Title: American Energy Efficiency Act
Policy area: Energy

Summary:
American Energy Efficiency Act
This bill requires electric utilities and natural gas utilities to meet performance standards for 2021 through 2035 with respect to cumulative electricity savings and cumulative natural gas savings.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5889 Introduced in House (IH)]

<DOC>






117th CONGRESS
  1st Session
                                H. R. 5889

To amend title VI of the Public Utility Regulatory Policies Act of 1978 
 to establish a Federal energy efficiency resource standard for retail 
 electricity suppliers and retail natural gas suppliers, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            November 4, 2021

   Mr. Welch (for himself and Ms. Clarke of New York) introduced the 
   following bill; which was referred to the Committee on Energy and 
                                Commerce

_______________________________________________________________________

                                 A BILL


 
To amend title VI of the Public Utility Regulatory Policies Act of 1978 
 to establish a Federal energy efficiency resource standard for retail 
 electricity suppliers and retail natural gas suppliers, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``American Energy 
Efficiency Act''.
    (b) Findings.--Congress finds that--
            (1) the Federal energy efficiency resource standard 
        established by section 610 of the Public Utility Regulatory 
        Policies Act of 1978 (as added by this Act)--
                    (A) establishes nationwide minimum levels of 
                electricity and natural gas savings to be achieved 
                through utility efficiency programs, building energy 
                codes, appliance standards, and related efficiency 
                measures; and
                    (B) rewards energy-saving improvements achieved 
                through--
                            (i) end-use energy efficiency upgrades;
                            (ii) reduced losses in transmission and 
                        distribution of energy; and
                            (iii) fuel switching, to the extent that 
                        the switching results in reduced primary energy 
                        use; and
            (2) in light of the cost-effective energy efficiency 
        opportunities that exist across the United States in every 
        sector of the economy, retail electricity suppliers, retail 
        natural gas suppliers, and States should--
                    (A) include energy efficiency as a resource in 
                utility planning and procurement activities; and
                    (B) seek to achieve all energy efficiency measures 
                that are available at lower cost than other energy 
                supply options.

SEC. 2. ENERGY EFFICIENCY RESOURCE STANDARD FOR RETAIL ELECTRICITY AND 
              NATURAL GAS SUPPLIERS.

    Title VI of the Public Utility Regulatory Policies Act of 1978 (16 
U.S.C. 2601 et seq.) is amended by adding at the end the following:

``SEC. 610. FEDERAL ENERGY EFFICIENCY RESOURCE STANDARD FOR RETAIL 
              ELECTRICITY AND NATURAL GAS SUPPLIERS.

