nancial institution or other commercial, industrial or 
non-profit entity that is capable of providing elec-
tricity savings or natural gas savings in accordance 
with the requirements of subsections (e) and (f). 
‘‘(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— 
‘‘(A) measurement and verification proce-
dures and standards under subsection (f); 
‘‘(B) requirements by which retail elec-
tricity distributors and retail natural gas dis-
tributors shall demonstrate, document, and re-
port their compliance with the performance 
standards specified in subsection (d) and esti-
mate the impact of the standards on current 
and future electricity and natural gas use in 
such distributors’ service territories; and 
‘‘(C) requirements governing applications 
for, and implementation of, delegated State ad-
ministration under subsection (h). 
‘‘(2) COORDINATION WITH STATE PROGRAMS.— 
In establishing and implementing this program, the 
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Secretary shall, to the extent practicable, preserve 
the integrity, and incorporate best practices, of ex-
isting State energy efficiency programs. 
‘‘(d) PERFORMANCE STANDARDS.— 
‘‘(1) COMPLIANCE
OBLIGATION.—Not later 
than April 1 of the calendar year immediately fol-
lowing each reporting period— 
‘‘(A) each retail electricity distributor shall 
submit to the Secretary a report, in accordance 
with regulations issued by the Secretary, dem-
onstrating that it has achieved cumulative elec-
tricity savings (adjusted to account for any at-
trition 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 this sub-
section, of the base quantity of such retail elec-
tricity distributor; and 
‘‘(B) each retail natural gas distributor 
shall submit to the Secretary a report, in ac-
cordance with regulations issued by the Sec-
retary, demonstrating that it has achieved cu-
mulative natural gas savings (adjusted to ac-
count for any attrition of savings measures im-
plemented in prior years) in each calendar year 
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that are equal to the applicable percentage, es-
tablished under paragraph (2), (3), or (4) of 
this subsection, of the base quantity of such re-
tail natural gas distributor. 
‘‘(2) STANDARDS FOR 2012 THROUGH 2020.— 
For calendar years 2012 through 2020, the applica-
ble percentages are as follows: 
‘‘Calendar Year 
Cumulative Electricity 
Savings Percentage 
Cumulative Natural Gas 
Savings Percentage 
2012 
1.00 
0.75 
2013 
2.00 
1.50 
2014 
3.25 
2.50 
2015 
4.50 
3.50 
2016 
6.00 
4.75 
2017 
7.50 
6.00 
2018 
10.00 
7.25 
2019 
12.50 
8.50 
2020 
15.00 
10.00 
‘‘(3) SUBSEQUENT YEARS.— 
‘‘(A) CALENDAR
YEARS
2021
THROUGH 
2030.—Not later than December 31, 2018, 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 calendar years 2021 
through 2030. 
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‘‘(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 
set under this paragraph, the Secretary shall 
promulgate regulations establishing perform-
ance standards (expressed as applicable per-
centages of base quantity for both cumulative 
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 set. 
‘‘(C) 
REQUIREMENTS.—The 
Secretary 
shall set standards under this paragraph at lev-
els reflecting the maximum achievable level of 
cost-effective energy efficiency potential, taking 
into 
account 
cost-effective 
energy 
savings 
achieved by leading retail electricity distributors 
and retail natural gas distributors, opportuni-
ties for new codes and standard savings, tech-
nology improvements, and other indicators of 
cost-effective energy efficiency potential. In no 
case shall the applicable percentages for any 
calendar year be lower than those for calendar 
year 2020 (including any increase in the stand-
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ard for calendar year 2020 pursuant to para-
graph (4)). 
