[Senate Report 115-250]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 417

115th Congress                                                   Report
                                 SENATE
 2d Session                                                     115-250

======================================================================
 
        RELIABLE INVESTMENT IN VITAL ENERGY REAUTHORIZATION ACT

                                _______
                                

                  May 21, 2018.--Ordered to be printed

                                _______
                                

  Ms. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1336]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 1336) to amend the Energy Policy Act of 
2005 to reauthorize hydroelectric production incentives and 
hydroelectric efficiency improvement incentives, and for other 
purposes, having considered the same, reports favorably thereon 
without amendment, and recommends that the bill do pass.

                                Purpose

    The purpose of S. 1336 is to reauthorize hydroelectric 
production incentives and hydroelectric efficiency improvement 
incentives, and for other purposes.

                          Background and Need

    Hydropower is the nation's largest renewable energy 
resource--providing reliable and inexpensive power to more than 
30 million homes. In recent years, there has been increased 
interest in small hydroelectric project development, and in 
2013, legislation was enacted to streamline the development of 
small hydro and conduit hydroelectric projects (Public Law 113-
23). With only three percent of the nation's existing 80,000 
dams currently generating electricity, there is growing 
interest in adding hydropower capacity to non-powered dams. As 
outlined in its 2016 report, Hydropower Vision, the Department 
of Energy found that hydropower in the United States could grow 
from 101 gigawatts (GW) of capacity to nearly 150 GW by 2050. 
Under this modeled scenario, this capacity growth would result 
from a combination of 13 GW of new hydropower generation 
capacity (upgrades to existing plants, adding power at existing 
dams and canals, and limited development of new stream-
reaches), and 36 GW of new pumped storage capacity.
    The Energy Policy Act of 2005 (Public Law 109-58) 
established two hydropower incentive programs. As explained in 
the Department of Energy's testimony at the December 5, 2017, 
hearing, hydropower production incentives ``are paid to 
qualifying hydropower facilities based on the amount of 
electricity they generate,'' while hydropower generation 
efficiency incentives ``support capital improvements to 
existing hydropower facilities that increase their 
efficiency.'' S. 1336 reauthorizes both programs through fiscal 
year 2027.

                          Legislative History

    Senator Gardner introduced S. 1336 on June 12, 2017. The 
Subcommittee on Energy conducted a hearing on S. 1336 on 
December 5, 2017. Similar language was included in section 3010 
of S. 1460, the Energy and Natural Resources Act of 2017 (Cal. 
162).
    Companion legislation, H.R. 3256, was introduced by Rep. 
McKinley and five cosponsors on July 14, 2017, in the House of 
Representatives and referred to the Committee on Energy and 
Commerce.
    In the 114th Congress, Senator Gardner introduced similar 
legislation, S. 1270, on May 11, 2015. The Energy and Natural 
Resources Committee conducted a hearing on S. 1270 on May 19, 
2015. The measure was also included in section 3002 of S. 2012, 
the Energy Policy Modernization Act of 2016, which the Senate 
passed, as amended, on April 20, 2016.
    The Committee on Energy and Natural Resources met in open 
business session on March 8, 2018, and ordered S. 1336 
favorably reported.

                        Committee Recommendation

    The Senate Committee on Energy and Natural Resources, in 
open business session on March 8, 2018, by a majority voice 
vote of a quorum present, recommends that the Senate pass S. 
1336.
    Senator Lee asked to be recorded as voting no.

                      Section-by-Section Analysis

    Section 1 sets forth the short title of the bill.
    Section 2 reauthorizes through fiscal year 2027 the 
incentives for hydroelectric production and hydroelectric 
efficiency improvements that were originally established in 
sections 242 and 243 of the Energy Policy Act of 2005 (Public 
Law 109-58).

                   Cost and Budgetary Considerations

    The following estimate of the costs of this measure has 
been provided by the Congressional Budget Office:
    Summary: S. 1336 would authorize appropriations for the 
Department of Energy (DOE) to make payments to owners or 
operators of certain hydroelectric facilities. Assuming 
appropriation of the authorized amounts, CBO estimates that 
implementing S. 1336 would cost $43 million over the 2018-2023 
period.
    Enacting the bill would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting S. 1336 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 1336 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of S. 1336 is shown in the following table. 
The costs of the legislation fall within budget function 270 
(energy).