    ``(a) Definitions.--In this section:
            ``(1) Affiliate.--The term `affiliate' when used in 
        relation to a person, means another person that owns or 
        controls, is owned or controlled by, or is under common 
        ownership control with, that person, as determined under 
        regulations promulgated by the Secretary.
            ``(2) ASHRAE, ansi, and iesna.--The terms `ASHRAE', `ANSI', 
        and `IESNA' mean the American Society of Heating, Refrigerating 
        and Air Conditioning Engineers, the American National Standards 
        Institute, and the Illuminating Engineering Society of North 
        America, respectively.
            ``(3) Base quantity.--
                    ``(A) In general.--The term `base quantity', with 
                respect to a retail electricity supplier or retail 
                natural gas supplier, means, for each calendar year for 
                which a performance standard is specified or 
                established under subsection (c), the average annual 
                quantity of electricity delivered by the retail 
                electricity supplier to electric consumers, or the 
                average annual quantity of natural gas delivered by the 
                retail natural gas supplier to gas consumers, during 
                the 3 calendar years immediately preceding the year 
                that compliance is required under subsection (c)(1).
                    ``(B) Exclusion.--The term `base quantity', with 
                respect to a retail natural gas supplier, does not 
                include natural gas delivered for purposes of 
                electricity generation.
            ``(4) CHP savings.--The term `CHP savings' means--
                    ``(A) CHP system savings from a combined heat and 
                power system that commences operation after the date of 
                enactment of this section; and
                    ``(B) the increase in CHP system savings from 
                upgrading or replacing, after the date of enactment of 
                this section, a combined heat and power system that 
                commenced operation on or before the date of enactment 
                of this section.
            ``(5) CHP system savings.--The term `CHP system savings' 
        means the electric output, and the electricity saved due to the 
        mechanical output, of a combined heat and power system, 
        adjusted to reflect any increase in fuel consumption by that 
        system as compared to the fuel that would have been required to 
        produce an equivalent useful thermal energy output in a 
        separate thermal-only system, as determined in accordance with 
        regulations promulgated by the Secretary.
            ``(6) Codes and standards savings.--The term `codes and 
        standards savings' means a reduction in electricity or natural 
        gas consumption as a result of the adoption and implementation, 
        after the date of enactment of this section, of new or revised 
        appliance and equipment efficiency standards or building energy 
        codes.
            ``(7) Combined heat and power system.--The term `combined 
        heat and power system' means a system that uses the same energy 
        source both for the generation of electrical or mechanical 
        power and the production of steam or another form of useful 
        thermal energy, if--
                    ``(A) the system meets any requirements relating to 
                efficiency and other operating characteristics that the 
                Secretary promulgates by regulation; and
                    ``(B) the net wholesale sales of electricity by the 
                applicable facility do not exceed 50 percent of total 
                annual electric generation by the facility.
            ``(8) Cost-effective.--The term `cost-effective' means, 
        with respect to an energy efficiency program, that the program 
        achieves a net present value of economic benefits over the life 
        of the implemented measures, both directly to the energy 
        consumer and to the economy, that is greater than the net 
        present value of the cost of the program over the life of the 
        program, both directly to the energy consumer and to the 
        economy. The cost-effectiveness of an energy efficiency program 
        shall be calculated using a societal benefit-cost test that 
        uses the lower of a utility weighted average cost of capital or 
        a social discount rate of 3 percent.
            ``(9) Customer facility savings.--The term `customer 
        facility savings' means a reduction in electricity or natural 
        gas consumption, including waste heat energy savings, at a 
        facility of an electricity consumer served by a retail 
        electricity supplier or a gas consumer served by a natural gas 
        supplier, as compared to--
                    ``(A) in the case of new equipment that replaces 
                existing equipment with remaining useful life--
                            ``(i) consumption of the existing equipment 
                        for the remaining useful life of the equipment; 
                        and
                            ``(ii) thereafter, consumption by new 
                        equipment of average efficiency of the same 
                        equipment type;
                    ``(B) in the case of new equipment other than new 
                equipment described in subparagraph (A), consumption by 
                new equipment of average efficiency of the same 
                equipment type;
                    ``(C) in the case of consumption, other than 
                consumption described in subparagraphs (A) and (B), at 
                an existing facility, consumption at the facility 
                during a base period of not less than 1 year; and
                    ``(D) in the case of consumption, other than 
                consumption described in subparagraphs (A) and (B), at 
                a new facility, consumption at a reference new facility 
                of average efficiency for new facilities of the same 
                type.
            ``(10) Electricity savings.--The term `electricity savings' 
        means reductions in electricity consumption or losses, as 
        determined in accordance with regulations promulgated by the 
        Secretary, that--
                    ``(A) are achieved through measures implemented 
                after the date of enactment of this section;
