Energy efficiency resource standard for retail electricity and natural gas distributors

(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:

610.

Federal energy efficiency resource standard for retail electricity and natural gas distributors

(a)

Definitions

In this section: (1)

Affiliate

The term affiliate, when used with respect to a person, means another person that owns or controls, is owned or controlled by, or is under common ownership control with, the person, as determined under regulations promulgated by the Secretary. (2)

ANSI

The term ANSI means the American National Standards Institute. (3)

ASHRAE

The term ASHRAE means the American Society of Heating, Refrigerating and Air Conditioning Engineers. (4)

Base quantity

(A)

In general

The term base quantity, when used with respect to a retail electricity distributor or retail natural gas distributor, means, for each year for which a performance standard is established under subsection (c), the average annual quantity of electricity or natural gas delivered by the retail electricity distributor or retail natural gas distributor to retail customers during the 2 calendar years immediately preceding the applicable year. (B)

Exclusion

The term base quantity, when used to determine the base quantity of a retail natural gas distributor, does not include natural gas delivered for purposes of electricity generation. (5)

CHP

The term CHP means combined heat and power. (6)

CHP savings

The term CHP savings means— (A)CHP system savings from a combined heat and power system that commences operation after the date of enactment of this section; and (B)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. (7)

CHP system savings

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. (8)

Codes and standards savings

(A)

In general

The term codes and standards savings means a reduction in end-use electricity or natural gas consumption in the service territory of a retail electricity distributor or a retail natural gas distributor 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. (B)

Baselines

In calculating codes and standards savings— (i)the baseline for calculating savings from building codes shall be the 2006 International Energy Conservation Code for residential buildings and the ASHRAE/ANSI/IESNA Standard 90.1 (2004) for commercial buildings, or the applicable State building code in effect on the date of enactment of this section, whichever is more stringent; and (ii)the baseline for calculating savings from appliance standards shall be the average efficiency of new appliances in the applicable 1 or more categories prior to adoption and implementation of the new standard. (9)

Combined heat and power system

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— (A)the system meets such requirements relating to efficiency and other operating characteristics as the Secretary may promulgate by regulation; and (B)the net wholesale sales of electricity by the facility will not exceed 50 percent of total annual electric generation by the facility. (10)

Cost-effective

The term cost-effective, when used 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. (11)

Customer facility savings

The term customer facility savings means a reduction in end-use electricity or natural gas consumption (including recycled energy savings) at a facility of an end-use consumer of electricity or natural gas served by a retail electricity distributor or natural gas distributor, as compared to— (A)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; (B)in the case of new equipment that replaces existing equipment with remaining useful life— (i)consumption of the existing equipment for the remaining useful life of the equipment; and (ii)thereafter, consumption of new equipment of average efficiency; (C)in the case of a new facility, consumption at a reference facility of average efficiency; or (D)in the case of energy savings measures at a facility not covered by subparagraphs (A) through (C), consumption at the facility during a base year. (12)

Electricity savings

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, through— (A)customer facility savings of electricity, adjusted to reflect any associated increase in fuel consumption at the facility; (B)reductions in distribution system losses of electricity achieved by a retail electricity distributor, as compared to losses attributable to new or replacement distribution system equipment of average efficiency (as defined in regulations promulgated by the Secretary); (C)CHP savings; and (D)codes and standards savings of electricity. (13)

IESNA

The term IESNA mean the Illuminating Engineering Society of North America. (14)

Natural gas savings

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, through— (A)customer facility savings of natural gas, adjusted to reflect any associated increase in electricity consumption or consumption of other fuels at the facility; (B)reductions in leakage, operational losses, and consumption of natural gas fuel to operate a gas distribution system, achieved by a retail natural gas distributor, as compared to similar leakage, losses, and consumption during a base period (which shall not be less than 1 year); and (C)codes and standards savings of natural gas. (15)

Power pool

The term power pool means an association of 2 or more interconnected electric systems that is recognized by the Commission as having an agreement to coordinate operations and planning for improved reliability and efficiencies, including a Regional Transmission Organization or an Independent System Operator. (16)

Recycled energy savings

The term recycled 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. (17)

Reporting period

The term reporting period means— (A)calendar year 2012; and (B)each successive 2-calendar-year period thereafter. (18)

Retail electricity distributor

(A)

In general

The term retail electricity distributor means, for any given calendar year, an electric utility that owns or operates an electric distribution facility and, using the facility, delivered not less than 1,500,000 megawatt-hours of electric energy to electric consumers for purposes other than resale during the most recent 2-calendar-year period for which data are available. (B)

Administration

For purposes of determining whether an electric utility qualifies as a retail electricity distributor under subparagraph (A)— (i)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 (ii)deliveries by any electric utility to a lessee, tenant, or affiliate of the electric utility shall not be treated as deliveries to electric consumers. (19)

