Sec. 5. Energy efficiency resource standard for retail electricity and natural gas suppliers
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Title VI of the Public Utility Regulatory Policies Act of 1978 ( 16 U.S.C. 2601 et seq. ) (as amended by section 2) is amended by adding after section 610 the following: Congress finds that— the Federal energy efficiency resource standard established by this section— 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 rewards energy-saving improvements achieved through— end-use energy efficiency upgrades; reduced losses in transmission and distribution of energy; and fuel-switching, to the extent that the switching results in reduced primary energy use; and 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— consider energy efficiency as a resource in utility planning and procurement activities; and seek to achieve all energy efficiency that is available at lower cost than other energy supply options.
In this section: 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. 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.
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 established under subsection (d), the average annual quantity of electricity or natural gas delivered by the retail electricity supplier or retail natural gas supplier to retail customers during the 3 calendar years immediately preceding the year that compliance is required under subsection (d)(1). The term base quantity , with respect to a retail natural gas supplier, does not include natural gas delivered for purposes of electricity generation.
The term CHP savings means— CHP system savings from a combined heat and power system that commences operation after the date of enactment of this section; and 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. 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.
The term codes and standards savings means a reduction in end-use electricity or natural gas consumption by a retail electricity supplier or in the service territory of a retail natural gas supplier 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. In calculating codes and standards savings under subparagraph (A)— the baseline for calculating savings from building codes shall be the more stringent of— the 2009 International Energy Conservation Code for residential buildings; or the ASHRAE/ANSI/IESNA Standard 90.1–2007 for commercial buildings; or the applicable State building code in effect on the date of enactment of this section; and the baseline for calculating savings from appliance standards shall be the average efficiency of new appliances in the applicable one or more categories prior to the adoption and implementation of the new standard.
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— the system meets any requirements relating to efficiency and other operating characteristics that the Secretary promulgates by regulation; and the net wholesale sales of electricity by a facility does not exceed 50 percent of total annual electric generation by the facility.
The term cost-effective , with respect to an energy efficiency measure, means that the measure achieves a net present value of economic benefits over the life of the measure, both directly to the energy consumer and to the economy, that is greater than the net present value of the cost of the measure over the life of the measure, both directly to the energy consumer and to the economy, using the societal benefit-cost test calculated using the weighted average utility cost of capital as the discount rate.
The term customer facility savings means a reduction in end-use electricity or natural gas consumption (including waste heat energy savings) at a facility of an end-use consumer of electricity or natural gas served by a retail electricity supplier or natural gas supplier, as compared to— in the case of a new facility, consumption at a reference facility of average efficiency; in the case of an existing facility, consumption at the facility during a base period of not less than 1 year; in the case of new equipment that replaces existing equipment at the end of the useful life of the existing equipment, consumption by new equipment of average efficiency of the same equipment type, except that customer savings under this subparagraph shall not be counted towards customer savings under subparagraph
(A)or (B); and in the case of new equipment that replaces existing equipment with remaining useful life— consumption of the existing equipment for the remaining useful life of the equipment; and thereafter, consumption of new equipment of average efficiency. The term electricity savings means reductions in electricity consumption achieved through measures implemented after the date of enactment of this section, as determined in accordance with regulations promulgated by the Secretary, that are limited to— customer facility savings of electricity, adjusted to reflect any associated increase in fuel consumption at the facility; reductions in distribution system losses of electricity achieved by a retail electricity supplier, as compared to losses attributable to new or replacement distribution system equipment of average efficiency, as defined in regulations promulgated by the Secretary; CHP savings; codes and standards savings of electricity; and fuel switching energy savings that results in net savings of electricity. The term fuel-switching energy savings means net energy savings, calculated in accordance with subparagraph (B), from end-user switches from 1 energy source to another, as determined in accordance with regulations promulgated by the Secretary. For purposes of calculating fuel-switching net energy savings— electricity use shall be evaluated based on the average quantity of fuel burned at a power plant to provide each kilowatt hour of electricity; electricity and natural gas use shall include losses in the transmission and distribution system; and fuel-switching that is not cost-effective to the end-user shall not be counted. The term natural gas savings means reductions in natural gas consumption from measures implemented after the date of enactment of this section, as determined in accordance with regulations promulgated by the Secretary, that are limited to— customer facility savings of natural gas, adjusted to reflect any associated increase in electricity consumption or consumption of other fuels at the facility; reductions in leakage, operational losses, and consumption of natural gas fuel 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; codes and standards savings of natural gas; and fuel switching energy savings that results in net savings of natural gas. 