                    ``(B) are additional to business-as-usual--
                            ``(i) customer purchase practices; and
                            ``(ii) distribution system efficiency;
                    ``(C) the retail electricity supplier claiming or 
                transferring the electricity savings has played a 
                significant role in achieving;
                    ``(D) occur in the service territory of the retail 
                electricity supplier claiming or transferring the 
                electricity savings; and
                    ``(E) are limited to--
                            ``(i) customer facility savings of 
                        electricity, adjusted to reflect any associated 
                        increase in fuel consumption at the facility;
                            ``(ii) reductions in distribution system 
                        losses of electricity achieved by a retail 
                        electricity supplier, as compared to losses 
                        that would occur with new distribution system 
                        equipment of average efficiency;
                            ``(iii) CHP savings;
                            ``(iv) codes and standards savings of 
                        electricity; and
                            ``(v) fuel-switching energy savings that 
                        result in net savings of electricity.
            ``(11) Fuel-switching energy savings.--
                    ``(A) In general.--The term `fuel-switching energy 
                savings' means net energy savings, calculated in 
                accordance with subparagraph (B), from consumer 
                switches from one energy source to another, as 
                determined in accordance with regulations promulgated 
                by the Secretary.
                    ``(B) Calculation.--For purposes of calculating net 
                energy savings under subparagraph (A)--
                            ``(i) electricity consumption shall be 
                        evaluated based on the average additional 
                        quantity of fuel burned at power plants to 
                        supply each additional kilowatt-hour of 
                        electricity consumption in the region;
                            ``(ii) electricity and natural gas 
                        consumption shall include losses in the 
                        transmission and distribution systems; and
                            ``(iii) fuel-switching that does not result 
                        in net cost savings to the consumer shall not 
                        be counted.
            ``(12) Gas consumer.--The term `gas consumer' has the 
        meaning given such term in section 302.
            ``(13) Natural gas savings.--The term `natural gas savings' 
        means reductions in natural gas consumption or losses, as 
        determined in accordance with regulations promulgated by the 
        Secretary, that--
                    ``(A) are achieved through measures implemented 
                after the date of enactment of this section;
                    ``(B) are additional to business-as-usual--
                            ``(i) customer purchase practices; and
                            ``(ii) distribution system efficiency;
                    ``(C) the retail natural gas supplier claiming or 
                transferring the natural gas savings has played a 
                significant role in achieving;
                    ``(D) occur in the service territory of the retail 
                natural gas supplier claiming or transferring the 
                natural gas savings; and
                    ``(E) are limited to--
                            ``(i) customer facility savings of natural 
                        gas, adjusted to reflect any associated 
                        increase in electricity consumption or 
                        consumption of other fuels at the facility;
                            ``(ii) reductions in leakage, operational 
                        losses, and consumption of natural gas to 
                        operate a gas distribution system, achieved by 
                        a retail natural gas supplier, as compared to 
                        similar leakage, losses, and consumption during 
                        a base period of not less than 1 year;
                            ``(iii) codes and standards savings of 
                        natural gas; and
                            ``(iv) fuel-switching energy savings that 
                        results in net savings of natural gas.
            ``(14) Performance standard.--The term `performance 
        standard' means a standard--
                    ``(A) established for a calendar year for 
                cumulative electricity savings or cumulative natural 
                gas savings that is expressed as a percentage of base 
                quantity; and
                    ``(B) for each of calendar years 2021 through 2035, 
                that is labeled as cumulative electricity savings 
                percentage or cumulative natural gas savings 
                percentage, as applicable, in the table under 
                subsection (c)(2).
            ``(15) Power pool.--The term `power pool' means an 
        association of two or more interconnected electric systems that 
        have entered into an agreement to coordinate operations and 
        planning for improved reliability and efficiencies, including a 
        Regional Transmission Organization or an Independent System 
        Operator, as determined by the Secretary.
            ``(16) Reporting period.--The term `reporting period' 
        means--
                    ``(A) calendar years 2021 through 2023; and
                    ``(B) each successive 2-calendar-year period 
                thereafter.
            ``(17) Retail electricity supplier.--
                    ``(A) In general.--The term `retail electricity 
                supplier' means, for any calendar year, an electric 
                utility that delivered not fewer than 1,000,000 
                megawatt hours of electricity to electric consumers for 
                purposes other than resale during the preceding 
                calendar year.
                    ``(B) Inclusions and limitations.--For purposes of 
                determining whether an electric utility qualifies as a 
                retail electricity supplier under subparagraph (A)--
                            ``(i) deliveries by any affiliate of the 
                        electric utility to electric consumers for 
