with, that person, as determined under regula-
tions promulgated by the Commission. 
‘‘(12) RETAIL
ELECTRIC
SUPPLIER’S
BASE 
QUANTITY.—The term ‘retail electric supplier’s base 
quantity’ means the total quantity of electric energy 
sold by the retail electric supplier, expressed in 
megawatt hours, to electric customers for purposes 
other than resale during the relevant calendar year, 
excluding— 
‘‘(A) electricity generated by a hydro-
electric facility, other than qualified hydro-
power; and 
‘‘(B) electricity generated by the combus-
tion of municipal solid waste. 
‘‘(13) RETIRE AND RETIREMENT.—The terms 
‘retire’ and ‘retirement’ with respect to a Federal re-
newable electricity credit, means to disqualify the 
credit for any subsequent use under this section, re-
gardless of whether the use is a sale, transfer, ex-
change, or submission in satisfaction of a compliance 
obligation. 
‘‘(c) ANNUAL COMPLIANCE OBLIGATION.—Except as 
otherwise provided in subsection (g), for each of calendar 
years 2015 through 2040, not later than March 31 of the 
following calendar year, each retail electric supplier shall 
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submit to the Commission a quantity of Federal renewable 
electricity credits that is equal to at least the annual tar-
get of the retail electric supplier under subsection (e). 
‘‘(d) ESTABLISHMENT OF PROGRAM.— 
‘‘(1) IN GENERAL.—Not later than 1 year after 
the date of enactment of this section, the Commis-
sion shall promulgate regulations to implement and 
enforce the requirements of this section. 
‘‘(2) CONSIDERATIONS.—In promulgating regu-
lations under paragraph (1), the Commission shall, 
to the maximum extent practicable— 
‘‘(A) preserve the integrity and incorporate 
best practices of existing State and tribal re-
newable electricity programs; 
‘‘(B) rely on existing and emerging State, 
tribal, or regional tracking systems that issue 
and track non-Federal renewable electricity 
credits; and 
‘‘(C) cooperate with States and Indian 
tribes— 
‘‘(i) to facilitate coordination between 
State, tribal, and Federal renewable elec-
tricity programs; and 
‘‘(ii) to minimize administrative bur-
dens and costs to retail electric suppliers. 
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‘‘(e) ANNUAL COMPLIANCE REQUIREMENT.— 
‘‘(1) ANNUAL TARGETS.—For each of calendar 
years 2015 through 2040, the annual target of a re-
tail electric supplier shall be equal to the product ob-
tained by multiplying— 
‘‘(A) the required annual percentage for 
that calendar year under paragraph (2); and 
‘‘(B) the retail electric supplier’s base 
quantity for that calendar year. 
‘‘(2) REQUIRED ANNUAL PERCENTAGE.— 
‘‘(A) CALENDAR
YEARS
2015
THROUGH 
2040.—Subject to subparagraph (B), for each of 
calendar years 2015 through 2040, the required 
annual percentage shall be as follows: 
Required annual 
‘‘Year: 
percentage: 
2015 ...................................................................................................
2016 ...................................................................................................
2017 ...................................................................................................
2018 ...................................................................................................
2019 ...................................................................................................
2020 ...................................................................................................
2021 ...................................................................................................
2022 ...................................................................................................
2023 ...................................................................................................
2024 ...................................................................................................
2025–2040 .........................................................................................
25. 
‘‘(B) INCREASE
AUTHORIZED
FOR
CAL-
ENDAR YEARS 2026 THROUGH 2040.—The Com-
mission may issue orders increasing the re-
quired annual percentage amounts for each of 
calendar years 2026 through 2040 to reflect the 
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maximum achievable level of renewable elec-
tricity generation potential, taking into account 
regional resource availability, economic feasi-
bility, and technological capability. 
‘‘(f) FEDERAL RENEWABLE ELECTRICITY CRED-
ITS.— 
‘‘(1) IN GENERAL.— 
‘‘(A) 
ISSUANCE; 
TRACKING; 
VERIFICATION.—The regulations promulgated 
under this section shall include provisions gov-
erning the issuance, tracking, and verification 
of Federal renewable electricity credits. 
‘‘(B) CREDIT RATIO.—Except as provided 
in paragraphs (2) through (4), the Commission 
shall issue to each generator of renewable elec-
tricity, 1 Federal renewable electricity credit for 
each megawatt hour of renewable electricity 
generated by the generator after December 31, 
2014. 
‘‘(C) SERIAL NUMBER.—The Commission 
shall assign a unique serial number to each 
Federal renewable electricity credit. 
‘‘(2) GENERATION FROM CERTAIN STATE RE-
NEWABLE ELECTRICITY PROGRAMS.— 
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‘‘(A) IN
GENERAL.—If renewable elec-
tricity is generated with the support of pay-
ments from a retail electric supplier pursuant 
to a State renewable electricity program 
(whether through State alternative compliance 
payments or through payments to a State re-
newable electricity procurement fund or entity), 
the Commission shall issue Federal renewable 
electricity credits to the retail electric supplier 
for the portion of the relevant renewable elec-
tricity generation that is attributable to pay-
ments made by the retail electric supplier, as 
determined pursuant to regulations promul-
gated by the Commission. 
‘‘(B) REMAINING PORTION.—For any re-
maining portion of the relevant renewable elec-
tricity generation, the Commission shall issue 
Federal renewable electricity credits to the gen-
erator, as provided in paragraph (1), except 
that not more than 1 Federal renewable elec-
tricity credit shall be issued for the same mega-
watt hour of electricity. 
‘‘(C) STATE
GUIDANCE.—In determining 
how Federal renewable electricity credits will be 
apportioned among retail electric suppliers and 
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generators under this paragraph, the Commis-
sion shall consider information and guidance 
issued by the applicable one or more States. 
