I

107TH CONGRESS

1ST SESSION H. R. 1945

To amend the Federal Power Act and the Internal Revenue Code of 1986

to encourage the development and deployment of innovative and efficient

energy technologies.

IN THE HOUSE OF REPRESENTATIVES

MAY 22, 2001

Mr. QUINN (for himself, Mr. MEEHAN, and Mr. DOYLE) introduced the following bill; which was referred to the Committee on Ways and Means,

and in addition to the Committee on Energy and Commerce, 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 amend the Federal Power Act and the Internal Revenue

Code of 1986 to encourage the development and deployment of innovative and efficient energy technologies.

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 ‘‘Combined Heat and Power Advancement Act of 2001’’.

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

7 this Act is as follows:
2

•HR 1945 IH

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Purpose.

TITLE I—INTERCONNECTION

Sec. 101. Interconnection.

TITLE II—INVESTMENT TAX CREDIT FOR COMBINED HEAT AND

POWER SYSTEMS

Sec. 201. Investment tax credit for combined heat and power systems.

1 SEC. 2. FINDINGS.

2 Congress finds that—

3 (1) the removal of barriers to the development

4 and deployment of combined heat and power tech5 nologies and systems, an example of an array of in6 novative energy-supply and energy-efficient tech7 nologies and systems, would—

8 (A) encourage technological innovation;

9 (B) reduce energy prices;

10 (C) spur economic development;

11 (D) enhance productivity;

12 (E) increase employment; and

13 (F) improve environmental quality and en14 ergy self-sufficiency;

15 (2) the level of efficiency of the United States

16 electricity-generating system has been stagnant over

17 the past several decades;

18 (3) technologies and systems available as of the

19 date of enactment of this Act, including a host of in-
3

•HR 1945 IH

1 novative onsite, distributed generation technologies,

2 could—

3 (A) dramatically increase productivity;

4 (B) double the efficiency of the United

5 States electricity-generating system; and

6 (C) reduce emissions of regulated pollut7 ants and greenhouse gases;

8 (4) innovative electric technologies emit a much

9 lower level of pollutants as compared to the average

10 quantity of pollutants generated by United States

11 electric generating plants as of the date of enact12 ment of this Act;

13 (5) a significant proportion of the United

14 States energy infrastructure will need to be replaced

15 by 2010;

16 (6) the public interest would best be served if

17 that infrastructure were replaced by innovative tech18 nologies that dramatically increase productivity, im19 prove efficiency, and reduce pollution;

20 (7) financing and regulatory practices in effect

21 as of the date of enactment of this Act do not recog22 nize the environmental and economic benefits to be

23 obtained from the avoidance of transmission and dis24 tribution losses, and the reduced load on the elec-
4

•HR 1945 IH

1 tricity-generating system, provided by onsite, com2 bined heat and power production;

3 (8) many legal, regulatory, informational, and

4 perceptual barriers block the development and dis5 semination of combined heat and power and other

6 innovative energy technologies; and

7 (9) because of those barriers, United States

8 taxpayers are not receiving the benefits of the sub9 stantial research and development investment in in10 novative energy technologies made by the Federal

11 Government.

12 SEC. 3. PURPOSE.

13 The purpose of this Act is to encourage energy pro14 ductivity and efficiency increases by—

15 (1) removing barriers to the development and

16 deployment of combined heat and power technologies

17 and systems; and

18 (2) establishing an investment tax credit for

19 qualified combined heat and power systems.