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. The term reporting period means— calendar year 2015; and each successive 2-calendar-year period thereafter. The term retail electricity supplier means, for any given calendar year, an electric utility that sells not less than 1,000,000 megawatt hours of electric energy to electric consumers for purposes other than resale during the preceding calendar. For purposes of determining whether an electric utility qualifies as a retail electricity supplier under subparagraph (A)— deliveries by any affiliate of an electric utility to electric consumers for purposes other than resale shall be considered to be deliveries by the electric utility; and 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. The term retail natural gas supplier means, for any given calendar year, a local distribution company (as defined in section 2 of the Natural Gas Policy Act of 1978 ( 15 U.S.C. 3301 )), that delivered to natural gas consumers more than 5,000,000,000 cubic feet of natural gas for purposes other than resale during the preceding calendar year. For purposes of determining whether a person qualifies as a retail natural gas supplier under subparagraph (A)— 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 deliveries of natural gas to a lessee, tenant, or affiliate of a local distribution company shall not be considered to be deliveries to natural gas consumers. 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
(e)and (f). 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. Such savings shall be included as part of customer facility savings. 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— establishing measurement and verification procedures and standards under subsection (f); establishing requirements under which retail electricity suppliers and retail natural gas suppliers shall— demonstrate, document, and report the compliance of the retail electricity suppliers and retail natural gas suppliers with the performance standards under subsection (d); and estimate the impact of the standards on current and future electricity and natural gas use in the service territories of the suppliers; and establishing requirements governing applications for, and implementation of, delegated State administration under subsection (h). 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. Not later than May 1 of the calendar year immediately following each reporting period— each retail electricity supplier shall submit to the Secretary a report, in accordance with regulations promulgated by the Secretary, demonstrating that the retail electricity supplier has achieved annual electricity savings (adjusted to account for any attrition of savings measures implemented in prior years) in each calendar year that are equal to the applicable percentage, established under paragraph (2), (3), or (4), of the base quantity of the retail electricity supplier; and each retail natural gas supplier shall submit to the Secretary a report, in accordance with regulations promulgated by the Secretary, demonstrating that it has achieved cumulative natural gas savings (adjusted to account for any attrition of savings measures implemented in prior years) in each calendar year that are equal to the applicable percentage, established under paragraph (2), (3), or (4), of the base quantity of such retail natural gas supplier, subject to business-as-usual consumption projections calculated in accordance with subsection (f)(1)(P). For each of calendar years 2015 through 2025, the applicable percentages are as follows: Calendar Year Cumulative Electricity Savings Percentage Cumulative Natural Gas Savings Percentage 2015 1.00 0.50 2016 2.00 1.25 2017 3.00 2.00 2018 4.25 3.00 2019 5.50 4.00 2020 7.00 5.00 2021 8.50 6.00 2022 10.00 7.00 2023 11.50 8.00 2024 13.25 9.00 2025 15.00 10.00. Not later than December 31, 2023, the Secretary shall promulgate regulations establishing performance standards (expressed as applicable percentages of base quantity for both cumulative electricity savings and cumulative natural gas savings) for each of calendar years 2026 through 2040. Except as provided in subparagraph (A), not later than December 31 of the penultimate reporting period for which performance standards have been established under this paragraph, the Secretary shall promulgate regulations establishing performance standards (expressed as applicable percentages of base quantity for both cumulative electricity savings and cumulative natural gas savings) for the 10-calendar-year period following the last calendar year for which performance standards previously were established. The Secretary shall establish standards under this paragraph at levels reflecting the maximum achievable level of cost-effective energy efficiency potential, taking into account— cost-effective energy savings achieved by leading retail electricity suppliers and retail natural gas suppliers; opportunities for new codes and standard savings; technology improvements; and other indicators of cost-effective energy efficiency potential. In no case shall the applicable percentages for any calendar year be less than the applicable percentages for calendar year 2025 (including any increase in the standard for calendar year 2025 established pursuant to paragraph (4)). Not later than December 31, 2020, and at 10-year intervals thereafter, the Secretary shall— review the most recent standards established under paragraph
