[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7729 Introduced in House (IH)]
<DOC>
119th CONGRESS
2d Session
H. R. 7729
To amend the Federal Power Act to require the issuance of rules
relating to shared savings frameworks for certain transmitting
utilities, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 26, 2026
Mr. Casten introduced the following bill; which was referred to the
Committee on Energy and Commerce
_______________________________________________________________________
A BILL
To amend the Federal Power Act to require the issuance of rules
relating to shared savings frameworks for certain transmitting
utilities, and for other purposes.
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 ``Shared Utility
Rewards for Grid Efficiency Act of 2026'' or the ``SURGE Act of 2026''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Federal Power Act.
Sec. 3. Shared savings framework rule for transmitting utilities
subject to Federal Energy Regulatory
Commission jurisdiction.
Sec. 4. Guidance for electric utilities not subject to Federal Energy
Regulatory Commission jurisdiction.
Sec. 5. Grant program for State regulatory authorities.
Sec. 6. Studies on effects of certain rate treatments and alternative
frameworks.
Sec. 7. Definitions.
SEC. 2. AMENDMENTS TO THE FEDERAL POWER ACT.
Section 219 of the Federal Power Act (16 U.S.C. 824s) is amended--
(1) in subsection (a)--
(A) by striking ``Not later than 1 year after the
date of enactment of this section, the Commission shall
establish, by rule,'' and inserting ``The Commission
shall issue such rules as may be necessary to
establish''; and
(B) by inserting ``, improving efficiency,'' after
``ensuring reliability'';
(2) in subsection (b)--
(A) in the matter preceding paragraph (1), by
striking ``The rule shall'' and inserting ``The rules
issued under this section shall'';
(B) in paragraph (1), by inserting ``, and
operational improvements for,'' after ``capital
investment in'';
(C) in paragraph (2)--
(i) by inserting ``or other incentive
mechanism'' after ``return on equity''; and
(ii) by inserting ``or incentivizes
improvements that increase the efficiency of
the transmission of electric energy and reduce
costs for consumers'' after ``(including
related transmission technologies)'';
(D) in paragraph (3), by inserting ``, including
performance-based measures,'' after ``other measures'';
and
(E) in paragraph (4)--
(i) in subparagraph (A), by striking ``;
and'' and inserting a semicolon;
(ii) in subparagraph (B), by striking the
period and inserting ``; and''; and
(iii) by adding at the end the following
new subparagraph:
``(C) amounts determined pursuant to shared savings
frameworks or other incentive mechanisms prescribed in
such rules.''; and
(3) in subsection (c), by striking ``In the rule'' and
inserting ``In a rule''.
SEC. 3. RULEMAKING ON SHARED SAVINGS FRAMEWORK FOR TRANSMITTING
UTILITIES SUBJECT TO FEDERAL ENERGY REGULATORY COMMISSION
JURISDICTION.
(a) Rule Required.--Not later than one year after the date of the
enactment of this Act, the Commission shall issue a final rule under
section 219(b)(3) of the Federal Power Act (16 U.S.C. 824s(b)(3)), as
amended by section 2, that establishes a framework under which a
covered transmitting utility may recover a portion of verified cost
savings attributable to a qualifying action of such transmitting
utility as an incentive (in this subsection referred to as the ``shared
savings framework'').
(b) Methodologies.--The Commission shall develop and include in the
rule under subsection (a) standardized methodologies, applicable across
similarly situated transmission segments, as follows:
(1) Baseline performance methodologies.--Methodologies,
developed in consultation with the Secretary, for covered
transmitting utilities to determine the annual baseline
performance of transmission facilities or transmission segments
absent qualifying actions--
(A) by measuring the baseline performance of such a
transmission facility or transmission segment--
(i) through the actual amount of electrical
energy entering and leaving such facility or
segment (commonly referred to as ``direct
metering''); or
(ii) if the method under clause (i) is not
feasible, through an estimation of such amount
consistent with modeling methodologies
prescribed by the Commission; and
(B) by normalizing data to ensure such baseline
performance accounts for variability in exogenous
factors determined by the Commission, such as
variability in--
(i) weather;
(ii) demand over time;
(iii) upgrades, interconnections, or
operational changes made by other utilities,
Independent System Operators or Regional
Transmission Organizations, or other entities
determined relevant by the Commission; or
(iv) other conditions affecting demand or
generation.
