curity Act of 1985 (16 U.S.C. 3837 et seq.), unless 
the biomass is produced in a manner consistent with 
all applicable guidelines and terms, and conditions 
under the program. 
‘‘(4) National interest lands with the exception 
of either of the following: 
‘‘(A) Harvest residue, mill waste, or pre- 
commercial thinnings, from lands assigned to 
timber production. 
‘‘(B) Biomass obtained from a Community 
Fire Safety Zone. 
‘‘(5) Recyclable postconsumer waste paper, 
painted, treated, or pressurized wood, wood contami-
nated with plastic or metals. 
‘‘(6) Municipal solid waste (as defined in the 
Solid Waste Disposal Act). 
‘‘(7) Materials produced, harvested, acquired, 
transported, or processed pursuant to an exemption 
from otherwise applicable environmental laws or 
rules. 
‘‘SEC. 709. AIR QUALITY IMPACTS. 
‘‘(a) IN GENERAL.—The Administrator shall ensure, 
under regulation, that no transportation fuel sold or intro-
duced in interstate commerce after January 1, 2010, shall 
result in— 
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‘‘(1) average per gallon vehicle emissions (meas-
ured on a mass basis) of air pollutants in excess of 
the quantity of those emissions attributable to gaso-
line sold or introduced into commerce in the United 
States during calendar year 2007; or 
‘‘(2) a violation of any motor vehicle emission 
or fuel content limitation under any other provision 
of this Act. 
‘‘SEC. 710. RESEARCH AND DEVELOPMENT FUNDING. 
‘‘There is authorized to be appropriated to the Sec-
retary of Energy such sums as may be necessary carry 
out a cooperative program of research and development 
relating to lower carbon alternatives for aircraft jet fuel 
and fuel for other vehicles. The program shall provide for 
matching Federal grants to private entities carrying out 
such research and development. 
‘‘SEC. 711. STATE LAWS. 
‘‘Nothing in this title shall be interpreted to preempt 
or limit State actions to address climate change.’’. 
SEC. 363. LOAN GUARANTEE PROGRAM TO DEMONSTRATE 
LOW CARBON RENEWABLE FUEL. 
(a) IN GENERAL.—Section 1703 of the Energy Policy 
Act of 2005 is amended by adding the following new sub-
section after subsection (b) and redesignating subsections 
(c) through (e) as (d) through (f): 
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‘‘(c) LOW CARBON RENEWABLE FUEL PROJECTS.— 
‘‘(1) DEFINITIONS.—In this subsection: 
‘‘(A) LOW CARBON RENEWABLE FUEL.— 
The term ‘low carbon renewable fuel’ means 
transportation fuel that is not an ether and 
that is produced from renewable biomass; or is 
natural gas produced from a biogas source, in-
cluding a landfill, sewage waste treatment 
plant, feedlot, or other place where decaying or-
ganic material is found; is used to replace or re-
duce the quantity of fossil fuel present in a fuel 
mixture used for transportation; and has a 
lifecycle greenhouse gas emissions, per unit of 
energy, that is at least 60 percent less than the 
baseline defined in section 704 of the Clean Air 
Act. 
‘‘(B) TRANSPORTATION FUEL.—The term 
‘transportation fuel’ means fuel used to power 
motor vehicles, nonroad engines, or aircraft. 
‘‘(C) RENEWABLE
BIOMASS.—The term 
‘renewable biomass’ is any organic matter that 
is available on a renewable or recurring basis, 
including dedicated energy crops and trees, ag-
ricultural food and feed crop residues, aquatic 
plants, animal wastes, wood and wood residues, 
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and other vegetative waste materials. Biomass 
sources that are covered under this definition 
are subject to the limitations set forth section 
708 of the Clean Air Act. 
‘‘(2) PROJECTS.—The Secretary may make 
loan guarantees under this section to carry out com-
mercial demonstration projects to demonstrate the 
feasibility and viability of producing low carbon re-
newable fuel until the technology becomes commer-
cially viable and feasible. 
