SECTION 1. RENEWABLE PORTFOLIO STANDARD.

    (a) In General.--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 RENEWABLE PORTFOLIO STANDARD.

    ``(a) Renewable Energy Requirement.--
            ``(1) In general.--Each electric utility that sells 
        electricity to electric consumers shall obtain a percentage of 
        the base amount of electricity it sells to electric consumers 
        in any calendar year from new renewable energy or existing 
        renewable energy. The percentage obtained in a calendar year 
        shall not be less than the amount specified in the following 
        table:

 
 
 
``Calendar year:                    Minimum annual percentage:
  2010............................  1
  2011............................  2
  2012............................  4
  2013............................  6
  2014............................  8
  2015............................  10
  2016............................  12
  2017............................  14
  2018............................  16
  2019............................  18
  2020............................  20
  2021............................  21
  2022............................  22
  2023............................  23
  2024............................  24
  2025............................  25.

            ``(2) Means of compliance.--An electric utility shall meet 
        the requirements of paragraph (1) by--
                    ``(A) submitting to the Secretary renewable energy 
                credits issued under subsection (b);
                    ``(B) making alternative compliance payments to the 
                Secretary at the rate of 2 cents per kilowatt hour (as 
                adjusted for inflation under subsection (g)); or
                    ``(C) a combination of activities described in 
                subparagraphs (A) and (B).
    ``(b) Renewable Energy Credit Trading Program.--
            ``(1) In general.--Not later than July 1, 2009, the 
        Secretary shall establish a renewable energy credit trading 
        program under which electric utilities shall submit to the 
        Secretary renewable energy credits to certify the compliance of 
        the electric utilities with respect to obligations under 
        subsection (a)(1).
            ``(2) Administration.--As part of the program, the 
        Secretary shall--
                    ``(A) issue tradeable renewable energy credits to 
                generators of electric energy from new renewable 
                energy;
                    ``(B) issue nontradeable renewable energy credits 
                to generators of electric energy from existing 
                renewable energy;
                    ``(C) issue renewable energy credits to electric 
                utilities associated with State renewable portfolio 
                standard compliance mechanisms pursuant to subsection 
                (h);
                    ``(D) ensure that a kilowatt hour, including the 
                associated renewable energy credit, shall be used only 
                once for purposes of compliance with this Act;
                    ``(E) allow double credits for generation from 
                facilities on Indian land, and triple credits for 
                generation from small renewable distributed generators 
                (meaning those no larger than 1 megawatt); and
                    ``(F) ensure that, with respect to a purchaser 
                that, as of the date of enactment of this section, has 
                a purchase agreement from a renewable energy facility 
                placed in service before that date, the credit 
                associated with the generation of renewable energy 
                under the contract is issued to the purchaser of the 
                electric energy.
            ``(3) Duration.--A credit described in subparagraph (A) or 
        (B) of paragraph (2) may only be used for compliance with this 
        section during the 3-year period beginning on the date of 
        issuance of the credit.
            ``(4) Transfers.--An electric utility that holds credits in 
        excess of the quantity of credits needed to comply with 
        subsection (a) may transfer the credits to another electric 
        utility in the same utility holding company system.
            ``(5) Delegation of market function.--The Secretary may 
        delegate to an appropriate market-making entity the 
        administration of a national tradeable renewable energy credit 
        market for purposes of creating a transparent national market 
        for the sale or trade of renewable energy credits.
    ``(c) Enforcement.--
            ``(1) Civil penalties.--Any electric utility that fails to 
        meet the compliance requirements of subsection (a) shall be 
        subject to a civil penalty.
            ``(2) Amount of penalty.--The amount of the civil penalty 
        shall be determined by multiplying the number of kilowatt-hours 
        of electric energy sold to electric consumers in violation of 
        subsection (a) by the greater of 2 cents (adjusted for 
        inflation under subsection (g)) or 200 percent of the average 
        market value of renewable energy credits during the year in 
        which the violation occurred.
            ``(3) Mitigation or waiver.--The Secretary may mitigate or 
        waive a civil penalty under this subsection if the electric 
        utility was unable to comply with subsection (a) for reasons 
        outside of the reasonable control of the utility. The Secretary 
        shall reduce the amount of any penalty determined under 
        paragraph (2) by an amount paid by the electric utility to a 
        State for failure to comply with the requirement of a State 
        renewable energy program if the State requirement is greater 
        than the applicable requirement of subsection (a).
            ``(4) Procedure for assessing penalty.--The Secretary shall 
        assess a civil penalty under this subsection in accordance with 