(2) Methodologies relating to cost savings.--Methodologies
for covered transmitting utilities to estimate and calculate,
and for independent evaluators to verify, the cost savings
attributable to qualifying actions under the shared savings
framework, taking into account--
(A) the baseline performance of any transmission
facility or transmission segment with respect to which
a qualifying action is conducted; and
(B) price proxies, determined according to a
methodology prescribed by the Commission, for the value
of electric energy transmitted (which may include, for
a region managed by an Independent System Operator or
Regional Transmission Organization, the locational
marginal price corresponding to the location on the
electric grid where an injection or withdrawal of power
is modeled (commonly referred to as a ``pricing
node'')).
(3) Methodologies relating to recoverable percentage and
rate recovery timeline.--
(A) In general.--Methodologies for covered
transmitting utilities to determine, taking into
account the factors described in subparagraph (B), the
following:
(i) The total percentage of cost savings
attributable to a qualifying action that such a
utility may recover as an incentive under the
shared savings framework, which may not be less
than 10 percent or greater than 60 percent of
such total attributable cost savings (in this
section referred to as the ``recoverable
percentage'' of such savings).
(ii) The period of time during which such a
utility may recover amounts as an incentive for
such an action, which may not be shorter than a
2-year period or longer than a 5-year period
(in this section referred to as the ``rate
recovery timeline'' for such action).
(B) Factors.--The factors described in this
subparagraph are the following:
(i) The extent of financial or operational
risk to be assumed by a covered transmitting
utility in conducting a qualifying action.
(ii) The baseline performance for
transmission facilities or transmission
segments with respect to which such action is
to be conducted.
(iii) The replicability or demonstration
value of such action.
(iv) The duration of cost savings predicted
to result from such action and whether such
cost savings will remain consistent over such
duration.
(v) The extent to which such action is
expected to result in additional benefits, such
as improvements to the resilience or the
reliable operation of the bulk-power system,
reductions to transmission congestion, or
reductions to greenhouse gas emissions.
(vi) Such other factors as the Commission
may determine relevant to ensure the incentive
is performance-based, transparent, and cost-
effective.
(c) Initial Filing Required.--To be considered for an incentive
under the shared savings framework for the conduct of a qualifying
action, a covered transmitting utility shall submit to the Commission
an initial filing, the contents of which shall be verified by an
independent evaluator determined appropriate by the Commission, that
includes the following:
(1) An identification of the baseline performance of any
transmission facility or transmission segment with respect to
which such action is to be conducted for the one-year period
preceding the date on which such conduct is to be commenced,
determined by such utility pursuant to an applicable
methodology under subsection (b)(1) (including the data
underlying such calculation).
(2) A description of such action, including an analysis of
improvements expected to result from such action.
(3) The rate recovery timeline for such action and the
recoverable percentage of cost savings attributable to such
action, determined pursuant to an applicable methodology under
subsection (b)(3).
(4) An estimate, developed pursuant to an applicable
methodology under subsection (b)(2), of the cost savings to
result from such action for--
(A) the one-year period beginning on the date on
which the conduct of such action commences; and
(B) the duration of the rate recovery timeline for
such action.
(5) A claim for 50 percent of the recoverable percentage of
cost savings estimated under paragraph (4)(A).
(6) An agreement by such utility to file with the
Commission the annual reports required under subsection (d),
the contents of which shall be verified by an independent
evaluator determined appropriate by the Commission.
(d) Annual Reporting Required.--Beginning one year after the date
on which a covered transmitting utility submits an initial filing for a
qualifying action under subsection (c), and on an annual basis
thereafter until the end of the rate recovery timeline for such action
determined under paragraph (3) of such subsection or until such action
no longer results in cost savings, whichever occurs first, such utility
shall file with the Commission a report containing, with respect to the
qualifying action of such utility, the following:
(1) Data on the performance during the preceding year of
any transmission facility or transmission segment with respect
to which such action was conducted, and a comparison of such
performance to the baseline performance of that transmission
facility or transmission segment determined pursuant to an
applicable methodology under subsection (b)(1) for such year.