‘‘(4) MIDCOURSE REVIEW AND ADJUSTMENT OF 
STANDARDS.—Not later than December 31, 2014, 
and at 10-year intervals thereafter, the Secretary 
shall review the most recent standards established 
under paragraph (2) or (3) and shall, by regulation, 
increase the standards if the Secretary determines 
that additional cost-effective energy efficiency poten-
tial is achievable, taking into account the factors 
identified in paragraph (3)(C). If the Secretary re-
vises standards pursuant to this paragraph, the reg-
ulations 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.—Notwithstanding paragraphs (1) 
and (2), for the 2012 reporting period, the Secretary 
may accept a request from a retail electricity dis-
tributor or a retail natural gas distributor to delay 
the required submission of documentation of some or 
all of the required savings for up to 2 years. The re-
quest for delay shall include a plan for coming into 
full compliance by the end of the 2013–2014 report-
ing period. 
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‘‘(e) TRANSFERS OF ELECTRICITY OR NATURAL GAS 
SAVINGS.— 
‘‘(1) BILATERAL
CONTRACTS
FOR
SAVINGS 
TRANSFERS.—Subject to the limitations of this para-
graph, a retail electricity distributor or retail natural 
gas distributor may use electricity savings or natural 
gas savings purchased, pursuant to a bilateral con-
tract, from another retail electricity distributor or 
retail natural gas distributor, a State, or a third- 
party efficiency provider to meet the applicable per-
formance standard under subsection (d). 
‘‘(2) REQUIREMENTS.—Electricity or natural 
gas savings purchased and used for compliance pur-
suant to this paragraph shall be— 
‘‘(A) measured and verified in accordance 
with the procedures specified under subsection 
(f); 
‘‘(B) reported in accordance with sub-
section (d); and 
‘‘(C) achieved within the same State as is 
served by the retail electricity distributor or re-
tail natural gas distributor. 
‘‘(3) EXCEPTION.—Notwithstanding paragraph 
(2)(C), a State regulatory authority may authorize a 
retail electricity distributor or a retail natural gas 
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distributor regulated by such State regulatory au-
thority to purchase savings achieved in a different 
State, provided that— 
‘‘(A) such savings are achieved within the 
same power pool; and 
‘‘(B) the State regulatory authority that 
regulates the purchaser oversees the measure-
ment and verification of the savings pursuant to 
the procedures and standards applicable in the 
purchaser’s State. 
‘‘(4) REGULATORY APPROVAL.—Nothing in this 
paragraph shall limit or affect the authority of a 
State regulatory authority to require a retail elec-
tricity distributor or retail natural gas distributor 
that is regulated by such State regulatory authority 
to obtain such State regulatory authority’s author-
ization or approval of a contract for transfer of sav-
ings under this paragraph. 
‘‘(5) LIMITATIONS.—In the interest of opti-
mizing achievement of cost-effective efficiency poten-
tial, the Secretary may prescribe such limitations as 
the Secretary determines appropriate with respect to 
the proportion of a retail electricity or natural gas 
distributor’s compliance obligation, under the appli-
cable performance standards under subsection (d), 
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that may be met using electricity or natural gas sav-
ings that are purchased under this paragraph. 
‘‘(f) MEASUREMENT
AND VERIFICATION
OF SAV-
INGS.—The regulations promulgated pursuant to sub-
section (b) 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 set forth in subsection (d), which 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; 
‘‘(C) account for the useful life of meas-
ures; 
‘‘(D) include deemed 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; 
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‘‘(F) include procedures for counting CHP 
savings and recycled energy savings; 
‘‘(G) establish methods for calculating 
codes and standards energy savings, including 
the use of verified compliance rates; 
‘‘(H) count only measures and savings that 
are additional to business-as-usual practices; 
‘‘(I) except in the case of codes and stand-
ards savings, ensure that the retail electricity 
distributor or retail natural gas distributor 
claiming the savings played a significant role in 
achieving the savings (including through the ac-
tivities of a designated agent of the distributor 
or through the purchase of transferred savings); 
‘‘(J) avoid double-counting of savings used 
for compliance with this section, including 
transferred savings; and 
‘‘(K) include savings from programs ad-
ministered by the retail electric or natural gas 
distributor that are funded by State, Federal, 
or other sources; and 
‘‘(2) procedures and standards for third-party 
verification of reported electricity savings or natural 
gas savings. 