‘‘(3) CERTAIN POWER SALES CONTRACTS.—Ex-
cept as otherwise provided in paragraph (2), if a 
generator has sold renewable electricity to a retail 
electric supplier under a contract for power from a 
facility placed in service before the date of enact-
ment of this section, and the contract does not pro-
vide for the determination of ownership of the Fed-
eral renewable electricity credits associated with the 
generation, the Commission shall issue the Federal 
renewable electricity credits to the retail electric sup-
plier for the duration of the contract. 
‘‘(4) CREDIT MULTIPLIERS.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph 
(B), 
the 
Commission 
shall 
issue— 
‘‘(i) not more than 3 Federal renew-
able electricity credits for each megawatt 
hour of renewable electricity generated by 
a distributed renewable generation facility; 
‘‘(ii) not more than 2 Federal renew-
able electricity credits for each megawatt 
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hour of renewable electricity generated on 
Indian land; and 
‘‘(iii) not more than 2 Federal renew-
able electricity credits for each megawatt 
hour of renewable electricity generated by 
a brownfield site generation facility. 
‘‘(B) ADJUSTMENT.—Except as provided 
in subparagraph (C), not later than January 1, 
2017, and not less frequently than every 4 
years thereafter, the Commission shall review 
the effect of this paragraph on the aggregate 
quantity of renewable electricity produced under 
the standard and shall, as necessary and after 
providing 1 year of notice, reduce the number 
of Federal renewable electricity credits per 
megawatt hour issued under this paragraph for 
any given energy source or facility, but not 
below one, to ensure that the number is no 
higher than the Commission determines is nec-
essary— 
‘‘(i) to incentivize incremental renew-
able energy generation on Indian land and 
brownfield sites; and 
‘‘(ii) to make distributed renewable 
generation facilities cost competitive with 
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other sources of renewable electricity gen-
eration. 
‘‘(C) FACILITIES
PLACED
IN
SERVICE 
AFTER ENACTMENT.— 
‘‘(i) IN GENERAL.—For any renewable 
generation facility placed in service after 
the date of enactment of this section, sub-
paragraph (B) shall not apply for the first 
10 years after the date on which the facil-
ity is placed in service. 
‘‘(ii) INITIAL PERIOD.—For each year 
during the 10-year period described in 
clause (i), the Commission shall issue to 
the facility the same number of Federal re-
newable electricity credits per megawatt 
hour as are issued to that facility in the 
year in which the facility is placed in serv-
ice. 
‘‘(iii) SUBSEQUENT
PERIOD.—After 
the 10-year period described in clause (i), 
the Commission shall issue Federal renew-
able electricity credits to the facility in ac-
cordance with subparagraph (B). 
‘‘(5) CREDITS BASED ON QUALIFIED HYDRO-
POWER.—For purposes of this subsection, the num-
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ber of Federal renewable electricity credits issued for 
qualified hydropower shall be calculated— 
‘‘(A) based solely on the increase in aver-
age annual generation directly resulting from 
the efficiency improvements or capacity addi-
tions described in subsection (a)(6)(A); and 
‘‘(B) using the same water flow informa-
tion used to determine a historic average an-
nual generation baseline for the hydroelectric 
facility, as certified by the Commission. 
‘‘(6) GENERATION
FROM
MIXED
RENEWABLE 
AND NONRENEWABLE RESOURCES.—If electricity is 
generated using both a renewable energy resource 
and an energy source that is not a renewable energy 
resource (such as cofiring of renewable biomass and 
fossil fuel), the Commission shall issue Federal re-
newable electricity credits based on the proportion of 
the electricity that is attributable to the renewable 
energy resource. 
‘‘(7) PROHIBITION
AGAINST
DOUBLE-COUNT-
ING.—The Commission shall ensure that— 
‘‘(A) no Federal renewable electricity cred-
it is used more than once for compliance with 
this section; and 
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‘‘(B) except as provided in paragraph (4), 
not more than 1 Federal renewable electricity 
credit is issued for any megawatt hour of re-
newable electricity. 
‘‘(8) TRADING.—The lawful holder of a Federal 
renewable electricity credit may— 
‘‘(A) sell, exchange, or transfer the credit; 
‘‘(B) submit the credit for compliance 
under subsection (c); or 
‘‘(C) submit the credit for retirement by 
the Commission. 
‘‘(9) BANKING.— 
‘‘(A) IN GENERAL.—A Federal renewable 
electricity credit may be submitted in satisfac-
tion of the compliance obligation under sub-
section (c) for the compliance year in which the 
credit was issued or for any of the 3 imme-
diately subsequent compliance years. 
‘‘(B) 
RETIREMENT.—The 
Commission 
shall retire any Federal renewable electricity 
credit that has not been retired by April 2 of 
the calendar year that is 3 years after the cal-
endar year during which the credit was issued. 
‘‘(10) RETIREMENT.—The Commission shall re-
tire a Federal renewable electricity credit imme-
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diately upon submission by the lawful holder of the 
credit, whether in satisfaction of a compliance obli-
gation under subsection (c) or for another reason. 
‘‘(g) ALTERNATIVE COMPLIANCE PAYMENTS.— 
‘‘(1) IN
GENERAL.—A retail electric supplier 
may satisfy the requirements of subsection (c) in 
whole or in part by submitting in accordance with 
this subsection, in lieu of each Federal renewable 
electricity credit that would otherwise be due, a pay-
ment equal to $50, adjusted for inflation on January 
1 of each year following calendar year 2015, in ac-
cordance with regulations promulgated by the Com-
mission. 