(2) The actual cost savings attributable to the qualifying
action for the preceding year, calculated pursuant to an
applicable methodology under subsection (b)(2).
(3) If such utility expects cost savings to result from the
qualifying action during the following year, an estimate,
developed pursuant to an applicable methodology under
subsection (b)(2), of the cost savings for such following year.
(4) A claim for the following:
(A) An amount that is the recoverable percentage of
the actual cost savings for the preceding year
calculated under paragraph (2) minus any amount
previously recovered based on an estimate of cost
savings for such year under subsection (e)(1) or
subsection (e)(2)(B), as the case may be.
(B) If the report includes an estimate of cost
savings for the following year under paragraph (3), an
amount that is 50 percent of the recoverable percentage
of such estimated cost savings.
(5) If such utility finds that the total amount recovered
for a year under subsection (e) exceeds the amount equal to the
total recoverable percentage of the actual cost savings for
that year under paragraph (2), an identification of the excess
amount.
(e) Recovery Mechanism.--
(1) Rate adjustment based on initial filing.--Not later
than 60 days after receiving an initial filing of a covered
transmitting utility under subsection (c), the Commission shall
provide to such utility a rate adjustment under which such
utility may recover the amount claimed under subsection (c)(5).
(2) Rate adjustment based on annual reports.--Not later
than 60 days after receiving an annual report of a covered
transmitting utility under subsection (d), the Commission shall
provide to such utility a rate adjustment under which--
(A) subject to paragraph (3), such utility may
recover the amount claimed under subsection (d)(4)(A);
and
(B) if the report included a claim under subsection
(d)(4)(B), such utility may recover the amount so
claimed.
(3) Reconciliation.--If a utility identifies an excess
amount under subsection (d)(5), or the Commission determines
the information reported for that year under subsection (d) is
insufficient for purposes of this subsection, the Commission
shall credit the difference to ratepayers through a rate
adjustment.
(f) Sense of Congress Regarding Additional Rulemakings.--It is the
sense of Congress that--
(1) following the issuance of the rule under subsection
(a), the Commission should revise such rule, or issue
additional rules under the authority of section 219(b)(3) of
the Federal Power Act (16 U.S.C. 824s(b)(3)), as amended by
section 2, to expand the shared savings framework to additional
categories of measurable, demonstrable, and verifiable covered
transmission actions;
(2) any such rule should include a version of the
methodologies developed under subsection (b) adapted for such
additional categories; and
(3) any such rule should take into account the findings of
the most recently conducted study under section 6.
SEC. 4. GUIDANCE FOR ELECTRIC UTILITIES NOT SUBJECT TO FEDERAL ENERGY
REGULATORY COMMISSION JURISDICTION.
(a) In General.--Not later than two years after the date of
enactment of this Act, the Secretary, in coordination with the
Commission and State regulatory authorities, shall develop and publish
on a publicly available website of the Department of Energy guidance to
support State regulatory authorities in establishing frameworks under
which covered electric utilities may recover a portion of verified cost
savings attributable to a covered utility action as an incentive.
(b) Minimum Elements.--The guidance under subsection (a) shall
include--
(1) guidance, developed in accordance with subsection (c),
for determining the baseline performance of a covered electric
utility absent a covered utility action;
(2) guidance, developed in accordance with subsection (d),
for determining the cost savings attributable to a covered
utility action;
(3) guidance for the measurement and verification of a
covered utility action, and any cost savings attributable to
such action, by an independent evaluator determined appropriate
by the State regulatory authority concerned;
(4) guidance on potential mechanisms by which covered
electric utilities may recover a portion of the verified cost
savings attributable to a covered utility action, including
through the provision of rate adjustments by State regulatory
authorities; and
(5) such other elements as the Secretary determines
appropriate to ensure the framework specified in subsection (a)
is transparent, performance-based, cost-effective, and
consistent with State ratemaking practices.