‘‘(g) ENFORCEMENT AND JUDICIAL REVIEW.— 
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‘‘(1) REVIEW
OF
RETAIL
DISTRIBUTOR
RE-
PORTS.—The Secretary shall review each report sub-
mitted to the Secretary by a retail electricity dis-
tributor or retail natural gas distributor under sub-
section (d) to verify that the applicable performance 
standards under subsection (d) have been met. In 
determining compliance with the applicable perform-
ance standards, the Secretary shall exclude reported 
electricity savings or natural gas savings that are 
not adequately demonstrated and documented, in ac-
cordance with the regulations issued under sub-
sections (d), (e), and (f). 
‘‘(2) PENALTY
FOR
FAILURE
TO
DOCUMENT 
ADEQUATE
SAVINGS.—If a retail electricity dis-
tributor or a retail natural gas distributor fails to 
demonstrate compliance with an applicable perform-
ance standard under subsection (d), or to pay to the 
State an applicable alternative compliance payment 
under subsection (h)(4), the Secretary shall assess 
against the retail electricity distributor or retail nat-
ural gas distributor a civil penalty for each such fail-
ure 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 distributor 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 distributor 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 distributor or retail natural 
gas distributor to a State for failure to comply with 
the requirements of a State energy efficiency re-
source standard during the same compliance period, 
provided that the State standard is comparable in 
type to the Federal standard established under this 
section and 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 (1), in accordance with the procedures 
described in section 333(d) of the Energy Policy and 
Conservation Act of 1954 (42 U.S.C. 6303). 
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‘‘(5) JUDICIAL REVIEW.—Any person who will 
be adversely affected by a final action taken by the 
Secretary under this section, other than the assess-
ment of a civil penalty, may use the procedures for 
review described in section 336(b) of the Energy 
Policy and Conservation Act (42 U.S.C. 6306). For 
purposes of this paragraph, references to a rule in 
section 336(b) of the Energy Policy and Conserva-
tion Act shall be deemed to refer also to all other 
final actions of the Secretary under this section 
other than the assessment of a civil penalty. 
‘‘(h) STATE ADMINISTRATION.— 
‘‘(1) IN GENERAL.—Upon receipt of an applica-
tion from the Governor of a State (including, for 
purposes of this subsection, the Mayor of the Dis-
trict of Columbia), the Secretary may delegate to the 
State the administration of this section within the 
State’s territory if the Secretary determines that the 
State will implement an energy efficiency program 
that meets or exceeds the requirements of this sec-
tion, including— 
‘‘(A) achieving electricity savings and nat-
ural gas savings at least as great as those re-
quired under the applicable performance stand-
ards established under subsection (d); 
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‘‘(B) reviewing reports and verifying elec-
tricity savings and natural gas savings achieved 
in the State (including savings transferred from 
outside the State); and 
‘‘(C) collecting any alternative compliance 
payments under paragraph (4) of this sub-
section and using such payments to implement 
cost-effective efficiency programs. 
‘‘(2) SECRETARIAL DETERMINATION.—The Sec-
retary shall make a substantive determination ap-
proving or disapproving a State application, after 
public notice and comment, within 180 days of re-
ceipt of a complete application. 
‘‘(3) 
ALTERNATIVE
MEASUREMENT
AND 
VERIFICATION PROCEDURES AND STANDARDS.—As 
part of an application submitted under paragraph 
(1), a State may request to use alternative measure-
ment and verification procedures and standards to 
those specified in subsection (f), provided the State 
demonstrates that such alternative procedures and 
standards provide a level of accuracy of measure-
ment and verification at least equivalent to the Fed-
eral procedures and standards promulgated under 
subsection (f). 