Retail natural gas distributor

(A)

In general

The term retail natural gas distributor means, for any given calendar year, a local distribution company (as that term is 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 during the most recent 2-calendar-year period for which data are available. (B)

Administration

For purposes of determining whether a person qualifies as a retail natural gas distributor under subparagraph (A)— (i)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 (ii)deliveries of natural gas to a lessee, tenant, or affiliate of a local distribution company shall not be treated as deliveries to natural gas consumers. (20)

Third-party efficiency provider

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 (d) and (e). (b)

Establishment of program

(1)

Regulations

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— (A)measurement and verification procedures and standards under subsection (e); (B)requirements under which retail electricity distributors and retail natural gas distributors shall demonstrate, document, and report compliance with the performance standards established under subsection (c) and estimate the impact of the standards on current and future electricity and natural gas use in the service territories of the retail electricity distributors and retail natural gas distributors, respectively; and (C)requirements governing applications for, and implementation of, delegated State administration under subsection (g). (2)

Coordination with State programs

In establishing and implementing the program established under this section, the Secretary shall, to the maximum extent practicable, preserve the integrity, and incorporate the best practices, of existing State energy efficiency programs. (c)

Performance standards

(1)

Compliance obligation

Not later than April 1 of the calendar year immediately following each reporting period— (A)each retail electricity distributor shall submit to the Secretary a report, in accordance with regulations promulgated by the Secretary, demonstrating that the retail electricity distributor has achieved cumulative electricity savings (adjusted to account for any attrition of savings measures implemented in prior years) in each calendar year that are least equal to the applicable percentage, established under paragraph (2), (3), or (4), of the base quantity of the retail electricity distributor; and (B)each retail natural gas distributor shall submit to the Secretary a report, in accordance with regulations promulgated by the Secretary, demonstrating that the retail natural gas distributor 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 at least equal to the applicable percentage, established under paragraph (2), (3), or (4), of the base quantity of the retail natural gas distributor. (2)

Standards for 2012 through 2020

For purposes of paragraph (1), for each of calendar years 2012 through 2020, the applicable percentages shall be as follows: Calendar YearCumulative Electricity Savings PercentageCumulative Natural Gas Savings Percentage 2012 1.00 0.75 2013 2.00 1.50 2014 3.25 2.50 2015 4.50 3.50 2016 6.00 4.75 2017 7.50 6.00 201810.00 7.25 201912.50 8.50 202015.0010.00.

(3)

Subsequent years

(A)

Calendar years 2021 through 2030

Not later than December 31, 2018, 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 2021 through 2030. (B)

Subsequent extensions

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. (C)

Requirements

(i)

In general

Subject to clause (ii), the Secretary shall establish standards under this paragraph at levels that reflect the maximum achievable level of cost-effective energy efficiency potential, taking into account— (I)cost-effective energy savings achieved by leading retail electricity distributors and retail natural gas distributors; (II)opportunities for new codes and standard savings; (III)technology improvements; and (IV)other indicators of cost-effective energy efficiency potential. (ii)

Minimum percentage

In no case shall the applicable percentages for any calendar year be lower than the applicable percentage for calendar year 2020 (including any increase in the standard for calendar year 2020 pursuant to paragraph (4)). (4)

Midcourse review and adjustment of standards

(A)

In general

Not later than December 31, 2014, and at 10-year intervals thereafter, the Secretary shall— (i)review the most recent standards established under paragraph (2) or (3); and (ii)by regulation, increase the standards if the Secretary determines that additional cost-effective energy efficiency potential is achievable, taking into account the factors described in paragraph (3)(C). (B)

Lead time

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. (5)

Delay of submission for first reporting period

(A)

In general

Notwithstanding paragraphs (1) and (2), for the 2012 reporting period, the Secretary may accept a request from a retail electricity distributor or a retail natural gas distributor to delay the required submission of documentation of part or all of the required savings for up to 2 years. (B)

Plan

The request for delay shall include a plan for coming into full compliance by the end of the 2013–2014 reporting period. (d)

Transfers of electricity or natural gas savings

(1)

Bilateral contracts for savings transfers

Subject to the other provisions of this subsection, a retail electricity distributor or retail natural gas distributor may use electricity savings or natural gas savings purchased, pursuant to a bilateral contract, from another retail electricity distributor or retail natural gas distributor, a State, or a third-party efficiency provider to meet the applicable performance standard under subsection (c). (2)

Requirements

Electricity or natural gas savings purchased and used for compliance pursuant to this subsection shall be— (A)measured and verified in accordance with the procedures specified under subsection (e); (B)reported in accordance with subsection (c); and (C)achieved within the same State as is served by the retail electricity distributor or retail natural gas distributor. (3)