‘‘(3) DESIGN
CAPACITY.—Each project for 
which a loan guarantee is provided under this sub-
section shall have a design capacity to produce at 
least 30,000,000 gallons of renewable fuel each year. 
‘‘(4) APPLICANT
ASSURANCES.—An applicant 
for a loan guarantee under this subsection shall pro-
vide assurances, satisfactory to the Secretary, that— 
‘‘(A) the project design has been validated 
through the operation of a continuous process 
facility with a cumulative output of at least 
50,000 gallons of renewable fuel; 
‘‘(B) the project has been subject to a full 
technical review; 
‘‘(C) the project is covered by adequate 
project performance guarantees; 
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‘‘(D) the project, with the loan guarantee, 
is economically viable; and 
‘‘(E) there is a reasonable assurance of re-
payment of the guaranteed loan.’’. 
(b) FUNDING.—Section 1704(a) of such Act is 
amended by adding the following at the end thereof: ‘‘Not 
less than 30 percent of the funds made available under 
this section shall be used for purposes of loan guarantees 
under section 1703(c) for low carbon renewable fuel. The 
aggregate amount of guarantees under section 1703(c) at 
any one time shall not exceed $20,000,000,000’’. 
SEC. 364. REQUIRE AUTOMAKERS TO REDUCE TAILPIPE 
GHG EMISSIONS. 
Title II of the Clean Air Act (42 U.S.C. 7581 et seq.) 
is amended by adding at the following: 
‘‘PART D—GREENHOUSE GAS EMISSION 
REDUCTIONS 
‘‘SEC. 251. DEFINITIONS. 
‘‘In this part: 
‘‘(1) GREENHOUSE GAS.—The term ‘greenhouse 
gas’ means—— 
‘‘(A) carbon dioxide; 
‘‘(B) methane; 
‘‘(C) nitrous oxide; 
‘‘(D) hydrofluorocarbons; 
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‘‘(E) perflourocarbons; and 
‘‘(F) sulfur hexafluoride. 
‘‘(2) MOTOR VEHICLE.—The term ‘motor vehi-
cle’ has the meaning given to such term in section 
216. 
‘‘SEC. 252. GREENHOUSE GAS EMISSION REDUCTIONS 
FROM AUTOMOBILES. 
‘‘(a) VEHICLE EMISSIONS BASELINE.—Not later 
than January 1, 2009, based on the aggregate quantity 
and variety of new automobiles sold in the United States 
during model year 2002 and the average greenhouse gas 
emissions from those new automobiles, the Administrator 
shall determine the average quantity of greenhouse gas 
emissions per vehicle mile (referred to in this section as 
the ‘new vehicle emissions baseline’). 
‘‘(b) SUBSEQUENT AVERAGE EMISSIONS FROM NEW 
AUTOMOBILES.—Not later than June 1, 2015, and annu-
ally thereafter, based on the aggregate quantity and vari-
ety of new automobiles sold in the United States during 
the preceding model year and the average greenhouse gas 
emissions from those new automobiles during the pre-
ceding model year, the Administrator shall determine the 
average quantity of greenhouse gas emissions per vehicle 
mile for the model year. 
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‘‘(c) REQUIRED REDUCTIONS IN GREENHOUSE GAS 
EMISSIONS FROM AUTOMOBILES.— 
‘‘(1) IN
GENERAL.—The Administrator shall, 
by regulation, require each manufacturer of auto-
mobiles for sale in the United States to reduce the 
average quantity of greenhouse gas emissions per ve-
hicle mile of the aggregate quantity and variety of 
automobiles manufactured by the manufacturer to a 
level that is—— 
‘‘(A) for automobiles manufactured in 
model year 2016, 30 percent less than the new 
vehicle emissions baseline; and 
‘‘(B) not later than every fifth model year 
thereafter, such percent as shall be specified by 
the Administrator that is less than the average 
quantity of greenhouse gas emissions per vehi-
cle mile required for the model year preceding 
that fifth model year, as determined by the Ad-
ministrator under subsection (b).’’. 
SEC. 365. ELIMINATION OF 2–FLEET RULE. 