                        purposes other than resale shall be considered 
                        to be deliveries by the electric utility; and
                            ``(ii) deliveries by any electric utility 
                        to a lessee, tenant, or affiliate of the 
                        electric utility shall not be considered to be 
                        deliveries to electric consumers.
            ``(18) Retail natural gas supplier.--
                    ``(A) In general.--The term `retail natural gas 
                supplier' means, for any calendar year, a local 
                distribution company (as defined in section 2 of the 
                Natural Gas Policy Act of 1978), that delivered to gas 
                consumers more than 5,000,000,000 cubic feet of natural 
                gas for purposes other than resale during the preceding 
                calendar year.
                    ``(B) Inclusions and limitations.--For purposes of 
                determining whether a local distribution company 
                qualifies as a retail natural gas supplier under 
                subparagraph (A)--
                            ``(i) deliveries of natural gas by any 
                        affiliate of a local distribution company to 
                        consumers for purposes other than resale shall 
                        be considered to be deliveries by the local 
                        distribution company; and
                            ``(ii) deliveries of natural gas to a 
                        lessee, tenant, or affiliate of a local 
                        distribution company shall not be considered to 
                        be deliveries to gas consumers.
            ``(19) State regulatory authority.--The term `State 
        regulatory authority' means any State agency which has 
        ratemaking authority with respect to--
                    ``(A) the sale of natural gas by any gas utility 
                (other than by such State agency); or
                    ``(B) the sale of electric energy by any electric 
                utility (other than such State agency), and in the case 
                of an electric utility with respect to which the 
                Tennessee Valley Authority has ratemaking authority, 
                such term means the Tennessee Valley Authority.
            ``(20) Third-party efficiency provider.--The term `third-
        party efficiency provider' means any retailer, building owner, 
        energy service company, financial institution, or other 
        commercial, industrial, or nonprofit entity that is capable of 
        providing electricity savings or natural gas savings in 
        accordance with subsections (d) and (e).
            ``(21) Waste heat energy savings.--
                    ``(A) In general.--The term `waste heat energy 
                savings' means a reduction in electricity or natural 
                gas consumption that results from a modification of an 
                industrial or commercial system that commenced 
                operation before the date of enactment of this section, 
                in order to recapture electrical, mechanical, or 
                thermal energy that would otherwise be wasted, as 
                determined in accordance with regulations promulgated 
                by the Secretary.
                    ``(B) Inclusion.--Waste heat energy savings shall 
                be included as part of customer facility savings.
    ``(b) Establishment.--
            ``(1) Regulations.--Not later than 1 year after the date of 
        enactment of this section, the Secretary shall, by regulation, 
        establish a program to implement and enforce the requirements 
        of this section, including by--
                    ``(A) establishing measurement and verification 
                procedures and standards under subsection (e);
                    ``(B) establishing requirements under which retail 
                electricity suppliers and retail natural gas suppliers 
                shall--
                            ``(i) demonstrate, document, and report the 
                        compliance of the retail electricity suppliers 
                        and retail natural gas suppliers with the 
                        performance standards under subsection (c); and
                            ``(ii) estimate the impact of the 
                        performance standards on current and future 
                        electricity and natural gas consumption in the 
                        service territories of the suppliers; and
                    ``(C) establishing requirements governing 
                applications for, and implementation of, State programs 
                under subsection (g).
            ``(2) Coordination with state programs.--In establishing 
        and implementing this section, the Secretary shall, to the 
        maximum extent practicable, preserve the integrity and 
        incorporate best practices of existing State energy efficiency 
        programs.
    ``(c) Performance Standards.--
            ``(1) Compliance obligation.--Not later than May 1 of the 
        calendar year immediately following each reporting period--
                    ``(A) each retail electricity supplier shall submit 
                to the Secretary a report, in accordance with 
                regulations promulgated by the Secretary, demonstrating 
                that such retail electricity supplier has achieved 
                cumulative electricity savings (adjusted to account for 
                any attrition of savings from measures implemented in 
                prior years) in each calendar year of such reporting 
                period that are equal to or greater than the applicable 
                performance standard; and
                    ``(B) each retail natural gas supplier shall submit 
                to the Secretary a report, in accordance with 
                regulations promulgated by the Secretary, demonstrating 
                that such retail natural gas supplier has achieved 
                cumulative natural gas savings (adjusted to account for 
                any attrition of savings from measures implemented in 
                prior years) in each calendar year of such reporting 
                period that are equal to or greater than the applicable 
                performance standard.
            ``(2) Performance standards for 2021 through 2035.--For 
        each of calendar years 2021 through 2035, the performance 
        standards are as follows:


------------------------------------------------------------------------
                          Cumulative Electricity  Cumulative Natural Gas
    ``Calendar Year         Savings Percentage       Savings Percentage
------------------------------------------------------------------------
                 2021                     1.00                    0.50
------------------------------------------------------------------------
                 2022                     2.25                    1.25
------------------------------------------------------------------------
                 2023                     3.75                    2.00
------------------------------------------------------------------------
                 2024                     5.25                    3.00
------------------------------------------------------------------------
                 2025                     7.00                    4.00
------------------------------------------------------------------------
                 2026                     9.00                    5.00
------------------------------------------------------------------------
                 2027                    11.00                    5.50
------------------------------------------------------------------------
                 2028                    13.00                    7.00
------------------------------------------------------------------------
                 2029                    15.00                    8.50
------------------------------------------------------------------------
                 2030                    17.00                   10.00
------------------------------------------------------------------------
                 2031                    19.00                   12.00
------------------------------------------------------------------------
                 2032                    21.00                   14.00
------------------------------------------------------------------------
                 2033                    23.00                   16.00
------------------------------------------------------------------------
                 2034                    25.00                   18.00
------------------------------------------------------------------------
                 2035                    27.00                   20.00
------------------------------------------------------------------------

            ``(3) Subsequent years.--
                    ``(A) Calendar years 2036 through 2045.--Not later 
                than December 31, 2033, the Secretary shall promulgate 
                regulations establishing performance standards for each 
                of calendar years 2036 through 2045.
                    ``(B) Subsequent extensions.--Except as provided in 
                subparagraph (A), not later than the last day of the 
                penultimate reporting period for which performance 
                standards have been established under this paragraph, 
                the Secretary shall promulgate regulations establishing 
                performance standards for the 10-calendar-year period 
                following the last calendar year for which performance 
                standards previously were established.
                    ``(C) Requirements.--The Secretary shall establish 
                performance standards under this paragraph at levels 
                reflecting the maximum achievable level of cost-
                effective energy efficiency potential, taking into 
                account--
                            ``(i) cost-effective energy savings 
                        achieved by leading retail electricity 
                        suppliers and retail natural gas suppliers;
                            ``(ii) opportunities for new codes and 
                        standards savings;
                            ``(iii) technology improvements; and
                            ``(iv) other indicators of cost-effective 
                        energy efficiency potential.
                    ``(D) Minimum percentage.--In no case shall a 
                performance standard established under this paragraph 
                for any calendar year be less than the applicable 
                performance standard for calendar year 2035 (including 
                any increase in the standard for calendar year 2035 
                established pursuant to paragraph (4)).
            ``(4) Midcourse review and adjustment of performance 
        standards.--
                    ``(A) In general.--Not later than December 31, 
                2029, and at 10-year intervals thereafter, the 
                Secretary shall--
                            ``(i) review the most recent performance 
                        standards established under paragraph (2) or 
                        (3); and
                            ``(ii) increase the performance standards 
                        by regulation if the Secretary determines that 
                        additional cost-effective energy efficiency 
                        potential is achievable, taking into account 
                        the requirements described in paragraph (3)(C).
                    ``(B) Lead time.--If the Secretary revises 
                performance standards under this paragraph, the 
                regulations shall provide adequate lead time to ensure 
                that compliance with the increased performance 
                standards is feasible.
            ``(5) Delay of submission for first reporting period.--
                    ``(A) In general.--Notwithstanding paragraphs (1) 
                and (2), for the first reporting period, the Secretary 
                may accept a request from a retail electricity supplier 
                or a retail natural gas supplier to delay the required 
                submission of documentation of all or part of the 
                required savings for up to 2 years.
                    ``(B) Plan for compliance.--The request for delay 
                under subparagraph (A) shall include a plan for coming 
                into full compliance by the end of the second reporting 
                period.
            ``(6) Applying unused savings to future years.--If 
        electricity savings or natural gas savings achieved by a retail 
        electricity supplier or retail natural gas supplier in a year 
        exceed the applicable performance standard specified or 
        established under this subsection, any savings in excess of the 
        performance standard may be applied toward performance 
        standards specified or established for any of the 2 immediately 
        subsequent compliance years.
    ``(d) Transfers of Electricity or Natural Gas Savings.--
            ``(1) Bilateral contracts for savings transfers.--Subject 
        to the limitations of this subsection, a retail electricity 
        supplier or retail natural gas supplier may use electricity 
        savings or natural gas savings purchased pursuant to a 
        bilateral contract from another retail electricity supplier or 
        retail natural gas supplier, a State, or a third-party 
        efficiency provider to meet the applicable performance standard 
        under subsection (c).
            ``(2) Requirements.--Electricity savings or natural gas 
        savings purchased and used for compliance under this subsection 
        shall be--
                    ``(A) measured and verified in accordance with 
                subsection (e);
                    ``(B) reported in accordance with subsection (c); 
                and
                    ``(C) achieved within the same State as is served 
                by the retail electricity supplier or retail natural 
                gas supplier.
            ``(3) Exception.--Notwithstanding paragraph (2)(C), a State 
        regulatory authority may authorize a retail electricity 
        supplier or a retail natural gas supplier regulated by the 
        State regulatory authority to purchase savings achieved in a 
        different State, if--
                    ``(A) the savings are achieved within the same 
                power pool; and
                    ``(B) the State regulatory authority that regulates 
                the purchaser oversees the measurement and verification 
                of the savings pursuant to the procedures and standards 
                applicable in the State in which the purchaser is 
                located.
            ``(4) Regulatory approval.--Nothing in this subsection 
        limits or affects the authority of a State regulatory authority 
        to require a retail electricity supplier or retail natural gas 
        supplier that is regulated by the State regulatory authority to 
        obtain the authorization or approval of the State regulatory 
        authority of a contract for transfer of electricity savings or 
        natural gas savings under this subsection.
            ``(5) Limitations.--To optimize the achievement of cost-
        effective energy efficiency potential, the Secretary may 
        prescribe such limitations as the Secretary determines 
        appropriate with respect to the proportion of the compliance 
        obligation of a retail electricity or natural gas supplier 
        under the applicable performance standards under subsection (c) 
        that may be met using electricity savings or natural gas 
        savings that are purchased under this subsection.
    ``(e) Evaluation, Measurement, and Verification of Savings.--
            ``(1) Regulations.--The regulations promulgated pursuant to 
        subsection (b) shall--
                    ``(A) be based on--
                            ``(i) the Uniform Methods Project of the 
                        Department of Energy;
                            ``(ii) the National Standard Practice 
                        Manual for Assessing the Cost-Effectiveness of 
                        Energy Efficiency Resources, developed by the 
                        National Efficiency Screening Project; and
                            ``(iii) other best practices recognized in 
                        the energy efficiency industry; and
                    ``(B) include--
                            ``(i) procedures and standards for 
                        evaluating, measuring, and verifying 
                        electricity savings and natural gas savings 
                        that count towards the performance standards 
                        under subsection (c) that--
                                    ``(I) specify the types of energy 
                                efficiency and energy conservation 
                                measures that may be counted;
                                    ``(II) require that energy 
                                consumption estimates for customer 
                                facilities or portions of facilities in 
                                the applicable base and current years 
                                be adjusted, as appropriate, to account 
                                for changes in weather, level of 
                                production, and building area;
                                    ``(III) do not prevent overall load 
                                growth due to beneficial 
                                electrification;
                                    ``(IV) account for the useful life 
                                of energy efficiency and energy 
                                conservation measures;
                                    ``(V) allow for savings from a 
                                program to be estimated based on 
                                extrapolation from a representative 
                                sample of participating customers;
                                    ``(VI) include procedures for 
                                calculating and documenting CHP 
                                savings, fuel-switching energy savings, 
                                and waste heat energy savings;
                                    ``(VII) establish methods for 
                                calculating codes and standards 
                                savings, including--
                                            ``(aa) the use of verified 
                                        compliance rates;
                                            ``(bb) requiring that the 
                                        baseline for calculating 
                                        savings from building energy 
                                        codes shall be the more 
                                        stringent of--

