[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1945 Introduced in House (IH)]







107th CONGRESS
  1st Session
                                H. R. 1945

To amend the Federal Power Act and the Internal Revenue Code of 1986 to 
 encourage the development and deployment of innovative and efficient 
                          energy technologies.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 22, 2001

   Mr. Quinn (for himself, Mr. Meehan, and Mr. Doyle) introduced the 
following bill; which was referred to the Committee on Ways and Means, 
 and in addition to the Committee on Energy and Commerce, for a period 
    to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend the Federal Power Act and the Internal Revenue Code of 1986 to 
 encourage the development and deployment of innovative and efficient 
                          energy technologies.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Combined Heat and 
Power Advancement Act of 2001''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Purpose.
                        TITLE I--INTERCONNECTION

Sec. 101. Interconnection.
  TITLE II--INVESTMENT TAX CREDIT FOR COMBINED HEAT AND POWER SYSTEMS

Sec. 201. Investment tax credit for combined heat and power systems.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) the removal of barriers to the development and 
        deployment of combined heat and power technologies and systems, 
        an example of an array of innovative energy-supply and energy-
        efficient technologies and systems, would--
                    (A) encourage technological innovation;
                    (B) reduce energy prices;
                    (C) spur economic development;
                    (D) enhance productivity;
                    (E) increase employment; and
                    (F) improve environmental quality and energy self-
                sufficiency;
            (2) the level of efficiency of the United States 
        electricity-generating system has been stagnant over the past 
        several decades;
            (3) technologies and systems available as of the date of 
        enactment of this Act, including a host of innovative onsite, 
        distributed generation technologies, could--
                    (A) dramatically increase productivity;
                    (B) double the efficiency of the United States 
                electricity-generating system; and
                    (C) reduce emissions of regulated pollutants and 
                greenhouse gases;
            (4) innovative electric technologies emit a much lower 
        level of pollutants as compared to the average quantity of 
        pollutants generated by United States electric generating 
        plants as of the date of enactment of this Act;
            (5) a significant proportion of the United States energy 
        infrastructure will need to be replaced by 2010;
            (6) the public interest would best be served if that 
        infrastructure were replaced by innovative technologies that 
        dramatically increase productivity, improve efficiency, and 
        reduce pollution;
            (7) financing and regulatory practices in effect as of the 
        date of enactment of this Act do not recognize the 
        environmental and economic benefits to be obtained from the 
        avoidance of transmission and distribution losses, and the 
        reduced load on the electricity-generating system, provided by 
        onsite, combined heat and power production;
            (8) many legal, regulatory, informational, and perceptual 
        barriers block the development and dissemination of combined 
        heat and power and other innovative energy technologies; and
            (9) because of those barriers, United States taxpayers are 
        not receiving the benefits of the substantial research and 
        development investment in innovative energy technologies made 
        by the Federal Government.

SEC. 3. PURPOSE.

    The purpose of this Act is to encourage energy productivity and 
efficiency increases by--
            (1) removing barriers to the development and deployment of 
        combined heat and power technologies and systems; and
            (2) establishing an investment tax credit for qualified 
        combined heat and power systems.

                        TITLE I--INTERCONNECTION

SEC. 101. INTERCONNECTION.

