ENCOURAGEMENT OF INVESTMENTS IN CONSERVATION AND ENERGY EFFICIENCY BY ELECTRIC UTILITIES.

SEC. 111. ENCOURAGEMENT OF INVESTMENTS IN CONSERVATION AND ENERGY EFFICIENCY BY ELECTRIC UTILITIES. (a) Amendment to the Public Utility Regulatory Policies Act.— The Public Utility Regulatory Policies Act of 1978 (P.L. 95— 617; 92 Stat. 3117; 16 U.S.C. 2601 and following) is amended by adding the following at the end of section 111(d): “(7) Integrated resource planning.— Each electric utility shall employ integrated resource planning. All plans or filings before a State regulatory authority to meet the requirements of this paragraph must be updated on a regular basis, must provide the opportunity for public participation and comment, and contain a requirement that the plan be implemented. “(8) Investments in conservation and demand management.— The rates allowed to be charged by a State regulated electric utility shall be such that the utility’s investment in and expenditures for energy conservation, energy efficiency resources, and other demand side management measures are at least as profitable, giving appropriate consideration to income lost from reduced sales due to investments in and expenditures for conservation and efficiency, as its investments in and expenditures for the construction of new generation, transmission, and distribution equipment. Such energy conservation, energy efficiency resources and other demand side management measures shall be appropriately monitored and evaluated. “(9) Energy efficiency investments in power generation and supply.— The rates charged by any electric utility shall be such that the utility is encouraged to make investments in, and expenditures for, all cost-effective improvements in the energy efficiency of power generation, transmission and distribution. In considering regulatory changes to achieve the objectives of this paragraph, State regulatory authorities and nonregulated electric utilities shall consider the disincentives caused by existing ratemaking policies, and practices, and consider incentives that would encourage better maintenance, and investment in more efficient power generation, transmission and distribution equipment.”. (b) Protection for Small Business.— The Public Utility Regulatory Policies Act of 1978 (Public Law 95–617; 92 Stat. 3117; 16 U.S.C. 2601 and following) is amended by inserting the following new paragraph at the end of subsection 111(c): “(3) If a State regulatory authority implements a standard established by subsection (d)(7) or (8), such authority shall— “(A) consider the impact that implementation of such standard would have on small businesses engaged in the design, sale, supply, installation or servicing of energy conservation, energy efficiency or other demand side management measures, and “(B) implement such standard so as to assure that utility actions would not provide such utilities with unfair competitive advantages over such small businesses.”. (c) Effective Date.— Section 112(b) of such Act is amended by inserting “(or after the enactment of the Comprehensive National Energy Policy Act in the case of standards under paragraphs (7), 106 STAT. 2796(8) , and (9) of section 111(d))” after “Act” in both places such word appears in paragraphs (1) and (2). (d) Definitions.— Section 3 of such Act is amended by adding the following new paragraphs at the end thereof: “(19) The term ‘integrated resource planning’ means, in the case of an electric utility, a planning and selection process for new energy resources that evaluates the full range of alternatives, including new generating capacity, power purchases, energy conservation and efficiency, cogeneration and district heating and cooling applications, and renewable energy resources, in order to provide adequate and reliable service to its electric customers at the lowest system cost. The process shall take into account necessary features for system operation, such as diversity, reliability, dispatchability, and other factors of risk; shall take into account the ability to verify energy savings achieved through energy conservation and efficiency and the projected durability of such savings measured over time; and shall treat demand and supply resources on a consistent and integrated basis. “(20) The term ‘system cost’ means all direct and quantifiable net costs for an energy resource over its available life, including the cost of production, distribution, transportation, utilization, waste management, and environmental compliance. “(21) The term ‘demand side management’ includes load management techniques.”. (e) Report.— Not later than 2 years after the date of the enactment of this Act, the Secretary shall transmit a report to the President and to the Congress containing— (1) a survey of all State laws, regulations, practices, and policies under which State regulatory authorities implement the provisions of paragraphs (7), (8), and (9) of section 111(d) of the Public Utility Regulatory Policies Act of 1978; (2) an evaluation by the Secretary of whether and to what extent, integrated resource planning is likely to result in— (A) higher or lower electricity costs to an electric utility’s ultimate consumers or to classes or groups of such consumers; (B) enhanced or reduced reliability of electric service; and (C) increased or decreased dependence on particular energy resources; and (3) a survey of practices and policies under which electric cooperatives prepare integrated resource plans, submit such plans to the Rural Electrification Administration and the extent to which such integrated resource planning is reflected in rates charged to customers. The report shall include an analysis prepared in conjunction with the Federal Trade Commission, of the competitive impact of implementation of energy conservation, energy efficiency, and other demand side management programs by utilities on small businesses engaged in the design, sale, supply, installation, or servicing of similar energy conservation, energy efficiency, or other demand side management measures and whether any unfair, deceptive, or predatory acts exist, or are likely to exist, from implementation of such programs.