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110th Congress                                            Rept. 110-305
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



 
                  SMART GRID FACILITATION ACT OF 2007

                                _______
                                

                 August 3, 2007.--Ordered to be printed

                                _______
                                

 Mr. Dingell, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3237]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 3237) to facilitate the transition to a smart 
electricity grid, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Subcommitte Consideration........................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
Statement of General Performance Goals and Objectives............     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     5
Earmarks and Tax and Tariff Benefits.............................     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Constitutional Authority Statement...............................     5
Applicability to Legislative Branch..............................     6
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill, as Reported............     7

                          Purpose and Summary

    The purpose of H.R. 3237 is to facilitate and provide 
Federal leadership for the transition of the Nation's 
electricity sector to a ``smart grid'' and to encourage demand-
response activities that support and improve the reliability of 
the grid. H.R. 3237 creates a Federal office in the Department 
of Energy (DOE) to serve as the focal point for Federal efforts 
to facilitate this transition, creates a Federal program to 
provide grants matching one-fourth of qualifying ``smart grid'' 
investments made by private sector participants, and requires 
the States to consider adopting policies that will foster a 
``smart grid.'' The bill contains provisions for review and 
encouragement of demand-response potential, including requiring 
Federal agencies to monitor and reduce their own peak demands 
for power through demand response.

                          Background and Need

    Although the electric industry supplies the critical energy 
required for our highly-computerized society, the industry's 
own operations are not highly computerized. Adoption of ``smart 
grid'' technologies will provide new options to the various 
participants in the electricity sector, permit remote and 
automatic controls to be programmed to respond to contingencies 
or opportunities, and make more detailed information concerning 
supply, demand, economics, and grid conditions available on a 
real-time basis.
    H.R. 3237 is intended to facilitate a transition toward a 
``smart grid'' that participants in the electricity sector 
appear to agree would be beneficial and is likely inevitable. 
There is general recognition that the older analog and manual 
information and control systems on which the grid still relies 
eventually will be replaced with digital controls and 
information.
    To date, however, this evolution has encountered 
institutional, economic, and practical barriers that the 
Federal Government can help reduce. At present, electric 
utilities are slow to make expensive ``smart grid'' investments 
unless their customers are prepared to benefit from them. At 
the same time, consumers are slow to purchase ``smart grid'' 
capable equipment when the grid does not accommodate or reward 
such investments. Prompting and accelerating such a transition, 
while not directing it to predetermined results in technology 
or in regulatory structure, will serve the national interest by 
helping the United States achieve a more resilient, efficient, 
and reliable electricity grid.
    ``Smart grid'' technologies can provide signals about 
costs, availability, and the ability of given power plants to 
provide ancillary services to the grid, and can record the 
performance of these facilities in response to those signals. 
``Smart'' sensors and monitors installed along the transmission 
and distribution systems can provide instant and pinpoint 
notice of a disruption or contingency that could threaten 
system reliability or operations. ``Smart'' meters can provide 
information about consumption at frequent intervals to 
utilities, supporting time-of-use pricing that reflects varying 
electricity value over time. Simultaneously, they can provide 
system information to electricity consumers and their 
equipment, to allow them to manage their own consumption in an 
economically optimum manner. For example, information provided 
through a smart grid can permit temporary suspension of 
operations at the utility's request to assure continuity of 
service to more critical uses or enable consumers to schedule 
their operations when prices are lowest.
    These technologies may use varying modes of communication--
such as wire-line, power-line, wireless, or internet. They may 
be owned and operated by various participants--utilities, 
customers, or third-parties. The technologies, however, should 
eventually complement each other and operate in harmony across 
the interconnected electricity system. H.R. 3237 establishes a 
Federal policy and role in fostering a common set of national 
standards or protocols to achieve such interoperability.
    The legislation is intended to help create the conditions 
for widespread innovation and creation of new value in the 
electricity sector, similar to the experience of recent decades 
in telecommunications, computer science, biotechnology, and 
other sectors. The Committee expects that electricity consumers 
and participants in the industry will all benefit from such 
innovation, but recognizes that it is likely there will be 
false starts, technological dead-ends, and competition among 
optional technologies. The Federal Government, however, should 
not try to direct or determine specific outcomes of this 
evolution. Similarly, the bill does not affect decisions by 
State regulators with respect to costs associated with smart 
grid investments.
    Demand response practices enable electricity consumers to 
become more active participants in power markets. Such programs 
provide incentives to consumers to curtail their own uses for 
the benefit of the broader system economics and reliability. As 
a major electricity consumer, the Federal Government itself has 
an opportunity and an obligation to be aware of its own peak 
power consumption and, wherever feasible, to reduce its peak 
demand or offer demand response. H.R. 3237 is intended to 
create better understanding of the potential for demand 
response and to foster demand response practices on the grid. 
Coupled with the ``smart grid'' technologies that will make 
such programs easy to administer and will make their market 
value more transparent, demand response practices will improve 
the economics and operation of the electricity infrastructure 
that, provides a vital basis for a modem economy and society.