20 TITLE I—INTERCONNECTION

21 SEC. 101. INTERCONNECTION.

22 (a) DEFINITIONS.—Section 3 of the Federal Power

23 Act (16 U.S.C. 796) is amended—

24 (1) by striking paragraph (23) and inserting

25 the following:
5

•HR 1945 IH

1 ‘‘(23) TRANSMITTING UTILITY.—The term

2 ‘transmitting utility’ means any entity (notwith3 standing section 201(f)) that owns, controls, or oper4 ates an electric power transmission facility that is

5 used for the sale of electric energy.’’; and

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

7 ‘‘(26) APPROPRIATE REGULATORY AUTHOR8 ITY.—The term ‘appropriate regulatory authority’

9 means—

10 ‘‘(A) the Commission;

11 ‘‘(B) a State commission;

12 ‘‘(C) a municipality; or

13 ‘‘(D) a cooperative that is self-regulating

14 under State law and is not a public utility.

15 ‘‘(27) GENERATING FACILITY.—The term ‘gen16 erating facility’ means a facility that generates elec17 tric energy.

18 ‘‘(28) LOCAL DISTRIBUTION UTILITY.—The

19 term ‘local distribution utility’ means an entity that

20 owns, controls, or operates an electric power dis21 tribution facility that is used for the sale of electric

22 energy.

23 ‘‘(29) NON-FEDERAL REGULATORY AUTHOR24 ITY.—The term ‘non-Federal regulatory authority’
6

•HR 1945 IH

1 means an appropriate regulatory authority other

2 than the Commission.’’.

3 (b) INTERCONNECTION TO DISTRIBUTION FACILI4 TIES.—Section 210 of the Federal Power Act (16 U.S.C.

5 824i) is amended—

6 (1) by redesignating subsection (e) as sub7 section (g); and

8 (2) by inserting after subsection (d) the fol9 lowing:

10 ‘‘(e) INTERCONNECTION TO DISTRIBUTION FACILI11 TIES.—

12 ‘‘(1) INTERCONNECTION.—

13 ‘‘(A) IN GENERAL.—A local distribution

14 utility shall interconnect a generating facility

15 with the distribution facilities of the local dis16 tribution utility if the owner of the generating

17 facility—

18 ‘‘(i) complies with the final rule pro19 mulgated under paragraph (2); and

20 ‘‘(ii) pays the costs of the interconnec21 tion.

22 ‘‘(B) COSTS.—The costs of the

23 interconnection—

24 ‘‘(i) shall be just and reasonable, and

25 not unduly discriminatory, as determined
7

•HR 1945 IH

1 by the appropriate regulatory authority;

2 and

3 ‘‘(ii) shall be comparable to the costs

4 charged by the local distribution utility for

5 interconnection by any similarly situated

6 generating facility to the distribution facili7 ties of the local distribution utility.

8 ‘‘(C) APPLICABLE REQUIREMENTS.—The

9 right of a generating facility to interconnect

10 under subparagraph (A) does not—

11 ‘‘(i) relieve the generating facility or

12 the local distribution utility of other Fed13 eral, State, or local requirements; or

14 ‘‘(ii) provide the generating facility

15 with transmission or distribution service.

16 ‘‘(2) RULE.—

17 ‘‘(A) IN GENERAL.—Not later than 1 year

18 after the date of enactment of this subpara19 graph, the Commission shall promulgate a final

20 rule to establish reasonable and appropriate

21 technical standards for the interconnection of a

22 generating facility with the distribution facili23 ties of a local distribution utility.
8

•HR 1945 IH

1 ‘‘(B) PROCESS.—To the extent feasible,

2 the Commission shall develop the standards

3 through a process involving interested parties.

4 ‘‘(C) ADVISORY COMMITTEE.—The Com5 mission shall establish an advisory committee

6 composed of qualified experts to make rec7 ommendations to the Commission concerning

8 development of the standards.

9 ‘‘(D) ADMINISTRATION.—

10 ‘‘(i) BY A NON-FEDERAL REGULATORY

11 AUTHORITY.—Except where subject to the

12 jurisdiction of the Commission pursuant to

13 provisions other than clause (ii), a non14 Federal regulatory authority may admin15 ister and enforce the rule promulgated

16 under subparagraph (A).