‘‘(2) PAYMENT TO STATE FUNDS.— 
‘‘(A) IN GENERAL.—Except as otherwise 
provided in this paragraph, payments made 
under this subsection shall be made directly to 
one or more States in which the retail electric 
supplier sells electric energy, in proportion to 
the portion of the retail electric supplier’s base 
quantity that is sold within each applicable 
State, if— 
‘‘(i) the payments are deposited di-
rectly into a fund of the State treasury es-
tablished for that purpose; and 
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‘‘(ii) the State uses the funds in ac-
cordance with paragraphs (3) and (4). 
‘‘(B) NONCOMPLIANCE.—If the Commis-
sion determines that a State is in substantial 
noncompliance with paragraph (3) or (4), the 
Commission shall direct that any future alter-
native compliance payments that would other-
wise be paid to the State under this subsection 
shall instead be paid to the Commission and de-
posited in the Treasury. 
‘‘(3) STATE USE OF FUNDS.—As a condition of 
receipt of alternative compliance payments under 
this subsection, a State shall use the payments ex-
clusively for— 
‘‘(A) deploying technologies that generate 
electricity from renewable energy resources; or 
‘‘(B) implementing cost-effective energy ef-
ficiency programs to achieve energy savings. 
‘‘(4) REPORTING.— 
‘‘(A) IN GENERAL.—As a condition of re-
ceipt of alternative compliance payments pursu-
ant to this subsection, a State shall submit to 
the Commission an annual report, in accord-
ance with regulations promulgated by the Com-
mission, containing a full accounting of the use 
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of the payments, including a detailed descrip-
tion of the activities funded by the payments 
and demonstrating compliance with the require-
ments of this subsection. 
‘‘(B) DEADLINE.—A State shall submit a 
report under this paragraph— 
‘‘(i) not later than 1 year after the 
date on which the first alternative compli-
ance payment is received; and 
‘‘(ii) every 1 year thereafter until all 
alternative compliance payments are ex-
pended. 
‘‘(h) INFORMATION COLLECTION.— 
‘‘(1) IN GENERAL.—The Commission may re-
quire any retail electric supplier, renewable elec-
tricity generator, or any other entity that the Com-
mission determines appropriate, to provide any in-
formation the Commission determines appropriate to 
carry out this section. 
‘‘(2) FAILURE
TO
SUBMIT; FALSE
OR
MIS-
LEADING
INFORMATION.—Any entity required to 
submit information under paragraph (1) that fails to 
submit the information or submits false or mis-
leading information shall be in violation of this sec-
tion. 
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‘‘(i) ENFORCEMENT AND JUDICIAL REVIEW.— 
‘‘(1) FAILURE
TO
SUBMIT
CREDITS.—If any 
person fails to comply with the requirements of sub-
section (c) or (g), the person shall be liable to pay 
to the Commission a civil penalty equal to the prod-
uct obtained by multiplying— 
‘‘(A) double the alternative compliance 
payment calculated under subsection (g)(1); 
and 
‘‘(B) the aggregate quantity of Federal re-
newable electricity credits or equivalent alter-
native compliance payments that the person 
failed to submit in violation of the requirements 
of subsections (c) and (g). 
‘‘(2) ENFORCEMENT.—The Commission shall 
assess a civil penalty under paragraph (1) in accord-
ance with the procedures described in section 31(d) 
of the Federal Power Act (16 U.S.C. 823b(d)). 
‘‘(3) VIOLATION OF REQUIREMENT OF REGULA-
TIONS OR ORDERS.— 
‘‘(A) IN GENERAL.—Any person who vio-
lates or fails or refuses to comply with any re-
quirement of a regulation promulgated or order 
issued under this section shall be subject to a 
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civil penalty under section 316A(b) of the Fed-
eral Power Act (16 U.S.C. 825o–1(b)). 
‘‘(B) ASSESSMENT.—The penalty under 
subparagraph (A) shall be assessed by the Com-
mission in the same manner as in the case of 
a violation referred to in section 316A(b) of 
that Act. 
‘‘(4) JUDICIAL REVIEW.— 
‘‘(A) IN GENERAL.—Any person aggrieved 
by a final action taken by the Commission 
under this section, other than the assessment of 
a civil penalty under paragraphs (1) through 
(3), may use the procedures for review de-
scribed in section 313 of the Federal Power Act 
(16 U.S.C. 825l). 
‘‘(B) REFERENCE.—For purposes of this 
paragraph, references to an order in section 
313 of that Act shall be considered to refer also 
to all other final actions of the Commission 
under this section other than the assessment of 
a civil penalty under paragraphs (1) through 
(3). 
‘‘(j) ADMINISTRATION.—Nothing in this section— 
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‘‘(1) diminishes or qualifies any authority of a 
State, a political subdivision of a State, or an Indian 
tribe— 
‘‘(A) to adopt or enforce any law or regula-
tion respecting renewable electricity, including 
any law or regulation establishing requirements 
that are more stringent than those established 
by this section, provided that no such law or 
regulation may relieve any person of any re-
quirement otherwise applicable under this sec-
tion; or 
‘‘(B) to regulate the acquisition and dis-
position of Federal renewable electricity credits 
by retail electric suppliers within the jurisdic-
tion of the State, political subdivision, or Indian 
tribe, including the authority to require the re-
tail electric supplier to acquire and submit to 
the Commission for retirement Federal renew-
able electricity credits in excess of those sub-
mitted under this section; or 
‘‘(2) affects the application of or the responsi-
bility for compliance with any other provision of law 
or regulation, including environmental and licensing 
requirements. 
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‘‘(k) SUNSET.—The authority provided by this sec-
tion expires on December 31, 2041.’’. 