                                Hearings

    There was one oversight hearing and one legislative hearing 
held by the Subcommittee on Energy and Air Quality, Committee 
on Energy and Commerce, in connection to the bill reported by 
the Committee.
    The Subcommittee on Energy and Air Quality held a hearing 
on ``Facilitating the Transition to a Smart Electric Grid: on 
Thursday, May 3, 2007. The Subcommittee received testimony from 
the following: Michael W. Howard, Ph.D., P.E., Senior Vice 
President, Research and Development, Electric Power Research 
Institute; Mr. Dean Kamen, President, DEKA Research and 
Development; Mr. Dan Delurey, Executive Director, Demand 
Response and Advanced Metering Coalition, Mr. Kurt Yeager, 
Executive Director, Galvin Electricity Initiative; Mr. Brad 
Gammons, Vice President, IBM Global Energy and Utilities 
Industry; Ms. Audrey A. Zibelman, Chief Operating Officer, PJM 
Interconnection; Mr. John Bryson, Chairman, CEO and President, 
Edison International; Mr. Kevin Kolevar, Director, Office of 
Energy Delivery and Electricity Reliability, U.S. Department of 
Energy; The Honorable Jon Wellinghoff, Commissioner, Federal 
Energy Regulatory Commission; The Honorable Robert F. 
Lieberman, Commissioner, Illinois Commerce Commission.
    The Subcommittee held a legislative hearing entitled 
``Legislative Hearing on Discussion Drafts concerning Energy 
Efficiency, Smart Electricity Grid, Energy Policy Act of 2005 
Title XVII Loan Guarantees, and Standby Loans for Coal-to-
Liquids Projects.'' The Subcommittee received testimony from 
the following: Mr. David Rogers, Deputy Assistant Secretary for 
Energy Efficiency, U.S. Department of Energy; Ms. Kateri 
Callahan, President, Alliance to Save Energy; Mr. Jay Birnbaum, 
Vice President and General Counsel, Current Group, LLC.; Ms. 
Katharine A. Fredriksen, Principal Deputy Assistant Secretary 
for Policy and International Affairs, U.S. Department ofEnergy; 
Mr. Don Maley, Vice President, Leucadia International Corporation; 
Daniel A. Lashof, Ph.D., Science Director, Climate Center, Natural 
Resources Defense Council.

                       Subcommittee Consideration

    Prior to the introduction of H.R. 3237, its text was 
considered in the Committee as a Committee Print.
    On Wednesday, June 20, 2007, the Subcommittee on Energy and 
Air Quality met in open markup session and considered a 
Committee Print to facilitate the transition to a smart 
electricity grid. The Committee Print was favorably forwarded 
to the full Committee, without amendment, by a recorded vote of 
16-10. The Committee Print forwarded by the Subcommittee was 
subsequently designated Committee Print #2 for full Committee 
consideration.