17 ‘‘(ii) BY THE COMMISSION.—To the

18 extent that a non-Federal regulatory au19 thority does not administer and enforce the

20 rule, the Commission shall administer and

21 enforce the rule with respect to inter22 connection in that jurisdiction.

23 ‘‘(3) RIGHT TO BACKUP POWER.—

24 ‘‘(A) IN GENERAL.—In accordance with

25 subparagraph (B), a local distribution utility
9

•HR 1945 IH

1 shall offer to sell backup power to a generating

2 facility that has interconnected with the local

3 distribution utility to the extent that the local

4 distribution utility—

5 ‘‘(i) is not subject to an order of a

6 non-Federal regulatory authority to pro7 vide open access to the distribution facili8 ties of the local distribution utility;

9 ‘‘(ii) has not offered to provide open

10 access to the distribution facilities of the

11 local distribution utility; or

12 ‘‘(iii) does not allow a generating fa13 cility to purchase backup power from an14 other entity using the distribution facilities

15 of the local distribution utility.

16 ‘‘(B) RATES, TERMS, AND CONDITIONS.—A

17 sale of backup power under subparagraph (A)

18 shall be at such a rate, and under such terms

19 and conditions, as are just and reasonable and

20 not unduly discriminatory or preferential, tak21 ing into account the actual incremental cost,

22 whenever incurred by the local distribution util23 ity, to supply such backup power service during

24 the period in which the backup power service is
10

•HR 1945 IH

1 provided, as determined by the appropriate reg2 ulatory authority.

3 ‘‘(C) NO REQUIREMENT FOR CERTAIN

4 SALES.—A local distribution utility shall not be

5 required to offer backup power for resale to any

6 entity other than the entity for which the

7 backup power is purchased.

8 ‘‘(D) NEW OR EXPANDED LOADS.—To the

9 extent backup power is used to serve a new or

10 expanded load on the distribution system, the

11 generating facility shall pay any reasonable

12 costs associated with any transmission, distribu13 tion, or generation upgrade required to provide

14 such service.’’.

15 (c) INTERCONNECTION TO TRANSMISSION FACILI16 TIES.—Section 210 of the Federal Power Act (16 U.S.C.

17 824i) is amended by inserting after subsection (e) (as

18 added by subsection (b)) the following:

19 ‘‘(f) INTERCONNECTION TO TRANSMISSION FACILI20 TIES.—

21 ‘‘(1) INTERCONNECTION.—

22 ‘‘(A) IN GENERAL.—Notwithstanding sub23 sections (a) and (c), a transmitting utility shall

24 interconnect a generating facility with the
11

•HR 1945 IH

1 transmission facilities of the transmitting utility

2 if the owner of the generating facility—

3 ‘‘(i) complies with the final rule pro4 mulgated under paragraph (2); and

5 ‘‘(ii) pays the costs of the interconnec6 tion.

7 ‘‘(B) COSTS.—

8 ‘‘(i) IN GENERAL.—Subject to clause

9 (ii), the costs of the interconnection—

10 ‘‘(I) shall be just and reasonable

11 and not unduly discriminatory; and

12 ‘‘(II) shall be comparable to the

13 costs charged by the transmitting util14 ity for interconnection by any simi15 larly situated generating facility to the

16 transmitting facilities of the transmit17 ting utility.

18 ‘‘(ii) EFFECT OF FERC LITE.—A non19 Federal regulatory authority that, under

20 any provision of Federal law enacted be21 fore, on, or after the date of enactment of

22 this subparagraph, is authorized to deter23 mine the rates for transmission service

24 shall be authorized to determine the costs

25 of any interconnection under this subpara-
12

•HR 1945 IH

1 graph in accordance with that provision of

2 Federal law.

3 ‘‘(C) APPLICABLE REQUIREMENTS.—The

4 right of a generating facility to interconnect

5 under subparagraph (A) does not—

6 ‘‘(i) relieve the generating facility or

7 the transmitting utility of other Federal,

8 State, or local requirements; or

9 ‘‘(ii) provide the generating facility

10 with transmission or distribution service.