        the procedures prescribed by section 333(d) of the Energy 
        Policy and Conservation Act of 1954 (42 U.S.C. 6303).
    ``(d) State Renewable Energy Account Program.--
            ``(1) In general.--The Secretary shall establish, not later 
        than December 31, 2008, a State renewable energy account 
        program.
            ``(2) Deposits.--All money collected by the Secretary from 
        alternative compliance payments and the assessment of civil 
        penalties under this section shall be deposited into the 
        renewable energy account established pursuant to this 
        subsection. The State renewable energy account shall be held by 
        the Secretary and shall not be transferred to the Treasury 
        Department.
            ``(3) Use.--Proceeds deposited in the State renewable 
        energy account shall be used by the Secretary, subject to 
        appropriations, for a program to provide grants to the State 
        agency responsible for developing State energy conservation 
        plans under section 362 of the Energy Policy and Conservation 
        Act (42 U.S.C. 6322) for the purposes of promoting renewable 
        energy production, including programs that promote technologies 
        that reduce the use of electricity at customer sites such as 
        solar water heating.
            ``(4) Administration.--The Secretary may issue guidelines 
        and criteria for grants awarded under this subsection. State 
        energy offices receiving grants under this section shall 
        maintain such records and evidence of compliance as the 
        Secretary may require.
            ``(5) Preference.--In allocating funds under this program, 
        the Secretary shall give preference--
                    ``(A) to States in regions which have a 
                disproportionately small share of economically 
                sustainable renewable energy generation capacity; and
                    ``(B) to State programs to stimulate or enhance 
                innovative renewable energy technologies.
    ``(e) Rules.--The Secretary shall issue rules implementing this 
section not later than 1 year after the date of enactment of this 
section.
    ``(f) Exemptions.--This section shall not apply in any calendar 
year to an electric utility--
            ``(1) that sold less than 4,000,000 megawatt-hours of 
        electric energy to electric consumers during the preceding 
        calendar year; or
            ``(2) in Hawaii.
    ``(g) Inflation Adjustment.--Not later than December 31 of each 
year beginning in 2008, the Secretary shall adjust for inflation the 
price of a renewable energy credit under subsection (b)(2) and the 
amount of the civil penalty per kilowatt-hour under subsection (c)(2).
    ``(h) State Programs.--
            ``(1) In general.--Nothing in this section diminishes any 
        authority of a State or political subdivision of a State to 
        adopt or enforce any law or regulation respecting renewable 
        energy, but, except as provided in subsection (c)(3), no such 
        law or regulation shall relieve any person of any requirement 
        otherwise applicable under this section. The Secretary, in 
        consultation with States having such renewable energy programs, 
        shall, to the maximum extent practicable, facilitate 
        coordination between the Federal program and State programs.
            ``(2) Regulations.--
                    ``(A) In general.--The Secretary, in consultation 
                with States, shall promulgate regulations to ensure 
                that an electric utility subject to the requirements of 
                this section that is also subject to a State renewable 
                energy standard receives renewable energy credits in 
                relation to equivalent quantities of renewable energy 
                associated with compliance mechanisms, other than the 
                generation or purchase of renewable energy by the 
                electric utility, including the acquisition of 
                certificates or credits and the payment of taxes, fees, 
                surcharges, or other financial compliance mechanisms by 
                the electric utility or a customer of the electric 
                utility, directly associated with the generation or 
                purchase of renewable energy.
                    ``(B) Prohibition on double counting.--The 
                regulations promulgated under this paragraph shall 
                ensure that a kilowatt hour associated with a renewable 
                energy credit issued pursuant to this subsection shall 
                not be used for compliance with this section more than 
                once.
    ``(i) Recovery of Costs.--
            ``(1) In general.--The Commission shall issue and enforce 
        such regulations as are necessary to ensure that an electric 
        utility recovers all prudently incurred costs associated with 
        compliance with this section.
            ``(2) Applicable law.--A regulation under paragraph (1) 
        shall be enforceable in accordance with the provisions of law 
        applicable to enforcement of regulations under the Federal 
        Power Act (16 U.S.C. 791a et seq.).
    ``(j) Wind Energy Development Study.--The Secretary, in 
consultation with appropriate Federal and State agencies, shall 
conduct, and submit to Congress a report describing the results of, a 
study on methods to increase transmission line capacity for wind energy 
development.
    ``(k) Definitions.--In this section:
            ``(1) Base amount of electricity.--The term `base amount of 
        electricity' means the total amount of electricity sold by an 
        electric utility to electric consumers in a calendar year, 
        excluding municipal waste and electricity generated by a 
        hydroelectric facility (including a pumped storage facility, 
        but excluding incremental hydropower).
            ``(2) Distributed generation facility.--The term 
        `distributed generation facility' means a facility at a 