SEC. 3. CLARIFYING STATE AUTHORITY TO ADOPT RENEW-
ABLE ENERGY INCENTIVES. 
Section 210 of the Public Utility Regulatory Policies 
Act of 1978 (16 U.S.C. 824a–3) is amended by adding 
at the end the following: 
‘‘(o) CLARIFICATION
OF STATE AUTHORITY TO 
ADOPT RENEWABLE ENERGY INCENTIVES.— 
‘‘(1) DEFINITION
OF
STATE-APPROVED
PRO-
DUCTION INCENTIVE PROGRAM.—In this subsection, 
the term ‘State-approved production incentive pro-
gram’ means a requirement imposed pursuant to 
State law or by a State regulatory authority acting 
within its authority under State law that an electric 
utility purchase renewable energy (as defined in sec-
tion 609(a)) at a specified rate. 
‘‘(2) STATE AUTHORITY TO ADOPT RENEWABLE 
ENERGY
INCENTIVES.—Notwithstanding any other 
provision of this Act or the Federal Power Act (16 
U.S.C. 791a et seq.), a State legislature or regu-
latory authority may set the rates for a sale of elec-
tric energy by a facility generating electric energy 
from renewable energy sources pursuant to a State- 
approved production incentive program under which 
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the facility voluntarily participates in the State-ap-
proved production incentive program.’’. 
SEC. 4. GUIDELINES FOR DETERMINING QUALIFIED RE-
NEWABLE BIOMASS. 
(a) DEFINITIONS.—In this section: 
(1) ADMINISTRATOR.—The term ‘‘Adminis-
trator’’ means the Administrator of the Environ-
mental Protection Agency. 
(2) 
LIFECYCLE
GREENHOUSE
GAS
EMIS-
SIONS.— 
(A) IN
GENERAL.—The term ‘‘lifecycle 
greenhouse gas emissions’’ means the aggregate 
quantity of greenhouse gas emissions, adjusted 
to account for the relative global warming po-
tential of the emissions relative to all green-
house gas emissions. 
(B) INCLUSIONS.—For purposes of sub-
paragraph (A), the term ‘‘greenhouse gas emis-
sions’’ includes— 
(i) direct emissions; and 
(ii) significant indirect emissions, in-
cluding from— 
(I) land use changes and tem-
poral changes in forest carbon seques-
tration; 
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(II) biomass harvests, regrowth, 
and avoided decomposition related to 
the full fuel lifecycle, including all 
stages of fuel and feedstock produc-
tion and distribution; and 
(III) feedstock generation or ex-
traction through the distribution and 
delivery of the finished fuel to the ul-
timate consumer. 
(b) GUIDELINES.—Not later than 1 year after the 
date of enactment of this Act, the Administrator shall, rec-
ognizing the recommendations of and coordinating with 
the Scientific Advisory Board of the Environmental Pro-
tection Agency regarding the accounting of biogenic car-
bon dioxide emissions and after notice and public com-
ment, issue guidelines for calculating lifecycle greenhouse 
gas emissions for renewable biomass (as that term is de-
fined in section 610(b) of the Public Utility Regulatory 
Policies Act of 1978). 
SEC. 5. ENERGY EFFICIENCY RESOURCE STANDARD FOR 
RETAIL ELECTRICITY AND NATURAL GAS 
SUPPLIERS. 
(a) IN GENERAL.—Title VI of the Public Utility Reg-
ulatory Policies Act of 1978 (16 U.S.C. 2601 et seq.) (as 
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amended by section 2) is amended by adding after section 
610 the following: 
‘‘SEC. 611. FEDERAL ENERGY EFFICIENCY RESOURCE 
STANDARD FOR RETAIL ELECTRICITY AND 
NATURAL GAS SUPPLIERS. 
‘‘(a) FINDINGS.—Congress finds that— 
‘‘(1) the Federal energy efficiency resource 
standard established by this section— 
‘‘(A) establishes nationwide minimum lev-
els of electricity and natural gas savings to be 
achieved through utility efficiency programs, 
building energy codes, appliance standards, and 
related efficiency measures; and 
‘‘(B) rewards energy-saving improvements 
achieved through— 
‘‘(i) end-use energy efficiency up-
grades; 
‘‘(ii) reduced losses in transmission 
and distribution of energy; and 
‘‘(iii) fuel-switching, to the extent that 
the switching results in reduced primary 
energy use; and 
‘‘(2) in light of the cost-effective energy effi-
ciency opportunities that exist across the United 
States in every sector of the economy, retail elec-
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tricity suppliers, retail natural gas suppliers, and 
States should— 
‘‘(A) consider energy efficiency as a re-
source in utility planning and procurement ac-
tivities; and 
‘‘(B) seek to achieve all energy efficiency 
that is available at lower cost than other energy 
supply options. 
‘‘(b) DEFINITIONS.—In this section: 
‘‘(1) AFFILIATE.—The term ‘affiliate’ when 
used in relation to a person, means another person 
that owns or controls, is owned or controlled by, or 
is under common ownership control with, that per-
son, as determined under regulations promulgated 
by the Secretary. 
‘‘(2) ASHRAE, ANSI, AND IESNA.—The terms 
‘ASHRAE’, ‘ANSI’, and ‘IESNA’ mean the Amer-
ican Society of Heating, Refrigerating and Air Con-
ditioning Engineers, the American National Stand-
ards Institute, and the Illuminating Engineering So-
ciety of North America, respectively. 
‘‘(3) BASE QUANTITY.— 
‘‘(A) IN GENERAL.—The term ‘base quan-
tity’, with respect to a retail electricity supplier 
or retail natural gas supplier, means, for each 
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calendar year for which a performance standard 
is established under subsection (d), the average 
annual quantity of electricity or natural gas de-
livered by the retail electricity supplier or retail 
natural gas supplier to retail customers during 
the 3 calendar years immediately preceding the 
year that compliance is required under sub-
section (d)(1). 
