SECTION 1. GRID-ENABLED WATER HEATERS.

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

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

                                                    ``(BB) 0.00168; or

                                            ``(bb) an equivalent 
                                        alternative standard prescribed 
                                        by the Secretary and developed 
                                        pursuant to paragraph (5)(E);
                                    ``(IV) is equipped by the 
                                manufacturer with an activation lock; 
                                and
                                    ``(V) bears a permanent label 
                                applied by the manufacturer that--
                                            ``(aa) is made of material 
                                        not adversely affected by 
                                        water;
                                            ``(bb) is attached by means 
                                        of non-water-soluble adhesive; 
                                        and
                                            ``(cc) advises purchasers 
                                        and end-users of the intended 
                                        and appropriate use of the 
                                        product with the following 
                                        notice printed in 16.5 point 
                                        Arial Narrow Bold font:
```IMPORTANT INFORMATION: This water heater is intended only for use as 
part of an electric thermal storage or demand response program. It will 
not provide adequate hot water unless enrolled in such a program and 
activated by your utility company or another program operator. Confirm 
the availability of a program in your local area before purchasing or 
installing this product.'.
                    ``(B) Requirement.--The manufacturer or private 
                labeler shall provide the activation key for a grid-
                enabled water heater only to a utility or other company 
                that operates an electric thermal storage or demand 
                response program that uses such a grid-enabled water 
                heater.
                    ``(C) Reports.--
                            ``(i) Manufacturers.--The Secretary shall 
                        require each manufacturer of grid-enabled water 
                        heaters to report to the Secretary annually the 
                        quantity of grid-enabled water heaters that the 
                        manufacturer ships each year.
                            ``(ii) Operators.--The Secretary shall 
                        require utilities and other demand response and 
                        thermal storage program operators to report 
                        annually the quantity of grid-enabled water 
                        heaters activated for their programs using 
                        forms of the Energy Information Agency or using 
                        such other mechanism that the Secretary 
                        determines appropriate after an opportunity for 
                        notice and comment.
                            ``(iii) Confidentiality requirements.--The 
                        Secretary shall treat shipment data reported by 
                        manufacturers as confidential business 
                        information.
                    ``(D) Publication of information.--
                            ``(i) In general.--In 2017 and 2019, the 
                        Secretary shall publish an analysis of the data 
                        collected under subparagraph (C) to assess the 
                        extent to which shipped products are put into 
                        use in demand response and thermal storage 
                        programs.
                            ``(ii) Prevention of product diversion.--If 
                        the Secretary determines that sales of grid-
                        enabled water heaters exceed by 15 percent or 
                        greater the quantity of such products activated 
                        for use in demand response and thermal storage 
                        programs annually, the Secretary shall, after 
                        opportunity for notice and comment, establish 
                        procedures to prevent product diversion for 
                        non-program purposes.
                    ``(E) Compliance.--
                            ``(i) In general.--Subparagraphs (A) 
                        through (D) shall remain in effect until the 
                        Secretary determines under this section that--
                                    ``(I) grid-enabled water heaters do 
                                not require a separate efficiency 
                                requirement; or
                                    ``(II) sales of grid-enabled water 
                                heaters exceed by 15 percent or greater 
                                the quantity of such products activated 
                                for use in demand response and thermal 
                                storage programs annually and 
                                procedures to prevent product diversion 
                                for non-program purposes would not be 
                                adequate to prevent such product 
                                diversion.
                            ``(ii) Effective date.--If the Secretary 
                        exercises the authority described in clause (i) 
                        or amends the efficiency requirement for grid-
                        enabled water heaters, that action will take 
                        effect on the date described in subsection 