                        Committee Consideration

    On Wednesday, June 27, 2007, the full Committee met in open 
markup session and ordered the Committee Print favorably 
reported to the House, amended, by a voice vote. On July 31, 
2007, a clean bill, H.R. 3237, was introduced with the approved 
language of the Committee Print, and was referred to the full 
Committee to be reported to the House without further 
consideration.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. Mr. 
Dingell moved that the Committee report the Committee Print, 
amended, favorably to the House. The motion to report the 
Committee Print favorably to the House was agreed to by a voice 
vote. There were no recorded votes on this legislation in the 
full Committee.

                      Committee Oversight Findings

    Regarding clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the oversight findings of the 
Committee on the bill are reflected in this report.

         Statement of General Performance Goals and Objectives

    The goals and objectives of H.R. 3237 are to facilitate the 
transition to a smart electricity grid, to establish a Grid 
Modernization Commission that will assess both progress towards 
a smart grid, to require development of protocols and standards 
for information management, to establish a smart grid 
investment grant program, to require state regulatory 
authorities to consider ways to encourage Smart Grid 
implementation and energy efficiency to assess and achieve 
demand response potential, and to establish programs to reduce 
Federal peak electricity demand.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Regarding compliance with clause 3(c)(2) of rule XIII of 
the Rules of the House of Representatives, the Committee finds 
that H.R. 3237 would result in no new or increased budget 
authority, entitlement authority, or tax expenditures or 
revenues.

                  Earmarks and Tax and Tariff Benefits

    Regarding compliance with clause 9 of rule XXI of the Rules 
of the House of Representatives, H.R. 3237 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.

                        Committee Cost Estimate

    The Committee will adopt as its own the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974.

                  Congressional Budget Office Estimate

    Regarding clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, a cost estimate on H.R. 3237 by the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not available as of the 
time of the filing of this report by the committee.

                       Federal Mandates Statement

    The Committe will adopt as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    Regarding section 5(b) of the Federal Advisory Committee 
Act, the bill does not establish any committee that is subject 
to such Act.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes, and in the provisions of 
Article I, section 8, clause 1, that relate to expending funds 
to provide for the general welfare of the United States.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


                  SUBTITLE A: SMART GRID FACILITATION

    Section 101. Statement of Policy in Support of 
Modernization of Electricity Grid--Establishes Federal policy 
to support implementation of Smart Grid technologies.
    Section 102. Grid Modernization Commission--Establishes a 
Grid Modernization Commission (Commission) to lead the Federal 
effort to implement Smart Grid technologies and to work with 
States and utilities.
    Section 103. Grid Assessment and Report--Instructs the 
Commission to study barriers to compatible Smart Grid 
technology implementation and to recommend means to assure 
development of consistent national protocols and model 
standards for Smart Grid technologies.
    Section 104. Federal Matching Fund for Smart Grid 
Investment Costs--Creates Federal matching grant program to 
reimburse one-fourth of the costs of implementation of Smart 
Grid technologies where consumers, utilities, States or other 
participants contribute three-quarters of the costs.
    Section 105. Smart Grid Technology Deployment Program--
Instructs DOE to develop programs to assist deployment of Smart 
Grid technologies and to perform cooperative demonstration 
projects with as many as five electric utilities.
    Section 106. Smart Grid Information Requirements--Instructs 
the Commission to work with States, utilities, and others to 
determine the information required by consumers to utilize 
Smart Grid technologies.
    Section 107. State Consideration of Incentives for Smart 
Grid--Amends the Public Utility Regulatory Policies Act of 1978 
(PURPA) to require States to consider regulatory standards that 
would (1) allow utilities to include Smart Grid investments in 
rates; (2) ``decouple'' utility profits from the volume of 
electricity throughput to consumers; and (3) require utilities 
to make time-sensitive supply, cost, price, and other 
information available to consumers to facilitate Smart Grid 
technologies and demand response.
    Section 108. DOE Study of Security Attributes of Smart Grid 
Systems--Requires DOE to study the effects of Smart Grid 
technologies on the security of the electricity grid and 
infrastructure.