                                                    ``(AA) the 2021 
                                                International Energy 
                                                Conservation Code for 
                                                residential buildings, 
                                                or the ASHRAE/ANSI/
                                                IESNA Standard 90.1-
                                                2019 for commercial 
                                                buildings; or

                                                    ``(BB) the 
                                                applicable State 
                                                building code in effect 
                                                on the date of 
                                                enactment of this 
                                                section; and

                                            ``(cc) requiring that the 
                                        baseline for calculating 
                                        savings from appliance and 
                                        equipment standards shall be 
                                        the average efficiency of new 
                                        appliances and equipment in the 
                                        applicable one or more 
                                        categories prior to the 
                                        adoption and implementation of 
                                        the new standard;
                                    ``(VIII) include procedures for 
                                calculating and documenting--
                                            ``(aa) customer facility 
                                        savings and reductions in 
                                        distribution system losses of 
                                        electricity and natural gas 
                                        that are achieved as a result 
                                        of smart grid deployment, as 
                                        described in section 1301 of 
                                        the Energy Independence and 
                                        Security Act of 2007; and
                                            ``(bb) reductions in 
                                        natural gas distribution system 
                                        losses attributable to pipeline 
                                        repair and replacement 
                                        programs;
                                    ``(IX) count only measures and 
                                savings that are additional to 
                                business-as-usual customer purchase 
                                practices;
                                    ``(X) ensure that the retail 
                                electricity supplier or retail natural 
                                gas supplier claiming the electricity 
                                savings or natural gas savings, 
                                including State and local codes and 
                                standards savings, has played a 
                                significant role in achieving the 
                                savings (including through the 
                                activities of a designated agent of the 
                                supplier);
                                    ``(XI) avoid double-counting of 
                                savings used for compliance with this 
                                section, including transferred savings;
                                    ``(XII) include electricity savings 
                                or natural gas savings from programs 
                                administered by retail electricity 
                                suppliers or natural gas suppliers that 
                                are funded by Federal, State, or other 
                                sources, unless the funding source 
                                specifies otherwise;
                                    ``(XIII) credit large customer 
                                self-directed electricity savings or 
                                natural gas savings to the retail 
                                electricity supplier or retail natural 
                                gas supplier if the large customer 
                                receives incentives or rate reductions 
                                from the retail electricity supplier or 
                                retail natural gas supplier for self-
                                directed energy efficiency 
                                improvements;
                                    ``(XIV) include guidance, as 
                                appropriate, for additional alternative 
                                approaches to evaluate electricity 
                                savings and natural gas savings for 
                                large commercial and industrial 
                                customers in energy-intensive 
                                industries that are subject to 
                                international competition;
                                    ``(XV) include procedures for 
                                counting electricity savings and 
                                natural gas savings achieved by solar 
                                heating and cooling technologies, solar 
                                light pipe technology, geothermal heat 
                                pumps, and other technologies utilizing 
                                renewable resources that do not produce 
                                electricity or gaseous fuel and reduce 
                                on-site energy consumption;
                                    ``(XVI) include procedures for 
                                counting electricity savings and 
                                natural gas savings achieved by 
                                weatherization measures, such as 
                                installing mechanical insulation, 
                                repairing or replacing heating and 
                                cooling systems, repairing or replacing 
                                windows and doors, performing air 
                                sealing, and replacing lights and 
                                appliances with more energy efficient 
                                models;
                                    ``(XVII) include procedures for 
                                counting electricity savings and 
                                natural gas savings achieved from 
                                increased utilization of mechanical 
                                insulation for new, retrofit, and 
                                maintenance construction for 
                                commercial, industrial, public, and 
                                nonprofit buildings and facilities;
                                    ``(XVIII) in any State in which the 
                                State regulatory authority has 
                                designated one or more entities to 
                                administer electric ratepayer-funded 
                                efficiency programs approved by the 
                                State regulatory authority, provide 
                                that electricity savings and natural 
                                gas savings achieved through those 
                                programs shall be distributed 
                                proportionally among retail electricity 
                                suppliers and retail natural gas 
                                suppliers;
                                    ``(XIX) include guidance for retail 
                                electricity suppliers and retail 
                                natural gas suppliers to calculate and 
                                document business-as-usual consumption 
                                projections;
                                    ``(XX) include guidance for 
                                estimating savings using information 
                                from the database established under 
                                paragraph (3) based on similar measures 
                                and programs in other settings with 
                                appropriate adjustments, as necessary; 
                                and
                                    ``(XXI) incorporate advances in 
                                methods of policy evaluation, such as 
                                the use of--
                                            ``(aa) randomized control 
                                        trials;
                                            ``(bb) other experimental 
                                        and quasi-experimental 
                                        approaches; and
                                            ``(cc) large data sets and 
                                        machine learning techniques; 
                                        and
