A bill to amend the Internal Revenue Code of 1986 to extend and modify the credit for electricity produced from renewable resources.

SECTION 1. CREDIT FOR ELECTRICITY PRODUCED FROM RENEWABLE RESOURCES.

    (a) Extension and Modification of Placed-in-Service Rules.--
Paragraph (3) of section 45(c) of the Internal Revenue Code of 1986 is 
amended to read as follows:
            ``(3) Qualified facility.--
                    ``(A) Wind facilities.--In the case of a facility 
                using wind to produce electricity, the term `qualified 
                facility' means any facility owned by the taxpayer 
                which is originally placed in service after December 
                31, 1993, and before July 1, 2004.
                    ``(B) Biomass facilities.--In the case of a 
                facility using biomass to produce electricity, the term 
                `qualified facility' means, with respect to any month, 
                any facility owned, leased, or operated by the taxpayer 
                which is originally placed in service before July 1, 
                2004, if, for such month--
                            ``(i) biomass comprises not less than 75 
                        percent (on a Btu basis) of the average monthly 
                        fuel input of the facility for the taxable year 
                        which includes such month, or
                            ``(ii) in the case of a facility 
                        principally using coal to produce electricity, 
                        biomass comprises not more than 25 percent (on 
                        a Btu basis) of the average monthly fuel input 
                        of the facility for the taxable year which 
                        includes such month.
                    ``(C) Special rules.--
                            ``(i) In the case of a qualified facility 
                        described in subparagraph (B)(i)--
                                    ``(I) the 10-year period referred 
                                to in subsection (a) shall be treated 
                                as beginning no earlier than the date 
                                of the enactment of this paragraph, and
                                    ``(II) subsection (b)(3) shall not 
                                apply to any such facility originally 
                                placed in service before January 1, 
                                1997.
                            ``(ii) In the case of a qualified facility 
                        described in subparagraph (B)(ii)--
                                    ``(I) the 10-year period referred 
                                to in subsection (a) shall be treated 
                                as beginning no earlier than the date 
                                of the enactment of this paragraph, and
                                    ``(II) the amount of the credit 
                                determined under subsection (a) with 
                                respect to any project for any taxable 
                                year shall be adjusted by multiplying 
                                such amount (determined without regard 
                                to this clause) by 0.59.''.
    (b) Credit Not To Apply to Electricity Sold to Utilities Under 
Certain Contracts.--Section 45(b) of the Internal Revenue Code of 1986 
(relating to limitations and adjustments) is amended by adding at the 
end the following:
            ``(4) Credit not to apply to electricity sold to utilities 
        under certain contracts.--
                    ``(A) In general.--The credit determined under 
                subsection (a) shall not apply to electricity--
                            ``(i) produced at a qualified facility 
                        placed in service by the taxpayer after June 
                        30, 1999, and
                            ``(ii) sold to a utility pursuant to a 
                        contract originally entered into before January 
                        1, 1987 (whether or not amended or restated 
                        after that date).
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                if--
                            ``(i) the prices for energy and capacity 
                        from such facility are established pursuant to 
                        an amendment to the contract referred to in 
                        subparagraph (A)(ii);
                            ``(ii) such amendment provides that the 
                        prices set forth in the contract which exceed 
                        avoided cost prices determined at the time of 
                        delivery shall apply only to annual quantities 
                        of electricity (prorated for partial years) 
                        which do not exceed the greater of--
                                    ``(I) the average annual quantity 
                                of electricity sold to the utility 
                                under the contract during calendar 
                                years 1994, 1995, 1996, 1997, and 1998, 
                                or
                                    ``(II) the estimate of the annual 
                                electricity production set forth in the 
                                contract, or, if there is no such 
                                estimate, the greatest annual quantity 
                                of electricity sold to the utility 
                                under the contract in any of the 
                                calendar years 1996, 1997, or 1998; and
                            ``(iii) such amendment provides that energy 
                        and capacity in excess of the limitation in 
                        clause (ii) may be--
                                    ``(I) sold to the utility only at 
                                prices that do not exceed avoided cost 
                                prices determined at the time of 
                                delivery, or
                                    ``(II) sold to a third party 
                                subject to a mutually agreed upon 
                                advance notice to the utility.
                For purposes of this subparagraph, avoided cost prices 
                shall be determined as provided for in 18 CFR 
                292.304(d)(1) or any successor regulation.''.
    (c) Qualified Facilities Include All Biomass Facilities.--
            (1) In general.--Subparagraph (B) of section 45(c)(1) of 
        the Internal Revenue Code of 1986 (defining qualified energy 
        resources) is amended to read as follows:
                    ``(B) biomass.''.
            (2) Biomass defined.--Paragraph (2) of section 45(c) of 
        such Code (relating to definitions) is amended to read as 
        follows:
            ``(2) Biomass.--The term `biomass' means--
                    ``(A) any organic material from a plant which is 
                planted exclusively for purposes of being used at a 
                qualified facility to produce electricity, or
                    ``(B) any solid, nonhazardous, cellulosic waste 
                material which is segregated from other waste materials 
                and which is derived from--
                            ``(i) any of the following forest-related 
                        resources: mill residues, precommercial 
                        thinnings, slash, and brush, but not including 
                        old-growth timber,
                            ``(ii) poultry waste,
                            ``(iii) urban sources, including waste 
                        pallets, crates, and dunnage, manufacturing and 
                        construction wood wastes, and landscape or 
                        right-of-way tree trimmings, but not including 
                        unsegregated municipal solid waste (garbage) or 
                        paper that is commonly recycled, or
                            ``(iv) agriculture sources, including 
                        orchard tree crops, vineyard, grain, legumes, 
                        sugar, and other crop by-products or 
                        residues.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to electricity produced after the date of the enactment of this 
Act.

Summary: Prohibits, subject to exception, the credit from applying to electricity produced at a qualified facility placed in service after June 30, 1999, and sold to a utility pursuant to a contract originally entered into before January 1, 1987.