    (a) Definitions.--Section 3 of the Federal Power Act (16 U.S.C. 
796) is amended--
            (1) by striking paragraph (23) and inserting the following:
            ``(23) Transmitting utility.--The term `transmitting 
        utility' means any entity (notwithstanding section 201(f)) that 
        owns, controls, or operates an electric power transmission 
        facility that is used for the sale of electric energy.''; and
            (2) by adding at the end the following:
            ``(26) Appropriate regulatory authority.--The term 
        `appropriate regulatory authority' means--
                    ``(A) the Commission;
                    ``(B) a State commission;
                    ``(C) a municipality; or
                    ``(D) a cooperative that is self-regulating under 
                State law and is not a public utility.
            ``(27) Generating facility.--The term `generating facility' 
        means a facility that generates electric energy.
            ``(28) Local distribution utility.--The term `local 
        distribution utility' means an entity that owns, controls, or 
        operates an electric power distribution facility that is used 
        for the sale of electric energy.
            ``(29) Non-federal regulatory authority.--The term `non-
        Federal regulatory authority' means an appropriate regulatory 
        authority other than the Commission.''.
    (b) Interconnection to Distribution Facilities.--Section 210 of the 
Federal Power Act (16 U.S.C. 824i) is amended--
            (1) by redesignating subsection (e) as subsection (g); and
            (2) by inserting after subsection (d) the following:
    ``(e) Interconnection to Distribution Facilities.--
            ``(1) Interconnection.--
                    ``(A) In general.--A local distribution utility 
                shall interconnect a generating facility with the 
                distribution facilities of the local distribution 
                utility if the owner of the generating facility--
                            ``(i) complies with the final rule 
                        promulgated under paragraph (2); and
                            ``(ii) pays the costs of the 
                        interconnection.
                    ``(B) Costs.--The costs of the interconnection--
                            ``(i) shall be just and reasonable, and not 
                        unduly discriminatory, as determined by the 
                        appropriate regulatory authority; and
                            ``(ii) shall be comparable to the costs 
                        charged by the local distribution utility for 
                        interconnection by any similarly situated 
                        generating facility to the distribution 
                        facilities of the local distribution utility.
                    ``(C) Applicable requirements.--The right of a 
                generating facility to interconnect under subparagraph 
                (A) does not--
                            ``(i) relieve the generating facility or 
                        the local distribution utility of other 
                        Federal, State, or local requirements; or
                            ``(ii) provide the generating facility with 
                        transmission or distribution service.
            ``(2) Rule.--
                    ``(A) In general.--Not later than 1 year after the 
                date of enactment of this subparagraph, the Commission 
                shall promulgate a final rule to establish reasonable 
                and appropriate technical standards for the 
                interconnection of a generating facility with the 
                distribution facilities of a local distribution 
                utility.
                    ``(B) Process.--To the extent feasible, the 
                Commission shall develop the standards through a 
                process involving interested parties.
                    ``(C) Advisory committee.--The Commission shall 
                establish an advisory committee composed of qualified 
                experts to make recommendations to the Commission 
                concerning development of the standards.
                    ``(D) Administration.--
                            ``(i) By a non-federal regulatory 
                        authority.--Except where subject to the 
                        jurisdiction of the Commission pursuant to 
                        provisions other than clause (ii), a non-
                        Federal regulatory authority may administer and 
                        enforce the rule promulgated under subparagraph 
                        (A).
                            ``(ii) By the commission.--To the extent 
                        that a non-Federal regulatory authority does 
                        not administer and enforce the rule, the 
                        Commission shall administer and enforce the 
                        rule with respect to interconnection in that 
                        jurisdiction.
            ``(3) Right to backup power.--
                    ``(A) In general.--In accordance with subparagraph 
                (B), a local distribution utility shall offer to sell 
                backup power to a generating facility that has 
                interconnected with the local distribution utility to 
                the extent that the local distribution utility--
                            ``(i) is not subject to an order of a non-
                        Federal regulatory authority to provide open 
                        access to the distribution facilities of the 
                        local distribution utility;
                            ``(ii) has not offered to provide open 
                        access to the distribution facilities of the 
                        local distribution utility; or
                            ``(iii) does not allow a generating 
                        facility to purchase backup power from another 
                        entity using the distribution facilities of the 
                        local distribution utility.
                    ``(B) Rates, terms, and conditions.--A sale of 
                backup power under subparagraph (A) shall be at such a 
                rate, and under such terms and conditions, as are just 
                and reasonable and not unduly discriminatory or 
                preferential, taking into account the actual 
                incremental cost, whenever incurred by the local 
                distribution utility, to supply such backup power 
                service during the period in which the backup power 
                service is provided, as determined by the appropriate 
                regulatory authority.
                    ``(C) No requirement for certain sales.--A local 
                distribution utility shall not be required to offer 
                backup power for resale to any entity other than the 
                entity for which the backup power is purchased.
                    ``(D) New or expanded loads.--To the extent backup 