                            ``(ii) procedures and standards for third-
                        party verification of reported electricity 
                        savings or natural gas savings.
            ``(2) National academy of sciences study.--Not later than 
        180 days after the date of enactment of this section, the 
        Secretary shall seek to enter into an agreement with the 
        National Academy of Sciences, under which the Academy shall--
                    ``(A) evaluate existing state-of-the-art methods 
                for evaluating energy efficiency policies and measures;
                    ``(B) identify approaches in program evaluation 
                literature that may be brought into the energy 
                efficiency domain, including--
                            ``(i) randomized control trials and other 
                        experimental or quasi-experimental approaches;
                            ``(ii) control of confounding factors;
                            ``(iii) longitudinal studies;
                            ``(iv) assessments by neutral arbiters; and
                            ``(v) disclosure of data for replication; 
                        and
                    ``(C) not later than 18 months after the date of 
                enactment of this section, publish a report that 
                includes--
                            ``(i) a description of the evaluation under 
                        subparagraph (A);
                            ``(ii) a description of the approaches 
                        identified under subparagraph (B); and
                            ``(iii) recommendations for advancing and 
                        adopting rigorous state-of-the-art methods for 
                        evaluating energy efficiency policies and 
                        measures.
            ``(3) Energy efficiency program evaluation database.--
                    ``(A) In general.--The Secretary shall establish 
                and maintain a searchable public database, accessible 
                on the website of the Department of Energy, that 
                contains a list of randomized control trials and other 
                experimental or quasi-experimental evaluations of 
                energy efficiency programs.
                    ``(B) Requirements.--Each trial or evaluation on 
                the list described in subparagraph (A) shall include, 
                at a minimum--
                            ``(i) the State in which the trial or 
                        evaluation was conducted;
                            ``(ii) the type of trial or evaluation 
                        conducted;
                            ``(iii) the type of program evaluated;
                            ``(iv) an abstract or summary of the 
                        program evaluated;
                            ``(v) a summary of the trial or evaluation 
                        methodology;
                            ``(vi) the revealed energy savings from the 
                        trial or evaluation; and
                            ``(vii) to the extent practicable, the 
                        underlying data used to conduct the trial or 
                        evaluation.
    ``(f) Enforcement and Judicial Review.--
            ``(1) Review of retail supplier reports.--
                    ``(A) In general.--The Secretary shall review each 
                report submitted to the Secretary by a retail 
                electricity supplier or retail natural gas supplier 
                under subsection (c) to verify that the applicable 
                performance standards under subsection (c) have been 
                met.
                    ``(B) Exclusion.--In determining compliance with 
                the applicable performance standards under subsection 
                (c), the Secretary shall exclude reported electricity 
                savings or natural gas savings that are not adequately 
                demonstrated and documented, in accordance with the 
                regulations promulgated under this section.
            ``(2) Penalty for failure to demonstrate.--If a retail 
        electricity supplier or a retail natural gas supplier that is 
        subject to the requirements of the Federal program established 
        under this section fails to demonstrate compliance with an 
        applicable performance standard under subsection (c), or a 
        retail electricity supplier or a retail natural gas supplier 
        that is subject to the requirements of a State program approved 
        pursuant to subsection (g) fails to comply with a requirement 
        to achieve electricity savings or natural gas savings under 
        such State program, the Secretary shall assess against the 
        retail electricity supplier or retail natural gas supplier a 
        civil penalty in an amount equal to, as adjusted for inflation 
        in accordance with such regulations as the Secretary may 
        promulgate--
                    ``(A) $100 per megawatt hour of electricity savings 
                or alternative compliance payment that the retail 
                electricity supplier 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 supplier 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 relevant retail electricity supplier or 
        retail natural gas supplier to a State for failure to comply 
        with the requirements of a State energy efficiency resource 
        standard during the same compliance period, if the State 
        standard--
                    ``(A) is comparable in type to performance 
                standards under subsection (c); and
                    ``(B) is more stringent than the applicable 
                performance standard under subsection (c).
            ``(4) Use of payments.--
                    ``(A) Definition of covered rate.--In this 
                paragraph, the term `covered rate' means the proportion 
                that--
                            ``(i) the amount of penalty payments made 
                        by retail electricity suppliers and natural gas 
                        suppliers in a State under paragraph (2); bears 
                        to
                            ``(ii) the total amount of penalty payments 
                        collected by the Secretary under that 
                        paragraph.
                    ``(B) Use of payments.--Penalty payments collected 
                under paragraph (2) by the Secretary shall be--
                            ``(i) provided to each State at the covered 
                        rate for the State; and
                            ``(ii) used by the State to implement cost-
                        effective energy efficiency programs that--
                                    ``(I) to the maximum extent 
                                practicable, achieve electricity 
                                savings and natural gas savings in the 
                                State sufficient to make up the deficit 
                                associated with the penalty payments; 
                                and
                                    ``(II) are measured and verified in 
                                accordance with the applicable 
                                procedures and standards established 
                                under subsection (e).
            ``(5) Enforcement procedures.--The Secretary shall assess a 
        civil penalty, as provided under paragraph (2), in accordance 
        with the procedures described in section 333(d) of the Energy 
        Policy and Conservation Act.
            ``(6) Judicial review.--
                    ``(A) In general.--Any person adversely affected by 
                a final action taken by the Secretary under this 
                section, other than the assessment of a civil penalty, 
                may use the procedures for review described in section 
                336(b) of the Energy Policy and Conservation Act.
                    ``(B) Reference.--In this paragraph, references to 
                a rule in section 336(b) of the Energy Policy and 
                Conservation Act shall be considered to refer also to 
                all other final actions of the Secretary under this 
                section other than the assessment of a civil penalty.
    ``(g) State Programs.--
            ``(1) In general.--Upon receipt of an application from the 
        Governor of a State (including the Mayor of the District of 
        Columbia), the Secretary may authorize the State to implement a 
        State energy efficiency program in lieu of the Federal program 
        established under subsection (b) if the Secretary determines 
        that the requirements of such State program meet or exceed the 
        requirements of such Federal program, including--
                    ``(A) achieving electricity savings and natural gas 
                savings that are equal to or greater than savings 
                required under the applicable performance standards 
                under subsection (c);
                    ``(B) reviewing reports and verifying electricity 
                savings and natural gas savings achieved in the State 
                (including savings transferred from outside the State); 
                and
                    ``(C) if applicable, collecting any alternative 
