December 31, 2005, in the case 

3 of Tier 1 energy-efficient building property (other 

4 than an oil, natural gas, or propane furnace or hot 

5 water boiler described in subsection (d)(3)(D))), and 

6 ‘‘(2) any energy efficient residential rental 

7 building property expenditures in connection with 

8 property—

9 ‘‘(A) placed in service after December 31, 

10 2009, or 

11 ‘‘(B) the construction, reconstruction, erec12 tion, or rehabilitation of which is not completed 

13 on or before December 31, 2009.’’. 

14 (b) CONFORMING AMENDMENTS.—

15 (1) Section 48(a)(3)(A) of the Internal Revenue 

16 Code of 1986 is amended to read as follows: 

17 ‘‘(A) which is equipment used to produce, 

18 distribute, or use energy derived from a geo19 thermal deposit (within the meaning of section 

20 613(e)(2)), but only, in the case of electricity 

21 generated by geothermal power, up to (but not 

22 including) the electrical transmission stage,’’. 

23 (2) Subparagraph (B) of section 168(e)(3) of 

24 such Code is amended—

25 (A) in clause (vi)(I)—
41

•HR 1834 IH 

1 (i) by striking ‘‘section 48(a)(3)’’ and 

2 inserting ‘‘section 200(d)(1)’’, and 

3 (ii) by striking ‘‘clause (i)’’ and in4 serting ‘‘such subparagraph (A)’’, and 

5 (B) in the last sentence, by striking ‘‘sec6 tion 48(a)(3)’’ and inserting ‘‘section 

7 200(c)(3)’’. 

8 (3) Section 1016(a) of such Code, as amended 

9 by section 102, is amended by striking ‘‘and’’ at the 

10 end of paragraph (32), by striking the period at the 

11 end of paragraph (33) and inserting ‘‘, and’’, and by 

12 inserting the following new paragraph: 

13 ‘‘(34) for amounts allowed as a deduction under 

14 section 200(a).’’. 

15 (c) CLERICAL AMENDMENT.—The table of sections 

16 for part VI of subchapter B of chapter 1 of the Internal 

17 Revenue Code of 1986 is amended by adding at the end 

18 the following new item:

‘‘200. Energy property deduction.’’.

19 (d) AUTHORIZATION OF APPROPRIATIONS.—There 

20 are authorized to be appropriated to the Department of 

21 Energy out of amounts not already appropriated such 

22 sums as necessary to carry out this section. 

23 (e) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to taxable years beginning after 

25 December 31, 2004. 
42

•HR 1834 IH 

1 SEC. 104. CREDIT FOR CERTAIN NONBUSINESS ENERGY 

2 PROPERTY. 

3 (a) IN GENERAL.—Subpart A of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 (relating to nonrefundable personal credits) is 

6 amended by inserting after section 25B the following new 

7 section: 

8 ‘‘SEC. 25C. NONBUSINESS ENERGY PROPERTY. 

9 ‘‘(a) ALLOWANCE OF CREDIT.—

10 ‘‘(1) IN GENERAL.—In the case of an indi11 vidual, there shall be allowed as a credit against the 

12 tax imposed by this chapter for the taxable year an 

13 amount equal to the sum of—

14 ‘‘(A) the amount determined under sub15 section (b) for each qualified energy property of 

16 the taxpayer placed in service during such tax17 able year, and 

18 ‘‘(B) so much of the credit amount speci19 fied in paragraph (2) which does not exceed the 

20 expenditures made by the taxpayer in connec21 tion with the construction, reconstruction, erec22 tion, or rehabilitation of a dwelling unit of the 

23 taxpayer which results in the unit being a high24 ly energy-efficient principal residence. 

25 For purposes of subparagraph (B), the expenditures 

26 may include labor costs properly allocable to the on-
43

•HR 1834 IH 

1 site preparation, assembly, or original installation of 

2 such property. 

3 ‘‘(2) CREDIT AMOUNT.—The credit amount 

4 with respect to a highly energy-efficient principal 

5 residence is—

6 ‘‘(A) $2,000 in the case of a percentage re7 duction of 50 percent as determined under sub8 section (c)(6)(A)(iii), and 

9 ‘‘(B) $4,000 times the percentage reduc10 tion in the case of a percentage reduction of 

11 less than 50 percent as determined under sub12 section (c)(6)(A)(iii). 

13 ‘‘(b) AMOUNT FOR QUALIFIED ENERGY PROP14 ERTY.—

15 ‘‘(1) RESIDENTIAL ENERGY PROPERTY EX16 PENDITURES.—Except as provided in paragraph (2), 

17 the amount determined under this subsection for the 

18 taxable year for each item of qualified energy prop19 erty shall equal the amount of residential energy 

20 property expenditures made by the taxpayer with re21 spect to such property during such taxable year. 

22 ‘‘(2) SOLAR HOT WATER PROPERTY; PHOTO23 VOLTAIC PROPERTY.—

24 ‘‘(A) IN GENERAL.—In the case of solar 

25 hot water property and photovoltaic property, 
44

•HR 1834 IH 

1 the amount determined under this subsection 

2 for the taxable year shall equal the amount 

3 specified for such property in the following 

4 table:

Description of property: Allowable amount is:

Elected solar hot water property ..................................... 35¢ per each kwh/

year of savings 

Photovoltaic property ....................................................... $1.50 per peak watt. 

5 ‘‘(B) ELECTED SOLAR HOT WATER PROP6 ERTY.—In the case of elected solar hot water 

7 property (as defined in section 200(d)(1)(B)), 

8 the taxpayer may elect to substitute ‘$7 per an9 nual Therm of natural gas savings’ for ‘35¢ per 

10 each kwh/year of savings’ in the table contained 

11 in subparagraph (A). 

12 ‘‘(3) MAXIMUM AMOUNT.—In the case of prop13 erty described in the following table, the amount of 

14 expenditures taken into account under paragraph 

15 (1) and the amount determined under paragraph (2) 

16 for the taxable year for each item of qualified energy 

17 property with respect to a dwelling unit shall not ex18 ceed the amount specified for such property in such 

19 table:

Description of property item: Maximum allowable 

credit amount is:

Tier 2 energy-efficient building property ......................... $300

Advanced main air circulating fan or a Tier 1 natural 

gas, propane, or oil water heater.

$50
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•HR 1834 IH 

Description of property item: Maximum allowable 

credit amount is:

Tier 1 energy-efficient building property (other than an 

advanced main air circulating fan or a natural gas, 

propane, or oil water heater).

$150

Solar hot water property ................................................. $1,000

Photovoltaic property ....................................................... $6,000. 

1 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section—

3 ‘‘(1) RESIDENTIAL ENERGY PROPERTY EX4 PENDITURES.—The term ‘residential energy prop5 erty expenditures’ means expenditures made by the 

6 taxpayer for qualified energy property installed on or 

7 in connection with a dwelling unit which—

8 ‘‘(A) is located in the United States, and 

9 ‘‘(B) is used as a principal residence. 

10 Such term includes expenditures for labor costs 

11 properly allocable to the onsite preparation, assem12 bly, or original installation of the property. 

13 ‘‘(2) QUALIFIED ENERGY PROPERTY.—

14 ‘‘(A) IN GENERAL.—The term ‘qualified 

15 energy property’ means—

16 ‘‘(i) energy-efficient building property, 

17 ‘‘(ii) solar hot water property, 

18 ‘‘(iii) photovoltaic property, and 

19 ‘‘(iv) an advanced main air circulating 

20 fan. 
46

•HR 1834 IH 

1 ‘‘(B) SWIMMING POOL, ETC., USED AS

2 STORAGE MEDIUM; SOLAR PANELS.—For pur3 poses of this paragraph, the provisions of sub4 paragraphs (D) and (E) section 200(d)(1) shall 

5 apply. 

6 ‘‘(C) REQUIRED STANDARDS.—Property 

7 described under subparagraph (A) shall meet 

8 the performance and quality standards and cer9 tification standards of paragraphs (1)(D) and 

10 (2) of section 200(c). 

11 ‘‘(3) ENERGY-EFFICIENT BUILDING PROP12 ERTY.—The term ‘energy-efficient building property’ 

13 has the same meaning given the terms ‘Tier 2 en14 ergy-efficient property’, ‘Tier 1 energy-efficient 

15 property’, and ‘advanced main air circulating fan’ in 

16 paragraphs (2), (3), and (4) of section 200(d), re17 spectively. 

18 ‘‘(4) SOLAR HOT WATER PROPERTY.—The term 

19 ‘solar hot water property’ means property which, 

20 when installed in connection with a structure, uses 

21 solar energy for the purpose of providing hot water 

22 for use within such structure and the performance 

23 of which is determined in accordance with section 

24 200(c)(2)(A). 
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•HR 1834 IH 

1 ‘‘(5) PHOTOVOLTAIC PROPERTY.—The term 

2 ‘photovoltaic property’ has the same meaning given 

3 such term in section 200(d)(1)(C). 

4 ‘‘(6) HIGHLY ENERGY-EFFICIENT PRINCIPAL

5 RESIDENCE.—

6 ‘‘(A) IN GENERAL.—Property is a highly 

7 energy-efficient principal residence if—

8 ‘‘(i) such property is located in the 

9 United States, 

10 ‘‘(ii) the property is used as a prin11 cipal residence, and 

12 ‘‘(iii) the projected heating and cool13 ing energy usage of such property, meas14 ured in terms of average annual energy 

15 cost to taxpayer, is reduced by a percent16 age certified according to subparagraph 

17 (C) in comparison to the energy cost of 

18 such property if expenditures made by the 

19 taxpayer with respect to energy efficient 

20 improvements to such property were not 

21 made. 

22 ‘‘(B) PRINCIPAL RESIDENCE.—

23 ‘‘(i) IN GENERAL.—The term ‘prin24 cipal residence’ has the same meaning as 

25 when used in section 121, except that—
48

•HR 1834 IH 

1 ‘‘(I) no ownership requirement 

2 shall be imposed, and 

3 ‘‘(II) the period for which a 

4 building is treated as used as a prin5 cipal residence shall also include the 

6 60-day period ending on the 1st day 

7 on which it would (but for this sub8 paragraph) first be treated as used as 

9 a principal residence. 

10 ‘‘(ii) MANUFACTURED HOUSING.—The 

11 term ‘residence’ shall include a dwelling 

12 unit which is a manufactured home con13 forming to Federal Manufactured Home 

14 Construction and Safety Standards (24 

15 C.F.R. 3280). 

16 ‘‘(C) CERTIFICATION PROCEDURES.—

17 ‘‘(i) IN GENERAL.—For purposes of 

18 subparagraph (A)(iii), energy usage shall 

19 be demonstrated by performance-based 

20 compliance. 

21 ‘‘(ii) PERFORMANCE-BASED COMPLI22 ANCE.—Performance-based compliance 

23 shall be demonstrated if the percent energy 

24 cost savings for heating and cooling is met 

25 with respect to a dwelling unit when com-
49

•HR 1834 IH 

1 pared to the original condition of the dwell2 ing unit. 

3 ‘‘(iii) COMPUTER SOFTWARE.—Com4 puter software shall be used in support of 

5 performance-based compliance under 

6 clause (ii) and such software shall meet all 

7 of the procedures and methods for calcu8 lating energy savings reductions which are 

9 promulgated by the Secretary of Energy. 

10 Such regulations on the specifications for 

11 software and verification protocols shall be 

12 based on the 2005 California Residential 

13 Alternative Calculation Method Approval 

14 Manual. 

15 ‘‘(iv) CALCULATION REQUIRE16 MENTS.—In calculating tradeoffs and en17 ergy performance, the regulations shall 

18 prescribe the costs per unit of energy and 

19 power, such as kilowatt hour, kilowatt, gal20 lon of fuel oil, and cubic foot or Btu of 

21 natural gas, which may be dependent on 

22 time of usage. If a State has developed an23 nual energy usage and cost calculation pro24 cedures based on time of usage costs for 

25 use in the performance standards of the 
50

•HR 1834 IH 

1 State’s building energy code before the ef2 fective date of this section, the State may 

3 use those annual energy usage and cost 

4 calculation procedures in lieu of those 

5 adopted by the Secretary. 

6 ‘‘(v) APPROVAL OF SOFTWARE SUB7 MISSIONS.—The Secretary shall approve 

8 software submissions which comply with 

9 the calculation requirements of clause (iii). 

10 ‘‘(vi) PROCEDURES FOR INSPECTION

11 AND TESTING OF DWELLING UNITS.—The 

12 Secretary shall ensure that procedures for 

13 the inspection and testing for compliance 

14 comply with the calculation requirements 

15 under clause (iii) and subsection (d)(2). 

16 ‘‘(d) SPECIAL RULES.—For purposes of this sec17 tion—

18 ‘‘(1) DETERMINATIONS OF COMPLIANCE.—A 

19 determination of compliance made for the purposes 

20 of this section shall be filed with the Secretary with21 in 1 year of the date of such determination and shall 

22 include the TIN of the certifier, the address of the 

23 building in compliance, and the identity of the per24 son for whom such determination was performed. 

25 Determinations of compliance filed with the Sec-
51

•HR 1834 IH 

1 retary shall be available for inspection by the Sec2 retary of Energy. 

3 ‘‘(2) COMPLIANCE.—

4 ‘‘(A) IN GENERAL.—The Secretary, after 

5 consultation with the Secretary of Energy shall 

6 establish requirements for certification and 

7 compliance procedures after examining the re8 quirements for energy consultants and home en9 ergy ratings providers specified by the Mort10 gage Industry National Home Energy Rating 

11 Standards. 

12 ‘‘(B) INDIVIDUALS QUALIFIED TO DETER13 MINE COMPLIANCE.—The determination of 

14 compliance may be provided by a local building 

15 regulatory authority, a utility, a manufactured 

16 home production inspection primary inspection 

17 agency (IPIA), or an accredited home energy 

18 rating system provider. All providers shall be 

19 accredited, or otherwise authorized to use ap20 proved energy performance measurement meth21 ods, by the Residential Energy Services Net22 work (RESNET). 

23 ‘‘(3) DOLLAR AMOUNTS IN CASE OF JOINT OC24 CUPANCY.—In the case of any dwelling unit which if 

25 jointly occupied and used during any calendar year 
52

•HR 1834 IH 

1 as a principal residence by 2 or more individuals the 

2 following rules shall apply: 

3 ‘‘(A) The amount of the credit allowable 

4 under subsection (a) by reason of expenditures 

5 made during such calendar year by any of such 

6 individuals with respect to such dwelling unit 

7 shall be determined by treating all of such indi8 viduals as 1 taxpayer whose taxable year is 

9 such calendar year. 