        customer site.
            ``(3) Existing renewable energy.--The term `existing 
        renewable energy' means, except as provided in paragraph 
        (7)(B), electric energy generated at a facility (including a 
        distributed generation facility) placed in service prior to 
        January 1, 2001, from solar, wind, or geothermal energy, ocean 
        energy, biomass (as defined in section 203(a) of the Energy 
        Policy Act of 2005), or landfill gas.
            ``(4) Geothermal energy.--The term `geothermal energy' 
        means energy derived from a geothermal deposit (within the 
        meaning of section 613(e)(2) of the Internal Revenue Code of 
        1986).
            ``(5) Incremental geothermal production.--
                    ``(A) In general.--The term `incremental geothermal 
                production' means for any year the excess of--
                            ``(i) the total kilowatt hours of 
                        electricity produced from a facility (including 
                        a distributed generation facility) using 
                        geothermal energy; over
                            ``(ii) the average annual kilowatt hours 
                        produced at such facility for 5 of the previous 
                        7 calendar years before the date of enactment 
                        of this section after eliminating the highest 
                        and the lowest kilowatt hour production years 
                        in such 7-year period.
                    ``(B) Special rule.--A facility described in 
                subparagraph (A) that was placed in service at least 7 
                years before the date of enactment of this section 
                shall, commencing with the year in which such date of 
                enactment occurs, reduce the amount calculated under 
                subparagraph (A)(ii) each year, on a cumulative basis, 
                by the average percentage decrease in the annual 
                kilowatt hour production for the 7-year period 
                described in subparagraph (A)(ii) with such cumulative 
                sum not to exceed 30 percent.
            ``(6) Incremental hydropower.--The term `incremental 
        hydropower' means additional energy generated as a result of 
        efficiency improvements or capacity additions made on or after 
        January 1, 2001, or the effective date of an existing 
        applicable State renewable portfolio standard program at a 
        hydroelectric facility that was placed in service before that 
        date. The term does not include additional energy generated as 
        a result of operational changes not directly associated with 
        efficiency improvements or capacity additions. Efficiency 
        improvements and capacity additions shall be measured on the 
        basis of the same water flow information used to determine a 
        historic average annual generation baseline for the 
        hydroelectric facility and certified by the Secretary or the 
        Federal Energy Regulatory Commission.
            ``(7) New renewable energy.--The term `new renewable 
        energy' means--
                    ``(A) electric energy generated at a facility 
                (including a distributed generation facility) placed in 
                service on or after January 1, 2001, from--
                            ``(i) solar, wind, or geothermal energy or 
                        ocean energy;
                            ``(ii) biomass (as defined in section 
                        203(b) of the Energy Policy Act of 2005 (42 
                        U.S.C. 15852(b));
                            ``(iii) landfill gas; or
                            ``(iv) incremental hydropower; and
                    ``(B) for electric energy generated at a facility 
                (including a distributed generation facility) placed in 
                service prior to the date of enactment of this 
                section--
                            ``(i) the additional energy above the 
                        average generation in the 3 years preceding the 
                        date of enactment of this section at the 
                        facility from--
                                    ``(I) solar or wind energy or ocean 
                                energy;
                                    ``(II) biomass (as defined in 
                                section 203(b) of the Energy Policy Act 
                                of 2005 (42 U.S.C. 15852(b));
                                    ``(III) landfill gas; or
                                    ``(IV) incremental hydropower.
                            ``(ii) incremental geothermal production.
            ``(8) Ocean energy.--The term `ocean energy' includes 
        current, wave, tidal, and thermal energy.
    ``(l) Sunset.--This section expires on December 31, 2040.''.
    (b) Table of Contents 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. 610. Federal renewable portfolio standard.''.
Output: Amends the Public Utility Regulatory Policies Act of 1978 to set forth a federal renewable energy portfolio standard applicable to calendar years 2010 to 2025.

Instructs the Secretary of Energy to establish: (1) a renewable energy credit trading program under which electric utilities shall submit to the Secretary renewable energy credits to certify their compliance with such standard; and (2) a state renewable energy account program for grants to state agencies to promote renewable energy production (including programs that promote technologies that reduce the use of electricity at customer sites such as solar water heating).



Requires the Federal Energy Regulatory Commission (FERC) to issue and enforce regulations to ensure that an electric utility recovers all prudently incurred costs associated with compliance with this Act.

Instructs the Secretary to study and report to Congress on methods to increase transmission line capacity for wind energy development.