I

107TH CONGRESS

1ST SESSION H. R. 1045

To lower energy costs to consumers, increase electric system reliability and

provide environmental improvements, through the rapid deployment of

distributed energy resources, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 15, 2001

Mrs. WILSON (for herself, Mr. HUNTER, and Mr. ISSA) 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

Science, 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 lower energy costs to consumers, increase electric system

reliability and provide environmental improvements,

through the rapid deployment of distributed energy resources, and for other purposes.

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.

4 This Act may be cited as the ‘‘Energy Self-Suffi5 ciency Act for the 21st Century’’.
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1 SEC. 2. FINDINGS AND PURPOSES.

2 (a) FINDINGS.—The Congress finds that:

3 (1) The greater deployment of distributed en4 ergy resources can help alleviate bottlenecks and de5 ficiencies in the nation’s energy production and de6 livery system, and improve power quality and reli7 ability, while bringing more efficient and environ8 mentally responsible energy resources into the main9 stream.

10 (2) The United States needs to ensure the

11 rapid deployment of new power generation tech12 nologies in order to meet the growing demand for

13 electricity in the ‘new economy,’ while at the same

14 time paying careful attention to improving energy ef15 ficiency and reducing pollution from energy produc16 tion.

17 (3) The United States is poised to be a world

18 leader in the design and manufacture of distributed

19 energy resources technology.

20 (4) The current regulatory environment serves

21 as a disincentive to the deployment of distributed en22 ergy resources in many parts of the country, due to

23 the lack of consistent policies and procedures for the

24 interconnection of distributed energy resources to

25 the local electric grid.
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1 (5) Existing tax treatment of distributed energy

2 resources also creates difficulties for the installation

3 of these technologies.

4 (6) The Federal Government needs a more co5 ordinated program for research, development and

6 demonstration of distributed energy resources.

7 (b) PURPOSES.—The purposes of this Act are to

8 lower energy costs to consumers, increase electric system

9 reliability, create a more diverse and robust energy net10 work, and provide energy efficiency and environmental im11 provements, through the rapid development and deploy12 ment of distributed energy resources.

13 TITLE I—INTERCONNECTION OF

14 LOCAL DISTRIBUTION FACILI15 TIES

16 SEC. 101. INTERCONNECTION OF LOCAL DISTRIBUTION FA17 CILITIES.

18 Section 210 of the Federal Power Act is amended by

19 adding the following at the end thereof:

20 ‘‘(f) SPECIAL RULE FOR DISTRIBUTED GENERA21 TION.—

22 ‘‘(1) DEFINITIONS.—As used in this subsection:

23 ‘‘(A) UTILITY DISTRIBUTION COMPANY.—

24 The term ‘utility distribution company’ means
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1 any entity which owns, controls, or operates, for

2 public use, local utility distribution facilities.

3 ‘‘(B) LOCAL UTILITY DISTRIBUTION FA4 CILITIES.—The term ‘local utility distribution

5 facilities’ means any facilities used for the local

6 distribution of electric energy. Such term does

7 not include any facilities determined by the

8 Commission to be transmission facilities subject

9 to the jurisdiction of the Commission under sec10 tion 201.

11 ‘‘(C) DISTRIBUTED GENERATION FACIL12 ITY.—The term ‘distributed generation facility’

13 means an electric power generation facility that

14 is designed to serve retail electric consumers at

15 or near the facility site and interconnect with

16 local utility distribution facilities.

17 ‘‘(2) INTERCONNECTION.—A utility distribution

18 company shall interconnect its local utility distribu19 tion facilities with, and provide service to, a distrib20 uted generation facility, if the distributed generation

21 facility owner or operator complies with the final

22 rule promulgated under paragraph (3) and pays the

23 costs directly related to such interconnection and

24 service, as determined by the Commission. The

25 costs, terms and conditions of such interconnection
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1 and subsequent service shall be just, reasonable and

2 non-discriminatory, as determined by the Commis3 sion.