(2)or (3); and increase the 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). If the Secretary revises standards under this paragraph, the regulations shall provide adequate lead time to ensure that compliance with the increased standards is feasible. Notwithstanding paragraphs
(1)and (2), for the 2015 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. The request for delay under subparagraph
(A)shall include a plan for coming into full compliance by the end of the 2016–2017 reporting period. If savings achieved in a year exceed the performance standards specified in this subsection, any savings in excess of the performance standards may be applied toward performance standards specified for future years. 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 (d). Electricity savings or natural gas savings purchased and used for compliance under this subsection shall be— measured and verified in accordance with subsection (f); reported in accordance with subsection (d); and achieved within the same State as is served by the retail electricity supplier or retail natural gas supplier. 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— the savings are achieved within the same power pool; and 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. 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 paragraph. To optimize the achievement of cost-effective 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
(d)that may be met using electricity savings or natural gas savings that are purchased under this subsection. The regulations promulgated pursuant to subsection
(c)shall include— procedures and standards for defining and measuring electricity savings and natural gas savings that can be counted towards the performance standards established under subsection (d), that shall— specify the types of energy efficiency and energy conservation measures that can be counted; 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; account for the useful life of measures; include assigned savings values for specific, commonly used measures; allow for savings from a program to be estimated based on extrapolation from a representative sample of participating customers; include procedures for calculating and documenting CHP savings, fuel-switching energy savings, and waste heat energy savings; establish methods for calculating codes and standards energy savings, including the use of verified compliance rates; include procedures for calculating and documenting— 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 (42 U.S.C. 17381); and reductions in natural gas distribution system losses attributable to pipeline repair and replacement programs; count only measures and savings that are additional to business-as-usual customer purchase practices; ensure that the retail electricity supplier or retail natural gas supplier claiming the electricity savings or natural gas savings, including codes and standards savings, played a significant role in achieving the savings (including through the activities of a designated agent of the supplier or through the purchase of transferred electricity savings or natural gas savings); avoid double-counting of savings used for compliance with this section, including transferred savings; include electricity savings or natural gas savings from programs administered by the retail electric supplier or natural gas supplier that are funded by Federal, State, or other sources; credit large customer self-directed electricity savings or natural gas savings to the retail electricity supplier or the retail natural gas supplier if the large customers receive incentives or rate reductions from the retail supplier for self-directed energy efficiency improvements; include procedures for counting electricity savings and natural gas savings achieved by solar water heating, solar light pipe technology, geothermal heat pumps, and other technologies utilizing renewable resources that reduce on-site energy use; 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 the programs shall be distributed proportionally among retail electric suppliers and retail natural gas suppliers; and include guidance for utilities to calculate and document business-as-usual consumption projections; and procedures and standards for third-party verification of reported electricity savings or natural gas savings. The Secretary shall review each report submitted to the Secretary by a retail electricity supplier or retail natural gas supplier under subsection
(d)to verify that the applicable performance standards under subsection
(d)have been met. In determining compliance with the applicable performance standards under subsection (d), 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 subsections (d), (e), and (f). If a retail electricity supplier or a retail natural gas supplier fails to demonstrate compliance with an applicable performance standard under subsection (d), or to pay to the State an applicable alternative compliance payment under subsection (h)(4), the Secretary shall assess against the retail electricity supplier or retail natural gas supplier a civil penalty for each failure in an amount equal to, as adjusted for inflation in accordance with such regulations as the Secretary may promulgate— $100 per megawatt hour of electricity savings or alternative compliance payment that the retail electricity supplier failed to achieve or make, respectively; or $10 per million Btu of natural gas savings or alternative compliance payment that the retail natural gas supplier failed to achieve or make, respectively. 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— is comparable in type to the Federal standard established under this section; and is more stringent than the applicable performance standards under subsection (d). 