Exception

Notwithstanding paragraph (2)(C), a State regulatory authority may authorize a retail electricity distributor or a retail natural gas distributor regulated by the State regulatory authority to purchase savings achieved in a different State, if— (A)the savings are achieved within the same power pool; and (B)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 of the purchaser. (4)

Regulatory approval

Nothing in this subsection limits or affects the authority of a State regulatory authority to require a retail electricity distributor or retail natural gas distributor that is regulated by the State regulatory authority to obtain the authorization or approval of the State regulatory authority for a contract for transfer of savings under this subsection. (5)

Limitations

In the interest of optimizing 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 distributor, under the applicable performance standards under subsection (c), that may be met using electricity or natural gas savings that are purchased under this subsection. (e)

Measurement and verification of savings

The regulations promulgated under subsection (b) shall include— (1)procedures and standards for defining and measuring electricity savings and natural gas savings that can be counted towards the performance standards established under subsection (c), which shall— (A)specify the types of energy efficiency and energy conservation measures that can be counted; (B)require that energy consumption estimates for customer facilities or parts 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; (C)account for the useful life of measures; (D)include considered savings values for specific, commonly used measures; (E)allow for savings from a program to be estimated based on extrapolation from a representative sample of participating customers; (F)include procedures for counting CHP savings and recycled energy savings; (G)establish methods for calculating codes and standards savings, including the use of verified compliance rates; (H)count only measures and savings that are additional to business-as-usual practices; (I)except in the case of codes and standards savings, ensure that the retail electricity distributor or retail natural gas distributor claiming the savings played a significant role in achieving the savings (including through the activities of a designated agent of the distributor or through the purchase of transferred savings); (J)avoid double-counting of savings used for compliance with this section, including transferred savings; and (K)include savings from programs administered by the retail electric or natural gas distributor that are funded by State, Federal, or other sources; and (2)procedures and standards for third-party verification of reported electricity savings or natural gas savings. (f)

Enforcement and judicial review

(1)

Review of retail distributor reports

(A)

In general

The Secretary shall review each report submitted to the Secretary by a retail electricity distributor or retail natural gas distributor under subsection (c) to verify that the applicable performance standards under that subsection have been met. (B)

Exclusions

In determining compliance with the applicable performance standards, 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 (c), (d), and (e). (2)

Penalty for failure to document adequate savings

If a retail electricity distributor or a retail natural gas distributor fails to demonstrate compliance with an applicable performance standard under subsection (c) or to pay to the State an applicable alternative compliance payment under subsection (g)(4), the Secretary shall assess against the retail electricity distributor or retail natural gas distributor a civil penalty for each such failure in an amount equal to, as adjusted for inflation in accordance with such regulations as the Secretary may promulgate–– (A)$100 per megawatt-hour of electricity savings or alternative compliance payment that the retail electricity distributor failed to achieve or make, respectively; or (B)$10 per million Btu of natural gas savings or alternative compliance payment that the retail natural gas distributor failed to achieve or make, respectively. (3)

Offsetting State penalties

The Secretary shall reduce the amount of any penalty under paragraph (2) by the amount paid by the applicable retail electricity distributor or retail natural gas distributor 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— (A)comparable in type to the Federal standard established under this section; and (B)more stringent than the applicable performance standards under subsection (c). (4)

Enforcement procedures

The Secretary shall assess a civil penalty, as provided under paragraph (1), in accordance with the procedures described in section 333(d) of the Energy Policy and Conservation Act (42 U.S.C. 6303(d)). (5)

Judicial review

(A)

In general

Any person who will be 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)). (B)

Administration

For purposes of 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. (g)

State administration

(1)

In general

On receipt of an application from the Governor of a State (including, for purposes of this subsection, the Mayor of the District of Columbia), the Secretary may delegate to the State the administration of 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— (A)achieving electricity savings and natural gas savings at least as great as the savings required under the applicable performance standards established under subsection (c); (B)reviewing reports and verifying electricity savings and natural gas savings achieved in the State (including savings transferred from outside the State); and (C)collecting any alternative compliance payments under paragraph (4) and using the payments to implement cost-effective efficiency programs. (2)

Secretarial determination

The Secretary shall make a substantive determination approving or disapproving a State application, after public notice and comment, not later than 180 days after the date of receipt of a complete application. (3)

Alternative measurement and verification procedures and standards

As part of an application submitted under paragraph (1), a State may request to use alternative measurement and verification procedures and standards to the procedures and standards established under subsection (e), if the State demonstrates that the alternative procedures and standards provide a level of accuracy of measurement and verification that is at least equivalent to the Federal procedures and standards promulgated under subsection (e). (4)

