To modify the efficiency standards for grid-enabled water heaters.

SECTION 1. GRID-ENABLED WATER HEATERS.

    Part B of title III of the Energy Policy and Conservation Act (42 
U.S.C. 6291 et seq.) is amended--
            (1) in section 325(e) (42 U.S.C. 6295(e)), by adding at the 
        end the following:
            ``(6) Additional standards for grid-enabled water 
        heaters.--
                    ``(A) Definitions.--In this paragraph:
                            ``(i) Activation key.--The term `activation 
                        key' means a physical device or control 
                        directly on the water heater, a software code, 
                        or a digital communication--
                                    ``(I) that must be activated to 
                                enable the product to operate 
                                continuously and at its designed 
                                specifications and capabilities; and
                                    ``(II) without which activation the 
                                product will provide not greater than 
                                50 percent of the rated first hour 
                                delivery of hot water certified by the 
                                manufacturer.
                            ``(ii) Grid-enabled water heater.--The term 
                        `grid-enabled water heater' means an electric 
                        resistance water heater that--
                                    ``(I) has a rated storage tank 
                                volume of more than 75 gallons;
                                    ``(II) is manufactured on or after 
                                April 16, 2015;
                                    ``(III) has--
                                            ``(aa) an energy factor of 
                                        not less than 1.061 minus the 
                                        product obtained by 
                                        multiplying--

                                                    ``(AA) the rated 
                                                storage volume of the 
                                                tank, expressed in 
                                                gallons; and

                                                    ``(BB) 0.00168; or

                                            ``(bb) an efficiency level 
                                        equivalent to the energy factor 
                                        under item (aa) and expressed 
                                        as a uniform energy descriptor 
                                        based on the revised test 
                                        procedure for water heaters 
                                        described in paragraph (5);
                                    ``(IV) is equipped by the 
                                manufacturer with an activation key; 
                                and
                                    ``(V) bears a permanent label 
                                applied by the manufacturer that--
                                            ``(aa) is made of material 
                                        not adversely affected by 
                                        water;
                                            ``(bb) is attached by means 
                                        of non-water-soluble adhesive; 
                                        and
                                            ``(cc) advises purchasers 
                                        and end-users of the intended 
                                        and appropriate use of the 
                                        product with the following 
                                        notice printed in 16.5 point 
                                        Arial Narrow Bold font:
```IMPORTANT INFORMATION: This water heater is intended only for use as 
part of an electric thermal storage or demand response program. It will 
not provide adequate hot water unless enrolled in such a program and 
activated by your utility company or another program operator. Confirm 
the availability of a program in your local area before purchasing or 
installing this product.'.
                    ``(B) Requirement.--The manufacturer or private 
                labeler shall provide the activation key only to 
                utilities or other companies operating electric thermal 
                storage or demand response programs that use grid-
                enabled water heaters.
                    ``(C) Reports.--
                            ``(i) Manufacturers.--The Secretary shall 
                        require each manufacturer of grid-enabled water 
                        heaters to report to the Secretary annually the 
                        quantity of grid-enabled water heaters that the 
                        manufacturer ships each year.
                            ``(ii) Operators.--The Secretary shall 
                        require utilities and other demand response and 
                        thermal storage program operators to report 
                        annually the quantity of grid-enabled water 
                        heaters activated for their programs using 
                        forms of the Energy Information Agency or using 
                        such other mechanism that the Secretary 
                        determines appropriate after an opportunity for 
                        notice and comment.
                            ``(iii) Confidentiality requirements.--The 
                        Secretary shall treat shipment data reported by 
                        manufacturers as confidential business 
                        information.
                    ``(D) Publication of information.--
                            ``(i) In general.--In 2017 and 2019, the 
                        Secretary shall publish an analysis of the data 
                        collected under subparagraph (C) to assess the 
                        extent to which shipped products are put into 
                        use in demand response and thermal storage 
                        programs.
                            ``(ii) Prevention of product diversion.--If 
                        the Secretary determines that sales of grid-
                        enabled water heaters exceed by 15 percent or 
                        greater the quantity of such products activated 
                        for use in demand response and thermal storage 
                        programs annually, the Secretary shall, after 
                        opportunity for notice and comment, establish 
                        procedures to prevent product diversion for 
                        non-program purposes.
                    ``(E) Compliance.--
                            ``(i) In general.--Subparagraphs (A) 
                        through (D) shall remain in effect until the 
                        Secretary determines under this section that 
                        grid-enabled water heaters do not require a 
                        separate efficiency requirement.
                            ``(ii) Effective date.--If the Secretary 
                        exercises the authority described in clause (i) 
                        or amends the efficiency requirement for grid-
                        enabled water heaters, that action will take 
                        effect on the date described in subsection 
                        (m)(4)(A)(ii).
                            ``(iii) Consideration.--In carrying out 
                        this section with respect to electric water 
                        heaters, the Secretary shall consider the 
                        impact on thermal storage and demand response 
                        programs, including the consequent impact on 
                        energy savings, electric bills, electric 
                        reliability, integration of renewable 
                        resources, and the environment.
                            ``(iv) Requirements.--In carrying out this 
                        subparagraph, the Secretary shall require that 
                        grid-enabled water heaters be equipped with 
                        communication capability to enable the grid-
                        enabled water heaters to participate in 
                        ancillary services programs if the Secretary 
                        determines that the technology is available, 
                        practical, and cost-effective.''; and
            (2) in section 332(a) (42 U.S.C. 6302(a))--
                    (A) in paragraph (5), by striking ``or'' at the 
                end;
                    (B) in the first paragraph (6), by striking the 
                period at the end and inserting a semicolon;
                    (C) by redesignating the second paragraph (6) as 
                paragraph (7);
                    (D) in subparagraph (B) of paragraph (7) (as so 
                redesignated), by striking the period at the end and 
                inserting ``; or''; and
                    (E) by adding at the end the following:
            ``(8) with respect to grid-enabled water heaters that are 
        not used as part of an electric thermal storage or demand 
        response program, for any person knowingly and repeatedly--
                    ``(A) to distribute activation keys for those grid-
                enabled water heaters;
                    ``(B) otherwise to enable the full operation of 
                those grid-enabled water heaters; or
                    ``(C) to remove or render illegible the labels of 
                those grid-enabled water heaters.''.

Summary: Amends the Energy Policy and Conservation Act (EPCA) to provide additional energy conservation standards applicable to grid-enabled water heaters (those intended for use as part of an electric thermal storage or demand response program). Requires annual reports from: (1) manufacturers of such water heaters regarding the quantity of the products shipped each year, and (2) utilities and other demand response and thermal storage program operators regarding the quantity of products activated for their programs. Requires the Secretary of Energy (DOE) to publish analyses of data collected from such reports and to establish procedures to prevent product diversion if sales of the products exceed by at least 15% the quantity activated for use in the demand response and thermal storage programs annually. Maintains the standards and publication procedures established by this Act until the Secretary determines that such water heaters do not require a separate efficiency requirement. Requires the Secretary to consider the impact of EPCA electric water heater standards on thermal storage and demand response programs, including on energy savings, electric bills, electric reliability, integration of renewable resources, and the environment. Makes unlawful, with respect to grid-enabled water heaters not used as part of an electric thermal storage or demand response program, the knowing and repeated distribution of activation keys, enabling of full operation of the products, or removing or making illegible their labels.