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 ( 42 U.S.C. 6303(d) ). 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 (42 U.S.C. 6306(b)). In this paragraph, references to a rule in section 336(b) of the Energy Policy and Conservation Act ( 42 U.S.C. 6306(b) ) 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. Upon receipt of an application from the Governor of a State (including the Mayor of the District of Columbia), the Secretary may delegate to the State responsibility for administering this section within the territory of the State if the Secretary determines that the State will implement an energy efficiency program that meets or exceeds the requirements of this section, including— achieving electricity savings and natural gas savings that are at least as great as those required under the applicable performance standards established under subsection (d); reviewing reports and verifying electricity savings and natural gas savings achieved in the State (including savings transferred from outside the State); and collecting any alternative compliance payments under paragraph
(4)and using the payments to implement cost-effective efficiency programs. Not later than 180 days after the date on which a complete application is received by the Secretary, the Secretary shall make a substantive determination approving or disapproving a State application, after public notice and comment. As part of an application submitted under paragraph (1), a State may request to use alternative measurement and verification procedures and standards from the procedures and standards described in subsection (f), 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 (f). 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 April 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— $50 per megawatt hour of electricity savings needed to make up any deficit with regard to a compliance obligation under the applicable performance standard; or $5 per million Btu of natural gas savings needed to make up any deficit with regard to a compliance obligation under the applicable performance standard. Alternative compliance payments collected by a State under subparagraph
(A)shall be used by the State to administer the delegated authority of the State under this section and to implement cost-effective energy efficiency programs that— 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 can be measured and verified in accordance with the applicable procedures and standards under subsection
(f)or paragraph (3), as applicable. Every 2 years, the Secretary shall review State implementation of this section for conformance with the requirements of this section in approximately ½ of the States that have received approval under this subsection to administer the program, so that each State shall be reviewed at least every 4 years. To facilitate the review under subparagraph (A), the Secretary may require the State to submit a report demonstrating the conformance of the State with the requirements of this section, including— reports submitted by retail electricity suppliers and retail natural gas suppliers to the State demonstrating compliance with applicable performance standards; the impact of the standards on projected electricity and natural gas demand within the State; an accounting of the use of alternative compliance payments by the State and the resulting electricity savings and natural gas savings achieved; and any other information that the Secretary determines appropriate. Notwithstanding subparagraph (A), upon receipt of a public petition containing credible allegation of substantial deficiencies, the Secretary shall promptly review the State implementation of delegated authority under this section. In completing a review under this paragraph, if the Secretary finds deficiencies, the Secretary shall— notify the State of the deficiencies; direct the State to correct the deficiencies; and 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). If the deficiencies are substantial, the Secretary shall— disallow the reported electricity savings or natural gas savings that the Secretary determines are not credible due to deficiencies; re-review the State not later than 2 years after the date on which the original review was completed; and if substantial deficiencies remain uncorrected after the review provided for under subclause (II), revoke the authority of the State to administer the program established under this section. As a condition of maintaining the delegated authority of a State to administer this section, the Secretary may require a State to submit a revised application under paragraph
(1)if the Secretary has— promulgated new or revised performance standards under subsection (d); promulgated new or substantially revised measurement and verification procedures and standards under subsection (f); or otherwise substantially revised the program established under this section. State utility regulatory commissions are encouraged to review the rules and regulations of the commission to ensure that utilities under the jurisdiction of the commission can— recover the direct costs of energy efficiency programs; fully recover authorized fixed costs, including lost margins from lower annual sales due to energy efficiency programs; and earn an incentive for shareholders if the energy efficiency standards are achieved. In accordance with section 13 of the Federal Energy Administration Act of 1974 ( 15 U.S.C. 772 ), 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. 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, except that no State law or regulation shall relieve any person of any requirement otherwise applicable under this section. .
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Sec. 5
Energy efficiency resource standard for retail electricity and natural gas suppliers
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