                compliance payments under paragraph (4) and using the 
                payments to implement cost-effective energy efficiency 
                programs.
            ``(2) Secretarial determination.--Not later than 180 days 
        after the date on which a complete application is received by 
        the Secretary under this subsection, the Secretary, after 
        public notice and opportunity for comment, shall approve or 
        disapprove such application.
            ``(3) Alternative measurement and verification procedures 
        and standards.--As part of an application pursuant to paragraph 
        (1), a State may request to use alternative measurement and 
        verification procedures and standards from the procedures and 
        standards described in subsection (e), if the State 
        demonstrates that the alternative procedures and standards 
        provide a level of accuracy of measurement and verification 
        that are at least equivalent to the Federal procedures and 
        standards under subsection (e).
            ``(4) Alternative compliance payments.--
                    ``(A) In general.--As part of an application 
                submitted under paragraph (1), a State may permit 
                retail electricity suppliers or retail natural gas 
                suppliers to pay to the State, by not later than May 1 
                of the calendar year immediately following the 
                applicable reporting period, an alternative compliance 
                payment in an amount equal to, as adjusted for 
                inflation in accordance with such regulations as the 
                Secretary may promulgate, not less than--
                            ``(i) $50 per megawatt hour of electricity 
                        savings needed to make up any deficit in 
                        achieving electricity savings required under 
                        the applicable State program; or
                            ``(ii) $5 per million Btu of natural gas 
                        savings needed to make up any deficit in 
                        achieving natural gas savings required under 
                        the applicable State program.
                    ``(B) Use of payments.--Alternative compliance 
                payments collected by a State under subparagraph (A) 
                shall be used by the State to implement the State 
                program authorized under this section and to implement 
                cost-effective energy efficiency programs that--
                            ``(i) to the maximum extent practicable, 
                        achieve electricity savings and natural gas 
                        savings in the State sufficient to make up the 
                        deficit associated with the alternative 
                        compliance payments; and
                            ``(ii) can be measured and verified in 
                        accordance with the applicable procedures and 
                        standards under subsection (e) or paragraph 
                        (3), as applicable.
            ``(5) Review of state program.--
                    ``(A) Periodic review.--Every 2 years, the 
                Secretary shall review State programs authorized under 
                this section in approximately \1/2\ of the States with 
                such authorized State programs, so that each such State 
                program shall be reviewed at least every 4 years.
                    ``(B) Report.--To facilitate review under 
                subparagraph (A), the Secretary may require a State to 
                submit a report demonstrating the State program 
                authorized under this section meets the requirements of 
                this section, including--
                            ``(i) reports submitted by retail 
                        electricity suppliers and retail natural gas 
                        suppliers to the State demonstrating compliance 
                        with applicable requirements;
                            ``(ii) the impact of applicable 
                        requirements on projected electricity and 
                        natural gas demand within the State;
                            ``(iii) an accounting of the use of 
                        alternative compliance payments by the State 
                        and the resulting electricity savings and 
                        natural gas savings achieved; and
                            ``(iv) any other information that the 
                        Secretary determines appropriate.
                    ``(C) Review upon petition.--Notwithstanding 
                subparagraph (A), upon receipt of a public petition 
                containing credible allegation of substantial 
                deficiencies of a State program authorized under this 
                section, the Secretary shall promptly re-review the 
                State program.
                    ``(D) Deficiencies.--
                            ``(i) In general.--In completing a review 
                        of a State program authorized under this 
                        section, if the Secretary finds deficiencies, 
                        the Secretary shall--
                                    ``(I) notify the State of the 
                                deficiencies;
                                    ``(II) direct the State to correct 
                                the deficiencies; and
                                    ``(III) require the State to report 
                                to the Secretary on progress made by 
                                not later than 180 days after the date 
                                on which the State receives notice 
                                under subclause (I).
                            ``(ii) Substantial deficiencies.--If the 
                        deficiencies are substantial, the Secretary 
                        shall--
                                    ``(I) disallow the reported 
                                electricity savings or natural gas 
                                savings that the Secretary determines 
                                are not credible due to deficiencies;
                                    ``(II) re-review the State program 
                                2 years after the date on which the 
                                original review was completed; and
                                    ``(III) if substantial deficiencies 
                                remain uncorrected after the review 
                                provided for under subclause (II), 
                                revoke the authorization for the State 
                                to implement a State program under this 
                                section.
            ``(6) Calls for revision of state applications.--As a 
        condition of maintaining the authorization to implement a State 
        program under this section, the Secretary may require the State 
        to submit a revised application under paragraph (1) if the 
        Secretary has--
                    ``(A) established new or revised performance 
                standards under subsection (c);
                    ``(B) promulgated new or substantially revised 
                measurement and verification procedures and standards 
                under subsection (e); or
                    ``(C) otherwise substantially revised the Federal 
                program established under this section.
    ``(h) Information and Reports.--In accordance with section 13 of 
the Federal Energy Administration Act of 1974, the Secretary may 
require any retail electricity supplier, retail natural gas supplier, 
third-party efficiency provider, or any other entity that the Secretary 
determines appropriate, to provide any information the Secretary 
determines appropriate to carry out this section.
    ``(i) State Law.--Nothing in this section diminishes or qualifies 
any authority of a State or political subdivision of a State to adopt 
or enforce any law or regulation respecting electricity savings or 
natural gas savings, including any law or regulation establishing 
energy efficiency requirements that are more stringent than those under 
this section.
    ``(j) Sense of Congress Regarding Cost Recovery, Fixed Cost 
Recovery, and Shareholder Incentives.--It is the sense of Congress that 
each State regulatory authority is encouraged to review the rules and 
regulations of the State regulatory authority to ensure that retail 
electric suppliers and retail natural gas suppliers under its 
jurisdiction can--
            ``(1) recover the direct costs of energy efficiency 
        programs;
            ``(2) fully recover authorized fixed costs, including lost 
        margins from lower annual sales due to energy efficiency 
        programs; and
            ``(3) earn an incentive for shareholders if the energy 
        efficiency standards are achieved.''.

SEC. 3. CONFORMING AMENDMENT.

    The table of contents of the Public Utility Regulatory Policies Act 
of 1978 (16 U.S.C. prec. 2601) is amended by adding at the end of the 
items relating to title VI the following:

``Sec. 609. Rural and remote communities electrification grants.
``Sec. 610. Federal energy efficiency resource standard for retail 
                            electricity and natural gas suppliers.''.
                                 <all>