(a) IN GENERAL.—Section 32904 of title 49, United 
States Code, is amended— 
(1) by striking subsection (b); and 
(2) by redesignating subsections (c) through (e) 
as subsections (b) through (d), respectively. 
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(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to model year 2010 and subse-
quent model years. 
TITLE IV—ELECTRICITY SECTOR 
Subtitle A—Tax Incentives 
SEC. 401. EXTENSION THROUGH 2018 FOR PLACING QUALI-
FIED FACILITIES IN SERVICE FOR PRO-
DUCING RENEWABLE ELECTRIC ENERGY. 
(a) IN GENERAL.—Subsection (d) of section 45 of the 
Internal Revenue Code of 1986 (relating to qualified facili-
ties) is amended by striking ‘‘January 1, 2009’’ each place 
it appears and inserting ‘‘January 1, 2019’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property originally placed in 
service on or after January 1, 2009. 
SEC. 402. EXTENSION OF ENERGY CREDIT. 
(a) IN GENERAL.—Section 48 of such Code (relating 
to energy credit) is amended— 
(1) by striking ‘‘January 1, 2009’’ in both 
places it appears and inserting ‘‘January 1, 1019’’, 
and 
(2) by striking ‘‘December 31, 2008’’ in both 
places it appears and inserting ‘‘December 31, 
2018’’. 
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SEC. 403. EXPANSION AND MODIFICATION OF RENEWABLE 
RESOURCE CREDIT. 
(a) ADDITIONAL QUALIFIED ENERGY RESOURCES.— 
(1) IN
GENERAL.—Section 45(c)(1) of such 
Code (relating to resources) is amended by striking 
‘‘and’’ at the end of subparagraph (F), by striking 
the period at the end of subparagraph (G), and by 
adding at the end the following new subparagraphs: 
‘‘(I) incremental geothermal production, 
and 
‘‘(J) marine and hydrokinetic renewable 
energy.’’. 
(2) DEFINITION OF RESOURCES.—Section 45(c) 
of such Code is amended by adding at the end the 
following new paragraphs: 
‘‘(10) INCREMENTAL
GEOTHERMAL
PRODUC-
TION.— 
‘‘(A) IN GENERAL.—In the case of an in-
cremental geothermal facility described in sub-
section (d)(9), the term ‘incremental geothermal 
production’ means for any taxable year the ex-
cess of— 
‘‘(i) the total kilowatt hours of elec-
tricity produced from such facility for the 
taxable year, over 
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‘‘(ii) the average annual kilowatt 
hours produced at such facility for 5 of the 
previous 7 calendar years before the date 
of the enactment of this paragraph after 
eliminating the highest and the lowest kilo-
watt hour production years in such 7-year 
period. 
‘‘(B) SPECIAL RULE.—A facility described 
in subsection (d)(9) which was placed in service 
at least 7 years before the date of the enact-
ment of this paragraph shall commencing with 
the year in which such date of enactment oc-
curs, reduce the amount calculated under sub-
paragraph (A)(ii) each year, on a cumulative 
basis, by the average percentage decrease in the 
annual kilowatt hour production for the 7-year 
period described in subparagraph (A)(ii) with 
such cumulative sum not to exceed 30 percent. 
‘‘(11) MARINE
AND
HYDROKINETIC
RENEW-
ABLE ENERGY.— 
‘‘(A) IN GENERAL.—The term ‘marine and 
hydrokinetic renewable energy’ means energy 
derived from— 
‘‘(i) waves, tides, or currents in 
oceans, estuaries, or tidal areas, 
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‘‘(ii) free flowing water in rivers, 
lakes, or streams, 
‘‘(iii) free flowing water in man-made 
channels, including projects that utilize 
nonmechanical structures to accelerate the 
flow of water for electric power production 
purposes, or 
‘‘(iv) differentials in ocean tempera-
ture. 
‘‘(B) EXCEPTIONS.—Such term shall not 
include any energy which is— 
‘‘(i) described in subparagraphs (A) 
through (I) of paragraph (1), or 
‘‘(ii) derived from any source that uti-
lizes a dam, diversionary structure, or im-
poundment for electric power production 
purposes, except as provided in subpara-
graph (A)(iii).’’. 
