To encourage the development of hydroelectric projects, and for other purposes.

SECTION 1. FINDINGS.

    The Congress finds that:
            (1) The United States must increase its supply of energy to 
        ensure a continuing prosperous economy and high standard of 
        life.
            (2) We currently rely heavily on imports of energy supplies 
        from foreign nations and utilize large quantities of carbon 
        fuels for electricity generation.
            (3) Hydropower is a domestic energy source which currently 
        produces 92,000 megawatts of electricity per year, a figure 
        representing 10 percent of the generation capacity in the 
        United States.
            (4) The Energy Information Agency estimates that, of the 
        75,000 dams in the United States, only 2,400 or three percent 
        of these dams currently produce electricity.
            (5) The Energy Information Agency further estimates that 
        there are approximately 21,300 megawatts of undeveloped 
        capacity at existing dams.
            (6) New technology allows this energy to be utilized with 
        little or no environmental effect by adding new turbines to 
        existing dams and improving the efficiency of existing 
        turbines.
            (7) Hydropower produces electricity without producing 
        hazardous waste or air pollutants.
            (8) The 92,000 megawatts of electricity currently generated 
        by hydropower avoid the annual emission of 4.75 million tons of 
        sulfur dioxide and 2 million tons of nitrous oxide by 
        eliminating the need to burn 345 million tons of coal.
            (9) Hydropower is a renewable energy source which, because 
        of the natural hydrologic cycle, will continue to be available 
        in perpetuity.

SEC. 2. CONSTITUTIONAL AUTHORITY.

    The Constitutional authority on which this Act rests is the power 
of Congress to make all laws which shall be necessary and proper as 
enumerated in article I, section 8 of the United States Constitution.

SEC. 3. HYDROELECTRIC PRODUCTION INCENTIVES.

    (a) Incentive Payments.--For electric energy generated and sold by 
a qualified hydroelectric facility during the incentive period, the 
Secretary of Energy (referred to in this section as the ``Secretary'') 
shall make, subject to the availability of appropriations, incentive 
payments to the owner or operator of such facility. The amount of such 
payment made to any such owner or operator shall be as determined under 
subsection (e) of this section. Payments under this section may only be 
made upon receipt by the Secretary of an incentive payment application 
which establishes that the applicant is eligible to receive such 
payment and which satisfies such other requirements as the Secretary 
deems necessary. Such application shall be in such form, and shall be 
submitted at such time, as the Secretary shall establish.
    (b) Definitions.--For purposes of this section:
            (1) Qualified hydroelectric facility.--The term ``qualified 
        hydroelectric facility'' means a turbine or other generating 
        device owned or solely operated by a non-Federal entity which 
        generates hydroelectric energy for sale and which is added to 
        an existing dam or conduit.
            (2) Existing dam or conduit.--The term ``existing dam or 
        conduit'' means any dam or conduit the construction of which 
        was completed before the date of the enactment of this section 
        and which does not require any construction or enlargement of 
        impoundment or diversion structures (other than repair or 
        reconstruction) in connection with the installation of a 
        turbine or other generating device.
            (3) Conduit.--The term ``conduit'' has the same meaning as 
        when used in section 30(a)(2) of the Federal Power Act.
The terms defined in this subsection shall apply without regard to the 
hydroelectric kilowatt capacity of the facility concerned, without 
regard to whether the facility uses a dam owned by a governmental or 
nongovernmental entity, and without regard to whether the facility 
begins operation on or after the date of the enactment of this section.
    (c) Eligibility Window.--Payments may be made under this section 
only for electric energy generated from a qualified hydroelectric 
facility which begins operation during the period of 10 fiscal years 
beginning with the first full fiscal year occurring after the date of 
enactment of this Act.
    (d) Incentive Period.--A qualified hydroelectric facility may 
receive payments under this section for a period of 10 fiscal years 
(referred to in this section as the ``incentive period''). Such period 
shall begin with the fiscal year in which electric energy generated 
from the facility is first eligible for such payments.
    (e) Amount of Payment.--
            (1) In general.--Payments made by the Secretary under this 
        section to the owner or operator of a qualified hydroelectric 
        facility shall be based on the number of kilowatt hours of 
        hydroelectric energy generated by the facility during the 
        incentive period. For any such facility, the amount of such 
        payment shall be 1.5 cents per kilowatt hour (adjusted as 
        provided in paragraph (2)), subject to the availability of 
        appropriations under subsection (g), except that no facility 
        may receive more than $1,000,000 in one calendar year.
            (2) Adjustments.--The amount of the payment made to any 
        person under this section as provided in paragraph (1) shall be 
        adjusted for inflation for each fiscal year beginning after 
        calendar year 2005 in the same manner as provided in the 
        provisions of section 29(d)(2)(B) of the Internal Revenue Code 
        of 1986, except that in applying such provisions the calendar 
        year 2005 shall be substituted for calendar year 1979.
    (f) Sunset.--No payment may be made under this section to any 
qualified hydroelectric facility after the expiration of the period of 
20 fiscal years beginning with the first full fiscal year occurring 
after the date of enactment of this Act, and no payment may be made 
under this section to any such facility after a payment has been made 
with respect to such facility for a period of 10 fiscal years.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated to the Secretary to carry out the purposes of this section 
$50,000,000 for each of the fiscal years 2006 through 2015.