                power is used to serve a new or expanded load on the 
                distribution system, the generating facility shall pay 
                any reasonable costs associated with any transmission, 
                distribution, or generation upgrade required to provide 
                such service.''.
    (c) Interconnection to Transmission Facilities.--Section 210 of the 
Federal Power Act (16 U.S.C. 824i) is amended by inserting after 
subsection (e) (as added by subsection (b)) the following:
    ``(f) Interconnection to Transmission Facilities.--
            ``(1) Interconnection.--
                    ``(A) In general.--Notwithstanding subsections (a) 
                and (c), a transmitting utility shall interconnect a 
                generating facility with the transmission facilities of 
                the transmitting utility if the owner of the generating 
                facility--
                            ``(i) complies with the final rule 
                        promulgated under paragraph (2); and
                            ``(ii) pays the costs of the 
                        interconnection.
                    ``(B) Costs.--
                            ``(i) In general.--Subject to clause (ii), 
                        the costs of the interconnection--
                                    ``(I) shall be just and reasonable 
                                and not unduly discriminatory; and
                                    ``(II) shall be comparable to the 
                                costs charged by the transmitting 
                                utility for interconnection by any 
                                similarly situated generating facility 
                                to the transmitting facilities of the 
                                transmitting utility.
                            ``(ii) Effect of ferc lite.--A non-Federal 
                        regulatory authority that, under any provision 
                        of Federal law enacted before, on, or after the 
                        date of enactment of this subparagraph, is 
                        authorized to determine the rates for 
                        transmission service shall be authorized to 
                        determine the costs of any interconnection 
                        under this subparagraph in accordance with that 
                        provision of Federal law.
                    ``(C) Applicable requirements.--The right of a 
                generating facility to interconnect under subparagraph 
                (A) does not--
                            ``(i) relieve the generating facility or 
                        the transmitting utility of other Federal, 
                        State, or local requirements; or
                            ``(ii) provide the generating facility with 
                        transmission or distribution service.
            ``(2) Rule.--
                    ``(A) In general.--Not later than 1 year after the 
                date of enactment of this subparagraph, the Commission 
                shall promulgate a final rule to establish reasonable 
                and appropriate technical standards for the 
                interconnection of a generating facility with the 
                transmission facilities of a transmitting utility.
                    ``(B) Process.--To the extent feasible, the 
                Commission shall develop the standards through a 
                process involving interested parties.
                    ``(C) Advisory committee.--The Commission shall 
                establish an advisory committee composed of qualified 
                experts to make recommendations to the Commission 
                concerning development of the standards.
            ``(3) Right to backup power.--
                    ``(A) In general.--In accordance with subparagraph 
                (B), a transmitting utility shall offer to sell backup 
                power to a generating facility that has interconnected 
                with the transmitting utility unless--
                            ``(i) Federal or State law (including 
                        regulations) allows a generating facility to 
                        purchase backup power from an entity other than 
                        the transmitting utility; or
                            ``(ii) a transmitting utility allows a 
                        generating facility to purchase backup power 
                        from an entity other than the transmitting 
                        utility using--
                                    ``(I) the transmission facilities 
                                of the transmitting utility; and
                                    ``(II) the transmission facilities 
                                of any other transmitting utility.
                    ``(B) Rates, terms, and conditions.--A sale of 
                backup power under subparagraph (A) shall be at such a 
                rate, and under such terms and conditions, as are just 
                and reasonable and not unduly discriminatory or 
                preferential, taking into account the actual 
                incremental cost, whenever incurred by the local 
                distribution utility, to supply such backup power 
                service during the period in which the backup power 
                service is provided, as determined by the appropriate 
                regulatory authority.
                    ``(C) No requirement for certain sales.--A 
                transmitting utility shall not be required to offer 
                backup power for resale to any entity other than the 
                entity for which the backup power is purchased.
                    ``(D) New or expanded loads.--To the extent backup 
                power is used to serve a new or expanded load on the 
                transmission system, the generating facility shall pay 
                any reasonable costs associated with any transmission, 
                distribution, or generation upgrade required to provide 
                such service.''.
    (d) Conforming Amendments.--Section 210 of the Federal Power Act 
(16 U.S.C. 824i) is amended--
            (1) in subsection (a)(1)--
                    (A) by inserting ``transmitting utility, local 
                distribution utility,'' after ``electric utility,''; 
                and
                    (B) in subparagraph (A), by inserting ``any 
                transmitting utility,'' after ``small power production 
                facility,'';
            (2) in subsection (b)(2), by striking ``an evidentiary 
        hearing'' and inserting ``a hearing'';
            (3) in subsection (c)(2)--
                    (A) in subparagraph (B), by striking ``or'' at the 
                end;
                    (B) in subparagraph (C), by striking ``and'' at the 
                end and inserting ``or''; and
                    (C) by adding at the end the following:
            ``(D) promote competition in electricity markets, and''; 
        and
            (4) in subsection (d), by striking the last sentence.