‘‘(B) EXCLUSION.—The term ‘base quan-
tity’, with respect to a retail natural gas sup-
plier, does not include natural gas delivered for 
purposes of electricity generation. 
‘‘(4) CHP SAVINGS.—The term ‘CHP savings’ 
means— 
‘‘(A) CHP system savings from a combined 
heat and power system that commences oper-
ation after the date of enactment of this sec-
tion; and 
‘‘(B) the increase in CHP system savings 
from upgrading or replacing, after the date of 
enactment of this section, a combined heat and 
power system that commenced operation on or 
before the date of enactment of this section. 
‘‘(5) CHP SYSTEM SAVINGS.—The term ‘CHP 
system savings’ means the electric output, and the 
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electricity saved due to the mechanical output, of a 
combined heat and power system, adjusted to reflect 
any increase in fuel consumption by that system as 
compared to the fuel that would have been required 
to produce an equivalent useful thermal energy out-
put in a separate thermal-only system, as deter-
mined in accordance with regulations promulgated 
by the Secretary. 
‘‘(6) CODES AND STANDARDS SAVINGS.— 
‘‘(A) IN GENERAL.—The term ‘codes and 
standards savings’ means a reduction in end- 
use electricity or natural gas consumption by a 
retail electricity supplier or in the service terri-
tory of a retail natural gas supplier as a result 
of the adoption and implementation, after the 
date of enactment of this section, of new or re-
vised appliance and equipment efficiency stand-
ards or building energy codes. 
‘‘(B) BASELINES.—In calculating codes 
and standards savings under subparagraph 
(A)— 
‘‘(i) the baseline for calculating sav-
ings from building codes shall be the more 
stringent of— 
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‘‘(I)(aa) the 2009 International 
Energy Conservation Code for resi-
dential buildings; or 
‘‘(bb) 
the 
ASHRAE/ANSI/ 
IESNA Standard 90.1–2007 for com-
mercial buildings; or 
‘‘(II) the applicable State building 
code in effect on the date of enactment of 
this section; and 
‘‘(ii) the baseline for calculating sav-
ings from appliance standards shall be the 
average efficiency of new appliances in the 
applicable one or more categories prior to 
the adoption and implementation of the 
new standard. 
‘‘(7) COMBINED HEAT AND POWER SYSTEM.— 
The term ‘combined heat and power system’ means 
a system that uses the same energy source both for 
the generation of electrical or mechanical power and 
the production of steam or another form of useful 
thermal energy, if— 
‘‘(A) the system meets any requirements 
relating to efficiency and other operating char-
acteristics that the Secretary promulgates by 
regulation; and 
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‘‘(B) the net wholesale sales of electricity 
by a facility does not exceed 50 percent of total 
annual electric generation by the facility. 
‘‘(8) COST-EFFECTIVE.—The term ‘cost-effec-
tive’, with respect to an energy efficiency measure, 
means that the measure achieves a net present value 
of economic benefits over the life of the measure, 
both directly to the energy consumer and to the 
economy, that is greater than the net present value 
of the cost of the measure over the life of the meas-
ure, both directly to the energy consumer and to the 
economy, using the societal benefit-cost test cal-
culated using the weighted average utility cost of 
capital as the discount rate. 
‘‘(9) CUSTOMER FACILITY SAVINGS.—The term 
‘customer facility savings’ means a reduction in end- 
use electricity or natural gas consumption (including 
waste heat energy savings) at a facility of an end- 
use consumer of electricity or natural gas served by 
a retail electricity supplier or natural gas supplier, 
as compared to— 
‘‘(A) in the case of a new facility, con-
sumption at a reference facility of average effi-
ciency; 
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‘‘(A) customer facility savings of elec-
tricity, adjusted to reflect any associated in-
crease in fuel consumption at the facility; 
‘‘(B) reductions in distribution system 
losses of electricity achieved by a retail elec-
tricity supplier, as compared to losses attrib-
utable to new or replacement distribution sys-
tem equipment of average efficiency, as defined 
in regulations promulgated by the Secretary; 
‘‘(C) CHP savings; 
‘‘(D) codes and standards savings of elec-
tricity; and 
‘‘(E) fuel switching energy savings that re-
sults in net savings of electricity. 
‘‘(11) FUEL SWITCHING ENERGY SAVINGS.— 
‘‘(A) IN GENERAL.—The term ‘fuel-switch-
ing energy savings’ means net energy savings, 
calculated in accordance with subparagraph 
(B), from end-user switches from 1 energy 
source to another, as determined in accordance 
with regulations promulgated by the Secretary. 
‘‘(B) CALCULATION.—For purposes of cal-
culating fuel-switching net energy savings— 
‘‘(i) electricity use shall be evaluated 
based on the average quantity of fuel 
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burned at a power plant to provide each 
kilowatt hour of electricity; 
‘‘(ii) electricity and natural gas use 
shall include losses in the transmission and 
distribution system; and 
‘‘(iii) fuel-switching that is not cost-ef-
fective to the end-user shall not be count-
ed. 
‘‘(12) NATURAL GAS SAVINGS.—The term ‘nat-
ural gas savings’ means reductions in natural gas 
consumption from measures implemented after the 
date of enactment of this section, as determined in 
accordance with regulations promulgated by the Sec-
retary, that are limited to— 
‘‘(A) customer facility savings of natural 
gas, adjusted to reflect any associated increase 
in electricity consumption or consumption of 
other fuels at the facility; 
‘‘(B) reductions in leakage, operational 
losses, and consumption of natural gas fuel to 
operate a gas distribution system, achieved by 
a retail natural gas supplier, as compared to 
similar leakage, losses, and consumption during 
a base period of not less than 1 year; 
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‘‘(C) codes and standards savings of nat-
ural gas; and 
‘‘(D) fuel switching energy savings that re-
sults in net savings of natural gas. 