                      SUBTITLE B: DEMAND RESPONSE

    Section 111. Electricity Sector Demand Response--Amends the 
National Energy Conservation Policy Act by adding three new 
sections:
    (1) Federal Electricity Peak Demand Reduction Standard--
Requires Federal agencies to reduce their peak electricity 
consumption by 2 percent per year for a 10-year period, or make 
such demand available as demand response, and include results 
in reports to Congress.
    National Action Plan for Demand Response--Requires the 
Commission to conduct an assessment of demand response 
potential and to prepare a plan to achieve that potential 
through assistance to States.
    (3) Environmental Attributes and Impacts of Demand Response 
and Smart Grid System--Requires an EPA Study of environmental 
effects of demand response and Smart Grid implementation.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the 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):

PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978

           *       *       *       *       *       *       *


TITLE I--RETAIL REGULATORY POLICIES FOR ELECTRIC UTILITIES

           *       *       *       *       *       *       *


              Subtitle B--Standards For Electric Utilities

SEC. 111. CONSIDERATION AND DETERMINATION RESPECTING CERTAIN RATEMAKING 
                    STANDARDS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Establishment.--The following Federal standards are 
hereby established:
          (1) * * *

           *       *       *       *       *       *       *

          (16) Utility investment in smart grid investments.--
        Each electric utility shall prior to undertaking 
        investments in non-advanced grid technologies 
        demonstrate that alternative investments in advanced 
        grid technologies have been considered, including from 
        a standpoint of cost-effectiveness, where such cost-
        effectiveness considers costs and benefits on a life-
        cycle basis.
          (17) Utility cost of smart grid investments.--Each 
        electric utility shall be permitted to--
                  (A) recover from ratepayers the capital and 
                operating expenditures and other costs of the 
                utility for qualified smart grid system, 
                including a reasonable rate of return on the 
                capital expenditures of the utility for a 
                qualified smart grid system, and
                  (B) recover in a timely manner the remaining 
                book-value costs of equipment rendered obsolete 
                by the deployment of a qualified smart grid 
                system, based on the remaining depreciable life 
                of the obsolete equipment.
          (18) Rate design modifications to promote energy 
        efficiency investments.--
                  (A) In general.--The rates allowed to be 
                charged by any electric utility shall--
                          (i) align utility incentives with the 
                        delivery of cost-effective energy 
                        efficiency; and
                          (ii) promote energy efficiency 
                        investments.
                  (B) Policy options.--In complying with 
                subparagraph (A), each State regulatory 
                authority and each nonregulated utility shall 
                consider--
                          (i) removing the throughput incentive 
                        and other regulatory and management 
                        disincentives to energy efficiency;
                          (ii) providing utility incentives for 
                        the successful management of energy 
                        efficiency programs;
                          (iii) including the impact on 
                        adoption of energy efficiency as 1 of 
                        the goals of retail rate design, 
                        recognizing that energy efficiency must 
                        be balanced with other objectives;
                          (iv) adopting rate designs that 
                        encourage energy efficiency for each 
                        customer class; and
                          (v) allowing timely recovery of 
                        energy efficiency-related costs.
          (19) Smart grid information.--
                  (A) Standard.--All electricity purchasers 
                shall be provided direct access, both in 
                written and electronic machine-readable form, 
                to information from their electricity provider 
                as provided in subparagraph (B).
                  (B) Information.--Information provided under 
                this section shall conform to the standardized 
                rules issued by the Commission on Grid 
                Modernization under section 106(b) of the 
                [SHORT TITLE Act of 2007] and shall include:
                          (i) Prices.--Purchasers and other 
                        interested persons shall be provided 
                        with information on:
                                  (I) Time-based electricity 
                                prices in the wholesale 
                                electricity market; and
                                  (II) Time-based electricity 
                                retail prices or rates that are 
                                available to the purchasers.
                          (ii) Usage.--Purchasers shall be 
                        provided with the number of electricity 
                        units, expressed in kwh, purchased by 
                        them
                          (iii) Intervals and projections.--
                        Updates of information on prices and 
                        usage shall be offered on not less than 
                        a daily basis, shall include hourly 
                        price and use information, where 
                        available, and shall include a day-
                        ahead projection of such price 
                        information to the extent available.
                          (iv) Sources.--Purchasers and other 
                        interested person shall be provided 
                        with written information on the sources 
                        of the power provided by the utility, 
                        to the extent it can be determined, by 
                        type of generation, including 
                        greenhouse gas emissions and criteria 
                        pollutants associated each type of 
                        generation, for intervals during which 
                        such information is available on a 
                        cost-effective basis, but not less than 
                        monthly.
                  (C) Access.--Purchasers shall be able to 
                access their own information at any time 
                through the internet and on other means of 
                communication elected by that utility for Smart 
                Grid applications. Other interested persons 
                shall be able to access information not 
                specific to any purchaser through the Internet. 
                Information specific to any purchaser shall be 
                provided solely to that purchaser.