                        (m)(4)(A)(ii).
                            ``(iii) Consideration.--In carrying out 
                        this section with respect to electric water 
                        heaters, the Secretary shall consider the 
                        impact on thermal storage and demand response 
                        programs, including any impact on energy 
                        savings, electric bills, peak load reduction, 
                        electric reliability, integration of renewable 
                        resources, and the environment.
                            ``(iv) Requirements.--In carrying out this 
                        paragraph, the Secretary shall require that 
                        grid-enabled water heaters be equipped with 
                        communication capability to enable the grid-
                        enabled water heaters to participate in 
                        ancillary services programs if the Secretary 
                        determines that the technology is available, 
                        practical, and cost-effective.''; and
            (2) in section 332(a) (42 U.S.C. 6302(a))--
                    (A) in paragraph (5), by striking ``or'' at the 
                end;
                    (B) in the first paragraph (6), by striking the 
                period at the end and inserting a semicolon;
                    (C) by redesignating the second paragraph (6) as 
                paragraph (7);
                    (D) in subparagraph (B) of paragraph (7) (as so 
                redesignated), by striking the period at the end and 
                inserting ``; or''; and
                    (E) by adding at the end the following:
            ``(8) for any person to--
                    ``(A) activate an activation lock for a grid-
                enabled water heater with knowledge that such water 
                heater is not used as part of an electric thermal 
                storage or demand response program;
                    ``(B) distribute an activation key for a grid-
                enabled water heater with knowledge that such 
                activation key will be used to activate a grid-enabled 
                water heater that is not used as part of an electric 
                thermal storage or demand response program;
                    ``(C) otherwise enable a grid-enabled water heater 
                to operate at its designed specification and 
                capabilities with knowledge that such water heater is 
                not used as part of an electric thermal storage or 
                demand response program; or
                    ``(D) knowingly remove or render illegible the 
                label of a grid-enabled water heater described in 
                section 325(e)(6)(A)(ii)(V).'';
            (3) in section 333(a) (42 U.S.C. 6303(a))--
                    (A) in the second sentence, by striking ``section 
                332(a)(5)'' and inserting ``paragraph (5), (6), (7), or 
                (8) of section 332(a)''; and
                    (B) in the fourth sentence, by striking ``paragraph 
                (1), (2), or (5) of section 332(a)'' and inserting 
                ``paragraph (1), (2), (5), (6), (7), or (8) of section 
                332(a)''; and
            (4) in section 334 (42 U.S.C. 6304)--
                    (A) in the second sentence, by striking ``section 
                332(a)(5)'' and inserting ``paragraph (5), (6), (7), or 
                (8) of section 332(a)''; and
                    (B) in the third sentence, by striking ``section 
                332(a)(6)'' and inserting ``section 332(a)(7)''.
Output:  Amends the Energy Policy and Conservation Act (EPCA) to provide additional energy conservation standards applicable to grid-enabled water heaters for use as part of an electric thermal storage or demand response program (a program that enables customers to reduce or shift their power use during peak demand periods). Requires annual reports from: (1) manufacturers of such water heaters regarding the quantity of the products shipped each year, and (2) utilities and other demand response and thermal storage program operators regarding the quantity of products activated for their programs.  Requires the Secretary of Energy to publish analyses of data collected from such reports and to establish procedures to prevent product diversion if sales of the products exceed by at least 15% the quantity activated for use in the demand response and thermal storage programs annually.  Maintains the standards and publication procedures established by this Act until the Secretary determines that: (1) such water heaters do not require a separate efficiency requirement, or (2) procedures to prevent product diversion for non-program purposes would not be adequate to prevent such product diversion. Requires the Secretary to consider the impact of EPCA electric water heater standards on thermal storage and demand response programs, including on energy savings, electric bills, peak load reduction, electric reliability, integration of renewable resources, and the environment.  Directs the Secretary to require the water heaters be equipped with communication capability to enable the grid-enabled water heaters to participate in ancillary services programs if the technology is available, practical, and cost-effective. Makes it unlawful for any person to:  activate an activation lock for a grid-enabled water heater with knowledge that it is not used as part of such program, distribute an activation key for such a water heater with knowledge that it will be used to activate a heater that is not used as part of the program, enable such water heater to operate at its designed specification and capabilities with knowledge that it is not used as part of the program, or knowingly remove or render illegible the label of a such water heater.