‘‘(13) POWER
POOL.—The term ‘power pool’ 
means an association of two or more interconnected 
electric systems that have entered into an agreement 
to coordinate operations and planning for improved 
reliability and efficiencies, including a Regional 
Transmission Organization or an Independent Sys-
tem Operator, as determined by the Secretary. 
‘‘(14) REPORTING PERIOD.—The term ‘report-
ing period’ means— 
‘‘(A) calendar year 2015; and 
‘‘(B) each successive 2-calendar-year pe-
riod thereafter. 
‘‘(15) RETAIL ELECTRICITY SUPPLIER.— 
‘‘(A) IN GENERAL.—The term ‘retail elec-
tricity supplier’ means, for any given calendar 
year, an electric utility that sells not less than 
1,000,000 megawatt hours of electric energy to 
electric consumers for purposes other than re-
sale during the preceding calendar. 
‘‘(B) INCLUSIONS AND LIMITATIONS.—For 
purposes of determining whether an electric 
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utility qualifies as a retail electricity supplier 
under subparagraph (A)— 
‘‘(i) deliveries by any affiliate of an 
electric utility to electric consumers for 
purposes other than resale shall be consid-
ered to be deliveries by the electric utility; 
and 
‘‘(ii) deliveries by any electric utility 
to a lessee, tenant, or affiliate of the elec-
tric utility shall not be considered to be de-
liveries to electric consumers. 
‘‘(16) RETAIL NATURAL GAS SUPPLIER.— 
‘‘(A) IN GENERAL.—The term ‘retail nat-
ural gas supplier’ means, for any given calendar 
year, a local distribution company (as defined 
in section 2 of the Natural Gas Policy Act of 
1978 (15 U.S.C. 3301)), that delivered to nat-
ural gas consumers more than 5,000,000,000 
cubic feet of natural gas for purposes other 
than resale during the preceding calendar year. 
‘‘(B) INCLUSIONS AND LIMITATIONS.—For 
purposes of determining whether a person 
qualifies as a retail natural gas supplier under 
subparagraph (A)— 
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‘‘(i) deliveries of natural gas by any 
affiliate of a local distribution company to 
consumers for purposes other than resale 
shall be considered to be deliveries by the 
local distribution company; and 
‘‘(ii) deliveries of natural gas to a les-
see, tenant, or affiliate of a local distribu-
tion company shall not be considered to be 
deliveries to natural gas consumers. 
‘‘(17) THIRD-PARTY EFFICIENCY PROVIDER.— 
The term ‘third-party efficiency provider’ means any 
retailer, building owner, energy service company, fi-
nancial institution or other commercial, industrial or 
nonprofit entity that is capable of providing elec-
tricity savings or natural gas savings in accordance 
with subsections (e) and (f). 
‘‘(18) WASTE HEAT ENERGY SAVINGS.— 
‘‘(A) IN GENERAL.—The term ‘waste heat 
energy savings’ means a reduction in electricity 
or natural gas consumption that results from a 
modification of an industrial or commercial sys-
tem that commenced operation before the date 
of enactment of this section, in order to recap-
ture electrical, mechanical, or thermal energy 
that would otherwise be wasted, as determined 
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in accordance with regulations promulgated by 
the Secretary. 
‘‘(B) INCLUSION.—Such savings shall be 
included as part of customer facility savings. 
‘‘(c) ESTABLISHMENT OF PROGRAM.— 
‘‘(1) REGULATIONS.—Not later than 1 year 
after the date of enactment of this section, the Sec-
retary shall, by regulation, establish a program to 
implement and enforce the requirements of this sec-
tion, including by— 
‘‘(A) 
establishing 
measurement 
and 
verification procedures and standards under 
subsection (f); 
‘‘(B) 
establishing 
requirements 
under 
which retail electricity suppliers and retail nat-
ural gas suppliers shall— 
‘‘(i) demonstrate, document, and re-
port the compliance of the retail electricity 
suppliers and retail natural gas suppliers 
with the performance standards under sub-
section (d); and 
‘‘(ii) estimate the impact of the stand-
ards on current and future electricity and 
natural gas use in the service territories of 
the suppliers; and 
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‘‘(C) establishing requirements governing 
applications for, and implementation of, dele-
gated State administration under subsection 
(h). 
‘‘(2) COORDINATION WITH STATE PROGRAMS.— 
In establishing and implementing this section, the 
Secretary shall, to the maximum extent practicable, 
preserve the integrity and incorporate best practices 
of existing State energy efficiency programs. 
‘‘(d) PERFORMANCE STANDARDS.— 
‘‘(1) COMPLIANCE
OBLIGATION.—Not later 
than May 1 of the calendar year immediately fol-
lowing each reporting period— 
‘‘(A) each retail electricity supplier shall 
submit to the Secretary a report, in accordance 
with regulations promulgated by the Secretary, 
demonstrating that the retail electricity supplier 
has achieved annual electricity savings (ad-
justed to account for any attrition of savings 
measures implemented in prior years) in each 
calendar year that are equal to the applicable 
percentage, established under paragraph (2), 
(3), or (4), of the base quantity of the retail 
electricity supplier; and 
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‘‘(B) each retail natural gas supplier shall 
submit to the Secretary a report, in accordance 
with regulations promulgated by the Secretary, 
demonstrating that it has achieved cumulative 
natural gas savings (adjusted to account for 
any attrition of savings measures implemented 
in prior years) in each calendar year that are 
equal to the applicable percentage, established 
under paragraph (2), (3), or (4), of the base 
quantity of such retail natural gas supplier, 
subject to business-as-usual consumption pro-
jections calculated in accordance with sub-
section (f)(1)(P). 