10 ‘‘(B) There shall be allowable with respect 

11 to such expenditures to each of such individ12 uals, a credit under subsection (a) for the tax13 able year in which such calendar year ends in 

14 an amount which bears the same ratio to the 

15 amount determined under subparagraph (A) as 

16 the amount of such expenditures made by such 

17 individual during such calendar year bears to 

18 the aggregate of such expenditures made by all 

19 of such individuals during such calendar year. 

20 ‘‘(4) TENANT-STOCKHOLDER IN COOPERATIVE

21 HOUSING CORPORATION.—In the case of an indi22 vidual who is a tenant-stockholder (as defined in sec23 tion 216) in a cooperative housing corporation (as 

24 defined in such section), such individual shall be 

25 treated as having made his tenant-stockholder’s pro-
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1 portionate share (as defined in section 216(b)(3)) of 

2 any expenditures of such corporation and such credit 

3 shall be allocated pro rata to such individual. 

4 ‘‘(5) CONDOMINIUMS.—

5 ‘‘(A) IN GENERAL.—In the case of an indi6 vidual who is a member of a condominium man7 agement association with respect to a condo8 minium which he owns, such individual shall be 

9 treated as having made his proportionate share 

10 of any expenditures of such association and any 

11 credit shall be allocated appropriately. 

12 ‘‘(B) CONDOMINIUM MANAGEMENT ASSO13 CIATION.—For purposes of this paragraph, the 

14 term ‘condominium management association’ 

15 means an organization which meets the require16 ments of paragraph (1) of section 528(c) (other 

17 than subparagraph (E) thereof) with respect to 

18 a condominium project substantially all of the 

19 units of which are used as principal residences. 

20 ‘‘(6) JOINT OWNERSHIP OF ENERGY ITEMS.—

21 ‘‘(A) IN GENERAL.—Any expenditure oth22 erwise qualifying as an expenditure under this 

23 section shall not be treated as failing to so 

24 qualify merely because such expenditure was 

25 made with respect to 2 or more dwelling units. 
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1 ‘‘(B) LIMITS APPLIED SEPARATELY.—In 

2 the case of any expenditure described in sub3 paragraph (A), the amount of the credit allow4 able under subsection (a) shall (subject to para5 graph (1)) be computed separately with respect 

6 to the amount of the expenditure made for each 

7 dwelling unit. 

8 ‘‘(7) ALLOCATION IN CERTAIN CASES.—If less 

9 than 80 percent of the use of an item is for nonbusi10 ness purposes, only that portion of the expenditures 

11 for such item which is properly allocable to use for 

12 nonbusiness purposes shall be taken into account. 

13 ‘‘(8) COORDINATION WITH OTHER CREDITS.—

14 Property which would, but for this paragraph, be eli15 gible for credit under more than one provision of 

16 this section shall be eligible only under one such pro17 vision, the provision specified by the taxpayer. 

18 ‘‘(9) YEAR CREDIT ALLOWED.—The credit 

19 under subsection (a)(2) shall be allowed in the tax20 able year in which the percentage reduction with re21 spect to the principal residence is certified. 

22 ‘‘(10) WHEN EXPENDITURE MADE; AMOUNT OF

23 EXPENDITURE.—

24 ‘‘(A) IN GENERAL.—Except as provided in 

25 subparagraph (B), an expenditure with respect 
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1 to an item shall be treated as made when the 

2 original installation of the item is completed. 

3 ‘‘(B) EXPENDITURES PART OF BUILDING

4 CONSTRUCTION.—In the case of an expenditure 

5 in connection with the construction of a struc6 ture, such expenditure shall be treated as made 

7 when the original use of the constructed struc8 ture by the taxpayer begins. 

9 ‘‘(11) PROPERTY FINANCED BY SUBSIDIZED

10 ENERGY FINANCING.—

11 ‘‘(A) REDUCTION OF EXPENDITURES.—

12 ‘‘(i) IN GENERAL.—Except as pro13 vided in subparagraph (C), for purposes of 

14 determining the amount of expenditures 

15 made by any individual with respect to any 

16 dwelling unit, there shall not be taken into 

17 account expenditures which are made from 

18 subsidized energy financing. 

19 ‘‘(ii) SUBSIDIZED ENERGY FINANC20 ING.—For purposes of clause (i), the term 

21 ‘subsidized energy financing’ has the same 

22 meaning given such term in section 

23 48(a)(4)(C). 

24 ‘‘(B) DOLLAR LIMITS REDUCED.—The dol25 lar amounts in the table contained in subsection 
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•HR 1834 IH 

1 (b)(3) with respect to each property purchased 

2 for such dwelling unit for any taxable year of 

3 such taxpayer shall be reduced proportionately 

4 by an amount equal to the sum of—

5 ‘‘(i) the amount of the expenditures 

6 made by the taxpayer during such taxable 

7 year with respect to such dwelling unit and 

8 not taken into account by reason of sub9 paragraph (A), and 

10 ‘‘(ii) the amount of any Federal, 

11 State, or local grant received by the tax12 payer during such taxable year which is 

13 used to make residential energy property 

14 expenditures with respect to the dwelling 

15 unit and is not included in the gross in16 come of such taxpayer. 

17 ‘‘(C) EXCEPTION FOR STATE PROGRAMS.—

18 Subparagraphs (A) and (B) shall not apply to 

19 expenditures made with respect to property for 

20 which the taxpayer has received a loan, State 

21 tax credit, or grant under any State energy pro22 gram. 

23 ‘‘(e) BASIS ADJUSTMENTS.—For purposes of this 

24 subtitle, if a credit is allowed under this section for any 

25 expenditure with respect to any property, the increase in 
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1 the basis of such property which would (but for this sub2 section) result from such expenditure shall be reduced by 

3 the amount of the credit so allowed. 

4 ‘‘(f) REGULATIONS.—The Secretary shall promulgate 

5 such regulations as necessary to take into account new 

6 technologies regarding energy efficiency and renewable en7 ergy for purposes of determining energy efficiency and 

8 savings under this section. 

9 ‘‘(g) TERMINATION.—This section shall not apply 

10 with respect to any energy property placed in service after 

11 December 31, 2009 (December 31, 2005, in the case of 

12 Tier 1 energy-efficient building property (other than an 

13 oil, natural gas, or propane furnace or hot water boiler 

14 described in section 200(d)(3)(D))).’’. 

15 (b) CONFORMING AMENDMENTS.—

16 (1) Subsection (a) of section 1016 of the Inter17 nal Revenue Code of 1986, as amended by section 

18 103, is amended by striking ‘‘and’’ at the end of 

19 paragraph (33), by striking the period at the end of 

20 paragraph (34) and inserting ‘‘, and’’, and by add21 ing at the end the following new paragraph: 

22 ‘‘(35) to the extent provided in section 25C(e), 

23 in the case of amounts with respect to which a credit 

24 has been allowed under section 25C.’’. 
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1 (2) The table of sections for subpart A of part 

2 IV of subchapter A of chapter 1 of such Code is 

3 amended by inserting after the item relating to sec4 tion 25B the following new item:

‘‘25C. Nonbusiness energy property.’’.

5 (c) EFFECTIVE DATES.—The amendments made by 

6 this section shall apply to expenditures made after Decem7 ber 31, 2004. 

8 SEC. 105. ENERGY CREDIT FOR COMBINED HEAT AND 

9 POWER SYSTEM PROPERTY. 

10 (a) IN GENERAL.—Section 48(a)(3)(A) of the Inter11 nal Revenue Code of 1986 (defining energy property), as 

12 amended by section 103, is amended to read as follows: 

13 ‘‘(A) which is—

14 ‘‘(i) equipment used to produce, dis15 tribute, or use energy derived from a geo16 thermal deposit (within the meaning of 

17 section 613(e)(2)), but only, in the case of 

18 electricity generated by geothermal power, 

19 up to (but not including) the electrical 

20 transmission stage, or 

21 ‘‘(ii) combined heat and power system 

22 property,’’. 

23 (b) COMBINED HEAT AND POWER SYSTEM PROP24 ERTY.—Section 48 of the Internal Revenue Code of 1986 
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1 (relating to energy credit; reforestation credit) is amended 

2 by adding at the end the following new subsection: 

3 ‘‘(c) COMBINED HEAT AND POWER SYSTEM PROP4 ERTY.—For purposes of subsection (a)(3)(A)(ii)—

5 ‘‘(1) COMBINED HEAT AND POWER SYSTEM

6 PROPERTY.—The term ‘combined heat and power 

7 system property’ means property comprising a sys8 tem—

9 ‘‘(A) which uses the same energy source 

10 for the simultaneous or sequential generation of 

11 electrical power, mechanical shaft power, or 

12 both, in combination with the generation of 

13 steam or other forms of useful thermal energy 

14 (including heating and cooling applications), 

15 ‘‘(B) which has an electrical capacity of 

16 not more than 15 megawatts or a mechanical 

17 energy capacity of not more than 2,000 horse18 power or an equivalent combination of electrical 

19 and mechanical energy capacities, 

20 ‘‘(C) which produces—

21 ‘‘(i) at least 20 percent of its total 

22 useful energy in the form of thermal en23 ergy which is not used to produce electrical 

24 or mechanical power (or combination 

25 thereof), and 
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•HR 1834 IH 

1 ‘‘(ii) at least 20 percent of its total 

2 useful energy in the form of electrical or 

3 mechanical power (or combination thereof), 

4 ‘‘(D) the energy efficiency percentage of 

5 which exceeds 60 percent, and 

6 ‘‘(E) which is placed in service before Jan7 uary 1, 2008. 

8 ‘‘(2) SPECIAL RULES.—

9 ‘‘(A) ENERGY EFFICIENCY PERCENT10 AGE.—For purposes of this subsection, the en11 ergy efficiency percentage of a system is the 

12 fraction—

13 ‘‘(i) the numerator of which is the 

14 total useful electrical, thermal, and me15 chanical power produced by the system at 

16 normal operating rates, and expected to be 

17 consumed in its normal application, and 

18 ‘‘(ii) the denominator of which is the 

19 lower heating value of the fuel sources for 

20 the system. 

21 ‘‘(B) DETERMINATIONS MADE ON BTU

22 BASIS.—The energy efficiency percentage and 

23 the percentages under paragraph (1)(C) shall 

24 be determined on a Btu basis. 
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1 ‘‘(C) INPUT AND OUTPUT PROPERTY NOT

2 INCLUDED.—The term ‘combined heat and 

3 power system property’ does not include prop4 erty used to transport the energy source to the 

5 facility or to distribute energy produced by the 

6 facility. 

7 ‘‘(D) PUBLIC UTILITY PROPERTY.—

8 ‘‘(i) ACCOUNTING RULE FOR PUBLIC

9 UTILITY PROPERTY.—If the combined heat 

10 and power system property is public utility 

11 property (as defined in section 168(i)(10)), 

12 the taxpayer may only claim the credit 

13 under subsection (a) if, with respect to 

14 such property, the taxpayer uses a normal15 ization method of accounting. 

16 ‘‘(ii) CERTAIN EXCEPTION NOT TO

17 APPLY.—The matter in subsection (a)(3) 

18 which follows subparagraph (D) thereof 

19 shall not apply to combined heat and 

20 power system property. 

21 ‘‘(3) SYSTEMS USING BAGASSE.—If a system is 

22 designed to use bagasse for at least 90 percent of 

23 the energy source—

24 ‘‘(A) paragraph (1)(D) shall not apply, but 
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1 ‘‘(B) the amount of credit determined 

2 under subsection (a) with respect to such sys3 tem shall not exceed the amount which bears 

4 the same ratio to such amount of credit (deter5 mined without regard to this paragraph) as the 

6 energy efficiency percentage of such system 

7 bears to 60 percent.’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this subsection shall apply to periods after December 31, 

10 2004, in taxable years ending after such date, under rules 

11 similar to the rules of section 48(m) of the Internal Rev12 enue Code of 1986 (as in effect on the day before the date 

13 of the enactment of the Revenue Reconciliation Act of 

14 1990). 

15 TITLE II—ENERGY EFFICIENT 

16 PRODUCTS 

17 SEC. 201. ENERGY CONSERVATION STANDARDS FOR ADDI18 TIONAL PRODUCTS. 

19 (a) DEFINITIONS.—Section 321 of the Energy Policy 

20 and Conservation Act (42 U.S.C. 6291) is amended—

21 (1) in paragraph (30)(S)—

22 (A) by inserting ‘‘(i)’’ before ‘‘The term’’; 

23 and 

24 (B) by adding at the end the following: 
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•HR 1834 IH 

1 ‘‘(ii) The term ‘medium base compact fluo2 rescent lamp’ does not include—

3 ‘‘(I) any lamp that is—

4 ‘‘(aa) specifically designed to be 

5 used for special purpose applications; 

6 and 

7 ‘‘(bb) unlikely to be used in gen8 eral purpose applications, such as the 

9 applications described in subpara10 graph (D); or 

11 ‘‘(II) any lamp not described in sub12 paragraph (D) that is excluded by the Sec13 retary, by rule, because the lamp is—

14 ‘‘(aa) designed for special appli15 cations; and 

16 ‘‘(bb) unlikely to be used in gen17 eral purpose applications.’’; and 

18 (2) by adding at the end the following: 

19 ‘‘(32) The term ‘battery charger’ means a de20 vice that charges batteries for consumer products, 

21 including battery chargers embedded in other con22 sumer products. 

23 ‘‘(33) The term ‘ceiling fan’ means a nonport24 able device that is suspended from a ceiling for cir25 culating air via the rotation of fan blades. 
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1 ‘‘(34) The term ‘ceiling fan light kit’ means 

2 equipment designed to provide light from a ceiling 

3 fan that can be—

4 ‘‘(A) integral, such that the equipment is 

5 attached to the ceiling fan prior to the time of 

6 retail sale; or 

7 ‘‘(B) attachable, such that at the time of 

8 retail sale the equipment is not physically at9 tached to the ceiling fan, but may be included 

10 inside the ceiling fan package at the time of 

11 sale or sold separately for subsequent attach12 ment to the fan. 