(3) DEFINITION OF FACILITIES.—Section 45(d) 
of such Code (relating to qualified facilities) is 
amended by adding at the end the following new 
paragraphs: 
‘‘(11) INCREMENTAL
GEOTHERMAL
FACILI-
TIES.—In the case of a facility using incremental 
geothermal to produce electricity, the term ‘qualified 
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facility’ means any facility owned by the taxpayer 
which is originally placed in service before the date 
of the enactment of this paragraph, but only to the 
extent of its incremental geothermal production. In 
the case of a qualified facility described in the pre-
ceding sentence, the 10-year period referred to in 
subsection (a) shall be treated as beginning not ear-
lier than such date of enactment. Such term shall 
not include any property described in section 
48(a)(3) the basis of which is taken into account by 
the taxpayer for purposes of determining the energy 
credit under section 48. 
‘‘(12) MARINE
AND
HYDROKINETIC
RENEW-
ABLE ENERGY.—In the case of a facility producing 
electricity from marine and hydrokinetic renewable 
energy, the term ‘qualified facility’ means any facil-
ity owned by the taxpayer which is originally placed 
in service after the date of the enactment of this 
paragraph and before January 1, 2019.’’. 
(b) FULL CREDIT RATE FOR QUALIFIED HYDRO-
POWER FACILITY.—Subparagraph (A) of section 45(b)(4) 
of such Code is amended by striking ‘‘(7), or (9)’’ and 
inserting ‘‘or (7)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to electricity produced and sold 
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in taxable years beginning after the date of the enactment 
of this Act. 
SEC. 404. ENERGY CREDIT FOR SMALL WIND, SMALL GEO-
THERMAL, SMALL BIOMASS, AND SMALL KI-
NETIC HYDROPOWER. 
(a) IN GENERAL.— 
(1) ENERGY PROPERTIES.—Subparagraph (A) 
of section 48(a)(3) of such Code, as amended by this 
title, is amended by striking ‘‘or’’ at the end of 
clause (iii), by inserting ‘‘or’’ at the end of clause 
(iv), and by adding at the end the following new 
clause: 
‘‘(v) equipment which uses wind, a 
geothermal deposit, biomass, or marine 
and hydrokinetic energy to generate elec-
tricity, if such equipment has a nameplate 
capacity of 2 megawatts or less and the 
principal consumer of such electricity is 
the taxpayer,’’. 
(2) ENERGY PERCENTAGE.—Subclause (II) of 
section 48(a)(2)(A)(i) of such Code is amended by 
striking ‘‘paragraph (3)(A)(i)’’ and inserting ‘‘clause 
(i) or (vi) of paragraph (3)(A)’’. 
(3) GEOTHERMAL; 
BIOMASS; 
MARINE
AND 
HYDROKINETIC
ENERGY
DEFINED.—Section 48 of 
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such Code is amended by adding at the end the fol-
lowing new subsection: 
‘‘(d) 
GEOTHERMAL; 
BIOMASS; 
MARINE
AND 
HYDROKINETIC ENERGY.—For purposes of this section— 
‘‘(1) GEOTHERMAL.—The term ‘geothermal de-
posit’ has the meaning given such term by section 
613(e)(2). 
‘‘(2) BIOMASS.—The term ‘biomass’ has the 
meaning given such term by section 45K(c)(3). 
‘‘(3) MARINE AND HYDROKINETIC ENERGY.— 
The term ‘marine and hydrokinetic energy’ has the 
meaning given such term by section 45(c)(11).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act, in taxable years 
ending after such date. 
SEC. 405. MODIFICATIONS FOR CLEAN RENEWABLE EN-
ERGY BONDS. 
