I 117th CONGRESS 1st Session H. R. 5889 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.

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. 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: 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: Calendar Year Cumulative Electricity Savings Percentage Cumulative Natural Gas 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. . 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. .