13 ‘‘(35) The term ‘commercial refrigerators, 

14 freezers, and refrigerator-freezers’ means refrig15 erators, freezers, or refrigerator-freezers that—

16 ‘‘(A) are not consumer products regulated 

17 under this Act; and 

18 ‘‘(B) incorporate most components involved 

19 in the vapor-compression cycle and the refrig20 erated compartment in a single package. 

21 ‘‘(36) The term ‘dehumidifier’ means a self-con22 tained, electrically operated, and mechanically en23 cased assembly consisting of—

24 ‘‘(A) a refrigerated surface (evaporator) 

25 that condenses moisture from the atmosphere; 
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•HR 1834 IH 

1 ‘‘(B) a refrigerating system, including an 

2 electric motor; 

3 ‘‘(C) an air-circulating fan; and 

4 ‘‘(D) means for collecting or disposing of 

5 the condensate. 

6 ‘‘(37)(A) The term ‘distribution transformer’ 

7 means a transformer that—

8 ‘‘(i) has an input voltage of 34.5 kilovolts 

9 or less; 

10 ‘‘(ii) has an output voltage of 600 volts or 

11 less; and 

12 ‘‘(iii) is rated for operation at a frequency 

13 of 60 hertz. 

14 ‘‘(B) The term ‘distribution transformer’ does 

15 not include—

16 ‘‘(i) a transformer with multiple voltage 

17 taps, with the highest voltage tap equaling at 

18 least 20 percent more than the lowest voltage 

19 tap; 

20 ‘‘(ii) a transformer that is designed to be 

21 used in a special purpose application and is un22 likely to be used in general purpose applica23 tions, such as a drive transformer, rectifier 

24 transformer, auto-transformer, Uninterruptible 

25 Power System transformer, impedance trans-
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•HR 1834 IH 

1 former, harmonic transformer, regulating trans2 former, sealed and nonventilating transformer, 

3 machine tool transformer, welding transformer, 

4 grounding transformer, or testing transformer; 

5 or 

6 ‘‘(iii) any transformer not listed in clause 

7 (ii) that is excluded by the Secretary by rule be8 cause—

9 ‘‘(I) the transformer is designed for a 

10 special application; 

11 ‘‘(II) the transformer is unlikely to be 

12 used in general purpose applications; and 

13 ‘‘(III) the application of standards to 

14 the transformer would not result in signifi15 cant energy savings. 

16 ‘‘(38) The term ‘external power supply’ means 

17 an external power supply circuit that is used to con18 vert household electric current into DC current or 

19 lower-voltage AC current to operate a consumer 

20 product. 

21 ‘‘(39) The term ‘illuminated exit sign’ means a 

22 sign that—

23 ‘‘(A) is designed to be permanently fixed in 

24 place to identify an exit; and 
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1 ‘‘(B) consists of an electrically powered in2 tegral light source that—

3 ‘‘(i) illuminates the legend ‘EXIT’ 

4 and any directional indicators; and 

5 ‘‘(ii) provides contrast between the 

6 legend, any directional indicators, and the 

7 background. 

8 ‘‘(40) The term ‘low-voltage dry-type distribu9 tion transformer’ means a distribution transformer 

10 that—

11 ‘‘(A) has an input voltage of 600 volts or 

12 less; 

13 ‘‘(B) is air-cooled; and 

14 ‘‘(C) does not use oil as a coolant. 

15 ‘‘(41) The term ‘standby mode’ means the low16 est power consumption mode, as established on an 

17 individual product basis by the Secretary, that—

18 ‘‘(A) cannot be switched off or influenced 

19 by the user; and 

20 ‘‘(B) may persist for an indefinite time 

21 when an appliance is—

22 ‘‘(i) connected to the main electricity 

23 supply; and 

24 ‘‘(ii) used in accordance with the in25 structions of the manufacturer. 
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1 ‘‘(42) The term ‘torchiere’ means a portable 

2 electric lamp with a reflector bowl that directs light 

3 upward to give indirect illumination. 

4 ‘‘(43) The term ‘traffic signal module’ means a 

5 standard 8-inch (200mm) or 12-inch (300mm) traf6 fic signal indication that—

7 ‘‘(A) consists of a light source, a lens, and 

8 all other parts necessary for operation; and 

9 ‘‘(B) communicates movement messages to 

10 drivers through red, amber, and green colors. 

11 ‘‘(44) The term ‘transformer’ means a device 

12 consisting of 2 or more coils of insulated wire that 

13 transfers alternating current by electromagnetic in14 duction from 1 coil to another to change the original 

15 voltage or current value. 

16 ‘‘(45)(A) The term ‘unit heater’ means a self17 contained fan-type heater designed to be installed 

18 within the heated space. 

19 ‘‘(B) The term ‘unit heater’ does not include a 

20 warm air furnace. 

21 ‘‘(46)(A) The term ‘commercial prerinse spray 

22 valve’ means a handheld device designed and mar23 keted for use with commercial dishwashing and ware 

24 washing equipment that sprays water on dishes, flat-
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•HR 1834 IH 

1 ware, and other food service items for the purpose 

2 of removing food residue before cleaning the items. 

3 ‘‘(B) The Secretary may modify the definition 

4 of ‘commercial prerinse spray valve’ by rule—

5 ‘‘(i) to include products—

6 ‘‘(I) that are extensively used in con7 junction with commercial dishwashing and 

8 ware washing equipment; 

9 ‘‘(II) the application of standards to 

10 which would result in significant energy 

11 savings; and 

12 ‘‘(III) the application of standards to 

13 which would meet the criteria specified in 

14 subsection (o)(4); and 

15 ‘‘(ii) to exclude products—

16 ‘‘(I) that are used for special food 

17 service applications; 

18 ‘‘(II) that are unlikely to be widely 

19 used in conjunction with commercial dish20 washing and ware washing equipment; and 

21 ‘‘(III) the application of standards to 

22 which would not result in significant en23 ergy savings.’’. 
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•HR 1834 IH 

1 (b) TEST PROCEDURES.—Section 323 of the Energy 

2 Policy and Conservation Act (42 U.S.C. 6293) is amend3 ed—

4 (1) in subsection (b), by adding at the end the 

5 following: 

6 ‘‘(9) Test procedures for illuminated exit signs shall 

7 be based on the test method used under version 2.0 of 

8 the Energy Star program of the Environmental Protection 

9 Agency for illuminated exit signs. 

10 ‘‘(10)(A) Test procedures for distribution trans11 formers and low-voltage dry-type distribution trans12 formers shall be based on the ‘Standard Test Method for 

13 Measuring the Energy Consumption of Distribution 

14 Transformers’ prescribed by the National Electrical Man15 ufacturers Association (NEMA TP 2–1998). 

16 ‘‘(B) The Secretary may review and revise the test 

17 procedures established under subparagraph (A). 

18 ‘‘(C) For purposes of section 346(a), the test proce19 dures established under subparagraph (A) shall be consid20 ered to be the testing requirements prescribed by the Sec21 retary under section 346(a)(1) for distribution trans22 formers for which the Secretary makes a determination 

23 that energy conservation standards would—

24 ‘‘(i) be technologically feasible and economically 

25 justified; and 
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•HR 1834 IH 

1 ‘‘(ii) result in significant energy savings. 

2 ‘‘(11) Test procedures for traffic signal modules shall 

3 be based on the test method used under the Energy Star 

4 program of the Environmental Protection Agency for traf5 fic signal modules, as in effect on the date of enactment 

6 of this paragraph. 

7 ‘‘(12)(A) Test procedures for medium-base compact 

8 fluorescent lamps shall be based on the test methods for 

9 compact fluorescent lamps used under the August 9, 2001, 

10 version of the Energy Star program of the Environmental 

11 Protection Agency and the Department of Energy. 

12 ‘‘(B) Except as provided in subparagraph (C), me13 dium-base compact fluorescent lamps shall meet all test 

14 requirements for regulated parameters of section 325(bb). 

15 ‘‘(C) Notwithstanding subparagraph (B), if manufac16 turers document engineering predictions and analysis that 

17 support expected attainment of lumen maintenance at 40 

18 percent rated life and lamp life time, medium-base com19 pact fluorescent lamps may be marketed before completion 

20 of lamp life and lumen maintenance at 40 percent of rated 

21 life testing. 

22 ‘‘(13) Air movement test procedures for ceiling fans 

23 shall be based on the test procedure contained in the En24 ergy Star Program Requirements for Residential Ceiling 

25 Fans, version 2.0, developed by the Environmental Protec-
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•HR 1834 IH 

1 tion Agency, unless, pursuant to this section, the Sec2 retary promulgates an alternative test procedure. 

3 ‘‘(14) Test procedures for dehumidifiers shall be 

4 based on the test criteria used under the Energy Star Pro5 gram Requirements for Dehumidifiers developed by the 

6 Environmental Protection Agency, as in effect on the date 

7 of enactment of this paragraph unless revised by the Sec8 retary pursuant to this section. 

9 ‘‘(15) The test procedure for measuring flow rate for 

10 commercial prerinse spray valves shall be based on Amer11 ican Society for Testing and Materials Standard F2324, 

12 entitled ‘Standard Test Method for Prerinse Spray 

13 Valves.’’’; and 

14 (2) by adding at the end the following: 

15 ‘‘(f) ADDITIONAL CONSUMER AND COMMERCIAL

16 PRODUCTS.—(1) Not later than 2 years after the date of 

17 enactment of this subsection, the Secretary shall prescribe 

18 testing requirements for—

19 ‘‘(A) refrigerated bottled or canned beverage 

20 vending machines; and 

21 ‘‘(B) commercial refrigerators, freezers, and re22 frigerator-freezers. 

23 ‘‘(2) To the maximum extent practicable, the testing 

24 requirements prescribed under paragraph (1) shall be 

25 based on existing test procedures used in industry.’’. 
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1 (c) NEW STANDARDS.—Section 325 of the Energy 

2 Policy and Conservation Act (42 U.S.C. 6295) is amended 

3 by adding at the end the following: 

4 ‘‘(u) BATTERY CHARGER AND EXTERNAL POWER

5 SUPPLY ELECTRIC ENERGY CONSUMPTION.—(1)(A) Not 

6 later than 18 months after the date of enactment of this 

7 subsection, the Secretary shall, after providing notice and 

8 an opportunity for comment, prescribe, by rule, definitions 

9 and test procedures for the power use of battery chargers 

10 and external power supplies. 

11 ‘‘(B) In establishing the test procedures under sub12 paragraph (A), the Secretary shall—

13 ‘‘(i) consider existing definitions and test proce14 dures used for measuring energy consumption in 

15 standby mode and other modes; and 

16 ‘‘(ii) assess the current and projected future 

17 market for battery chargers and external power sup18 plies. 

19 ‘‘(C) The assessment under subparagraph (B)(ii) 

20 shall include—

21 ‘‘(i) estimates of the significance of potential 

22 energy savings from technical improvements to bat23 tery chargers and external power supplies; and 

24 ‘‘(ii) suggested product classes for standards. 
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1 ‘‘(D) Not later than 18 months after the date of en2 actment of this subsection, the Secretary shall hold a 

3 scoping workshop to discuss and receive comments on 

4 plans for developing energy conservation standards for en5 ergy use for battery chargers and external power supplies. 

6 ‘‘(E)(i) Not later than 3 years after the date of enact7 ment of this subsection, the Secretary shall issue a final 

8 rule that determines whether energy conservation stand9 ards shall be issued for battery chargers and external 

10 power supplies or classes of battery chargers and external 

11 power supplies. 

12 ‘‘(ii) For each product class, any standards issued 

13 under clause (i) shall be set at the lowest level of energy 

14 use that—

15 ‘‘(I) meets the criteria and procedures of sub16 sections (o), (p), (q), (r), (s), and (t); and 

17 ‘‘(II) would result in significant overall annual 

18 energy savings, considering standby mode and other 

19 operating modes. 

20 ‘‘(2) In determining under section 323 whether test 

21 procedures and energy conservation standards under this 

22 section should be revised with respect to covered products 

23 that are major sources of standby mode energy consump24 tion, the Secretary shall consider whether to incorporate 

25 standby mode into the test procedures and energy con-
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1 servation standards, taking into account standby mode 

2 power consumption compared to overall product energy 

3 consumption. 

4 ‘‘(3) The Secretary shall not propose a standard 

5 under this section unless the Secretary has issued applica6 ble test procedures for each product under section 323. 

7 ‘‘(4) Any standard issued under this subsection shall 

8 be applicable to products manufactured or imported begin9 ning on the date that is 3 years after the date of issuance. 

10 ‘‘(5) The Secretary and the Administrator shall col11 laborate and develop programs (including Energy Star 

12 Programs and other voluntary industry agreements or 

13 codes of conduct) that are designed to reduce standby 

14 mode energy use. 

15 ‘‘(v) VENDING MACHINES AND COMMERCIAL RE16 FRIGERATORS, FREEZERS, AND REFRIGERATOR-FREEZ17 ERS.—(1) Not later than 3 years after the date on which 

18 testing requirements are prescribed by the Secretary 

19 under section 323(f), the Secretary shall prescribe, by 

20 rule, energy conservation standards for— 

21 ‘‘(A) refrigerated bottled or canned beverage 

22 vending machines; and 

23 ‘‘(B) commercial refrigerators, freezers, and re24 frigerator-freezers. 
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1 ‘‘(2) In establishing standards under this subsection, 

2 the Secretary shall use the criteria and procedures pre3 scribed under subsections (o) and (p). 

4 ‘‘(3) Any standard prescribed under this subsection 

5 shall apply to products manufactured 3 years after the 

6 date of publication of a final rule establishing the stand7 ard. 

8 ‘‘(w) ILLUMINATED EXIT SIGNS.—An illuminated 

9 exit sign manufactured on or after January 1, 2006, shall 

10 meet the version 2.0 Energy Star Program performance 

11 requirements for illuminated exit signs prescribed by the 

12 Environmental Protection Agency. 

13 ‘‘(x) TORCHIERES.—A torchiere manufactured on or 

14 after January 1, 2006—

15 ‘‘(1) shall consume not more than 190 watts of 

16 power; and 

17 ‘‘(2) shall not be capable of operating with 

18 lamps that total more than 190 watts. 