‘‘(2) STANDARDS FOR 2015 THROUGH 2025.— 
For each of calendar years 2015 through 2025, the 
applicable percentages are as follows: 
‘‘Calendar Year 
Cumulative Electricity 
Savings Percentage 
Cumulative Natural Gas 
Savings Percentage 
2015 
1.00 
0.50
2016 
2.00 
1.25
2017 
3.00 
2.00
2018 
4.25 
3.00
2019 
5.50 
4.00
2020 
7.00 
5.00
2021 
8.50 
6.00
2022 
10.00 
7.00
2023 
11.50 
8.00
2024 
13.25 
9.00
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‘‘Calendar Year 
Cumulative Electricity 
Savings Percentage 
Cumulative Natural Gas 
Savings Percentage 
2025 
15.00 
10.00. 
‘‘(3) SUBSEQUENT YEARS.— 
‘‘(A) CALENDAR
YEARS
2026
THROUGH 
2040.—Not later than December 31, 2023, the 
Secretary shall promulgate regulations estab-
lishing performance standards (expressed as ap-
plicable percentages of base quantity for both 
cumulative electricity savings and cumulative 
natural gas savings) for each of calendar years 
2026 through 2040. 
‘‘(B) SUBSEQUENT EXTENSIONS.—Except 
as provided in subparagraph (A), not later than 
December 31 of the penultimate reporting pe-
riod for which performance standards have been 
established under this paragraph, the Secretary 
shall promulgate regulations establishing per-
formance standards (expressed as applicable 
percentages of base quantity for both cumu-
lative electricity savings and cumulative natural 
gas savings) for the 10-calendar-year period fol-
lowing the last calendar year for which perform-
ance standards previously were established. 
‘‘(C) 
REQUIREMENTS.—The 
Secretary 
shall establish standards under this paragraph 
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at levels reflecting the maximum achievable 
level of cost-effective energy efficiency potential, 
taking into account— 
‘‘(i) 
cost-effective 
energy 
savings 
achieved by leading retail electricity sup-
pliers and retail natural gas suppliers; 
‘‘(ii) opportunities for new codes and 
standard savings; 
‘‘(iii) technology improvements; and 
‘‘(iv) other indicators of cost-effective 
energy efficiency potential. 
‘‘(D) MINIMUM PERCENTAGE.—In no case 
shall the applicable percentages for any cal-
endar year be less than the applicable percent-
ages for calendar year 2025 (including any in-
crease in the standard for calendar year 2025 
established pursuant to paragraph (4)). 
‘‘(4) MIDCOURSE REVIEW AND ADJUSTMENT OF 
STANDARDS.— 
‘‘(A) IN
GENERAL.—Not later than De-
cember 31, 2020, and at 10-year intervals 
thereafter, the Secretary shall— 
‘‘(i) review the most recent standards 
established under paragraph (2) or (3); 
and 
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‘‘(ii) increase the standards by regula-
tion if the Secretary determines that addi-
tional cost-effective energy efficiency po-
tential is achievable, taking into account 
the requirements described in paragraph 
(3)(C). 
‘‘(B) LEAD TIME.—If the Secretary revises 
standards under this paragraph, the regulations 
shall provide adequate lead time to ensure that 
compliance with the increased standards is fea-
sible. 
‘‘(5) DELAY
OF
SUBMISSION
FOR
FIRST
RE-
PORTING PERIOD.— 
‘‘(A) 
IN
GENERAL.—Notwithstanding 
paragraphs (1) and (2), for the 2015 reporting 
period, the Secretary may accept a request from 
a retail electricity supplier or a retail natural 
gas supplier to delay the required submission of 
documentation of all or part of the required 
savings for up to 2 years. 
‘‘(B) PLAN
FOR
COMPLIANCE.—The re-
quest for delay under subparagraph (A) shall 
include a plan for coming into full compliance 
by the end of the 2016–2017 reporting period. 
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‘‘(6) APPLYING UNUSED SAVINGS TO FUTURE 
YEARS.—If savings achieved in a year exceed the 
performance standards specified in this subsection, 
any savings in excess of the performance standards 
may be applied toward performance standards speci-
fied for future years. 
‘‘(e) TRANSFERS OF ELECTRICITY OR NATURAL GAS 
SAVINGS.— 
‘‘(1) BILATERAL
CONTRACTS
FOR
SAVINGS 
TRANSFERS.—Subject to the limitations of this sub-
section, a retail electricity supplier or retail natural 
gas supplier may use electricity savings or natural 
gas savings purchased pursuant to a bilateral con-
tract from another retail electricity supplier or retail 
natural gas supplier, a State, or a third-party effi-
ciency provider to meet the applicable performance 
standard under subsection (d). 
‘‘(2) REQUIREMENTS.—Electricity savings or 
natural gas savings purchased and used for compli-
ance under this subsection shall be— 
‘‘(A) measured and verified in accordance 
with subsection (f); 
‘‘(B) reported in accordance with sub-
section (d); and 
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retary may prescribe such limitations as the Sec-
retary determines appropriate with respect to the 
proportion of the compliance obligation of a retail 
electricity or natural gas supplier under the applica-
ble performance standards under subsection (d) that 
may be met using electricity savings or natural gas 
savings that are purchased under this subsection. 