SEC. 112. OBLIGATIONS TO CONSIDER AND DETERMINE.

  (a) * * *
  (b) Time Limitations.--(1) * * *

           *       *       *       *       *       *       *

  (6)(A) Not later than 1 year after the enactment of this 
paragraph, but not less than 3 years after the conclusion of 
any prior review of such standards, each State regulatory 
authority (with respect to each electric utility for which it 
has ratemaking authority) and each nonregulated utility shall 
commence the consideration referred to in section 111, or set a 
hearing date for consideration, with respect to the standards 
established by paragraphs (16) through (19) of section 111(d). 
Not later than 6 months after the promulgation of rules by the 
Commission on Grid Modernization under section 106(b) of the 
[SHORT TITLE Act of 2007], each State regulatory authority 
(with respect to each electric utility for which it has 
ratemaking authority) and each nonregulated utility shall 
commence the consideration referred to in section 111, or set a 
hearing date for consideration, with respect to the standard 
established by paragraph (19) of section 111(d).
  (B) Not later than 2 years after the date of the enactment of 
the this paragraph, but not less than 4 years after the 
conclusion of any prior review of such standard, each State 
regulatory authority (with respect to each electric utility for 
which it has ratemaking authority), and each nonregulated 
electric utility, shall complete the consideration, and shall 
make the determination, referred to in section 111 with respect 
to each standard established by paragraphs (16) through (18) of 
section 111(d). Not later than 18 months after the promulgation 
of rules by the Commission on Grid Modernization under section 
106(b) of the [SHORT TITLE Act of 2007] each State regulatory 
authority (with respect to each electric utility for which it 
has ratemaking authority), and each nonregulated electric 
utility, shall complete the consideration, and shall make the 
determination, referred to in section 111 with respect to each 
standard established by paragraph (19) of section 111(d).
  (c) Failure To Comply.--Each State regulatory authority (with 
respect to each electric utility for which it has ratemaking 
authority) and each nonregulated electric utility shall 
undertake the consideration, and make the determination, 
referred to in section 111 with respect to each standard 
established by section 111(d) in the first rate proceeding 
commenced after the date three years after the date of 
enactment of this Act respecting the rates of such utility if 
such State regulatory authority or nonregulated electric 
utility has not, before such date, complied with subsection 
(b)(2) with respect to such standard. In the case of each 
standard established by paragraphs (11) through (13) of section 
111(d), the reference contained in this subsection to the date 
of enactment of this Act shall be deemed to be a reference to 
the date of enactment of such paragraphs (11) through (13). In 
the case of the standard established by paragraph (14) of 
section 111(d), the reference contained in this subsection to 
the date of enactment of this Act shall be deemed to be a 
reference to the date of enactment of such paragraph (14). In 
the case of the standard established by paragraph (15), the 
reference contained in this subsection to the date of enactment 
of this Act shall be deemed to be a reference to the date of 
enactment of paragraph (15). In the case of the standards 
established by paragraphs (16) through (19) of section 111(d), 
the reference contained in this subsection to the date of 
enactment of this Act shall be deemed to be a reference to the 
date of enactment of such paragraphs.
  (d) Prior State Actions.--Subsections (b) and (c) of this 
section shall not apply to the standards established by 
paragraphs (11) through (13) and paragraphs (16) through (18) 
of section 111(d) in the case of any electric utility in a 
State if, before the enactment of this subsection--
          (1) * * *