19 ‘‘(y) LOW VOLTAGE DRY-TYPE DISTRIBUTION

20 TRANSFORMERS.—The efficiency of a low voltage dry-type 

21 distribution transformer manufactured on or after Janu22 ary 1, 2006, shall be the Class I Efficiency Levels for dis23 tribution transformers specified in table 4–2 of the ‘Guide 

24 for Determining Energy Efficiency for Distribution Trans-
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•HR 1834 IH 

1 formers’ published by the National Electrical Manufactur2 ers Association (NEMA TP–1–2002). 

3 ‘‘(z) TRAFFIC SIGNAL MODULES.—A traffic signal 

4 module manufactured on or after January 1, 2007, 

5 shall—

6 ‘‘(1) meet the performance requirements used 

7 under the Energy Star program of the Environ8 mental Protection Agency for traffic signals, as in 

9 effect on the date of enactment of this subsection; 

10 and 

11 ‘‘(2) be installed with compatible, electrically 

12 connected signal control interface devices and con13 flict monitoring systems. 

14 ‘‘(aa) UNIT HEATERS.—A unit heater manufactured 

15 on or after the date that is 3 years after the date of enact16 ment of this subsection shall—

17 ‘‘(1) be equipped with an intermittent ignition 

18 device; and 

19 ‘‘(2) have power venting or an automatic flue 

20 damper. 

21 ‘‘(bb) MEDIUM-BASE COMPACT FLUORESCENT

22 LAMPS.—(1) A bare lamp and covered lamp (no reflector) 

23 medium-base compact fluorescent lamp manufactured on 

24 or after January 1, 2006, shall meet the following require25 ments prescribed by the August 9, 2001, version of the 
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1 Energy Star Program Requirements for Compact Fluores2 cent Lamps, Energy Star Eligibility Criteria, Energy-Effi3 ciency Specification issued by the Environmental Protec4 tion Agency and Department of Energy: 

5 ‘‘(A) Minimum initial efficacy. 

6 ‘‘(B) Lumen maintenance at 1,000 hours. 

7 ‘‘(C) Lumen maintenance at 40 percent of 

8 rated life. 

9 ‘‘(D) Rapid cycle stress test. 

10 ‘‘(E) Lamp life. 

11 ‘‘(2) The Secretary may, by rule, establish require12 ments for color quality (CRI), power factor, operating fre13 quency, and maximum allowable start time based on the 

14 requirements prescribed by the August 9, 2001, version 

15 of the Energy Star Program Requirements for Compact 

16 Fluorescent Lamps. 

17 ‘‘(3) The Secretary may, by rule—

18 ‘‘(A) revise the requirements established under 

19 paragraph (2); or 

20 ‘‘(B) establish other requirements, after consid21 ering energy savings, cost effectiveness, and con22 sumer satisfaction. 

23 ‘‘(cc) CEILING FANS AND CEILING FAN LIGHT

24 KITS.—(1)(A) All ceiling fans manufactured on or after 

25 January 1, 2008, shall have the following features: 
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1 ‘‘(i) Lighting controls separate from fan speed 

2 controls. 

3 ‘‘(ii) Adjustable speed controls (either more 

4 than 1 speed or variable speed). 

5 ‘‘(iii) The capability of reversible fan action, ex6 cept for fans sold for industrial applications, outdoor 

7 applications, and where safety standards would be 

8 violated by the use of the reversible mode. 

9 ‘‘(B) The Secretary may promulgate regulations to 

10 define in greater detail the exceptions provided under sub11 paragraph (A)(iii) but may not substantively expand the 

12 exceptions. 

13 ‘‘(2) Ceiling fan light kits manufactured on or after 

14 January 1, 2008, shall—

15 ‘‘(A) meet the Energy Star Program Require16 ments for Residential Light Fixtures, version 3.1, 

17 issued by the Environmental Protection Agency, and 

18 be packaged with lamps to fill all sockets; 

19 ‘‘(B) be packaged with screw-based compact 

20 fluorescent lamps to fill all sockets and meet the En21 ergy Star Program Requirements for Compact Fluo22 rescent Lamps, version 3.0, issued by the Depart23 ment of Energy; or 

24 ‘‘(C) use and be packaged with light sources 

25 other than compact fluorescent lamps that meet the 
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1 minimum efficacy requirements, as measured in 

2 lumens per watt, of the Energy Star Program Re3 quirements for Compact Fluorescent Lamps, version 

4 3.0, issued by the Department of Energy. 

5 ‘‘(3)(A) Notwithstanding any provision of this Act, 

6 if the requirements of subsections (o) and (p) are met, 

7 the Secretary may consider and prescribe energy efficiency 

8 or energy use standards for electricity used by ceiling fans 

9 to circulate air in a room. 

10 ‘‘(B) If the Secretary sets the standards, the Sec11 retary shall consider—

12 ‘‘(i) exempting or setting different standards 

13 for certain product classes for which the primary 

14 standards are not technically feasible or economically 

15 justified; and 

16 ‘‘(ii) establishing separate exempted product 

17 classes for highly decorative fans for which air move18 ment performance is a secondary design feature. 

19 ‘‘(C) Any air movement standard prescribed under 

20 this subsection shall apply to products manufactured on 

21 or after the date that is 3 years after the date of publica22 tion of a final rule establishing the standard. 

23 ‘‘(dd) DEHUMIDIFIERS.—(1) Dehumidifiers manu24 factured on or after October 1, 2008, shall have an Energy 

25 Factor that meets or exceeds the following values:
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‘‘Product Capacity (pints/day): Minimum Energy Factor 

(Liters/kWh) 

25 ............................................................................................. 1.00

> 25 – 35 ................................................................................ 1.20

> 35 – 54 ................................................................................ 1.30

> 54 – < 75 ............................................................................ 1.50

75 ............................................................................................. 2.25.

1 ‘‘(2)(A) Not later than October 1, 2010, the Sec2 retary shall publish a final rule in accordance with sub3 sections (o) and (p), to determine whether the standards 

4 established under paragraph (1) should be amended. 

5 ‘‘(B) The final rule shall contain any amendment by 

6 the Secretary and shall provide that the amendment shall 

7 apply to products manufactured on or after October 1, 

8 2012. 

9 ‘‘(C) If the Secretary does not publish an amendment 

10 that takes effect by October 1, 2012, dehumidifiers manu11 factured on or after October 1, 2012, shall have an Energy 

12 Factor that meets or exceeds the following values:

‘‘Product Capacity (pints/day): Minimum Energy Factor 

(Liters/kWh) 

25 ............................................................................................. 1.20

> 25 – 35 ................................................................................ 1.30

> 35 – 45 ................................................................................ 1.40

> 45 – 54 ................................................................................ 1.50

> 54 – < 75 ............................................................................ 1.60

75 ............................................................................................. 2.5.

13 ‘‘(ee) COMMERCIAL PRERINSE SPRAY VALVES.—

14 Commercial prerinse spray valves manufactured on or 

15 after January 1, 2006, shall have a flow rate less than 

16 or equal to 1.6 gallons per minute. 

17 ‘‘(ff) EFFECTIVE DATE.—Section 327 shall apply 

18 to—
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1 ‘‘(1) a product for which standards are to be 

2 established under subsections (u) and (v) on the 

3 date on which a final rule is issued by the Depart4 ment of Energy, except that any State or local 

5 standards prescribed or enacted for the product be6 fore the date on which the final rule is issued shall 

7 not be preempted until the standard established 

8 under subsection (u) or (v) for the product takes ef9 fect; and 

10 ‘‘(2) a product for which standards are estab11 lished under subsections (w) through (ee) on the 

12 date of enactment of those subsections, except that 

13 any State or local standards prescribed or enacted 

14 before the date of enactment of those subsections 

15 shall not be preempted until the standards estab16 lished under subsections (w) through (ee) take ef17 fect.’’. 

18 (d) RESIDENTIAL FURNACE FANS.—Section 

19 325(f)(3) of the Energy Policy and Conservation Act (42 

20 U.S.C. 6295(f)(3)) is amended by adding at the end the 

21 following: 

22 ‘‘(D) Notwithstanding any other provision of this Act, 

23 if the requirements of subsection (o) are met, the Sec24 retary may consider and prescribe energy efficiency or en-
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1 ergy use standards for electricity used for purposes of cir2 culating air through duct work.’’. 

3 (e) GENERAL RULE OF PREEMPTION.—Section 

4 327(c) of the Energy Policy and Conservation Act (42 

5 U.S.C. 6297(c)) is amended—

6 (1) in paragraph (5), by striking ‘‘or’’ at the 

7 end; 

8 (2) in paragraph (6), by striking the period at 

9 the end and inserting ‘‘; or’’; and 

10 (3) by adding at the end the following: 

11 ‘‘(7) is a regulation concerning standards for 

12 commercial prerinse spray valves adopted by the 

13 California Energy Commission before January 1, 

14 2005, or is an amendment to such a regulation de15 veloped to align California regulations with changes 

16 in American Society for Testing and Materials Reg17 ulation F2324.’’. 

18 SEC. 202. ENERGY LABELING. 

19 (a) RULEMAKING ON EFFECTIVENESS OF CONSUMER

20 PRODUCT LABELING.—Section 324(a)(2) of the Energy 

21 Policy and Conservation Act (42 U.S.C. 6294(a)(2)) is 

22 amended by adding at the end the following: 

23 ‘‘(F)(i) Not later than 90 days after the date of en24 actment of this subparagraph, the Commission shall ini25 tiate a rulemaking to consider—
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1 ‘‘(I) the effectiveness of the consumer products 

2 labeling program in—

3 ‘‘(aa) assisting consumers in making pur4 chasing decisions; and 

5 ‘‘(bb) improving energy efficiency; and 

6 ‘‘(II) changes to the labeling rules that would 

7 improve the effectiveness of consumer product labels. 

8 ‘‘(ii) Not later than 2 years after the date of enact9 ment of this subparagraph, the Commission shall complete 

10 the rulemaking initiated under clause (i).’’. 

11 (b) RULEMAKING ON LABELING FOR ADDITIONAL

12 PRODUCTS.—Section 324(a) of the Energy Policy and 

13 Conservation Act (42 U.S.C. 6294(a)) is amended by add14 ing at the end the following: 

15 ‘‘(5)(A) After a test procedure has been prescribed 

16 under section 323, the Secretary or the Commission, as 

17 appropriate, may, for covered products referred to in sub18 sections (u) through (ee) of section 325, prescribe, by rule, 

19 under this section, labeling requirements for the products. 

20 ‘‘(B) In the case of products to which TP–1 stand21 ards under section 325(y) apply, labeling requirements 

22 shall be based on the ‘Standard for the Labeling of Dis23 tribution Transformer Efficiency’ prescribed by the Na24 tional Electrical Manufacturers Association (NEMA TP–

25 3) as in effect on the date of enactment of this paragraph. 
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1 ‘‘(C) In the case of dehumidifiers covered under sec2 tion 325(dd), the Commission shall not require an Energy 

3 Guide label. 

4 ‘‘(6)(A) Not later than July 1, 2006, the Commission 

5 shall prescribe by rule, pursuant to this section, labeling 

6 requirements for the electricity used by ceiling fans to cir7 culate air in a room. 

8 ‘‘(B) The requirements shall be based on the test pro9 cedure and labeling requirements contained in the Energy 

10 Star Program Requirements for Residential Ceiling Fans, 

11 version 2.0, issued by the Environmental Protection Agen12 cy, except that third party testing and other non-labeling 

13 requirements shall not be promulgated unless the Commis14 sion determines the requirements are necessary to achieve 

15 compliance. 

16 ‘‘(C) The rule shall apply to products manufactured 

17 after the later of—

18 ‘‘(i) January 1, 2008; or 

19 ‘‘(ii) the date that is 60 days after the final rule 

20 is prescribed.’’. 

21 SEC. 203. COMMERCIAL PACKAGE AIR CONDITIONING AND 

22 HEATING EQUIPMENT. 

23 (a) DEFINITIONS.—Section 340 of the Energy Policy 

24 and Conservation Act (42 U.S.C. 6311) is amended—

25 (1) in paragraph (1)—
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1 (A) by redesignating subparagraphs (D) 

2 through (G) as subparagraphs (E) through (H), 

3 respectively; and 

4 (B) by inserting after subparagraph (C) 

5 the following: 

6 ‘‘(D) Very large commercial package air 

7 conditioning and heating equipment.’’; 

8 (2) in paragraph (2)(B), by striking ‘‘small and 

9 large’’; and 

10 (3) by striking paragraphs (8) and (9) and in11 serting the following: 

12 ‘‘(8)(A) The term ‘commercial package air con13 ditioning and heating equipment’ means air-cooled, 

14 water-cooled, evaporatively-cooled, or water source 

15 (not including ground water source) electrically oper16 ated, unitary central air conditioners and central air 

17 conditioning heat pumps for commercial application. 

18 ‘‘(B) The term ‘small commercial package air 

19 conditioning and heating equipment’ means commer20 cial package air conditioning and heating equipment 

21 that is rated below 135,000 Btu per hour (cooling 

22 capacity). 

23 ‘‘(C) The term ‘large commercial package air 

24 conditioning and heating equipment’ means commer25 cial package air conditioning and heating equipment 
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1 that is rated at or above 135,000 Btu per hour and 

2 below 240,000 Btu per hour (cooling capacity). 

3 ‘‘(D) The term ‘very large commercial package 

4 air conditioning and heating equipment’ means com5 mercial package air conditioning and heating equip6 ment that is rated at or above 240,000 Btu per hour 

7 and below 760,000 Btu per hour (cooling capac8 ity).’’. 