4 ‘‘(3) RULES.—Within one year after the date of

5 enactment of this subsection, the Commission shall

6 promulgate a final rule to establish safety, reli7 ability, and power quality standards relating to dis8 tributed generation facilities. To the extent feasible,

9 the Commission shall develop the standards through

10 a process involving interested parties. For purposes

11 of developing such standards, the Commission shall

12 establish an advisory committee composed of quali13 fied experts to make recommendations to the Com14 mission.’’.

15 TITLE II—TAX INCENTIVES FOR

16 DISTRIBUTED ENERGY RE17 SOURCES

18 SEC. 201. TAX INCENTIVES FOR DISTRIBUTED ENERGY RE19 SOURCES.

20 (a) AMENDMENT OF 1986 CODE.—Except as other21 wise expressly provided, whenever in this title an amend22 ment or repeal is expressed in terms of an amendment

23 to, or repeal of, a section or other provision, the reference

24 shall be considered to be made to a section or other provi25 sion of Internal Revenue Code of 1986.
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1 (b) IN GENERAL.—Section 48(a)(3) of the Internal

2 Revenue Code of 1986 (defining energy property) is

3 amended by inserting before the last sentence the fol4 lowing: ‘‘The term ‘energy property’ includes distributed

5 power property or combined heat and power system prop6 erty, but only if the requirements of subparagraphs (B)

7 and (C) are met with respect to the property.’’.

8 (c) DEFINITIONS.—Subsection (a) of section 48 of

9 the Internal Revenue Code of 1986 (related to the energy

10 credit) is amended by adding at the end the following new

11 paragraphs:

12 ‘‘(6) DISTRIBUTED POWER PROPERTY.—The

13 term ‘distributed power property’ means property—

14 ‘‘(A) which is used in the generation of

15 electricity for primary use—

16 ‘‘(i) in nonresidential real or residen17 tial rental property used in the taxpayer’s

18 trade or business;

19 ‘‘(ii) in the taxpayer’s industrial man20 ufacturing process or plant activity,

21 ‘‘(B) which may also produce usable ther22 mal energy or mechanical power for use in heat23 ing or cooling application, but only if at least

24 40 percent of the total useful energy produced

25 consists of—
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1 ‘‘(i) with respect to assets described in

2 subparagraph (A)(i), electrical power

3 (whether sold or used by the taxpayer), or

4 ‘‘(ii) with respect to assets described

5 in subparagraph (A)(ii), electrical power

6 (whether sold or used by the taxpayer) and

7 thermal or mechanical energy used in the

8 taxpayer’s industrial manufacturing proc9 ess or plant activity,

10 ‘‘(C) which is not used to transport pri11 mary fuel to the generating facility or to dis12 tribute energy within or outside of the facility,

13 and

14 ‘‘(D) if it is reasonably expected that not

15 more than 50 percent of the produced elec16 tricity will be sold to, or used by, unrelated per17 sons.

18 ‘‘(7) COMBINED HEAT AND POWER SYSTEM

19 PROPERTY.—For purposes of this subsection—

20 ‘‘(A) COMBINED HEAT AND POWER SYS21 TEM PROPERTY.—The term ‘combined heat and

22 power system property’ means property com23 prising a system—

24 ‘‘(i) which uses the same energy

25 source for the simultaneous or sequential
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1 generation of electrical power, mechanical

2 shaft power, or both, in combination with

3 the generation of steam or other forms of

4 useful thermal energy (including heating

5 and cooling applications),

6 ‘‘(ii) which has an electrical capacity

7 of more than 50 kilowatts or a mechanical

8 energy capacity of more than 67 horse9 power or an equivalent combination of elec10 trical and mechanical energy capacities,

11 ‘‘(iii) which produces—

12 ‘‘(I) at least 20 percent of its

13 total useful energy in the form of

14 thermal energy, and

15 ‘‘(II) at least 20 percent of its

16 total useful energy in the form of elec17 trical or mechanical power (or com18 bination thereof), and

19 ‘‘(iv) the energy efficiency percentage

20 of which exceeds 60 percent (70 percent in

21 the case of a system with an electrical ca22 pacity in excess of 50 megawatts or a me23 chanical energy capacity in excess of

24 67,000 horsepower, or an equivalent com-
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1 bination of electrical and mechanical en2 ergy capacities).