‘‘(4) ALTERNATIVE COMPLIANCE PAYMENTS.— 
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‘‘(A) IN GENERAL.—As part of an applica-
tion submitted under paragraph (1), a State 
may permit retail electricity distributors or re-
tail natural gas distributors to pay to the State, 
by not later than April 1 of the calendar year 
immediately following the relevant reporting pe-
riod, an alternative compliance payment in an 
amount equal to, as adjusted for inflation in ac-
cordance with such regulations as the Secretary 
may promulgate, not less than— 
‘‘(i) $50 per megawatt-hour of elec-
tricity savings needed to make up any def-
icit with regard to a compliance obligation 
under the applicable performance stand-
ard; or 
‘‘(ii) $5 per million Btu of natural gas 
savings needed to make up any deficit with 
regard to a compliance obligation under 
the applicable performance standard. 
‘‘(B) USE
OF
PAYMENTS.—Alternative 
compliance payments collected by a State pur-
suant to paragraph (4) shall be used by the 
State to administer its delegated authority 
under this section and to implement cost-effec-
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tive energy efficiency programs. Such programs 
shall— 
‘‘(i) to the extent feasible, achieve 
electricity savings and natural gas savings 
in the State sufficient to make up the def-
icit associated with the alternative compli-
ance payments; and 
‘‘(ii) be measured and verified in ac-
cordance with the applicable procedures 
and standards under subsection (f) or 
paragraph (3) of this subsection, as the 
case may be. 
‘‘(5) REVIEW OF STATE IMPLEMENTATION.— 
‘‘(A) PERIODIC REVIEW.—Every 2 years, 
the Secretary shall review State implementation 
of this section for conformance with the re-
quirements of this section in approximately one- 
half of the States that have received approval 
under this subsection to administer the pro-
gram, such that each State shall be reviewed at 
least every 4 years. To facilitate such review, 
the Secretary may require the State to submit 
a report demonstrating its conformance with 
the requirements of this section, including— 
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‘‘(i) reports submitted by retail elec-
tricity distributors and retail natural gas 
distributors to the State demonstrating 
compliance with applicable performance 
standards; 
‘‘(ii) the impact of such standards on 
projected electricity and natural gas de-
mand within the State; 
‘‘(iii) an accounting of the State’s use 
of alternative compliance payments and the 
resulting electricity savings and natural 
gas savings achieved; and 
‘‘(iv) such other information as the 
Secretary determines appropriate. 
‘‘(B) REVIEW UPON PETITION.—Notwith-
standing subparagraph (A), upon receipt of a 
public petition containing credible allegation of 
substantial deficiencies, the Secretary shall 
promptly review a State’s implementation of 
delegated authority under this section. 
‘‘(C) DEFICIENCIES.—If deficiencies are 
found in a review under this paragraph, the 
Secretary shall notify the State and direct it to 
correct such deficiencies and to report to the 
Secretary on progress within 180 days of the 
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receipt of review results. If the deficiencies are 
substantial, the Secretary shall— 
‘‘(i) disallow such reported savings as 
the Secretary determines are not credible 
due to deficiencies; 
‘‘(ii) re-review the State not later than 
2 years after the original review; and 
‘‘(iii) if substantial deficiencies remain 
uncorrected after the review provided for 
under clause (ii), revoke the authority of 
such State to administer the program es-
tablished under this section. 
‘‘(6) CALLS FOR REVISION OF STATE APPLICA-
TIONS.—As a condition of maintaining its delegated 
authority to administer this section, the Secretary 
may require a State to submit a revised application 
under paragraph (1) if the Secretary has— 
‘‘(A) promulgated new or revised perform-
ance standards under subsection (d); 
‘‘(B) promulgated new or substantially re-
vised measurement and verification procedures 
and standards under subsection (f); or 
‘‘(C) otherwise substantially revised the 
program established under this section. 
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