9 (b) STANDARDS.—Section 342(a) of the Energy Pol10 icy and Conservation Act (42 U.S.C. 6313(a)) is amend11 ed—

12 (1) in the subsection heading, by striking 

13 ‘‘Small and Large’’ and inserting ‘‘Small, Large, 

14 and Very Large’’; 

15 (2) in paragraph (1), by inserting ‘‘but before 

16 January 1, 2010,’’ after ‘‘January 1, 1994,’’; 

17 (3) in paragraph (2), by inserting ‘‘but before 

18 January 1, 2010,’’ after ‘‘January 1, 1995,’’; and 

19 (4) in paragraph (6)—

20 (A) in subparagraph (A)—

21 (i) by inserting ‘‘(i)’’ after ‘‘(A)’’; 

22 (ii) by striking ‘‘the date of enactment 

23 of the Energy Policy Act of 1992’’ and in24 serting ‘‘January 1, 2010’’; 
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1 (iii) by inserting after ‘‘large commer2 cial package air conditioning and heating 

3 equipment’’ the following: ‘‘and very large 

4 commercial package air conditioning and 

5 heating equipment, or if ASHRAE/IES 

6 Standard 90.1, as in effect on October 24, 

7 1992, is amended with respect to any’’; 

8 and 

9 (iv) by adding at the end the fol10 lowing: 

11 ‘‘(ii) If ASHRAE/IES Standard 90.1 is not amended 

12 with respect to small commercial package air conditioning 

13 and heating equipment, large commercial package air con14 ditioning and heating equipment, and very large commer15 cial package air conditioning and heating equipment dur16 ing the 5-year period beginning on the effective date of 

17 a standard, the Secretary may initiate a rulemaking to 

18 determine whether a more stringent standard would result 

19 in significant additional conservation of energy and is 

20 technologically feasible and economically justified.’’; and 

21 (B) in subparagraph (C)(ii), by inserting 

22 ‘‘and very large commercial package air condi23 tioning and heating equipment’’ after ‘‘large 

24 commercial package air conditioning and heat25 ing equipment’’; and 
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1 (5) by adding at the end the following: 

2 ‘‘(7) Each small commercial package air conditioning 

3 and heating equipment manufactured on or after January 

4 1, 2010, shall meet the following standards: 

5 ‘‘(A) The minimum energy efficiency ratio of 

6 air-cooled central air conditioners at or above 65,000 

7 Btu per hour (cooling capacity) and less than 

8 135,000 Btu per hour (cooling capacity) shall be—

9 ‘‘(i) 11.2 for equipment with no heating or 

10 electric resistance heating; and 

11 ‘‘(ii) 11.0 for equipment with all other 

12 heating system types that are integrated into 

13 the equipment (at a standard rating of 95 de14 grees F db). 

15 ‘‘(B) The minimum energy efficiency ratio of 

16 air-cooled central air conditioner heat pumps at or 

17 above 65,000 Btu per hour (cooling capacity) and 

18 less than 135,000 Btu per hour (cooling capacity) 

19 shall be—

20 ‘‘(i) 11.0 for equipment with no heating or 

21 electric resistance heating; and 

22 ‘‘(ii) 10.8 for equipment with all other 

23 heating system types that are integrated into 

24 the equipment (at a standard rating of 95 de25 grees F db). 
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1 ‘‘(C) The minimum coefficient of performance 

2 in the heating mode of air-cooled central air condi3 tioning heat pumps at or above 65,000 Btu per hour 

4 (cooling capacity) and less than 135,000 Btu per 

5 hour (cooling capacity) shall be 3.3 (at a high tem6 perature rating of 47 degrees F db). 

7 ‘‘(8) Each large commercial package air conditioning 

8 and heating equipment manufactured on or after January 

9 1, 2010, shall meet the following standards: 

10 ‘‘(A) The minimum energy efficiency ratio of 

11 air-cooled central air conditioners at or above 

12 135,000 Btu per hour (cooling capacity) and less 

13 than 240,000 Btu per hour (cooling capacity) shall 

14 be—

15 ‘‘(i) 11.0 for equipment with no heating or 

16 electric resistance heating; and 

17 ‘‘(ii) 10.8 for equipment with all other 

18 heating system types that are integrated into 

19 the equipment (at a standard rating of 95 de20 grees F db). 

21 ‘‘(B) The minimum energy efficiency ratio of 

22 air-cooled central air conditioner heat pumps at or 

23 above 135,000 Btu per hour (cooling capacity) and 

24 less than 240,000 Btu per hour (cooling capacity) 

25 shall be—
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1 ‘‘(i) 10.6 for equipment with no heating or 

2 electric resistance heating; and 

3 ‘‘(ii) 10.4 for equipment with all other 

4 heating system types that are integrated into 

5 the equipment (at a standard rating of 95 de6 grees F db). 

7 ‘‘(C) The minimum coefficient of performance 

8 in the heating mode of air-cooled central air condi9 tioning heat pumps at or above 135,000 Btu per 

10 hour (cooling capacity) and less than 240,000 Btu 

11 per hour (cooling capacity) shall be 3.2 (at a high 

12 temperature rating of 47 degrees F db). 

13 ‘‘(9) Each very large commercial package air condi14 tioning and heating equipment manufactured on or after 

15 January 1, 2010, shall meet the following standards: 

16 ‘‘(A) The minimum energy efficiency ratio of 

17 air-cooled central air conditioners at or above 

18 240,000 Btu per hour (cooling capacity) and less 

19 than 760,000 Btu per hour (cooling capacity) shall 

20 be—

21 ‘‘(i) 10.0 for equipment with no heating or 

22 electric resistance heating; and 

23 ‘‘(ii) 9.8 for equipment with all other heat24 ing system types that are integrated into the 
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1 equipment (at a standard rating of 95 degrees 

2 F db). 

3 ‘‘(B) The minimum energy efficiency ratio of 

4 air-cooled central air conditioner heat pumps at or 

5 above 240,000 Btu per hour (cooling capacity) and 

6 less than 760,000 Btu per hour (cooling capacity) 

7 shall be—

8 ‘‘(i) 9.5 for equipment with no heating or 

9 electric resistance heating; and 

10 ‘‘(ii) 9.3 for equipment with all other heat11 ing system types that are integrated into the 

12 equipment (at a standard rating of 95 degrees 

13 F db). 

14 ‘‘(C) The minimum coefficient of performance 

15 in the heating mode of air-cooled central air condi16 tioning heat pumps at or above 240,000 Btu per 

17 hour (cooling capacity) and less than 760,000 Btu 

18 per hour (cooling capacity) shall be 3.2 (at a high 

19 temperature rating of 47 degrees F db).’’. 

20 (c) TEST PROCEDURES.—Section 343 of the Energy 

21 Policy and Conservation Act (42 U.S.C. 6314) is amended 

22 in subsections (a)(4) and (d)(1), by inserting ‘‘very large 

23 commercial package air conditioning and heating equip24 ment,’’ after ‘‘large commercial package air conditioning 

25 and heating equipment,’’ each place it appears. 
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1 (d) LABELING.—Section 344(e) of the Energy Policy 

2 and Conservation Act (42 U.S.C. 6315(e)) is amended in 

3 the first and second sentences, by inserting ‘‘very large 

4 commercial package air conditioning and heating equip5 ment,’’ after ‘‘large commercial package air conditioning 

6 and heating equipment,’’ each place it appears. 

7 (e) ADMINISTRATION, PENALTIES, ENFORCEMENT, 

8 AND PREEMPTION.—Section 345 of the Energy Policy and 

9 Conservation Act (42 U.S.C. 6316) is amended by adding 

10 at the end the following: 

11 ‘‘(d)(1) Except as provided in paragraphs (2) and 

12 (3), section 327 shall apply with respect to the equipment 

13 specified in section 340(1)(D) to the same extent and in 

14 the same manner as section 327 applies under part B on 

15 the date of enactment of this subsection. 

16 ‘‘(2) Any State or local standard prescribed or en17 acted prior to the date of enactment of this subsection 

18 shall not be preempted until the standards established 

19 under section 342(a)(9) take effect on January 1, 2010. 

20 ‘‘(3) If the California Energy Commission adopts, not 

21 later than March 31, 2006, a regulation concerning the 

22 energy efficiency or energy use of the equipment specified 

23 in section 340(1)(D), the regulation shall be effective 

24 until, and shall no longer be effective after, the standards 
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1 established under section 342(a)(9) take effect on January 

2 1, 2010.’’. 

3 SEC. 204. COMMERCIAL REFRIGERATORS, FREEZERS, AND 

4 REFRIGERATOR-FREEZERS. 

5 (a) DEFINITIONS.—Section 340 of the Energy Policy 

6 and Conservation Act (42 U.S.C. 6311), as amended by 

7 section 203, is amended—

8 (1) in paragraph (1)—

9 (A) by redesignating subparagraph (H) as 

10 subparagraph (I); and 

11 (B) by inserting after subparagraph (G) 

12 the following: 

13 ‘‘(H) commercial refrigerators, freezers, and re14 frigerator-freezers.’’; and 

15 (2) by adding at the end the following: 

16 ‘‘(19)(A) The term ‘commercial refrigerator, 

17 freezer, and refrigerator-freezer’ means refrigeration 

18 equipment that—

19 ‘‘(i) is not a consumer product (as defined 

20 in section 321); 

21 ‘‘(ii) operates at a chilled, frozen, combina22 tion chilled and frozen, or variable temperature; 

23 ‘‘(iii) displays or stores merchandise and 

24 other perishable materials horizontally, 

25 semivertically, or vertically; 
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1 ‘‘(iv) has transparent or solid doors, sliding 

2 or hinged doors, a combination of hinged, slid3 ing, transparent, or solid doors, or no doors; 

4 ‘‘(v) is designed for pull-down temperature 

5 applications or holding temperature applica6 tions; and 

7 ‘‘(vi) is connected to a self-contained con8 densing unit or to a remote condensing unit. 

9 ‘‘(B) The term ‘holding temperature applica10 tion’ means a use of commercial refrigeration equip11 ment other than a pull-down temperature applica12 tion, except a blast chiller or freezer. 

13 ‘‘(C) The term ‘integrated average temperature’ 

14 means the average temperature of all test package 

15 measurements taken during the test. 

16 ‘‘(D) The term ‘pull-down temperature applica17 tion’ means a commercial refrigerator with doors 

18 that, when fully loaded with 12 ounce beverage cans 

19 at 90 degrees F, can cool those beverages to an av20 erage stable temperature of 38 degrees F in 12 

21 hours or less. 

22 ‘‘(E) The term ‘remote condensing unit’ means 

23 a factory-made assembly of refrigerating components 

24 designed to compress and liquefy a specific refrig25 erant that is remotely located from the refrigerated 
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1 equipment and consists of 1 or more refrigerant 

2 compressors, refrigerant condensers, condenser fans 

3 and motors, and factory supplied accessories. 

4 ‘‘(F) The term ‘self-contained condensing unit’ 

5 means a factory-made assembly of refrigerating com6 ponents designed to compress and liquefy a specific 

7 refrigerant that is an integral part of the refrig8 erated equipment and consists of 1 or more refrig9 erant compressors, refrigerant condensers, condenser 

10 fans and motors, and factory supplied accessories.’’. 

11 (b) STANDARDS.—Section 342 of the Energy Policy 

12 and Conservation Act (42 U.S.C. 6313) is amended by 

13 adding at the end the following: 

14 ‘‘(c) COMMERCIAL REFRIGERATORS, FREEZERS, AND

15 REFRIGERATOR-FREEZERS.—(1) In this subsection: 

16 ‘‘(A) The term ‘AV’ means the adjusted volume 

(ft3 17 ) (defined as 1.63 x frozen temperature compartment volume (ft3 18 ) + chilled temperature compartment volume (ft3 19 )) with compartment volumes meas20 ured in accordance with the Association of Home 

21 Appliance Manufacturers Standard HRF1–1979. 

22 ‘‘(B) The term ‘V’ means the chilled or frozen 

compartment volume (ft3 23 ) (as defined in the Asso24 ciation of Home Appliance Manufacturers Standard 

25 HRF1–1979). 
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1 ‘‘(C) Other terms have the meanings estab2 lished by the Secretary, based on industry-accepted 

3 definitions and practice. 

4 ‘‘(2) Each commercial refrigerator, freezer, and re5 frigerator-freezer with a self-contained condensing unit de6 signed for holding temperature applications manufactured 

7 on or after January 1, 2010, shall meet the following 

8 standard levels in kilowatt hours per day:

‘‘Refrigerators with solid doors .............................. 0.10 V + 2.04

Refrigerators with transparent doors ..................... 0.12 V + 3.34

Freezers with solid doors ....................................... 0.40 V + 1.38

Freezers with transparent doors ............................ 0.75 V + 4.10

Refrigerators/freezers with solid doors the greater 

of.

0.27 AV – 0.71 or 

0.70. 

9 ‘‘(3) Each commercial refrigerator with a self-con10 tained condensing unit designed for pull-down tempera11 ture applications manufactured on or after January 1, 

12 2010, shall meet the following standard levels in kilowatt 

13 hours per day: Refrigerators with transparent doors 0.126 

14 V + 3.51. 

15 ‘‘(4)(A) Not later than January 1, 2009, the Sec16 retary of Energy shall prescribe, by rule, standard levels 

17 for ice-cream freezers, self-contained commercial refrig18 erators, freezers, and refrigerator-freezers without doors, 

19 and remote condensing commercial refrigerators, freezers, 

20 and refrigerator-freezers, with the standard levels effective 

21 for equipment manufactured on or after January 1, 2012. 
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1 ‘‘(B) Not later than January 1, 2009, the Secretary 

2 shall prescribe, by rule, standard levels for other types of 

3 commercial refrigerators, freezers, and refrigerator-freez4 ers not covered by paragraphs (1), (2), and (3) and sub5 paragraph (A) with the standard levels effective for equip6 ment manufactured on or after January 1, 2012. 

7 ‘‘(5)(A)(i) Not later than January 1, 2013, the Sec8 retary shall publish a final rule to determine if the stand9 ards established under paragraphs (1), (2), (3), and 

10 (4)(A) should be amended. 

11 ‘‘(ii) The rule shall provide that any amended stand12 ards shall apply to products manufactured on or after the 

13 date that is 3 years after the final amended standard is 

14 published unless the Secretary determines, by rule, that 

15 3 years is inadequate, in which case the Secretary may 

16 establish an application date for products manufactured 

17 not later than 5 years after the final amended standard 

18 is published. 

19 ‘‘(B)(i) Not later than 3 years after the amended 

20 final standard referred to in subparagraph (A) takes effect 

21 or after the Secretary publishes a final rule determining 

22 that the standard should not be amended, the Secretary 

23 shall publish a final rule to determine if the standards es24 tablished under paragraphs (1), (2), (3), and (4)(A) 

25 should be amended. 
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1 ‘‘(ii) The rule shall provide that any amended stand2 ards shall apply to products manufactured on or after the 

3 date that is 3 years after the final amended standard is 

4 published unless the Secretary determines, by rule, that 

5 3 years is inadequate, in which case the Secretary may 

6 establish an application date for products manufactured 

7 not later than 5 years after the final amended standard 

8 is published.’’. 