(a) IN GENERAL.— 
(1) INCREASE IN LIMITATION AND CHANGE TO 
ANNUAL LIMIT.—Paragraph (1) of section 54(f) of 
such Code (relating to limitation on amount of 
bonds designated) is amended by striking ‘‘of 
$1,200,000,000’’ in subsection (f)(1) and inserting 
‘‘for each calendar year of $2,000,000,000’’— 
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(2) EXTENSION OF TERMINATION.—Subsection 
(m) of section 54 (relating to termination) is amend-
ed by striking ‘‘2008’’ subsection (m) and inserting 
‘‘2018’’. 
(3) MODIFICATION
IN
ALLOCATION
OF
NA-
TIONAL ANNUAL BOND LIMITATION.—Paragraph (2) 
of section 54 of such Code is amended— 
(A) by striking ‘‘may not allocate’’ and all 
that follows through the period and inserting 
‘‘shall allocate—’’ , and 
(B) by adding the end the following new 
subparagraphs: 
‘‘(A) $1,187,500,000 of the annual na-
tional clean renewable energy bond limitation to 
finance qualified projects of qualified borrowers 
which are public power entities, 
‘‘(B) $750,000,000 of such limitation to fi-
nance qualified projects of qualifiied borrowers 
which are cooperative electric companies, and 
‘‘(C) $62,500,000 of such limitation to fi-
nance qualified projects of qualified borrowers 
which are governmental bodies.’’. 
(4) PUBLIC
POWER
ENTITY
DEFINED.—Sub-
section (j) of section 54 of such Code (defining Co-
operative electric company; qualified energy tax 
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credit bond lender; governmental body; qualified bor-
rower) is amended— 
(A) by redesignating paragraphs (4) and 
(5) as paragraphs (5) and (6), respectively, and 
by inserting after paragraph (3) the following 
new paragraph: 
‘‘(4) PUBLIC POWER ENTITY.—The term ‘public 
power entity’ means a State utility with a service ob-
ligation, as such terms are defined in section 217 of 
the Federal Power Act (as in effect on the date of 
enactment of this paragraph).’’. 
(B) in paragraph (5), as so redesignated, 
by striking ‘‘or’’ at the end of subparagraph 
(B), by striking the period at the end of sub-
paragraph (C) and inserting ‘‘, or’’, and by 
adding at the end the following new subpara-
graph: 
‘‘(D) a public power entity.’’, and 
(C) in paragraph (6), as so redesignated, 
by striking ‘‘or’’ at the end of subparagraph 
(A), by striking the period at the end of sub-
paragraph (B) and inserting ‘‘, or’’, and by 
adding at the end the following new subpara-
graph: 
‘‘(C) a public power entity.’’. 
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(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after December 
31, 2007. 
SEC. 406. EXPANSION AND INCREASE FOR RESIDENTIAL 
ENERGY EFFICIENT PROPERTY CREDIT. 
(a) INCREASE IN CREDIT LIMITATION FOR RESIDEN-
TIAL
SOLAR
PROPERTY.—Paragraph (1) of section 
25D(b) of the Internal Revenue Code (relating to limita-
tions) is amended— 
(1) by striking ‘‘$2,000’’ in subparagraph (B) 
and inserting ‘‘$4,000’’, and 
(2) by striking subparagraph (A) and redesig-
nating subparagraphs (B) and (C) and subpara-
graphs (A) and (B), respectively. 
(b) INCLUSION OF WIND.— 
(1) IN
GENERAL.—Subsection (a) of section 
25D of such Code (relating to allowance of credit) 
is amended by striking ‘‘and’’ at the end of para-
graph (2), by striking the period at the end of para-
graph (3), and by adding at the end the following 
new paragraph: 
‘‘(4) 30 percent of the qualified wind property 
expenditures made by the taxpayer during such 
year,’’. 
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(2) DEFINITION.—Subsection (d) of section 
25D of such Code (relating to definitions) is amend-
ed by adding at the end the following new para-
graphs: 
‘‘(4) QUALIFIED
WIND
PROPERTY
EXPENDI-
TURES.—The term ‘qualified wind property expendi-
tures’ means an expenditure for property which uses 
wind to generate electricity for use in a dwelling unit 
located in the United States and used as a principal 
residence (within the meaning of section 121) by the 
taxpayer.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service in 
taxable years beginning after December 31, 2007. 