           *       *       *       *       *       *       *

  (g) Reconsideration of Prior Time-of-Day and Communication 
Standards.--Not later than 1 year after the enactment of this 
subsection, each State regulatory authority (with respect to 
each electric utility for which it has ratemaking authority) 
and each nonregulated utility shall commence a reconsideration 
under section 111, or set a hearing date for reconsideration, 
with respect to the standards established by paragraphs (3) and 
(14) of section 111(d) to take into account Smart Grid 
technologies. Not later than 2 years after the date of the 
enactment of this subsection, each State regulatory authority 
(with respect to each electric utility for which it has 
ratemaking authority), and each nonregulated electric utility, 
shall complete the reconsideration, and shall make the 
determination, referred to in section 111 with respect to the 
standards established by paragraphs (3) and (14) of section 
111(d).

           *       *       *       *       *       *       *

                              ----------                              


NATIONAL ENERGY CONSERVATION POLICY ACT

           *       *       *       *       *       *       *


                      TITLE I--GENERAL PROVISIONS

SEC. 101. SHORT TITLE AND TABLE OF CONTENTS.

  (a) * * *
  (b) Table of Contents.--

                       TITLE I--GENERAL PROVISIONS

Sec. 101. Short title and table of contents.
Sec. 102. Findings and statement of purposes.
     * * * * * * *

                   TITLE V--FEDERAL ENERGY INITIATIVES

               Part 1--Executive Agency Conservation Plan

Sec. 501. Conservation plan authorization.
     * * * * * * *

                      Part 5--Peak Demand Reduction

Sec. 571. Definitions.
Sec. 572. Federal Electricity Peak Demand Reduction Standard.
Sec. 573. National action plan for demand response.
Sec. 574. Report on environmental attributes and impacts of demand 
          response and smart grid systems.

           *       *       *       *       *       *       *


TITLE V--FEDERAL ENERGY INITIATIVE

           *       *       *       *       *       *       *


                     PART 5--PEAK DEMAND REDUCTION

SEC. 571. DEFINITIONS

  (a) Secretary.--As used in this part, the term ``Secretary'' 
means the Secretary of Energy.
  (b) Federal Agency.--As used in this part, the term ``Federal 
agency'' has the same meaning as provided by section 551 of 
this Act.

SEC. 572. FEDERAL ELECTRICITY PEAK DEMAND REDUCTION STANDARD

  (a) 2008 Agency Annual Energy Plan.--Each Federal agency 
shall prepare, and include in its annual report under section 
548(a) of this Act, each of the following:
          (1) A determination of the agency's aggregate 
        electricity demand during the system peak hours for the 
        utilities providing electricity service to its 
        facilities during 2006 and 2007.
          (2) A forecast for each year through 2018 of the 
        projected growth in such peak demand in light of 
        projected growth of facilities, staff, activities, 
        electric intensity of activities, and other relevant 
        factors.
  (b) Federal Electricity Peak Demand Reduction Standard.--
          (1) In general.--Except as provided in paragraph (2), 
        for calendar year 2009 and each calendar year 
        thereafter, each Federal agency shall reduce its 
        aggregate peak electricity demand or make such amounts 
        of electricity demand available in the form of demand 
        response, by the percentage amount specified in the 
        Federal Electricity Peak Demand Reduction Standard set 
        forth in the following table:

           Federal Electricity Peak Demand Reduction Standard
------------------------------------------------------------------------
         Calendar Year              Reduction of Peak Demand Forecast
------------------------------------------------------------------------
2009...........................   2 percent of the peak demand forecast
                                  for calendar year 2009
2010...........................   4 percent of the peak demand forecast
                                  for calendar year 2010
2011...........................   6 percent of the peak demand forecast
                                  for calendar year 2011
2012...........................   8 percent of the peak demand forecast
                                  for calendar year 2012
2013...........................   10 percent of the peak demand forecast
                                  for calendar year 2013
2014...........................   12 percent of the peak demand forecast
                                  for calendar year 2014
2015...........................  14 percent of the peak demand forecast
                                  for calendar year 2015
2016...........................  16 percent of the peak demand forecast
                                  for calendar year 2016
2017...........................  18 percent of the peak demand forecast
                                  for calendar year 2017
2018 and each calendar year      20 percent of the peak demand forecast
 thereafter.                      for the applicable calendar year
------------------------------------------------------------------------

        In the table above, the term ``forecast'' refers to the 
        forecast set forth in the 2008 report under section 
        548(a) of this Act as updated in accordance with 
        subsection in (c)(1)(C).
          (2) Exception.--The standard under this subsection 
        shall not apply to any activity of a Federal agency 
        relating to defense or national security if compliance 
        with the standard would have an adverse mission impact 
        on the activity, as determined by the Secretary of 
        Defense or the Secretary of Homeland Security.
  (c) Implementation of Standard.--
          (1) In general.--Not later than January 1, 2010, and 
        each calendar year thereafter, each Federal agency 
        shall include in the annual energy plan of the Federal 
        agency each of the following:
                  (A) An assessment of whether the Federal 
                agency was in compliance with the standard 
                under subsection (b) for the preceding year.
                  (B) A description of--
                          (i) the method by which the Federal 
                        agency proposes to comply with the 
                        standard for the following calendar 
                        year; and
                          (ii) the factors relied on by the 
                        head of the Federal agency in 
                        determining whether to participate in 
                        demand response programs offered by an 
                        electric utility or others during the 
                        preceding calendar year; and
                          (iii) if the Federal agency did not 
                        participate in a demand response 
                        program offered by each utility 
                        providing electric service to 
                        facilities of the agency during the 
                        preceding calendar year, an explanation 
                        for the decision by the head of the 
                        Federal agency to not participate.
                  (C) An update of the agency's prior forecast 
                for the remaining years in the period until 
                2018.
          (2) Availability to public.--Not later than January 
        1, 2010, and each calendar year thereafter, the head of 
        each Federal agency shall make available to the public 
        a description of each provision included in the annual 
        energy plan of the Federal agency described in 
        subparagraphs (A) through (C) of paragraph (1).
  (d) Modifications to Federal Energy Management Program.--The 
Secretary shall make any modification to the Federal Energy 
Management Program of the Department of Energy that the 
Secretary determines to be necessary to
          (1) incorporate the standard established under 
        subsection (b) into the Federal Energy Management 
        Program;
          (2) assist any Federal agency to comply with the 
        standard established under subsection (b) through any 
        appropriate means, including conducting 1 or more 
        demonstration projects at Federal facilities.
  (e) Annual Report.--Not later than March 1, 2010, and 
annually thereafter, the Secretary shall submit to Congress a 
report that evaluates the success of agencies in meeting the 
standard established under subsection (b) and the success of 
the Federal Energy Management Program in assisting agencies 
with meeting the standard, and the costs and benefits of such 
participation.