(c) Methodology for Determining Baseline Performance.--
(1) In general.--In developing the guidance under
subsection (b)(1), the Secretary, in coordination with the
Commission, shall--
(A) consult with State regulatory authorities,
Independent System Operators, Regional Transmission
Organizations, and independent evaluators determined
appropriate by the Secretary regarding such guidance;
(B) include in such guidance technical guidance for
normalizing data to ensure the baseline performance of
a covered electric utility accounts for variability in
exogenous factors, such as variability in--
(i) weather;
(ii) demand over time;
(iii) upgrades, interconnections, or
operational changes made by other utilities,
Independent System Operators or Regional
Transmission Organizations, or other entities
determined relevant by the Commission; or
(iv) other conditions affecting demand or
generation, as determined by the Secretary; and
(C) ensure such guidance supports consistent
treatment across covered electric utilities within each
category described in subsection (e).
(2) Support from national laboratories.--The National
Laboratories shall provide such technical support as the
Secretary determines necessary to carry out this subsection.
(d) Guidance on Determining Cost Savings.--In developing the
guidance under subsection (b)(2), the Secretary shall--
(1) include in such guidance--
(A) principles to ensure that cost savings
attributable to a covered utility action are calculated
in a manner that takes into account price proxies for
the value of electric energy and the baseline
performance of the covered electric utility; and
(B) tools, technical support, and reference data to
assist State regulatory authorities in applying the
principles specified in subparagraph (A); and
(2) ensure such guidance supports consistent treatment
across covered electric utilities within each category
described in subsection (e).
(e) Applicability to Utility Market Structures.--In carrying out
subsection (a), the Secretary shall develop separate guidance for each
category of covered electric utilities as follows:
(1) Vertically integrated utilities.
(2) Covered electric utilities that own or operate
transmission infrastructure but not distribution or generation
infrastructure.
(3) Covered electric utilities that own or operate
distribution infrastructure but not transmission or generation
infrastructure.
(4) Covered electric utilities that own or operate
distribution and transmission infrastructure but not generation
infrastructure.
(f) Revisions.--Upon the publication of each report under section
6, the Secretary shall determine whether to revise the guidance under
subsection (a), taking into account the contents of such report and the
recommendations included therein.
SEC. 5. GRANT PROGRAM FOR STATE REGULATORY AUTHORITIES.
(a) Establishment.--Not later than two years after the date of the
enactment of this Act, the Secretary shall establish a program under
which the Secretary may award grants to State regulatory authorities to
support the development, implementation, and oversight by such State
regulatory authorities of frameworks under which covered electric
utilities may recover a portion of verified cost savings attributable
to a covered utility action as an incentive (in this section referred
to as the ``grant program'').
(b) Authorized Uses of Funds.--Amounts awarded under the grant
program may only be used to conduct the following activities:
(1) The development of a framework referred to in
subsection (a), or revision of an existing such framework, such
that the framework is consistent with the guidance developed
under section 4, including the following:
(A) The development, including the design or
modeling, of methodologies consistent with the
methodologies set forth under such guidance.
(B) The development of data systems or other tools
necessary for the development of the framework.
(C) The issuance or revision of regulations
necessary for the development of the framework.
(D) The engagement with stakeholders with respect
to the development of the framework.
(2) The implementation or oversight of a framework
consistent with such guidance.
(c) Prohibited Use of Funds.--No amounts awarded under the grant
program may be used to pay a covered electric utility.
(d) Grant Recipient Reporting Requirement.--
(1) In general.--As a condition of receiving amounts under
the grant program, a State regulatory authority shall agree to
submit to the Secretary, on an annual basis for the duration of
the period in which such State regulatory authority expends
such amounts, a report describing the activities carried out
using such amounts.
(2) Effect of noncompliance.--If a grant recipient fails to
submit a report required under paragraph (1), such recipient
shall be ineligible for additional awards under this section
until the report is submitted.
(e) Administration of Program.--
(1) Technical support; public registry.--In carrying out
the grant program, the Secretary shall--
(A) provide to grant recipients technical
assistance in support of activities conducted using
amounts awarded under the grant program; and
(B) maintain a publicly accessible registry of the
activities so conducted.
