Under a renewable energy portfolio standard (RPS), retail electricity suppliers (electric utilities) must either provide a minimum amount of electricity from renewable energy resources or purchase tradable credits that represent an equivalent amount of renewable energy production. The minimum requirement is often set as a percentage share of retail electricity sales, which is usually expressed in terms of kilowatt-hours (kwh). Many RPS programs use tradable credits, sometimes referred to as renewable energy certificates, to increase flexibility and reduce the cost of compliance with the purchase mandate, and to facilitate compliance tracking. In the late 1990s, many states began to restructure their electric utility industries to allow for increased competition. Some of the states with this newly "restructured" system established an RPS as a way to create a continuing role for renewable energy in power production. Some states without a restructured industry also began to adopt an RPS. The total number of states with an RPS has grown steadily. In June 2007, the Federal Energy Regulatory Commission (FERC) reported that 23 states and the District of Columbia had an RPS in place, collectively covering about 40% of the national electric load. Mandatory state RPS targets range from a low of 2% to a high of 25%. However, most targets range from 10% to 20% and are scheduled to be reached between 2010 and 2025. Although this emerging "tapestry of state programs" continues to spread to more states, the majority of recent actions have been to increase and accelerate previously established standards. Most states have a similar definition of eligible renewable resources that covers wind, solar, geothermal, biomass, and several forms of water-based power, including hydropower, current, wave, tidal, and ocean power. At least 19 of the 23 states allow some form of credit trading. Non-compliance penalties range from about one cent per kwh to 5.5 cents per kwh. There are significant regional differences in resource availability. As shown in the previously cited FERC map, most states in the Southeast and Midwest regions do not have an RPS requirement. Several states have broadened their RPS provisions to allow certain energy efficiency measures and technologies to help satisfy the requirement. Most state RPS programs employ an annual renewable energy target that is set as a percentage of total projected electricity production. With a percentage requirement, the amount of mandated renewable energy will increase or decrease in proportion to changes in end-use electricity sales. In general, the targets increase gradually, in a step-wise fashion, over a period of several years. The scheduled rise of the annual target, and its peak value, are intended to create predictable long-term purchase obligations that drive new development and economies of scale. The graduated schedule is intended to allow time for competition to emerge among eligible resources. Also, to create stability that allows for long-term contracts and financing that can help keep renewable energy costs down, the peak target often is designed to remain in place for several years after it is reached. Most state targets include only generation from new renewable energy facilities, placed in service after the RPS standard is enacted. Many states have created tradable credits as a way to lower costs and facilitate compliance. Typically, the owner of a qualified renewable energy facility receives one credit for each kilowatt-hour of electricity produced. The credits are treated as a product separate from generated power. Credits are a purely financial product that represents the attributes of electricity generated from renewable energy sources. The owner may bundle the credits for sale with its electrical energy. Alternatively, the owner may sell the credits and power separately. The power would be sold in the electricity market, and the credits would be sold in a secondary credit trading market. Each year, RPS requires all retail suppliers to show that they have acquired a number of credits equivalent to the percentage target for the previous year. The retail suppliers have options for meeting this requirement. Suppliers can choose to build a renewable energy facility, purchase renewable power bundled with credits, or buy credits separately through the trading market. They are also free to choose the types of renewable energy to acquire, the price paid, and the contract terms offered. Further, they can choose whether to enter into long-term credit and/or renewable power purchase contracts or to purchase these commodities on the spot market. If a supplier cannot obtain sufficient credits through these means, it can achieve "alternative compliance" by purchasing additional credits from the state regulatory agency. For a supplier that otherwise fails to meet the credit target, most states require that it purchase additional credits at a higher penalty price. Spreading credit requirements over a longer time period can make a credit