SEC. 407. EXPANSION OF RENEWABLE RESOURCE CREDIT 
TO INCLUDE THERMAL ENERGY. 
(a) IN GENERAL.— 
(1) PRODUCTION OF THERMAL ENERGY.—Para-
graph (2) of section 45(a) of the Internal Revenue 
Code of 1986 is amended by inserting after ‘‘elec-
tricity’’ the following: ‘‘or each 3,413 British Ther-
mal Units of thermal energy (or fraction thereof)’’. 
(2) RECYCLED ENERGY AS QUALIFIED ENERGY 
RESOURCE.—Paragraph (1) of section 45(c) of such 
Code, as amended by this Act, is amended by strik-
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ing ‘‘and’’ at the end of subparagraph (I), by strik-
ing the period at the end of subparagraph (J) and 
inserting ‘‘and’’, and by adding at the end the fol-
lowing new subparagraph: 
‘‘(K) recycled energy.’’. 
(3) DEFINITION OF RESOURCE.—Subsection (c) 
of section 45 of such Code is amended by adding at 
the end the following new paragraph: 
‘‘(12) RECYCLED ENERGY.— 
‘‘(A) IN GENERAL.—The term ‘recycled en-
ergy’ means electricity or thermal energy de-
rived from combined heat and power, industrial 
waste heat, or municipal waste heat. 
‘‘(B) DEFINITIONS.—For purposes of this 
paragraph— 
‘‘(i) COMBINED HEAT AND POWER.— 
The term ‘combined heat and power’ 
means a system which uses the same en-
ergy source, which may be non-renewable 
fuel, for the simultaneous or sequential 
generation of electrical power, mechanical 
shaft power, or both, in combination with 
the generation of steam or other forms of 
useful thermal energy (including heating 
and cooling applications). 
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‘‘(ii) INDUSTRIAL WASTE HEAT.—The 
term ‘industrial waste heat’ means heat 
which— 
‘‘(I) is a byproduct of a manufac-
turing process, and 
‘‘(II) is normally not recovered or 
used. 
‘‘(iii) MUNICIPAL WASTE HEAT.—The 
term ‘municipal waste heat’ means heat 
which— 
‘‘(I) is a byproduct of a munic-
ipal sewage treatment or other munic-
ipal process, and 
‘‘(II) is normally not recovered or 
used.’’. 
(4) DEFINITION OF FACILITY.—Subsection (d) 
of section 45 of such Code is amended by adding at 
the end the following: 
‘‘(13) RECYCLED ENERGY.— 
‘‘(A) IN GENERAL.—In the case of a facil-
ity using recycled energy to produce electricity 
or thermal energy, the term ‘qualified facility’ 
means a facility which— 
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‘‘(i) is a combined heat and power fa-
cility, an industrial waste heat facility, or 
a municipal waste heat facility, and 
‘‘(ii) which is placed in service after 
the date of the enactment of this para-
graph and before January 1, 2014. 
‘‘(B) COMBINED HEAT AND POWER.—For 
purposes of this paragraph, the term ‘combined 
heat and power facility’ means any facility— 
‘‘(i) owned by the taxpayer, 
‘‘(ii) which produces— 
‘‘(I) at least 20 percent of its 
total useful energy in the form of 
thermal energy, and 
‘‘(II) at least 20 percent of its 
total useful energy in the form of elec-
trical or mechanical power (or a com-
bination thereof), and 
‘‘(iii) the energy efficiency percentage 
of which exceeds 60 percent. 
‘‘(C) INDUSTRIAL WASTE HEAT OR MUNIC-
IPAL WASTE HEAT.—For purposes of this para-
graph, the term ‘industrial waste heat facility’ 
means any facility which uses industrial waste 
heat to produce electricity or thermal energy. 
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‘‘(D) MUNICIPAL
WASTE
HEAT
FACIL-
ITY.—For purposes of this paragraph, the term 
municipal waste heat facility means any facility 
which uses municipal waste heat to produce 
electricity or thermal energy. 