9 (c) TEST PROCEDURES.—Section 343 of the Energy 

10 Policy and Conservation Act (42 U.S.C. 6314) is amend11 ed—

12 (1) in subsection (a), by adding at the end the 

13 following: 

14 ‘‘(6)(A)(i) In the case of commercial refrigerators, 

15 freezers, and refrigerator-freezers, the test procedures 

16 shall be the test procedures determined by the Secretary 

17 to be generally accepted industry testing procedures or 

18 rating procedures developed or recognized by the 

19 ASHRAE or by the American National Standards Insti20 tute. 

21 ‘‘(ii) In the case of self-contained refrigerators, freez22 ers, and refrigerator-freezers to which standards are appli23 cable under subsection 342(c)(1), the initial test proce24 dures shall be ASHRAE 117 that is in effect on January 

25 1, 2005. 
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1 ‘‘(B) In the case of commercial refrigerators, freez2 ers, and refrigerators-freezers with doors covered by the 

3 standards adopted in February 2002, by the California 

4 Energy Commission, the rating temperatures shall be the 

5 integrated average temperature of 38 degrees F (+/– 2 

6 degrees F) for refrigerator compartments and 0 degrees 

7 F (+/– 2 degrees F) for freezer compartments. 

8 ‘‘(C) The Secretary shall prescribe a rule, that meets 

9 the requirements of paragraphs (2) and (3), to establish 

10 the appropriate rating temperatures for the other products 

11 for which standards will be established under subsection 

12 342(c)(2). 

13 ‘‘(D) In establishing the appropriate test tempera14 tures under this subparagraph, the Secretary shall follow 

15 the procedures and meet the requirements specified in sec16 tion 323(e). 

17 ‘‘(E)(i) Not later than 180 days after the publication 

18 of the new ASHRAE 117 test procedure, if the ASHRAE 

19 117 test procedure for commercial refrigerators, freezers, 

20 and refrigerator-freezers is amended, the Secretary shall, 

21 by rule, amend the test procedure for the product as nec22 essary to be consistent with the amended ASHRAE 117 

23 test procedure unless the Secretary makes a determina24 tion, by rule, and supported by clear and convincing evi-
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1 dence, that to do so would not meet the requirements for 

2 test procedures described in paragraphs (2) and (3). 

3 ‘‘(ii) If the Secretary needs more than 180 days to 

4 review and adopt the amended test procedure or rating 

5 procedure, the Secretary shall publish a notice in the Fed6 eral Register stating the intent of the Secretary to take 

7 up to an additional 1 year before the amended test proce8 dure or rating procedure would become effective. 

9 ‘‘(F)(i) If another test procedure besides ASHRAE 

10 117 is approved by the American National Standards In11 stitute, the Secretary shall, by rule—

12 ‘‘(I) review the relative strengths and weak13 nesses of the new test procedure relative to 

14 ASHRAE 117; and 

15 ‘‘(II) based on that review, adopt 1 of those test 

16 procedures for subsequent use in the standards pro17 gram. 

18 ‘‘(ii) If a new test procedure is adopted—

19 ‘‘(I) section 323(e) shall apply; and 

20 ‘‘(II) subparagraph (B) shall apply to the 

21 adopted test procedure.’’; and 

22 (2) in subsection (d)(1), by striking ‘‘and 

23 unfired hot water storage tanks,’’ and inserting: 

24 ‘‘unfired hot water storage tanks, and commercial 

25 refrigerators, freezers, and refrigerator-freezers,’’. 
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1 (d) LABELING.—Section 344(e) of the Energy Policy 

2 and Conservation Act (42 U.S.C. 6315(e)), as amended 

3 by section 203(d), is amended by striking ‘‘and unfired 

4 hot water storage tanks’’ each place it appears and insert5 ing ‘‘unfired hot water storage tanks, and commercial re6 frigerators, freezers, and refrigerator-freezers’’. 

7 (e) ADMINISTRATION, PENALTIES, ENFORCEMENT, 

8 AND PREEMPTION.—Section 345 of the Energy Policy and 

9 Conservation Act (42 U.S.C. 6316), as amended by sec10 tion 203(e), is amended by adding at the end the fol11 lowing: 

12 ‘‘(e)(1)(A) The provisions of subsections (a), (b), and 

13 (d) of section 326, subsections (m) through (s) of section 

14 325, and sections 328 through 336 shall apply with re15 spect to equipment specified in section 340(1)(G) to the 

16 same extent and in the same manner as those provisions 

17 apply under part B. 

18 ‘‘(B) In applying those provisions to that equipment, 

19 paragraphs (1), (2), (3), and (4) of subsection (a) shall 

20 apply. 

21 ‘‘(2)(A)(i) The provisions of section 327 shall apply 

22 with respect to the equipment specified in section 

23 340(1)(G) that have standards established under section 

24 342(c)(2) to the same extent and in the same manner as 

25 those provisions apply under part B on the date of enact-
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1 ment of this subsection, except that any State or local 

2 standard prescribed or enacted before the date of enact3 ment of this subsection shall not be preempted until the 

4 standards established under section 342(c) take effect. 

5 ‘‘(ii) In applying those provisions to that equipment, 

6 paragraphs (1), (2), and (3) of subsection (a) shall apply. 

7 ‘‘(B) Notwithstanding subparagraph (A), if the Cali8 fornia Energy Commission adopts, not later than March 

9 31, 2005, a regulation concerning the energy efficiency or 

10 energy use of the equipment specified in section 340(1)(G) 

11 that have standards established under section 342(c)(2), 

12 those standards shall be effective until, and shall no longer 

13 be effective after, the standards established under section 

14 342(c)(2) take effect on January 1, 2010. 

15 ‘‘(3)(A) The provisions of section 327 shall apply 

16 with respect to the equipment specified in 340(1)(G) that 

17 have standards established under section 342(c)(3) to the 

18 same extent and in the same manner as they apply under 

19 part B on the date of publication of the final rule by the 

20 Secretary, except that any State or local standard pre21 scribed or enacted before the date of publication of the 

22 final rule by the Secretary shall not be preempted until 

23 the standards take effect. 
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1 ‘‘(B) In applying those provisions for the purpose of 

2 that equipment, paragraphs (1), (2), and (3) of subsection 

3 (a) shall apply. 

4 ‘‘(4) If the Secretary does not issue a final rule for 

5 a specific type of equipment specified in section 340(1)(G) 

6 within the time frame specified in section 342(c)(3), the 

7 provisions of subsections (b) and (c) of section 327 shall 

8 no longer apply to that specific type of equipment begin9 ning on the date that is 2 years after the scheduled date 

10 for a final rule and until the Secretary publishes a final 

11 rule covering the specific type of equipment, at which time 

12 those provisions shall apply to the specific type of equip13 ment. 

14 ‘‘(5)(A) In the case of any commercial refrigerator, 

15 freezer, and refrigerator-freezer to which standards are 

16 applicable under section 342(c)(2), the Secretary shall re17 quire manufacturers to certify, through an independent 

18 testing or certification program nationally recognized in 

19 the United States, that the commercial refrigerator, freez20 er, and refrigerator-freezer meets the applicable standard. 

21 ‘‘(B) The Secretary shall, to the maximum extent 

22 practicable, encourage the establishment of at least 2 such 

23 independent testing and certification programs. 
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1 ‘‘(C) As part of certification, information on equip2 ment energy use and interior volume shall be made avail3 able to the Secretary.’’. 

4 TITLE III—ENERGY EFFICIENT 

5 FEDERAL PROGRAMS 

6 SEC. 301. PROCUREMENT OF ENERGY EFFICIENT PROD7 UCTS. 

8 (a) REQUIREMENTS.—Part 3 of title V of the Na9 tional Energy Conservation Policy Act is amended—

10 (1) by redesignating section 551 (42 U.S.C. 

11 8259) as section 552; and 

12 (2) by inserting after section 550 (42 U.S.C. 

13 8258b) the following: 

14 ‘‘SEC. 551. FEDERAL PROCUREMENT OF ENERGY EFFI15 CIENT PRODUCTS. 

16 ‘‘(a) DEFINITIONS.—In this section: 

17 ‘‘(1) The term ‘Energy Star product’ means a 

18 product that is rated for energy efficiency under an 

19 Energy Star program. 

20 ‘‘(2) The term ‘Energy Star program’ means 

21 the Energy Star program of the Environmental Pro22 tection Agency. 

23 ‘‘(3) The term ‘executive agency’ has the mean24 ing given the term in section 4 of the Office of Fed25 eral Procurement Policy Act (41 U.S.C. 403). 
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1 ‘‘(4) The term ‘FEMP designated product’ 

2 means a product that is designated under the Fed3 eral Energy Management Program of the Depart4 ment of Energy as being among the highest 25 per5 cent of equivalent products for energy efficiency. 

6 ‘‘(b) PROCUREMENT OF ENERGY EFFICIENT PROD7 UCTS.—(1) Except as provided in paragraph (2), to meet 

8 the requirements of an executive agency for an energy con9 suming product, the head of the executive agency shall 

10 procure—

11 ‘‘(A) an Energy Star product; or 

12 ‘‘(B) a FEMP designated product. 

13 ‘‘(2) The head of an executive agency shall not be 

14 required to comply with paragraph (1) if the head of the 

15 executive agency specifies in writing that—

16 ‘‘(A) taking into account energy cost savings, 

17 an Energy Star product or FEMP designated prod18 uct is not cost-effective over the life of the product; 

19 or 

20 ‘‘(B) no Energy Star product or FEMP des21 ignated product is reasonably available that meets 

22 the functional requirements of the executive agency. 

23 ‘‘(3) The head of an executive agency shall incor24 porate criteria for energy efficiency that are consistent 
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1 with the criteria used for rating Energy Star products and 

2 FEMP designated products into—

3 ‘‘(A) the specifications for any procurements in4 volving energy consuming products and systems, in5 cluding—

6 ‘‘(i) guide specifications; 

7 ‘‘(ii) project specifications; and 

8 ‘‘(iii) construction, renovation, and services 

9 contracts that include the provision of energy 

10 consuming products and systems; and 

11 ‘‘(B) the factors for the evaluation of offers re12 ceived for the procurement. 

13 ‘‘(c) LISTING OF ENERGY EFFICIENT PRODUCTS IN

14 FEDERAL CATALOGS.—(1) Any inventory or listing of 

15 products by the General Services Administration or the 

16 Defense Logistics Agency shall clearly identify and promi17 nently display Energy Star products and FEMP des18 ignated products. 

19 ‘‘(2)(A) Except as provided in subparagraph (B), the 

20 General Services Administration or the Defense Logistics 

21 Agency shall supply only Energy Star products or FEMP 

22 designated products for all product categories covered by 

23 the Energy Star program or the Federal Energy Manage24 ment Program. 
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1 ‘‘(B) Subparagraph (A) shall not apply if an agency 

2 ordering a product specifies in writing that—

3 ‘‘(i) taking into account energy cost savings, no 

4 Energy Star product or FEMP designated product 

5 is cost-effective for the intended application over the 

6 life of the product; or 

7 ‘‘(ii) no Energy Star product or FEMP des8 ignated product is available to meet the functional 

9 requirements of the ordering agency. 

10 ‘‘(d) SPECIFIC PRODUCTS.—(1) In the case of an 

11 electric motor of 1 to 500 horsepower, an executive agency 

12 shall select only a premium efficient motor that meets the 

13 standard established by the Secretary under paragraph 

14 (2). 

15 ‘‘(2) Not later than 120 days after the date of enact16 ment of this subsection and after considering the rec17 ommendations of associated electric motor manufacturers 

18 and energy efficiency groups, the Secretary shall establish 

19 a standard for premium efficient motors. 

20 ‘‘(3)(A) Each Federal agency is encouraged to take 

21 actions (such as appropriate cleaning and maintenance) 

22 to maximize the efficiency of air conditioning and refrig23 eration equipment, including the use of a system treat24 ment or additive that—
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1 ‘‘(i) would reduce the electricity consumed by 

2 air conditioning and refrigeration equipment; and 

3 ‘‘(ii) meets the criteria specified in subpara4 graph (B). 

5 ‘‘(B) A system treatment or additive referred to in 

6 subparagraph (A) shall be—

7 ‘‘(i) determined by the Secretary to be effective 

8 in increasing the efficiency of air conditioning and 

9 refrigeration equipment without having an adverse 

10 impact on—

11 ‘‘(I) air conditioning and refrigeration per12 formance (including cooling capacity); or 

13 ‘‘(II) the useful life of the equipment; 

14 ‘‘(ii) determined by the Administrator of the 

15 Environmental Protection Agency to be environ16 mentally safe; and 

17 ‘‘(iii) shown, in tests conducted by the National 

18 Institute of Standards and Technology, in accord19 ance with Department of Energy test procedures, to 

20 increase the seasonal energy efficiency ratio (SEER) 

21 or energy efficiency ratio (EER) without having any 

22 adverse impact on the system, system components, 

23 the refrigerant or lubricant, or other materials in the 

24 system. 
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1 ‘‘(4) The results of the tests described in paragraph 

2 (3)(B)(iii) shall be published in the Federal Register for 

3 public review and comment. 

4 ‘‘(5) For purposes of this subsection, a hardware de5 vice or primary refrigerant shall not be considered an ad6 ditive. 

7 ‘‘(e) REGULATIONS.—Not later than 180 days after 

8 the date of enactment of this section, the Secretary shall 

9 issue guidelines to carry out this section.’’. 

10 (b) CONFORMING AMENDMENT.—The table of con11 tents of the National Energy Conservation Policy Act is 

12 amended—

13 (1) by redesignating the item relating to section 

14 551 as section 552; and 

15 (2) by inserting after the item relating to sec16 tion 550 the following:

‘‘551. Federal procurement of energy efficient products.’’.

17 SEC. 302. ENERGY SAVINGS PERFORMANCE CONTRACTS. 

18 (a) PERMANENT EXTENSION.—Effective September 

19 30, 2005, section 801 of the National Energy Conserva20 tion Policy Act (42 U.S.C. 8287) is amended by striking 

21 subsection (c). 