3 ‘‘(B) SPECIAL RULES.—

4 ‘‘(i) ENERGY EFFICIENCY PERCENT5 AGE.—For purposes of subparagraph

6 (A)(iv), the energy efficiency percentage of

7 a system is the fraction—

8 ‘‘(I) the numerator of which is

9 the total useful electrical, thermal,

10 and mechanical power produced by

11 the system at normal operating rates,

12 and

13 ‘‘(II) the denominator of which is

14 the lower heating value of the primary

15 fuel source for the system.

16 ‘‘(ii) DETERMINATIONS MADE ON BTU

17 BASIS.—The energy efficiency percentage

18 and the percentages under subparagraph

19 (A)(iii) shall be determined on a Btu basis.

20 ‘‘(iii) INPUT AND OUTPUT PROPERTY

21 NOT INCLUDED.—The term ‘combined heat

22 and power system property’ does not in23 clude property used to transport the en24 ergy source to the facility or to distribute

25 energy produced by the facility.
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1 ‘‘(iv) PUBLIC UTILITY PROPERTY.—

2 ‘‘(I) ACCOUNTING RULE FOR

3 PUBLIC UTILITY PROPERTY.—If the

4 combined heat and power system

5 property is public utility property (as

6 defined in section 46(f)(5) as in effect

7 on the day before the date of enact8 ment of the Revenue Reconciliation

9 Act of 1990), the taxpayer may only

10 claim the credit under the subsection

11 if, with respect to such property, the

12 taxpayer uses a normalization method

13 of accounting.

14 ‘‘(II) CERTAIN EXCEPTION NOT

15 TO APPLY.—The matter in paragraph

16 (3) which follows subparagraph (D)

17 shall not apply to combined heat and

18 power system property.’’.

19 (d) NO CARRYBACK OF ENERGY CREDIT BEFORE

20 EFFECTIVE DATE.—Subsection (d) of section 39 is

21 amended by adding at the end the following new para22 graph:

23 ‘‘(10) NO CARRYBACK OF ENERGY CREDIT BE24 FORE EFFECTIVE DATE.—No portion of the unused

25 business credit for any taxable year which is attrib-
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1 utable to the portion of the energy credit described

2 in paragraph (6) or (7) of section 48(a) may be car3 ried back to a taxable year ending before the date

4 of the enactment of this paragraph.’’.

5 (e) DEPRECIATION.—Subparagraph (C) of section

6 168(e)(3) (relating to classification of certain property as

7 7-year property) is amended by redesignating clause (ii)

8 as clause (iii) and by inserting after clause (i) the fol9 lowing new clause:

10 ‘‘(ii) any distributed power property

11 (as defined in section 48(a)) or combined

12 heat and power system property (as de13 fined in such section), and’’.

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

15 this title shall apply to property placed in service after

16 December 31, 2000.

17 TITLE III—RESEARCH AND DE18 VELOPMENT OF NEW DIS19 TRIBUTED ENERGY RE20 SOURCE TECHNOLOGIES

21 SEC. 301. RESEARCH AND DEVELOPMENT OF NEW DISTRIB22 UTED ENERGY RESOURCE TECHNOLOGIES.

23 (a) IN GENERAL.—The Secretary of Energy shall de24 velop and implement an accelerated comprehensive and co25 operative program of research and development to ensure
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1 the reliability, efficiency and environmental responsibility

2 of Distributed Energy Resources (hereafter in this section

3 referred to as ‘‘DER’’). This research and development

4 program shall include Advanced Energy Technologies De5 velopment, Advanced Energy Systems Development, Ad6 vanced Grid Reliability Technologies development and

7 Technology Transfer and Education.

8 (b) PURPOSES.—The cooperative research program

9 shall promote and accelerate research and development for

10 the following purposes:

11 (1) Ensure long-term safety, reliability, and

12 service for DER.

13 (2) Expand the capability of DER to be safely,

14 reliably, and with integrity connected to the distribu15 tion electric grid.

16 (3) Improve the non-renewable technologies

17 ability to reduce fossil fuel consumption.

18 (4) Minimize the environmental impact of DER

19 technologies.