‘‘(f) MEASUREMENT
AND VERIFICATION
OF SAV-
INGS.—The regulations promulgated pursuant to sub-
section (c) shall include— 
‘‘(1) procedures and standards for defining and 
measuring electricity savings and natural gas sav-
ings that can be counted towards the performance 
standards established under subsection (d), that 
shall— 
‘‘(A) specify the types of energy efficiency 
and energy conservation measures that can be 
counted; 
‘‘(B) require that energy consumption esti-
mates for customer facilities or portions of fa-
cilities in the applicable base and current years 
be adjusted, as appropriate, to account for 
changes in weather, level of production, and 
building area; 
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‘‘(C) account for the useful life of meas-
ures; 
‘‘(D) include assigned savings values for 
specific, commonly used measures; 
‘‘(E) allow for savings from a program to 
be estimated based on extrapolation from a rep-
resentative sample of participating customers; 
‘‘(F) include procedures for calculating and 
documenting CHP savings, fuel-switching en-
ergy savings, and waste heat energy savings; 
‘‘(G) establish methods for calculating 
codes and standards energy savings, including 
the use of verified compliance rates; 
‘‘(H) include procedures for calculating 
and documenting— 
‘‘(i) customer facility savings and re-
ductions in distribution system losses of 
electricity and natural gas that are 
achieved as a result of smart grid deploy-
ment, as described in section 1301 of the 
Energy Independence and Security Act of 
2007 (42 U.S.C. 17381); and 
‘‘(ii) reductions in natural gas dis-
tribution system losses attributable to pipe-
line repair and replacement programs; 
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‘‘(I) count only measures and savings that 
are additional to business-as-usual customer 
purchase practices; 
‘‘(J) ensure that the retail electricity sup-
plier or retail natural gas supplier claiming the 
electricity savings or natural gas savings, in-
cluding codes and standards savings, played a 
significant role in achieving the savings (includ-
ing through the activities of a designated agent 
of the supplier or through the purchase of 
transferred electricity savings or natural gas 
savings); 
‘‘(K) avoid double-counting of savings used 
for compliance with this section, including 
transferred savings; 
‘‘(L) include electricity savings or natural 
gas savings from programs administered by the 
retail electric supplier or natural gas supplier 
that are funded by Federal, State, or other 
sources; 
‘‘(M) credit large customer self-directed 
electricity savings or natural gas savings to the 
retail electricity supplier or the retail natural 
gas supplier if the large customers receive in-
centives or rate reductions from the retail sup-
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plier for self-directed energy efficiency improve-
ments; 
‘‘(N) include procedures for counting elec-
tricity savings and natural gas savings achieved 
by solar water heating, solar light pipe tech-
nology, geothermal heat pumps, and other tech-
nologies utilizing renewable resources that re-
duce on-site energy use; 
‘‘(O) in any State in which the State regu-
latory authority has designated one or more en-
tities to administer electric ratepayer-funded ef-
ficiency programs approved by the State regu-
latory authority, provide that electricity savings 
and natural gas savings achieved through the 
programs shall be distributed proportionally 
among retail electric suppliers and retail nat-
ural gas suppliers; and 
‘‘(P) include guidance for utilities to cal-
culate and document business-as-usual con-
sumption projections; and 
‘‘(2) procedures and standards for third-party 
verification of reported electricity savings or natural 
gas savings. 
‘‘(g) ENFORCEMENT AND JUDICIAL REVIEW.— 
‘‘(1) REVIEW OF RETAIL SUPPLIER REPORTS.— 
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‘‘(A) IN
GENERAL.—The Secretary shall 
review each report submitted to the Secretary 
by a retail electricity supplier or retail natural 
gas supplier under subsection (d) to verify that 
the applicable performance standards under 
subsection (d) have been met. 
‘‘(B) EXCLUSION.—In determining compli-
ance with the applicable performance standards 
under subsection (d), the Secretary shall ex-
clude reported electricity savings or natural gas 
savings that are not adequately demonstrated 
and documented, in accordance with the regula-
tions promulgated under subsections (d), (e), 
and (f). 
‘‘(2) PENALTY
FOR
FAILURE
TO
DOCUMENT 
ADEQUATE SAVINGS.—If a retail electricity supplier 
or a retail natural gas supplier fails to demonstrate 
compliance with an applicable performance standard 
under subsection (d), or to pay to the State an ap-
plicable alternative compliance payment under sub-
section (h)(4), the Secretary shall assess against the 
retail electricity supplier or retail natural gas sup-
plier a civil penalty for each failure in an amount 
equal to, as adjusted for inflation in accordance with 
such regulations as the Secretary may promulgate— 
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‘‘(A) $100 per megawatt hour of electricity 
savings or alternative compliance payment that 
the retail electricity supplier failed to achieve or 
make, respectively; or 
‘‘(B) $10 per million Btu of natural gas 
savings or alternative compliance payment that 
the retail natural gas supplier failed to achieve 
or make, respectively. 
‘‘(3) OFFSETTING
STATE
PENALTIES.—The 
Secretary shall reduce the amount of any penalty 
under paragraph (2) by the amount paid by the rel-
evant retail electricity supplier or retail natural gas 
supplier to a State for failure to comply with the re-
quirements of a State energy efficiency resource 
standard during the same compliance period, if the 
State standard— 
‘‘(A) is comparable in type to the Federal 
standard established under this section; and 
‘‘(B) is more stringent than the applicable 
performance standards under subsection (d). 
‘‘(4) ENFORCEMENT PROCEDURES.—The Sec-
retary shall assess a civil penalty, as provided under 
paragraph (2), in accordance with the procedures 
described in section 333(d) of the Energy Policy and 
Conservation Act (42 U.S.C. 6303(d)). 
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