22 (b) PAYMENT OF COSTS.—Section 802 of the Na23 tional Energy Conservation Policy Act (42 U.S.C. 8287a) 

24 is amended by inserting ‘‘, water, or wastewater treat25 ment’’ after ‘‘payment of energy’’. 
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1 (c) ENERGY SAVINGS.—Section 804 of the National 

2 Energy Conservation Policy Act (42 U.S.C. 8287c) is 

3 amended by striking paragraph (2) and inserting the fol4 lowing: 

5 ‘‘(2) The term ‘energy savings’ means a reduc6 tion in the cost of energy, water, or wastewater 

7 treatment, from a base cost established through a 

8 methodology set forth in the contract, used in 1 or 

9 more existing federally owned buildings or other fed10 erally owned facilities as a result of—

11 ‘‘(A) the lease or purchase of operating 

12 equipment, improvements, altered operation and 

13 maintenance, or technical services; 

14 ‘‘(B) the increased efficient use of existing 

15 energy sources by cogeneration or heat recov16 ery, excluding any cogeneration process for 

17 other than a federally owned building or build18 ings or other federally owned facilities; or 

19 ‘‘(C) the increased efficient use of existing 

20 water sources in interior or exterior applica21 tions.’’. 

22 (d) ENERGY SAVINGS CONTRACT.—Section 804 of 

23 the National Energy Conservation Policy Act (42 U.S.C. 

24 8287c) is amended by striking paragraph (3) and insert25 ing the following: 
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1 ‘‘(3)(A) The terms ‘energy savings contract’ 

2 and ‘energy savings performance contract’ mean a 

3 contract that provides for the performance of serv4 ices for the design, acquisition, installation, testing, 

5 and, as appropriate, operation, maintenance, and re6 pair, of an identified energy or water conservation 

7 measure or series of measures at 1 or more loca8 tions. 

9 ‘‘(B) With respect to an agency facility that is 

10 a public building (as defined in section 3301 of title 

11 40, United States Code), a contract described in 

12 subparagraph (A) shall be in compliance with the 

13 prospectus requirements and procedures of section 

14 3307 of title 40, United States Code.’’. 

15 (e) ENERGY OR WATER CONSERVATION MEASURE.—

16 Section 804(4) of the National Energy Conservation Pol17 icy Act (42 U.S.C. 8287c(4)) is amended to read as fol18 lows: 

19 ‘‘(4) The term ‘energy or water conservation 

20 measure’ means—

21 ‘‘(A) an energy conservation measure (as 

22 defined in section 551); or 

23 ‘‘(B) a water conservation measure at a 

24 non-Federal hydroelectric facility that—
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1 ‘‘(i) improves the efficiency of water 

2 use; 

3 ‘‘(ii) is life-cycle cost-effective; and 

4 ‘‘(iii) involves—

5 ‘‘(I) water conservation, recy6 cling, or reuse; 

7 ‘‘(II) more efficient treatment of 

8 wastewater or stormwater; 

9 ‘‘(III) improvements in operation 

10 or maintenance efficiencies; 

11 ‘‘(IV) retrofit activities; or 

12 ‘‘(V) other related activities.’’. 

13 (f) REVIEW.—

14 (1) IN GENERAL.—Not later than 180 days 

15 after the date of enactment of this Act, the Sec16 retary of Energy shall complete a review of the en17 ergy savings performance contract program carried 

18 out under title VIII of the National Energy Con19 servation Policy Act (42 U.S.C. 8287 et seq.) to 

20 identify—

21 (A) statutory, regulatory, and administra22 tive obstacles that prevent Federal agencies 

23 from fully using the program; and 

24 (B) any areas for increasing program flexi25 bility and effectiveness, including—
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1 (i) audit and measurement verification 

2 requirements; 

3 (ii) accounting for energy use in de4 termining savings; 

5 (iii) contracting requirements, includ6 ing the identification of additional qualified 

7 contractors; and 

8 (iv) energy efficiency services covered. 

9 (2) REPORT.—The Secretary shall—

10 (A) submit to Congress a report that de11 scribes the findings of the Secretary under 

12 paragraph (1); and 

13 (B) to the extent that the changes are con14 sistent with statutory authority, implement the 

15 identified administrative and regulatory changes 

16 to increase program flexibility and effectiveness. 

17 (g) EXTENSION OF AUTHORITY.—Any energy sav18 ings performance contract entered into under section 801 

19 of the National Energy Conservation Policy Act (42 

20 U.S.C. 8287) after October 1, 2004, and before the date 

21 of enactment of this Act, shall be deemed to have been 

22 entered into under that section. 

23 SEC. 303. FEDERAL BUILDING PERFORMANCE STANDARDS. 

24 Section 305(a) of the Energy Conservation and Pro25 duction Act (42 U.S.C. 6834(a)) is amended—
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1 (1) in paragraph (2)(A), by striking ‘‘CABO 

2 Model Energy Code, 1992’’ and inserting ‘‘the 2003 

3 International Energy Conservation Code, as such 

4 Code (including supplements) is in effect on the date 

5 of the enactment of the Efficient Energy Through 

6 Certified Technologies and Electricity Reliability 

7 (EFFECTER) Act of 2005’’; and 

8 (2) by adding at the end the following: 

9 ‘‘(3)(A) Not later than 1 year after the date of enact10 ment of this paragraph, there shall be establish, by rule, 

11 revised Federal building energy efficiency performance 

12 standards that require that—

13 ‘‘(i) if life-cycle cost-effective for new Federal 

14 buildings—

15 ‘‘(I) the buildings be designed to achieve 

16 energy consumption levels that are at least 30 

17 percent below the levels established in the 

18 version of the ASHRAE Standard or the Inter19 national Energy Conservation Code, as appro20 priate, that is in effect as of the date of enact21 ment of this paragraph; and 

22 ‘‘(II) sustainable design principles are ap23 plied to the siting, design, and construction of 

24 all new and replacement buildings; and 
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1 ‘‘(ii) if water is used to achieve energy effi2 ciency, water conservation technologies shall be ap3 plied to the extent that the technologies are life-cycle 

4 cost-effective. 

5 ‘‘(B) Not later than 1 year after the date of approval 

6 of each subsequent revision of the ASHRAE Standard or 

7 the International Energy Conservation Code, as appro8 priate, the Secretary shall determine, based on the cost9 effectiveness of the requirements under the amendment, 

10 whether the revised standards established under this para11 graph should be updated to reflect the amendment. 

12 ‘‘(C) In the budget request of the Federal agency for 

13 each fiscal year and each report submitted by the Federal 

14 agency under section 548(a) of the National Energy Con15 servation Policy Act (42 U.S.C. 8258(a)), the head of each 

16 Federal agency shall include—

17 ‘‘(i) a list of all new Federal buildings owned, 

18 operated, or controlled by the Federal agency; and 

19 ‘‘(ii) a statement specifying whether the Federal 

20 buildings meet or exceed the revised standards es21 tablished under this paragraph.’’. 

22 TITLE IV—PUBLIC HOUSING 

23 SEC. 401. PUBLIC HOUSING CAPITAL FUND. 

24 Section 9 of the United States Housing Act of 1937 

25 (42 U.S.C. 1437g) is amended—
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1 (1) in subsection (d)(1)—

2 (A) in subparagraph (I), by striking ‘‘and’’ 

3 at the end; 

4 (B) in subparagraph (J), by striking the 

5 period at the end and inserting a semicolon; 

6 and 

7 (C) by adding at the end the following new 

8 subparagraphs: 

9 ‘‘(K) improvement of energy and water-use 

10 efficiency by installing fixtures and fittings that 

11 conform to the American Society of Mechanical 

12 Engineers/American National Standards Insti13 tute standards A112.19.2–1998 and 

14 A112.18.1–2000, or any revision thereto, appli15 cable at the time of installation, and by increas16 ing energy efficiency and water conservation by 

17 such other means as the Secretary determines 

18 are appropriate; and 

19 ‘‘(L) integrated utility management and 

20 capital planning to maximize energy conserva21 tion and efficiency measures.’’; and 

22 (2) in subsection (e)(2)(C)—

23 (A) by striking ‘‘The’’ and inserting the 

24 following: 

25 ‘‘(i) IN GENERAL.—The’’; and 
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1 (B) by adding at the end the following: 

2 ‘‘(ii) THIRD-PARTY CONTRACTS.—

3 Contracts described in clause (i) may in4 clude contracts for equipment conversions 

5 to less costly utility sources, projects with 

6 resident-paid utilities, and adjustments to 

7 frozen base year consumption, including 

8 systems repaired to meet applicable build9 ing and safety codes and adjustments for 

10 occupancy rates increased by rehabilita11 tion. 

12 ‘‘(iii) TERM OF CONTRACT.—The total 

13 term of a contract described in clause (i) 

14 shall not exceed 20 years to allow longer 

15 payback periods for retrofits, including 

16 windows, heating system replacements, 

17 wall insulation, site-based generation, ad18 vanced energy savings technologies, includ19 ing renewable energy generation, and other 

20 such retrofits.’’. 

21 SEC. 402. GRANTS FOR ENERGY-CONSERVING IMPROVE22 MENTS FOR ASSISTED HOUSING. 

23 Section 251(b)(1) of the National Energy Conserva24 tion Policy Act (42 U.S.C. 8231(1)) is amended—
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1 (1) by striking ‘‘financed with loans’’ and in2 serting ‘‘assisted’’; 

3 (2) by inserting after ‘‘1959,’’ the following: 

4 ‘‘which are eligible multifamily housing projects (as 

5 such term is defined in section 512 of the Multi6 family Assisted Housing Reform and Affordability 

7 Act of 1997 (42 U.S.C. 1437f note)) and are subject 

8 to mortgage restructuring and rental assistance suf9 ficiency plans under such Act,’’; and 

10 (3) by inserting after the period at the end of 

11 the first sentence the following new sentence: ‘‘Such 

12 improvements may also include the installation of 

13 energy and water conserving fixtures and fittings 

14 that conform to the American Society of Mechanical 

15 Engineers/American National Standards Institute 

16 standards A112.19.2–1998 and A112.18.1–2000, or 

17 any revision thereto, applicable at the time of instal18 lation.’’. 

19 SEC. 403. ENERGY-EFFICIENT APPLIANCES. 

20 In purchasing appliances, a public housing agency 

21 shall purchase energy-efficient appliances that are Energy 

22 Star products or FEMP-designated products, as such 

23 terms are defined in section 553 of the National Energy 

24 Conservation Policy Act (as amended by this subtitle), un-
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1 less the purchase of energy-efficient appliances is not cost2 effective to the agency. 

3 SEC. 404. ENERGY EFFICIENCY STANDARDS. 

4 Section 109 of the Cranston-Gonzalez National Af5 fordable Housing Act (42 U.S.C. 12709) is amended—

6 (1) in subsection (a)—

7 (A) in paragraph (1)—

8 (i) by striking ‘‘1 year after the date 

9 of the enactment of the Energy Policy Act 

10 of 1992’’ and inserting ‘‘September 30, 

11 2005’’; 

12 (ii) in subparagraph (A), by striking 

13 ‘‘and’’ at the end; 

14 (iii) in subparagraph (B), by striking 

15 the period at the end and inserting ‘‘; 

16 and’’; and 

17 (iv) by adding at the end the fol18 lowing: 

19 ‘‘(C) rehabilitation and new construction of 

20 public and assisted housing funded by HOPE 

21 VI revitalization grants under section 24 of the 

22 United States Housing Act of 1937 (42 U.S.C. 

23 1437v), where such standards are determined 

24 to be cost effective by the Secretary of Housing 

25 and Urban Development.’’; and 
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1 (B) in paragraph (2), by striking ‘‘Council 

2 of American’’ and all that follows through 

3 ‘‘90.1–1989’)’’ and inserting ‘‘2003 Inter4 national Energy Conservation Code, as such 

5 Code (including supplements) is in effect on the 

6 date of the enactment of the Efficient Energy 

7 Through Certified Technologies and Electricity 

8 Reliability (EFFECTER) Act of 2005’’; 

9 (2) in subsection (b)—

10 (A) by striking ‘‘within 1 year after the 

11 date of the enactment of the Energy Policy Act 

12 of 1992’’ and inserting ‘‘by September 30, 

13 2005’’; and 

14 (B) by striking ‘‘CABO’’ and all that fol15 lows through ‘‘1989’’ and inserting ‘‘2003 

16 International Energy Conservation Code, as 

17 such Code (including supplements) is in effect 

18 on the date of the enactment of the Efficient 

19 Energy Through Certified Technologies and 

20 Electricity Reliability (EFFECTER) Act of 

21 2005’’; and 

22 (3) in subsection (c)—

23 (A) in the heading, by striking ‘‘Model En24 ergy Code’’ and inserting ‘‘The International 

25 Energy Conservation Code’’; and 
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1 (B) by striking ‘‘CABO’’ and all that fol2 lows through ‘‘1989’’ and inserting ‘‘the 2003 

3 International Energy Conservation Code, as 

4 such Code (including supplements) is in effect 

5 on the date of the enactment of the Efficient 

6 Energy Through Certified Technologies and 

7 Electricity Reliability (EFFECTER) Act of 

8 2005’’. 

9 TITLE V—RELIABILITY 

10 STANDARDS 

11 SEC. 501. ELECTRIC RELIABILITY STANDARDS. 

12 (a) IN GENERAL.—Part II of the Federal Power Act 

13 (16 U.S.C 824 et seq.) is amended by adding at the end 

14 the following: 

15 ‘‘SEC. 215. ELECTRIC RELIABILITY. 

16 ‘‘(a) DEFINITIONS.—In this section: 

17 ‘‘(1)(A) The term ‘bulk-power system’ means—

18 ‘‘(i) facilities and control systems necessary 

19 for operating an interconnected electric energy 

20 transmission network (or any portion thereof); 

21 and 

22 ‘‘(ii) electric energy from generation facili23 ties needed to maintain transmission system re24 liability. 
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1 ‘‘(B) The term ‘bulk-power system’ does not in2 clude facilities used in the local distribution of elec3 tric energy. 

4 ‘‘(2) The terms ‘Electric Reliability Organiza5 tion’ and ‘ERO’ mean the organization certified by 

6 the Commission under subsection (c) the purpose of 

7 which is to establish and enforce reliability stand8 ards for the bulk-power system, subject to Commis9 sion review. 

10 ‘‘(3) The term ‘interconnection’ means a geo11 graphic area in which the operation of bulk-power 

12 system components is synchronized such that the 

13 failure of 1 or more of such components may ad14 versely affect the ability of the operators of other 

15 components within the system to maintain reliable 

16 operation of the facilities within their control. 

17 ‘‘(4) The term ‘regional entity’ means an entity 

18 having enforcement authority pursuant to subsection 

19 (e)(4). 

20 ‘‘(5)(A) The term ‘reliability standard’ means a 

21 requirement, approved by the Commission under this 

22 section, to provide for reliable operation of the bulk23 power system. 