(2) Reporting by secretary.--Not later than two years after
the date of enactment of this Act, and biennially thereafter
for the duration of the grant program, the Secretary shall
submit to the appropriate congressional committees a report
containing--
(A) a summary of the activities conducted using
amounts awarded under the grant program;
(B) an assessment of the effectiveness of any
framework implemented using such amounts; and
(C) an identification of any barrier to the
development, implementation, or oversight of a
framework consistent with the guidance developed under
section 4 and recommendations for addressing such
barrier, as applicable.
(3) Allocation of funds.--Of the amounts authorized to be
appropriated or otherwise made available to the Secretary to
carry out the grant program--
(A) not more than 70 percent may be awarded for the
conduct of activities under subsection (b)(1);
(B) not less than 30 percent may be awarded for the
conduct of activities under subsection (b)(2); and
(C) not more than five percent may be obligated or
expended for Federal administrative expenses.
SEC. 6. STUDIES ON EFFECTS OF CERTAIN RATE TREATMENTS AND ALTERNATIVE
FRAMEWORKS.
(a) Studies Required.--Not later than three years after the date of
enactment of this Act, and every five years thereafter, the Secretary,
in consultation with the Commission, shall--
(1) conduct a study on--
(A) inefficiencies in the electric power sector
incentivized by existing rate treatments for the
transmission of electric energy and any economic,
environmental, or societal effect of such
inefficiencies, including with respect to the customers
of electric utilities, the reliable operation of the
bulk-power system, and the deployment of cost-effective
grid-enhancing technologies; and
(B) alternative frameworks for incentive-based,
including performance-based, rate treatments for such
transmission, such as the alternative frameworks
described in subsection (b); and
(2) publish on a publicly available website of the
Department of Energy, and submit to the appropriate
congressional committees, a report that includes--
(A) a detailed description of the findings of such
study; and
(B) recommendations of the Secretary to align rate
treatments for the transmission of electric energy with
the goals of lowering costs for the customers of
electric utilities, enhancing the reliable operation of
the bulk-power system, reducing transmission congestion
and other inefficiencies in the transmission or
delivery of electric energy, and encouraging the
deployment of cost-effective grid-enhancing
technologies.
(b) Examples of Alternative Frameworks.--The alternative frameworks
described in this subsection are the following:
(1) Shared savings frameworks.
(2) Revenue decoupling models, under which authorized
revenues of utilities are separated from volumetric sales of
electricity to reduce disincentives for energy efficiency and
programs to reduce the consumption of, or peak demand for,
electric energy.
(3) Return on equity adjustments, under which authorized
utility returns are increased or decreased based on measurable
factors such as risk profile, performance outcomes, or
efficiency improvements.
(4) Multi-year rate plans, under which revenue requirements
and performance expectations for utilities are established for
a fixed multi-year period rather than through single-year rate
cases.
(5) Earnings sharing mechanisms, under which earnings of
utilities falling outside an authorized range as compared to
the return on equity are shared between shareholders and
ratepayers.
(6) Total expenditure models, under which capital and
operating expenditures of utilities are treated on an
equivalent basis to reduce bias toward capital investment.
(7) Performance scorecards, under which utilities are
evaluated against transparent outcome-based metrics such as
reliability, affordability, equity, or the reduction of
emissions, with results informing regulatory decisions or
incentive adjustments.
(c) Sources.--The Secretary shall ensure that each study under
subsection (a) is informed by--
(1) reports filed with the Commission pursuant to sections
3 and 5 of this Act and section 304 of the Federal Power Act
(16 U.S.C. 825c);
(2) relevant reports issued by the National Laboratories;
and
(3) such other studies, reports, and other data sources as
the Secretary may determine appropriate.
SEC. 7. DEFINITIONS.
In this Act:
(1) Advanced conductor.--The term ``advanced conductor''
means an electric transmission conductor that, relative to a
conductor being replaced on a given transmission or
distribution line, is designed to substantially improve
electrical or mechanical performance through the achievement of
at least one of the following criteria, as determined by the
Commission:
(A) A substantial increase in current-carrying
capacity under normal operating conditions.
(B) A substantial reduction in electrical
resistance or line losses under normal operating
conditions.
(C) Operation at materially higher continuous
allowable operating temperatures.
(D) A reduction in thermal sag or mechanical
constraints that enables increased use of a
transmission segment or facility.
