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.

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

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.

END