11 ‘‘(2) RULE.—

12 ‘‘(A) IN GENERAL.—Not later than 1 year

13 after the date of enactment of this subpara14 graph, the Commission shall promulgate a final

15 rule to establish reasonable and appropriate

16 technical standards for the interconnection of a

17 generating facility with the transmission facili18 ties of a transmitting utility.

19 ‘‘(B) PROCESS.—To the extent feasible,

20 the Commission shall develop the standards

21 through a process involving interested parties.

22 ‘‘(C) ADVISORY COMMITTEE.—The Com23 mission shall establish an advisory committee

24 composed of qualified experts to make rec-
13

•HR 1945 IH

1 ommendations to the Commission concerning

2 development of the standards.

3 ‘‘(3) RIGHT TO BACKUP POWER.—

4 ‘‘(A) IN GENERAL.—In accordance with

5 subparagraph (B), a transmitting utility shall

6 offer to sell backup power to a generating facil7 ity that has interconnected with the transmit8 ting utility unless—

9 ‘‘(i) Federal or State law (including

10 regulations) allows a generating facility to

11 purchase backup power from an entity

12 other than the transmitting utility; or

13 ‘‘(ii) a transmitting utility allows a

14 generating facility to purchase backup

15 power from an entity other than the trans16 mitting utility using—

17 ‘‘(I) the transmission facilities of

18 the transmitting utility; and

19 ‘‘(II) the transmission facilities

20 of any other transmitting utility.

21 ‘‘(B) RATES, TERMS, AND CONDITIONS.—A

22 sale of backup power under subparagraph (A)

23 shall be at such a rate, and under such terms

24 and conditions, as are just and reasonable and

25 not unduly discriminatory or preferential, tak-
14

•HR 1945 IH

1 ing into account the actual incremental cost,

2 whenever incurred by the local distribution util3 ity, to supply such backup power service during

4 the period in which the backup power service is

5 provided, as determined by the appropriate reg6 ulatory authority.

7 ‘‘(C) NO REQUIREMENT FOR CERTAIN

8 SALES.—A transmitting utility shall not be re9 quired to offer backup power for resale to any

10 entity other than the entity for which the

11 backup power is purchased.

12 ‘‘(D) NEW OR EXPANDED LOADS.—To the

13 extent backup power is used to serve a new or

14 expanded load on the transmission system, the

15 generating facility shall pay any reasonable

16 costs associated with any transmission, distribu17 tion, or generation upgrade required to provide

18 such service.’’.

19 (d) CONFORMING AMENDMENTS.—Section 210 of the

20 Federal Power Act (16 U.S.C. 824i) is amended—

21 (1) in subsection (a)(1)—

22 (A) by inserting ‘‘transmitting utility, local

23 distribution utility,’’ after ‘‘electric utility,’’;

24 and
15

•HR 1945 IH

1 (B) in subparagraph (A), by inserting

2 ‘‘any transmitting utility,’’ after ‘‘small power

3 production facility,’’;

4 (2) in subsection (b)(2), by striking ‘‘an evi5 dentiary hearing’’ and inserting ‘‘a hearing’’;

6 (3) in subsection (c)(2)—

7 (A) in subparagraph (B), by striking ‘‘or’’

8 at the end;

9 (B) in subparagraph (C), by striking

10 ‘‘and’’ at the end and inserting ‘‘or’’; and

11 (C) by adding at the end the following:

12 ‘‘(D) promote competition in electricity mar13 kets, and’’; and

14 (4) in subsection (d), by striking the last sen15 tence.