SEC. 573. NATIONAL ACTION PLAN FOR DEMAND RESPONSE

  (a) National Assessment and Report.--The Grid Modernization 
Commission established under subtitle A of title III of the 
[SHORT TITLE Act of 2007] shall conduct a National Assessment 
of Demand Response. The Commission shall, within 18 months of 
the date on which the full Commission first meets, submit a 
Report to Congress that includes each of the following:
          (1) Estimation of nationwide demand response 
        potential in 5 and 10 year horizons, including data on 
        a State-by-State basis, and a methodology for updates 
        of such estimates on an annual basis.
          (2) Estimation of how much of this potential can be 
        achieved within 5 and 10 years after the enactment of 
        this Act accompanied by specific policy recommendations 
        that if implemented can achieve the estimated 
        potential. Such recommendations shall include options 
        for funding and/or incentives for the development of 
        demand response resources. The Commission shall seek to 
        take advantage of preexisting research and ongoing 
        work, and shall assume that there is no duplication of 
        effort. The Commission shall further note any barriers 
        to demand response programs that are flexible, non-
        discriminatory, and fairly compensatory for the 
        services and benefits made available and shall provide 
        recommendations for overcoming such barriers.
  (b) National Action Plan on Demand Response.--The Grid 
Modernization Commission shall further develop and implement a 
National Action Plan on Demand Response. Such Plan shall be 
completed within one year after the completion of the National 
Assessment of Demand Response, and shall meet each of the 
following objectives:
          (1) Provision of adequate technical assistance to 
        States to allow them to maximize the amount of demand 
        response resources that can be developed and deployed.
          (2) Implementation of a national communications 
        program that includes broad-based customer education 
        and support.
          (3) Development and dissemination of tools, 
        information and other support mechanisms for use by 
        customers, states, utilities and demand response 
        providers.
  (c) Authorization.--There are authorized to be appropriated 
to carry out this section not more than $10,000,000 for each of 
the fiscal years 2008 and 2009 and $20,000,000 for each of the 
fiscal years 2010 through 2020.

SEC. 574. REPORT ON ENVIRONMENTAL ATTRIBUTES AND IMPACTS OF DEMAND 
                    RESPONSE AND SMART GRID SYSTEMS

  (a) Report.--The Administrator of the Environmental 
Protection Agency shall solicit public input and, within 6 
months after completion of the National Assessment of Demand 
Response required by section 573, submit a report to Congress 
that addresses each of the following:
          (1) A quantitative assessment and determination of 
        the existing and potential impacts of demand response 
        and ``smart grid'' systems on air emissions and air 
        quality, including but not limited to carbon dioxide, 
        oxides of nitrogen and oxides of sulfur.
          (2) An assessment and determination of the existing 
        and potential impacts of demand response and ``smart 
        grid'' systems on environmental parameters other than 
        emissions and air quality, including but not limited 
        to:
                  (A) Land use.
                  (B) Water use.
                  (C) Use of renewable energy.
                  (D) Effect on energy sources other than 
                electricity.
          (3) A detailed plan for how Energy Efficiency and 
        Clean Energy programs administered by the Agency, 
        including the Energy Star Program, will incorporate and 
        encourage end-use efficiency, demand response and 
        ``smart grid'' systems and technologies, including but 
        not limited to each of the following:
                  (A) Requirements that appliances and other 
                equipment are capable of manually and 
                automatically receiving and acting upon pricing 
                and control information and or instructions 
                provided by the customer, a load serving entity 
                or a third-party designated by the customer.
                  (B) Requirements for time-based valuation of 
                kilowatt hour reductions in planning and 
                evaluation of energy efficiency programs.
                  (C) Education and communication, including to 
                state energy officials and state regulators, 
                that build awareness of demand response and 
                smart grid systems and technologies and their 
                existing and potential relationship to such 
                Agency programs.
  (b) Funding.--There are authorized to be appropriated to 
carry out this section such sums as may be necessary for fiscal 
year 2010, to remain available until expended.

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