SEC. 4. HYDROELECTRIC EFFICIENCY IMPROVEMENT.

    (a) Incentive Payments.--The Secretary of Energy shall make 
incentive payments to the owners or operators of hydroelectric 
facilities at existing dams to be used to make capital improvements in 
the facilities that are directly related to improving the efficiency of 
such facilities by at least 3 percent.
    (b) Limitations.--Incentive payments under this section shall not 
exceed 10 percent of the costs of the capital improvement concerned and 
not more than one payment may be made with respect to improvements at a 
single facility. No payment in excess of $1,000,000 may be made with 
respect to improvements at a single facility.
    (c) Authorization.--There is authorized to be appropriated to carry 
out this section not more than $50,000,000 in each fiscal year after 
the fiscal year 2005.

SEC. 5. SMALL HYDROELECTRIC POWER PROJECTS.

    Section 408(a)(6) of the Public Utility Regulatory Policies Act of 
1978 is amended by striking ``April 20, 1977'' and inserting ``March 4, 
2005''.

SEC. 6. INCREASED HYDROELECTRIC GENERATION AT EXISTING FEDERAL 
              FACILITIES.

    (a) In General.--The Secretary of Energy, in consultation with the 
Secretary of the Interior and Secretary of the Army, shall conduct 
studies of the cost-effective opportunities to increase hydropower 
generation at existing federally-owned or operated water regulation, 
storage, and conveyance facilities. Such studies shall be completed 
within two years after the date of enactment of this Act and 
transmitted to the Committee on Commerce of the House of 
Representatives and the Committee on Energy and Natural Resources of 
the Senate. An individual study shall be prepared for each of the 
Nation's principal river basins. Each such study shall identify and 
describe with specificity the following matters:
            (1) Opportunities to improve the efficiency of hydropower 
        generation at such facilities through, but not limited to, 
        mechanical, structural, or operational changes.
            (2) Opportunities to improve the efficiency of the use of 
        water supplied or regulated by Federal projects where such 
        improvement could, in the absence of legal or administrative 
        constraints, make additional water supplies available for 
        hydropower generation or reduce project energy use.
            (3) Opportunities to create additional hydropower 
        generating capacity at existing facilities through, but not 
        limited to, the construction of additional generating 
        facilities, the uprating of generators and turbines, and the 
        construction of pumped storage facilities.
            (4) Preliminary assessment of the costs and the economic 
        and environmental consequences of such measures.
    (b) Previous Studies.--If studies of the type required by 
subsection (a) have been prepared by any agency of the United States 
and published within the five years prior to the date of enactment of 
this Act, the Secretary of Energy may choose not to perform new studies 
and incorporate the information in such studies into the studies 
required by subsection (a).
    (c) Authorization.--There is authorized to be appropriated such 
sums as may be necessary to carry out the purposes of this section.

SEC. 7. RENEWABLE ENERGY PRODUCTION INCENTIVES PROGRAM.

    Section 1212 of the Energy Policy Act of 1992 is amended in 
subsection (b) by inserting after ``and which'' the following ``is a 
small hydroelectric power project (as defined in section 408(a)(1) of 
the Public Utility Regulatory Policies Act of 1978) or which''.

Summary: Directs the Secretary of Energy to make incentive payments during a specified incentive period to the owner or operator of: (1) a turbine or other generating device owned or solely operated by a non-Federal entity which generates hydroelectric energy for sale and which is added to an existing dam or conduit (a qualified hydroelectric facility); and (2) hydroelectric facilities at existing dams for capital improvements that are directly related to improving their efficiency by at least three percent.

Describes payment limitations.