16 TITLE II—INVESTMENT TAX

17 CREDIT FOR COMBINED HEAT

18 AND POWER SYSTEMS

19 SEC. 201. INVESTMENT TAX CREDIT FOR COMBINED HEAT

20 AND POWER SYSTEMS.

21 (a) IN GENERAL.—Section 48(a)(3)(A) of the Inter22 nal Revenue Code of 1986 (relating to energy property)

23 is amended by striking ‘‘or’’ at the end of clause (i), by

24 adding ‘‘or’’ at the end of clause (ii), and by adding at

25 the end the following new clause:
16

•HR 1945 IH

1 ‘‘(iii) a qualified combined heat and

2 power system,’’.

3 (b) QUALIFIED COMBINED HEAT AND POWER SYS4 TEMS.—

5 (1) IN GENERAL.—Section 48 of the Internal

6 Revenue Code of 1986 (relating to energy credit; re7 forestation credit) is amended by adding at the end

8 the following new subsection:

9 ‘‘(c) QUALIFIED COMBINED HEAT AND POWER SYS10 TEMS CREDIT.—

11 ‘‘(1) IN GENERAL.—For purposes of this sub12 part, the term ‘qualified combined heat and power

13 system’ means any property—

14 ‘‘(A) comprising a system that uses the

15 same energy source for the simultaneous or se16 quential generation of electricity or mechanical

17 shaft power (or both) and steam or other forms

18 of useful thermal energy (including heating and

19 cooling applications), and

20 ‘‘(B) which meets the requirements de21 scribed in paragraph (2).

22 ‘‘(2) REQUIREMENTS.—The requirements de23 scribed in this paragraph are as follows:

24 ‘‘(A) MINIMUM STANDARDS FOR QUALI25 FIED COMBINED HEAT AND POWER SYSTEMS.—
17

•HR 1945 IH

1 ‘‘(i) CAPACITY.—A qualified combined

2 heat and power system must have an elec3 trical capacity in excess of 50 kilowatts or

4 with a capacity to produce mechanical

5 power in excess of 67 horsepower (or an

6 equivalent combination of electrical and

7 mechanical energy capacities).

8 ‘‘(ii) POWER PRODUCED.—A qualified

9 combined heat and power system must

10 produce at least 20 percent of its total use11 ful energy in the form of thermal energy

12 and at least 20 percent of its total useful

13 energy in the form of electrical or mechan14 ical power (or a combination thereof).

15 ‘‘(B) ENERGY EFFICIENCY STANDARDS.—

16 ‘‘(i) ENERGY EFFICIENCY FOR SMALL17 ER SYSTEMS.—In the case of a qualified

18 combined heat and power system with an

19 electrical capacity of not more than 50

20 megawatts (or a mechanical energy capac21 ity in excess of 67,000 horsepower), the

22 total energy efficiency of the system must

23 exceed 60 percent.

24 ‘‘(ii) ENERGY EFFICIENCY FOR LARG25 ER SYSTEMS.—In the case of a qualified
18

•HR 1945 IH

1 combined heat and power system with an

2 electrical capacity in excess of 50

3 megawatts (or a mechanical energy capac4 ity in excess of 67,000 horsepower), the

5 total energy efficiency of the system must

6 exceed 70 percent.

7 ‘‘(iii) ENERGY EFFICIENCY.—For pur8 poses of this paragraph, the total energy

9 efficiency of a combined heat and power

10 system is computed as the sum of the use11 ful electrical, thermal, and mechanical

12 power produced by the system at normal

13 operating rates, measured on a Btu basis,

14 divided by the lower heating value of the

15 primary fuel source for the system sup16 plied.’’.

17 (2) QUALIFIED COMBINED HEAT AND POWER

18 SYSTEM AS PUBLIC UTILITY PROPERTY.—Section

19 48(a)(3) of such Code (relating to energy property)

20 is amended by inserting ‘‘(other than qualified com21 bined heat and power systems)’’ after ‘‘ ‘energy

22 property’ ’’ in the last sentence.
19

•HR 1945 IH

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

2 this section shall apply to property placed in service after

3 June 30, 2001, and before June 30, 2005.

Æ