‘‘(E) 
ENERGY
EFFICIENCY
PERCENT-
AGE.—For purposes of subparagraph (B), the 
term ‘energy efficiency percentage’, with respect 
to a facility, means the percentage determined 
by dividing— 
‘‘(i) the total useful electrical, ther-
mal, and mechanical power, calculated in 
British Thermal Units, produced by the 
system at normal operating rates, by 
‘‘(ii) the lower heating value, cal-
culated in British Thermal Units, of the 
primary fuel source for the system.’’. 
(5) REDUCED CREDIT.—Subparagraph (A) of 
section 45(b)(4) of such Code (relating to credit rate 
and period for electricity produced and sold from 
certain facilities) is amended— 
(A) by striking ‘‘or (7)’’ inserting ‘‘(7), or 
(13)’’, and 
(B) by inserting ‘‘or thermal energy sold in 
any calendar year after 2007 at a facility de-
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scribed in subsection (d)(13),’’ after ‘‘sub-
section (d),’’. 
(6) CONFORMING AMENDMENTS.— 
(A) Subsection (a) of section 45 of such 
Code is amended by inserting ‘‘and thermal en-
ergy’’ after ‘‘renewable electricity’’. 
(B) Paragraph (2) of section 45(c) of such 
Code is amended by inserting ‘‘or thermal en-
ergy’’ after ‘‘electricity’’. 
(C) Subsection (d) of section 45 of such 
Code is amended by inserting ‘‘or thermal en-
ergy’’ after ‘‘electricity’’ in each place it ap-
pears. 
(D) Subsection (e) of section 45 of such 
Code is amended by inserting ‘‘or thermal en-
ergy’’ after ‘‘electricity’’ each place it appears 
in paragraphs (1) and (4). 
(E) Paragraph (8) of section 38(b) of such 
Code is amended by inserting ‘‘or thermal en-
ergy’’ after ‘‘electricity’’. 
(F) The heading of section 45 of such 
Code is amended by inserting ‘‘OR THERMAL 
ENERGY’’ after ‘‘ELECTRICITY’’. 
(G) The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amend-
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ed by striking the item relating to section 45 
and inserting the following new item: 
‘‘Sec. 45. Electricity or thermal energy produced from certain renewable re-
sources, etc.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to electricity or thermal energy 
produced and sold after the date of the enactment of his 
Act. 
Subtitle B—Promoting Energy 
Efficient Investments 
SEC. 411. RATE MODIFICATIONS PROMOTING ENERGY EFFI-
CIENCY INVESTMENTS. 
(a) ELECTRIC UTILITIES.—Section 111(d) of the 
Public Utility Regulatory Policies Act of 1978 is amended 
by inserting at the end thereof: 
‘‘(16) RATE DESIGN MODIFICATIONS TO PRO-
MOTE ENERGY EFFICIENCY INVESTMENTS.— 
‘‘(A) IN GENERAL.—The rates allowed to 
be charged by any electric utility shall— 
‘‘(i) align utility incentives with the 
delivery of cost-effective energy efficiency; 
and 
‘‘(ii) promote energy efficiency invest-
ments. 
‘‘(B) POLICY OPTIONS.—In complying with 
subparagraph (A), each State regulatory au-
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thority and each nonregulated utility shall con-
sider— 
‘‘(i) removing the throughput incen-
tive and other regulatory and management 
disincentives to energy efficiency; 
‘‘(ii) providing utility incentives for 
the successful management of energy effi-
ciency programs; 
‘‘(iii) including the impact on adoption 
of energy efficiency as 1 of the goals of re-
tail rate design, recognizing that energy ef-
ficiency must be balanced with other objec-
tives; 
‘‘(iv) adopting rate designs that en-
courage energy efficiency for each cus-
tomer class; and 
‘‘(v) allowing timely recovery of en-
ergy efficiency-related costs.’’. 
(b) NATURAL GAS UTILITY.—Section 303 of the 
Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 
3203(b)) is amended by adding the following at the end 
of subsection (b): 
‘‘(5) ENERGY EFFICIENCY.—Each natural gas 
utility shall— 
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