  TITLE II--INVESTMENT TAX CREDIT FOR COMBINED HEAT AND POWER SYSTEMS

SEC. 201. INVESTMENT TAX CREDIT FOR COMBINED HEAT AND POWER SYSTEMS.

    (a) In General.--Section 48(a)(3)(A) of the Internal Revenue Code 
of 1986 (relating to energy property) is amended by striking ``or'' at 
the end of clause (i), by adding ``or'' at the end of clause (ii), and 
by adding at the end the following new clause:
                            ``(iii) a qualified combined heat and power 
                        system,''.
    (b) Qualified Combined Heat and Power Systems.--
            (1) In general.--Section 48 of the Internal Revenue Code of 
        1986 (relating to energy credit; reforestation credit) is 
        amended by adding at the end the following new subsection:
    ``(c) Qualified Combined Heat and Power Systems Credit.--
            ``(1) In general.--For purposes of this subpart, the term 
        `qualified combined heat and power system' means any property--
                    ``(A) comprising a system that uses the same energy 
                source for the simultaneous or sequential generation of 
                electricity or mechanical shaft power (or both) and 
                steam or other forms of useful thermal energy 
                (including heating and cooling applications), and
                    ``(B) which meets the requirements described in 
                paragraph (2).
            ``(2) Requirements.--The requirements described in this 
        paragraph are as follows:
                    ``(A) Minimum standards for qualified combined heat 
                and power systems.--
                            ``(i) Capacity.--A qualified combined heat 
                        and power system must have an electrical 
                        capacity in excess of 50 kilowatts or with a 
                        capacity to produce mechanical power in excess 
                        of 67 horsepower (or an equivalent combination 
                        of electrical and mechanical energy 
                        capacities).
                            ``(ii) Power produced.--A qualified 
                        combined heat and power system must produce at 
                        least 20 percent of its total useful energy in 
                        the form of thermal energy and at least 20 
                        percent of its total useful energy in the form 
                        of electrical or mechanical power (or a 
                        combination thereof).
                    ``(B) Energy efficiency standards.--
                            ``(i) Energy efficiency for smaller 
                        systems.--In the case of a qualified combined 
                        heat and power system with an electrical 
                        capacity of not more than 50 megawatts (or a 
                        mechanical energy capacity in excess of 67,000 
                        horsepower), the total energy efficiency of the 
                        system must exceed 60 percent.
                            ``(ii) Energy efficiency for larger 
                        systems.--In the case of a qualified combined 
                        heat and power system with an electrical 
                        capacity in excess of 50 megawatts (or a 
                        mechanical energy capacity in excess of 67,000 
                        horsepower), the total energy efficiency of the 
                        system must exceed 70 percent.
                            ``(iii) Energy efficiency.--For purposes of 
                        this paragraph, the total energy efficiency of 
                        a combined heat and power system is computed as 
                        the sum of the useful electrical, thermal, and 
                        mechanical power produced by the system at 
                        normal operating rates, measured on a Btu 
                        basis, divided by the lower heating value of 
                        the primary fuel source for the system 
                        supplied.''.
            (2) Qualified combined heat and power system as public 
        utility property.--Section 48(a)(3) of such Code (relating to 
        energy property) is amended by inserting ``(other than 
        qualified combined heat and power systems)'' after ```energy 
        property''' in the last sentence.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after June 30, 2001, and before 
June 30, 2005.
                                 <all>