trading market more flexible. Many credit trading systems provide a "true-up" (reconciliation) period after the RPS compliance year. During this period, retailers that are short on their obligation can buy additional credits and those with excess credits can sell them. "Credit banking" can reduce retailer risk and promote economies of scale by allowing credits to be carried forward to one or more future years. "Deficit banking" allows a retailer to defer making up a credit shortage to a future year. Legislative proposals to establish a federal RPS date back to the 105 th Congress. During the 107 th , 108 th , and 109 th Congresses, the Senate passed an RPS, but it did not survive conference committee action. Several bills introduced in the 110 th Congress would create an RPS. In Senate floor action on H.R. 6 , S.Amdt. 1537 proposed a 15% RPS. The proposal triggered a lively debate, but was ultimately ruled non-germane. In House action during the 110 th Congress, H.R. 969 was introduced with a proposal for a 20% RPS target. The House Leadership indicates that H.R. 969 may be offered as a floor amendment to H.R. 3221 , the House energy independence legislation. During Senate floor debate on H.R. 6 , S.Amdt. 1537 proposed to add an RPS title to the bill. The proposal would have modified Title VI of the Public Utility Regulatory Policies Act of 1978 to establish an RPS for retail electric utilities that would be administered by the Department of Energy (DOE). For each retail supplier that sells more than four billion kwh per year, the RPS would set a minimum electricity production requirement from renewable resources. The standard would start at 3.75% in 2010, rising to 7.5% in 2013, 11.25% in 2017, and then reaching a peak of 15% in 2020. Resources eligible to meet the RPS would include wind, solar, geothermal, biomass, landfill gas, ocean (including current, wave, tidal, and ocean thermal), and incremental hydropower. Existing generation from hydroelectric and municipal solid waste facilities would not be eligible to meet the percentage standard, but could be excluded from the sales base used to calculate the RPS. To supplement direct generation, retail suppliers would be allowed to purchase power from other organizations, purchase tradable credits from suppliers with a surplus, and purchase credits from the government at an inflation-adjusted rate that would currently stand at 1.9 cents/kwh credit. Power generated on Native American lands would receive a double credit, and onsite distributed generation capacity smaller than one megawatt (mw) used to offset the requirement would receive a triple credit. An excess of tradable credits could be carried forward (banked) for up to two additional years into the future. A credit deficit would lead to a penalty that would be set as the greater of 2.0 cents/kwh or 200% of the average market value of the credits. A credit cost cap (adjusted for inflation) would be set at 2.0 cents/kwh. States would be allowed to have stronger RPS requirements. Funds gathered from alternative compliance and penalty payments would be used for state grants to support renewable energy production, particularly in states that have a low current capacity for renewable energy production. During the House Energy and Commerce Committee's markup of draft energy independence legislation, a proposed amendment would have added H.Amdt. 748 to the legislation, but it was later withdrawn. Similar to S.Amdt. 1537 , H.Amdt. 748 would modify Title VI of the Public Utility Regulatory Policies Act of 1978 to establish an RPS for retail electric utilities that would be administered by DOE. For each retail supplier that sells more than one billion kwh per year, the RPS would set a minimum electricity production requirement from renewable resources. The standard would start at 2.75% in 2010 and then rise annually until reaching a peak of 15% in 2020. Electricity savings from energy efficiency measures would be allowed to compose a maximum of 25% of the standard in any given year, rising to a peak of 4% of the 15% total in 2020. Renewable energy resources eligible to meet the RPS would include wind, solar, geothermal, biomass, landfill gas, ocean, tidal, and incremental hydropower. Existing generation from hydroelectric facilities would not be eligible to meet the percentage standard, but could be excluded from the sales base used to calculate the RPS. To supplement direct generation, retail suppliers would be allowed to purchase power from other organizations, purchase tradable credits from suppliers with a surplus, and purchase credits from the government at an initial rate of 1.9 cents/kwh credit that would be inflation-adjusted. Power generated on Native American lands would receive a double credit, and onsite generation used to offset the requirement would receive a triple credit. An excess of tradable credits could be carried forward (banked) for up to four years, and a deficit of credits could be "borrowed" from anticipated generation up to three years into the future.