20 (5) Provide highly secure interface systems for

21 command, control, and communication of DER tech22 nologies with the electrical grid.

23 (6) Develop technologies that advance and en24 hance the electrical transmission and distribution

25 grid.
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1 (7) Develop integration techniques and meth2 odologies that enhance the electric grid’s perform3 ance.

4 (c) AREAS.—(1) In carrying out this act, the Sec5 retary of Energy shall consider research and development

6 on DER, Advanced Systems Development, and Advanced

7 Electrical Grid reliability for each of the following:

8 (A) Significant advancement in efficiency for

9 Distributed Power Prime Movers.

10 (B) Significant advancement in efficiency for

11 thermally activated technologies.

12 (C) Significant advancement in reduction of en13 vironmental impact deploying pollution prevention

14 enabling technologies

15 (2) The program should include the following areas:

16 (A) Interconnection standards, protocols, and

17 equipment.

18 (B) Microturbines.

19 (C) Fuel cells.

20 (D) Combined heat and power systems.

21 (E) Advanced internal combustion engine gen22 erators.

23 (F) Advanced natural gas turbines.

24 (G) Energy storage devices.
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1 (H) Ancillary equipment for dispatch and con2 trol.

3 (d) POINTS OF CONTACT.—

4 (1) IN GENERAL.—To coordinate and imple5 ment the research and development programs and

6 activities authorized under this Act—

7 (A) the Secretary of Energy shall des8 ignate, as the point of contact for the Depart9 ment of Energy, an officer of the Department

10 of Energy who has been appointed by the Presi11 dent and confirmed by the Senate; and

12 (B) the Administrator of the Environ13 mental Protection Agency shall designate, as

14 the point of contact for the Environmental Pro15 tection Agency, an officer of the Environmental

16 Protection Agency.

17 (2) DUTIES.—The point of contact for the De18 partment of Energy shall have the primary responsi19 bility for coordinating and overseeing the implemen20 tation of the research, development, and field evalua21 tion program plan. The point of contact for the En22 vironment Protection Agency shall have the respon23 sibility for coordinating the Environmental Protec24 tion Agency’s input to the research, development

25 and field evaluation of those elements of the pro-
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1 gram that impact the directive of the Agency under

2 the Clean Air Act. The primary point of contact

3 shall be responsible in arranging cooperative agree4 ments for research, development and Field evalua5 tion involving respective departments, national lab6 oratories, universities, industry research organiza7 tions and industry.

8 (3) RESEARCH AND DEVELOPMENT PROGRAM

9 PLAN.—Within 120 days after the date of enactment

10 of this Act, the Secretary of Energy shall prepare

11 and submit to Congress a 6-year program plan to

12 guide activities under this Act. In preparing the pro13 gram plan, the Secretary shall consult with appro14 priate representatives of the DER industry to select

15 and prioritize appropriate project proposals. The

16 Secretary may also seek the advice of utilities, en17 ergy services providers, manufacturers, institutions

18 of higher learning, Federal agencies, national labora19 tories, State energy officials, State regulatory offi20 cials, environmental organizations, and professional

21 and technical societies. In order to ensure that tech22 nologies are readily adopted by private entities, the

23 Secretary shall create cost-sharing programs with

24 private entities.

25 (e) IMPLEMENTATION.—
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1 (1) REPORT TO CONGRESS.—Two years after

2 the enactment of this Act and at two year intervals

3 thereafter, the Secretary, jointly with the Adminis4 trator of the Environmental Protection Agency, shall

5 submit a report to Congress describing the progress

6 made to achieve the purposes of this Act and identi7 fying any additional resources needed to continue

8 the rapid development and deployment of DER.

9 (2) AUTHORIZATION OF APPROPRIATIONS.—

10 (A) There are authorized to be appro11 priated to the Secretary of Energy for carrying

12 out this Act $236,000,000, for each of the fis13 cal years 2002 through 2007.

14 (B) There are authorized to be appro15 priated to the Administrator of the Environ16 mental Protection Agency for carrying out this

17 Act such sums as may be necessary for each of

18 the fiscal years 2002 through 2007.

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