Alternative compliance payments

(A)

In general

As part of an application submitted under paragraph (1), a State may permit retail electricity distributors or retail natural gas distributors 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— (i)$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 (ii)$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. (B)

Use of payments

(i)

In general

Alternative compliance payments collected by a State pursuant to 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. (ii)

Programs

The programs shall— (I)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 (II)be measured and verified in accordance with the applicable procedures and standards under subsection (e) or paragraph (3), as the case may be. (5)

Review of State implementation

(A)

Periodic review

Every 2 years, the Secretary shall review State implementation of this section for conformance with the requirements of this section in approximately 1/2 of the States that have received approval under this subsection to administer the program, such that each State shall be reviewed at least every 4 years. (B)

Report

To facilitate the review, the Secretary may require the State to submit a report demonstrating the compliance of the State with the requirements of this section, including— (i)reports submitted by retail electricity distributors and retail natural gas distributors to the State demonstrating compliance with applicable performance standards; (ii)the impact of the standards on projected electricity and natural gas demand within the State; (iii)an accounting of the use of alternative compliance payments by the State and the resulting electricity savings and natural gas savings achieved; and (iv)such other information as the Secretary determines appropriate. (C)

Review on petition

Notwithstanding subparagraph (A), on receipt of a public petition containing credible allegation of substantial deficiencies, the Secretary shall promptly review the implementation by the State of delegated authority under this section. (D)

Deficiencies

(i)

In general

If deficiencies are found in a review under this paragraph, the Secretary shall— (I)notify the State; and (II)direct the State to correct the deficiencies and to report to the Secretary on progress not later than 180 days after the date of the receipt of review results. (ii)

Substantial deficiencies

If the deficiencies are substantial, the Secretary shall— (I)disallow such reported savings as the Secretary determines are not credible due to deficiencies; (II)re-review the State not later than 2 years after the date of the original review; and (III)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. (6)

Calls for revision of State applications

As a condition of maintaining the delegated authority of a State to administer this section, the Secretary may require the State to submit a revised application under paragraph (1) if the Secretary has— (A)promulgated new or revised performance standards under subsection (c); (B)promulgated new or substantially revised measurement and verification procedures and standards under subsection (e); or (C)otherwise substantially revised the program established under this section. (h)

Information and reports

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 distributor, any retail natural gas distributor, any third-party efficiency provider, or such other entities as the Secretary considers appropriate, to provide any information the Secretary determines appropriate to carry out this section. (i)

State law

Nothing in this section diminishes or qualifies any authority of a State or political subdivision of a State to adopt or enforce any law (including a regulation) respecting electricity savings or natural gas savings, including any law (including a regulation) establishing energy efficiency requirements that are more stringent than the requirements established under this section, except that no such law or regulation may relieve any person of any requirement otherwise applicable under this section. (j)

Program review

(1)

National Academy of Sciences review

The Secretary shall offer to enter into a contract with the National Academy of Sciences under which the Academy shall, not later than July 1, 2017, and every 10 years thereafter, submit to the Secretary and to Congress a comprehensive evaluation of all aspects of the program established under this section, including— (A)an evaluation of the effectiveness of the program, including the specific design elements of the program, in increasing the efficiency of retail natural gas and electricity distribution and consumption; (B)the opportunities for additional technologies and sources of efficiency that have emerged since the date of enactment of this section; (C)the impact of the program on the reliability of electricity and natural gas supply; (D)the net benefits or costs of the program to the national and State economies, including the effects of the program on— (i)electricity and natural gas demand and prices; (ii)economic development benefits of investment; (iii)environmental benefits; and (iv)avoided costs related to environmental and congestion mitigation investments that otherwise would have been required; (E)an assessment of the benefits and costs of increasing the performance standards established under subsection (c); (F)the feasibility, advantages, and disadvantages of alternative models for demonstrating compliance with a Federal energy efficiency resource standard, including— (i)establishing a national trading system for energy efficiency credits; or (ii)demonstrating compliance through actual reductions in delivery or sales of electricity and natural gas, rather than on program savings; and (G)recommendations regarding potential changes to this section, to regulations and procedures for implementing this section, or to related public policies. (2)

Recommendations to Congress

Not later than January 1, 2018, and every 10 years thereafter, the Secretary shall submit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Energy and Natural Resources of the Senate a report making recommendations for modifications and improvements to the program established under this section and any related programs, including an explanation of the inconsistencies, if any, between the recommendations of the Secretary and recommendations included in the National Academy of Sciences evaluation under paragraph (1).

(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. 609. Rural and remote communities electrification grants.

Sec. 610. Federal energy efficiency resource standard.