----------------------------------------------------------------------------------------------------------------
                                                                   By fiscal year, in millions of dollars--
                                                            ----------------------------------------------------
                                                              2018   2019   2020   2021   2022   2023  2019-2023
----------------------------------------------------------------------------------------------------------------
                                 INCREASES IN SPENDING SUBJECT TO APPROPRIATION
 
Authorization Level........................................     10     10     10     10     10     10        50
Estimated Outlays..........................................      0      4      9     10     10     10        43
----------------------------------------------------------------------------------------------------------------

    The bill would authorize the appropriation of $10 million 
in 2018. CBO does not estimate any outlays for that 
authorization because appropriations for 2018 have already been 
enacted.
    Basis of estimate: For this estimate, CBO assumes that S. 
1336 will be enacted near the start of fiscal year 2019 and 
that the amounts will be provided each year beginning in 2019.
    S. 1336 would authorize the appropriation of $10 million 
annually over the 2018-2027 period for DOE to provide payments 
to nonfederal owners and operators of certain facilities that 
generate and sell hydroelectric energy. Such payments would 
equal 1.8 cents per kilowatt hour of electricity generated by 
qualified facilities that use a turbine or other power-
generating device that was added to a dam or conduit that was 
completed before August 8, 2005. Under the bill, to qualify for 
incentive payments facilities would need to begin operating 
before August 8, 2025, owners and operators could receive such 
payments for up to 10 years.
    For 2018, the Congress has provided nearly $7 million for 
payments that would be reauthorized under the bill; for this 
estimate. CBO assumes no further funding will be provided this 
year. Assuming appropriation of the authorized amounts over the 
2019-2027 period, CBO estimates that implementing S. 1336 would 
cost $43 million over the 2018-2023 period covered by this 
estimate and $47 million after 2023. That estimate is based on 
historical spending patterns for existing activities.
    Pay-As-You-Go considerations: None.
    Increase in long-term direct spending and deficits: CBO 
estimates that enacting S. 1336 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2029.
    Mandates: S. 1336 contains no intergovernmental or private-
sector mandates as defined in UMRA.
    Estimate prepared by: Costs: Megan Carroll; Mandates: Jon 
Sperl.
    Estimate reviewed by: Kim P. Cawley, Chief, Natural and 
Physical Resources Cost Estimates Unit; H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                      Regulatory Impact Evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 1336.
    The bill is not a regulatory measure in the sense of 
imposing Government-established standards or significant 
economic responsibilities on private individuals and 
businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 1336 as ordered reported.

                   Congressionally Directed Spending

    S. 1336, as ordered reported, does not contain any 
congressionally directed spending items, limited tax benefits, 
or limited tariff benefits as defined in rule XLIV of the 
Standing Rules of the Senate.

                        Executive Communications

    The testimony provided by the Department of the Energy at 
the December 5, 2017, hearing on S. 1336 follows:

 Testimony of Under Secretary Mark Menezes, U.S. Department of Energy, 
   Before the U.S. Senate Committee on Energy and Natural Resources 
                         Subcommittee on Energy

S. 1336--Reliable Investment in Vital Energy Reauthorization
    This bill reauthorizes hydropower production and efficiency 
upgrade incentives established in the Energy Policy Act of 2005 
for an additional 10 years. Hydropower production incentives, 
which are paid to qualifying hydropower facilities based on the 
amount of electricity they generate, are reauthorized from 2018 
through 2027. Hydropower generation efficiency incentives, 
which support capital improvements to existing hydropower 
facilities that increase their efficiency, are likewise 
reauthorized from 2018 through 2027.
    Hydropower has significant capabilities to support economic 
competitiveness and electricity system reliability by providing 
low-cost, flexible generation. The recent Staff Report to the 
Secretary on Electricity Markets and Reliability found that 
while some hydropower plants are operated as baseload 
resources, many also support the dynamic behavior of grid 
operations by providing a full range of ancillary services. 
This flexibility has historically complemented other 
traditional forms of baseload generation, such as coal and 
nuclear.
    DOE appreciates the goal S. 1336 attempts to achieve. 
Hydropower furthers goals of economic competitiveness and 
electricity system reliability, and it appears this bill 
incentivizes both hydropower generation and efficiency 
upgrades.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the original bill, as reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

ENERGY POLICY ACT OF 2005 (PUBLIC LAW 109-58)

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SEC. 242. HYDROELECTRIC PRODUCTION INCENTIVES.