(2) Appropriate congressional committees.--The term
``appropriate congressional committees'' means--
(A) the Committee on Energy and Commerce of the
House of Representatives; and
(B) the Committee on Energy and Natural Resources
of the Senate.
(3) Bulk-power system; electric utility; independent system
operator; regional transmission organization; state regulatory
authority; transmitting utility.--The terms ``bulk-power
system'', ``electric utility'', ``Independent System
Operator'', ``Regional Transmission Organization'', ``State
regulatory authority'', and ``transmitting utility'' have the
meanings given such terms in section 3 of the Federal Power Act
(16 U.S.C. 796).
(4) Commission.--The term ``Commission'' means the Federal
Energy Regulatory Commission.
(5) Covered electric utility.--The term ``covered electric
utility'' means an electric utility not subject to the
jurisdiction of the Commission for ratemaking purposes under
Part II of the Federal Power Act (16 U.S.C. 824 et seq.).
(6) Covered action.--The term ``covered action''--
(A) means an action that would generate cost
savings for ratepayers; and
(B) does not include the construction of a new
facility or the complete reconstruction of an existing
facility.
(7) Covered transmission action.--The term ``covered
transmission action'' means a covered action to improve the
efficiency, capacity, reliability, or resilience of one or more
transmission facilities or transmission segments, including
through--
(A) the replacement of a conductor on a
transmission line within such a facility or segment
with an advanced conductor; or
(B) the deployment of a grid-enhancing technology.
(8) Covered transmitting utility.--The term ``covered
transmitting utility'' means a transmitting utility subject to
the jurisdiction of the Commission for ratemaking purposes
under part II of the Federal Power Act (16 U.S.C. 824 et seq.).
(9) Covered utility action.--The term ``covered utility
action'' means a covered action taken by an electric utility
to--
(A) improve the efficiency of the generation,
transmission, or distribution of electric energy,
including by reducing the proportion of electrical
energy lost during such generation, transmission, or
distribution (including through the deployment of
energy storage systems or other technologies); or
(B) reduce the consumption of, or peak demand for,
electric energy, including through--
(i) a technological improvement, such as
the deployment of high-efficiency appliances,
smart thermostats, distributed energy
resources, or building retrofits;
(ii) the establishment of a pricing
mechanism to encourage customers of the
electric utility to reduce such consumption or
shift such demand to non-peak hours; or
(iii) any other action or program to
incentivize or otherwise produce such a
reduction or shift in demand.
(10) Grid-enhancing technology.--The term ``grid-enhancing
technology'' means any hardware or software that--
(A) increases the capacity, efficiency,
reliability, resilience, or safety of transmission
facilities and transmission technologies; and
(B) is installed, in addition to transmission
facilities and transmission technologies, for the
purpose of--
(i) providing operators of such facilities
and technologies increased situational
awareness and control over the electric grid;
(ii) improving the efficiency of such
facilities and technologies;
(iii) increasing the transfer capacity of
such facilities and technologies; or
(iv) otherwise enabling the increased use,
or more efficient of use, of such facilities
and technologies under normal operating
conditions.
(11) Qualifying action.--The term ``qualifying action''
means a covered transmission action achieved through the
reduction of transmission physical losses.
(12) Secretary.--The term ``Secretary'' means the Secretary
of Energy.
(13) Similarly situated.--The term ``similarly situated'',
with respect to transmission segments, means transmission
segments that the Commission determines share comparable
characteristics, such as voltage class, geography, load
profile, or historical performance.
(14) Transmission physical loss.--The term ``transmission
physical loss'' means the amount of electrical energy that
enters a transmission segment but does not exit such
transmission segment, as measured over a prescribed period of
time.
(15) Transmission segment.--The term ``transmission
segment'' means a functionally distinct portion of an
interconnected transmission system (such as a single
transmission line or multiple transmission lines within a
prescribed zone, such as between prescribed substations), for
which the amount of electrical energy transmitted and the
amount of electrical energy lost during such transmission may
be independently measured, as determined by the Commission.
(16) Vertically integrated electric utility.--The term
``vertically integrated electric utility'' means a covered
electric utility that--
(A) owns and operates generation, transmission, and
distribution facilities; and
(B) directly provides retail electric service to
end-use customers.
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