24 ‘‘(B) The term ‘reliability standard’ includes re25 quirements for the operation of existing bulk-power 
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1 system facilities and the design of planned additions 

2 or modifications to those facilities to the extent nec3 essary to provide for reliable operation of the bulk4 power system. 

5 ‘‘(C) The term ‘reliability standard’ does not in6 clude any requirement to enlarge a facility described 

7 in subparagraph (B) or to construct new trans8 mission capacity or generation capacity. 

9 ‘‘(6) The term ‘reliable operation’ means oper10 ating the elements of the bulk-power system within 

11 equipment and electric system thermal, voltage, and 

12 stability limits so that instability, uncontrolled sepa13 ration, or cascading failures of such system will not 

14 occur as a result of a sudden disturbance or unan15 ticipated failure of system elements. 

16 ‘‘(7) The term ‘transmission organization’ 

17 means a regional transmission organization, inde18 pendent system operator, independent transmission 

19 provider, or other transmission organization finally 

20 approved by the Commission for the operation of 

21 transmission facilities. 

22 ‘‘(b) JURISDICTION AND APPLICABILITY.—(1)(A) 

23 The Commission shall have jurisdiction, within the United 

24 States, over the ERO certified by the Commission under 

25 subsection (c), any regional entities, and all users, owners 
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1 and operators of the bulk-power system, including the en2 tities described in section 201(f), for purposes of approv3 ing reliability standards established under this section and 

4 enforcing compliance with this section. 

5 ‘‘(B) All users, owners, and operators of the bulk6 power system shall comply with reliability standards that 

7 take effect under this section. 

8 ‘‘(2) Not later than 180 days after the date of enact9 ment of this section, the Commission shall issue a final 

10 rule to implement this section. 

11 ‘‘(c) CERTIFICATION.—(1) Following the issuance of 

12 a Commission rule under subsection (b)(2), any person 

13 may submit an application to the Commission for certifi14 cation as the Electric Reliability Organization. 

15 ‘‘(2) The Commission may certify an ERO described 

16 in paragraph (1) if the Commission determines that the 

17 ERO—

18 ‘‘(A) has the ability to develop and enforce, sub19 ject to subsection (e)(2), reliability standards that 

20 provide for an adequate level of reliability of the 

21 bulk-power system; and 

22 ‘‘(B) has established rules that—

23 ‘‘(i) ensure the independence of the ERO 

24 from the users and owners and operators of the 

25 bulk-power system, while ensuring fair stake-
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1 holder representation in the selection of direc2 tors of the ERO and balanced decisionmaking 

3 in any ERO committee or subordinate organiza4 tional structure; 

5 ‘‘(ii) allocate equitably reasonable dues, 

6 fees, and other charges among end users for all 

7 activities under this section; 

8 ‘‘(iii) provide fair and impartial procedures 

9 for enforcement of reliability standards through 

10 the imposition of penalties in accordance with 

11 subsection (e) (including limitations on activi12 ties, functions, or operations, or other appro13 priate sanctions); 

14 ‘‘(iv) provide for reasonable notice and op15 portunity for public comment, due process, 

16 openness, and balance of interests in developing 

17 reliability standards and otherwise exercising 

18 the duties of the ERO; and 

19 ‘‘(v) provide for taking, after certification, 

20 appropriate steps to gain recognition in Canada 

21 and Mexico. 

22 ‘‘(d) RELIABILITY STANDARDS.—(1) The Electric 

23 Reliability Organization shall file each reliability standard 

24 or modification to a reliability standard that the Electric 
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1 Reliability Organization proposes to be made effective 

2 under this section with the Commission. 

3 ‘‘(2)(A) The Commission may approve, by rule or 

4 order, a proposed reliability standard or modification to 

5 a reliability standard if the Commission determines that 

6 the standard is just, reasonable, not unduly discriminatory 

7 or preferential, and in the public interest. 

8 ‘‘(B) The Commission—

9 ‘‘(i) shall give due weight to the technical exper10 tise of the Electric Reliability Organization with re11 spect to the content of a proposed standard or modi12 fication to a reliability standard and to the technical 

13 expertise of a regional entity organized on an inter14 connection-wide basis with respect to a reliability 

15 standard to be applicable within that interconnec16 tion; but 

17 ‘‘(ii) shall not defer with respect to the effect of 

18 a standard on competition. 

19 ‘‘(C) A proposed standard or modification shall take 

20 effect upon approval by the Commission. 

21 ‘‘(3) The Electric Reliability Organization shall 

22 rebuttably presume that a proposal from a regional entity 

23 organized on an interconnection-wide basis for a reliability 

24 standard or modification to a reliability standard to be ap25 plicable on an interconnection-wide basis is just, reason-
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1 able, and not unduly discriminatory or preferential, and 

2 in the public interest. 

3 ‘‘(4) The Commission shall remand to the Electric 

4 Reliability Organization for further consideration a pro5 posed reliability standard or a modification to a reliability 

6 standard that the Commission disapproves in whole or in 

7 part. 

8 ‘‘(5) The Commission, upon a motion of the Commis9 sion or upon complaint, may order the Electric Reliability 

10 Organization to submit to the Commission a proposed reli11 ability standard or a modification to a reliability standard 

12 that addresses a specific matter if the Commission con13 siders such a new or modified reliability standard appro14 priate to carry out this section. 

15 ‘‘(6)(A) The final rule adopted under subsection 

16 (b)(2) shall include fair processes for the identification 

17 and timely resolution of any conflict between a reliability 

18 standard and any function, rule, order, tariff, rate sched19 ule, or agreement accepted, approved, or ordered by the 

20 Commission applicable to a transmission organization. 

21 ‘‘(B) The transmission organization shall continue to 

22 comply with such function, rule, order, tariff, rate sched23 ule, or agreement as is accepted, approved, or ordered by 

24 the Commission until—
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1 ‘‘(i) the Commission finds a conflict exists be2 tween a reliability standard and any such provision; 

3 ‘‘(ii) the Commission orders a change to the 

4 provision pursuant to section 206; and 

5 ‘‘(iii) the ordered change becomes effective 

6 under this part. 

7 ‘‘(C) If the Commission determines that a reliability 

8 standard needs to be changed as a result of such a con9 flict, the Commission shall order the ERO to develop and 

10 file with the Commission a modified reliability standard 

11 under paragraph (4) or (5). 

12 ‘‘(e) ENFORCEMENT.—(1) Subject to paragraph (2), 

13 the ERO may impose a penalty on a user or owner or 

14 operator of the bulk-power system for a violation of a reli15 ability standard approved by the Commission under sub16 section (d) if the ERO, after notice and an opportunity 

17 for a hearing—

18 ‘‘(A) finds that the user or owner or operator 

19 has violated a reliability standard approved by the 

20 Commission under subsection (d); and 

21 ‘‘(B) files notice and the record of the pro22 ceeding with the Commission. 

23 ‘‘(2)(A) A penalty imposed under paragraph (1) may 

24 take effect not earlier than the 31st day after the date 
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1 on which the ERO files with the Commission notice of the 

2 penalty and the record of proceedings. 

3 ‘‘(B) The penalty shall be subject to review by the 

4 Commission upon—

5 ‘‘(i) a motion by the Commission; or 

6 ‘‘(ii) application by the user, owner, or operator 

7 that is the subject of the penalty filed not later than 

8 30 days after the date on which the notice is filed 

9 with the Commission. 

10 ‘‘(C) Application to the Commission for review, or the 

11 initiation of review by the Commission upon a motion of 

12 the Commission, shall not operate as a stay of the penalty 

13 unless the Commission orders otherwise upon a motion of 

14 the Commission or upon application by the user, owner, 

15 or operator that is the subject of the penalty. 

16 ‘‘(D) In any proceeding to review a penalty imposed 

17 under paragraph (1), the Commission, after notice and op18 portunity for hearing (which hearing may consist solely 

19 of the record before the ERO and opportunity for the 

20 presentation of supporting reasons to affirm, modify, or 

21 set aside the penalty), shall by order affirm, set aside, re22 instate, or modify the penalty, and, if appropriate, remand 

23 to the ERO for further proceedings. 

24 ‘‘(E) The Commission shall implement expedited pro25 cedures for hearings described in subparagraph (D). 
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1 ‘‘(3) Upon a motion of the Commission or upon com2 plaint, the Commission may order compliance with a reli3 ability standard and may impose a penalty against a user 

4 or owner or operator of the bulk-power system if the Com5 mission finds, after notice and opportunity for a hearing, 

6 that the user or owner or operator of the bulk-power sys7 tem has engaged or is about to engage in any act or prac8 tice that constitutes or will constitute a violation of a reli9 ability standard. 

10 ‘‘(4)(A) The Commission shall issue regulations au11 thorizing the ERO to enter into an agreement to delegate 

12 authority to a regional entity for the purpose of proposing 

13 reliability standards to the ERO and enforcing reliability 

14 standards under paragraph (1) if—

15 ‘‘(i) the regional entity is governed by an inde16 pendent board, a balanced stakeholder board, or a 

17 combination of an independent and balanced stake18 holder board; 

19 ‘‘(ii) the regional entity otherwise meets the re20 quirements of paragraphs (1) and (2) of subsection 

21 (c); and 

22 ‘‘(iii) the agreement promotes effective and effi23 cient administration of bulk-power system reliability. 

24 ‘‘(B) The Commission may modify a delegation under 

25 this paragraph. 
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1 ‘‘(C) The ERO and the Commission shall rebuttably 

2 presume that a proposal for delegation to a regional entity 

3 organized on an interconnection-wide basis promotes effec4 tive and efficient administration of bulk-power system reli5 ability and should be approved. 

6 ‘‘(D) The regulations issued under this paragraph 

7 may provide that the Commission may assign the author8 ity of the ERO to enforce reliability standards under para9 graph (1) directly to a regional entity in accordance with 

10 this paragraph. 

11 ‘‘(5) The Commission may take such action as the 

12 Commission determines to be appropriate against the 

13 ERO or a regional entity to ensure compliance with a reli14 ability standard or any Commission order affecting the 

15 ERO or a regional entity. 

16 ‘‘(6) Any penalty imposed under this section shall 

17 bear a reasonable relation to the seriousness of the viola18 tion and shall take into consideration the efforts of the 

19 user, owner, or operator to remedy the violation in a time20 ly manner. 

21 ‘‘(f) CHANGES IN ELECTRIC RELIABILITY ORGANIZA22 TION RULES.—(1) The Electric Reliability Organization 

23 shall file with the Commission for approval any proposed 

24 rule or proposed rule change, accompanied by an expla-
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1 nation of the basis and purpose of the rule and proposed 

2 rule change. 

3 ‘‘(2) The Commission, upon a motion of the Commis4 sion or upon complaint, may propose a change to the rules 

5 of the ERO. 

6 ‘‘(3) A proposed rule or proposed rule change shall 

7 take effect upon a finding by the Commission, after notice 

8 and opportunity for comment, that the change is just, rea9 sonable, not unduly discriminatory or preferential, is in 

10 the public interest, and meets the requirements of sub11 section (c). 

12 ‘‘(g) RELIABILITY REPORTS.—The ERO shall con13 duct periodic assessments of the reliability and adequacy 

14 of the bulk-power system in North America. 

15 ‘‘(h) COORDINATION WITH CANADA AND MEXICO.—

16 The President is urged to negotiate international agree17 ments with the governments of Canada and Mexico to pro18 vide for effective compliance with reliability standards and 

19 the effectiveness of the ERO in the United States and 

20 Canada or Mexico. 

21 ‘‘(i) SAVINGS PROVISIONS.—(1) The ERO may de22 velop and enforce compliance with reliability standards for 

23 only the bulk-power system. 

24 ‘‘(2) Nothing in this section authorizes the ERO or 

25 the Commission to order the construction of additional 
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1 generation or transmission capacity or to set and enforce 

2 compliance with standards for adequacy or safety of elec3 tric facilities or services. 

4 ‘‘(3) Nothing in this section preempts any authority 

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

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

7 as such action is not inconsistent with any reliability 

8 standard. 

9 ‘‘(4) Not later than 90 days after the date of applica10 tion of the Electric Reliability Organization or other af11 fected party, and after notice and opportunity for com12 ment, the Commission shall issue a final order deter13 mining whether a State action is inconsistent with a reli14 ability standard, taking into consideration any rec15 ommendation of the ERO. 

16 ‘‘(5) The Commission, after consultation with the 

17 ERO and the State taking action, may stay the effective18 ness of any State action, pending the issuance by the Com19 mission of a final order. 

20 ‘‘(j) REGIONAL ADVISORY BODIES.—(1) The Com21 mission shall establish a regional advisory body on the petition of at least 2 22 ⁄3 of the States within a region that have 

more than 1 23 ⁄2 of the electric load of the States served with24 in the region. 

25 ‘‘(2) A regional advisory body—
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1 ‘‘(A) shall be composed of 1 member from each 

2 participating State in the region, appointed by the 

3 Governor of the State; and 

4 ‘‘(B) may include representatives of agencies, 

5 States, and provinces outside the United States. 

6 ‘‘(3) A regional advisory body may provide advice to 

7 the Electric Reliability Organization, a regional entity, or 

8 the Commission regarding—

9 ‘‘(A) the governance of an existing or proposed 

10 regional entity within the same region; 

11 ‘‘(B) whether a standard proposed to apply 

12 within the region is just, reasonable, not unduly dis13 criminatory or preferential, and in the public inter14 est; 

15 ‘‘(C) whether fees proposed to be assessed with16 in the region are just, reasonable, not unduly dis17 criminatory or preferential, and in the public inter18 est; and 

19 ‘‘(D) any other responsibilities requested by the 

20 Commission. 

21 ‘‘(4) The Commission may give deference to the ad22 vice of a regional advisory body if that body is organized 

23 on an interconnection-wide basis. 

24 ‘‘(k) ALASKA AND HAWAII.—This section does not 

25 apply to Alaska or Hawaii.’’. 
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1 (b) STATUS OF ERO.—The Electric Reliability Orga2 nization certified by the Federal Energy Regulatory Com3 mission under section 215(c) of the Federal Power Act 

4 (as added by subsection (a)) and any regional entity dele5 gated enforcement authority pursuant to section 215(e)(4) 

6 of that Act (as so added) are not departments, agencies, 

7 or instrumentalities of the United States Government.

Æ