    (a) Incentive Payments.--For electric energy generated and 
sold by a qualified hydroelectric facility during the incentive 
period, the Secretary shall make, subject to the availability 
of appropriations, incentive payments to the owner or operator 
of such facility. The amount of such payment made to any such 
owner or operator shall be as determined under subsection (e) 
of this section. Payments under this section may only be made 
upon receipt by the Secretary of an incentive payment 
application which establishes that the applicant is eligible to 
receive such payment and which satisfies such other 
requirements as the Secretary deems necessary. Such application 
shall be in such form, and shall be submitted at such time, as 
the Secretary shall establish.
    (b) Definitions.--For purposes of this section:
          (1) Qualified hydroelectric facility.--The term 
        ``qualified hydroelectric facility'' means a turbine or 
        other generating device owned or solely operated by a 
        non-Federal entity which generates hydroelectric energy 
        for sale and which is added to an existing dam or 
        conduit.
          (2) Existing dam or conduit.--The term ``existing dam 
        or conduit'' means any dam or conduit the construction 
        of which was completed before the date of the enactment 
        of this section and which does not require any 
        construction or enlargement of impoundment or diversion 
        structures (other than repair or reconstruction) in 
        connection with the installation of a turbine or other 
        generating device.
          (3) Conduit.--The term ``conduit'' has the same 
        meaning as when used in section 30(a)(2) of the Federal 
        Power Act (16 U.S.C. 823a(a)(2)).
The terms defined in this subsection shall apply without regard 
to the hydroelectric kilowatt capacity of the facility 
concerned, without regard to whether the facility uses a dam 
owned by a governmental or nongovernmental entity, and without 
regard to whether the facility begins operation on or after the 
date of the enactment of this section.
    (c) Eligibility Window.--Payments may be made under this 
section only for electric energy generated from a qualified 
hydroelectric facility which begins operation during the period 
of [10] 20 fiscal years beginning with the first full fiscal 
year occurring after the date of enactment of this subtitle.
    (d) Incentive Period.--A qualified hydroelectric facility 
may receive payments under this section for a period of 10 
fiscal years (referred to in this section as the `incentive 
period'). Such period shall begin with the fiscal year in which 
electric energy generated from the facility is first eligible 
for such payments.
    (e) Amount of Payment.--
          (1) In general.--Payments made by the Secretary under 
        this section to the owner or operator of a qualified 
        hydroelectric facility shall be based on the number of 
        kilowatt hours of hydroelectric energy generated by the 
        facility during the incentive period. For any such 
        facility, the amount of such payment shall be 1.8 cents 
        per kilowatt hour (adjusted as provided in paragraph 
        (2)), subject to the availability of appropriations 
        under subsection (g), except that no facility may 
        receive more than $750,000 in 1 calendar year.
          (2) Adjustments.--The amount of the payment made to 
        any person under this section as provided in paragraph 
        (1) shall be adjusted for inflation for each fiscal 
        year beginning after calendar year 2005 in the same 
        manner as provided in the provisions of section 
        29(d)(2)(B) of the Internal Revenue Code of 1986, 
        except that in applying such provisions the calendar 
        year 2005 shall be substituted for calendar year 1979.
    (f) Sunset.--No payment may be made under this section to 
any qualified hydroelectric facility after the expiration of 
the period of [20] 30 fiscal years beginning with the first 
full fiscal year occurring after the date of enactment of this 
subtitle, and no payment may be made under this section to any 
such facility after a payment has been made with respect to 
such facility for a period of 10 fiscal years.
    (g) Authorization of Appropriations.--There are authorized 
to be appropriated to the Secretary to carry out the purposes 
of this section $10,000,000 for [each of the fiscal years 2006 
through 2015] each of fiscal years 2018 through 2027.

SEC. 243. HYDROELECTRIC EFFICIENCY IMPROVEMENT.

    (a) Incentive Payments.--The Secretary shall make incentive 
payments to the owners or operators of hydroelectric facilities 
at existing dams to be used to make capital improvements in the 
facilities that are directly related to improving the 
efficiency of such facilities by at least 3 percent.
    (b) Limitations.--Incentive payments under this section 
shall not exceed 10 percent of the costs of the capital 
improvement concerned and not more than 1 payment may be made 
with respect to improvements at a single facility. No payment 
in excess of $750,000 may be made with respect to improvements 
at a single facility.
    (c) Authorization of Appropriations.--There are authorized 
to be appropriated to carry out this section not more than 
$10,000,000 for [each of the fiscal years 2006 through 2015] 
each of fiscal years 2018 through 2027.

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