H.R. 7729 — SURGE Act of 2026

This section establishes the short title of the Act as the “Shared Utility Rewards for Grid Efficiency Act of 2026” or the “SURGE Act of 2026” and sets forth the table of contents.

This section revises Section 219 of the Federal Power Act (16 U.S.C. 824s) to modify Federal Energy Regulatory Commission (FERC) requirements for incentive-based (including performance-based) rate treatments for the transmission of electric energy in interstate commerce by public utilities. (As background, these rate treatments promote capital investment and other measures to ensure reliability, improve efficiency, reduce congestion, and lower delivered power costs for consumers.) Specifically, the section: (1) in subsection (a), removes the prior rulemaking deadline of one year after August 8, 2005, and replaces it with ongoing authority for FERC to "issue such rules as may be necessary to establish" the rate treatments; inserts ", improving efficiency" in the purpose clause after "ensuring reliability"; (2) in subsection (b), changes "the rule" to "the rules issued under this section"; in paragraph (1), inserts ", and operational improvements for" after "capital investment in"; in paragraph (2), inserts "or other incentive mechanism" after "return on equity" and "or incentivizes improvements that increase the efficiency of the transmission of electric energy and reduce costs for consumers" after "(including related transmission technologies)"; in paragraph (3), inserts ", including performance-based measures" after "other measures"; and in paragraph (4), adds a new subparagraph (C) allowing recovery of "amounts determined pursuant to shared savings frameworks or other incentive mechanisms prescribed in such rules"; and (3) in subsection (c), changes "in the rule" to "in a rule."

This section directs the Federal Energy Regulatory Commission (FERC) to issue, not later than one year after enactment, a final rule under section 219(b)(3) of the Federal Power Act (16 U.S.C. 824s(b)(3)) establishing a shared savings framework under which covered transmitting utilities may recover 10% to 60% (the "recoverable percentage") of verified cost savings from qualifying actions over a 2-to-5-year rate recovery timeline (the "rate recovery timeline"). (As background, section 219 requires FERC to establish incentive-based rate treatments for transmission facilities to promote reliability, reduce congestion, and attract investment.) The rule must develop standardized methodologies, applicable across similarly situated transmission segments, for (1) baseline performance using direct metering or estimation normalized for exogenous factors (e.g., weather, demand variability, upgrades by other entities); (2) estimating and verifying cost savings relative to baselines using price proxies (e.g., locational marginal prices at pricing nodes); and (3) determining the recoverable percentage and rate recovery timeline based on factors such as financial risk, replicability, duration of savings, and additional benefits (e.g., resilience, congestion relief, emissions reductions). To claim incentives, a covered transmitting utility must submit an initial filing verified by an independent evaluator, including one-year pre-action baseline data, action description, timeline and percentage determinations, cost savings estimates, and an upfront claim for 50% of the recoverable percentage for the first year, plus an agreement to submit annual reports.

This section directs the Secretary of Energy, in coordination with the Federal Energy Regulatory Commission and state regulatory authorities, to develop and publish on the department's website, not later than two years after enactment, guidance to support state regulatory authorities in establishing frameworks under which covered electric utilities may recover a portion of verified cost savings attributable to covered utility actions as an incentive. The guidance must include (1) methodology for determining baseline performance absent such actions (accounting for exogenous factors such as weather variability and demand changes, with National Laboratories providing technical support); (2) methodology for determining attributable cost savings (incorporating price proxies for energy value); (3) standards for measurement and verification by an independent evaluator selected by the state authority; (4) mechanisms for recovery, such as rate adjustments; and (5) other elements to ensure transparency, performance-based incentives, cost-effectiveness, and consistency with state ratemaking. The Secretary must develop separate guidance for four categories of covered electric utilities—(1) vertically integrated, (2) transmission-only owners/operators, (3) distribution-only owners/operators, and (4) distribution-and-transmission (but not generation) owners/operators—and revise the guidance as appropriate following each report under section 6.

This section establishes a grant program to be administered by the Secretary of Energy, not later than two years after enactment, under which state regulatory authorities (i.e., public utility commissions) may receive grants to develop, implement, and oversee frameworks allowing covered electric utilities to recover a portion of verified cost savings from covered utility actions as incentives. Grants may be used only for (1) developing or revising frameworks consistent with guidance under section 4—including methodologies, data systems, regulations, and stakeholder engagement—and (2) framework implementation and oversight; funds may not be used to pay covered electric utilities. Grant recipients must submit annual reports on funded activities, with noncompliance resulting in ineligibility for further awards. In administering the program, the Secretary must provide technical assistance and maintain a public registry of activities; submit biennial reports to Congress—not later than two years after enactment and thereafter—summarizing activities, assessing framework effectiveness, and identifying barriers with recommendations; and allocate funds such that no more than 70% supports subsection (b)(1) activities, at least 30% supports subsection (b)(2) activities, and no more than 5% covers federal administrative expenses.

This section requires the Secretary of Energy, in consultation with FERC, to conduct a study not later than three years after enactment and every five years thereafter on (1) inefficiencies in the electric power sector incentivized by existing rate treatments for electric transmission and related economic, environmental, or societal effects (including on utility customers, bulk-power system reliability, and cost-effective grid-enhancing technologies) and (2) alternative incentive-based (including performance-based) rate frameworks such as shared savings, revenue decoupling, return on equity adjustments, multi-year rate plans, earnings sharing, total expenditure models, and performance scorecards. The Secretary must publish the study's findings and recommendations—aimed at aligning transmission rates with goals of lowering customer costs, enhancing bulk-power system reliability, reducing transmission congestion and inefficiencies, and encouraging grid-enhancing technologies—on a publicly available Department of Energy website and submit them to the appropriate congressional committees. Studies must draw from FERC-filed reports (including under section 304 of the Federal Power Act, 16 U.S.C. 825c), National Laboratory reports, and other sources deemed appropriate by the Secretary.

This section defines 16 terms for purposes of the Act, including (1) "advanced conductor," meaning an electric transmission conductor designed to substantially improve electrical or mechanical performance relative to the conductor replaced (e.g., through increased current-carrying capacity, reduced line losses, higher operating temperatures, or reduced thermal sag); (2) "covered electric utility," meaning an electric utility not subject to FERC ratemaking jurisdiction under part II of the Federal Power Act; (3) "covered action," meaning an action generating ratepayer cost savings that does not include new facility construction or complete reconstruction; (4) "covered transmission action," meaning a covered action improving transmission efficiency, capacity, reliability, or resilience (e.g., replacing conductors with advanced conductors or deploying grid-enhancing technology); (5) "grid-enhancing technology," meaning hardware or software installed on transmission facilities to increase capacity, efficiency, reliability, resilience, or safety (e.g., by improving operator situational awareness or transfer capacity); and (6) other terms such as "qualifying action," "transmission physical loss," "transmission segment," "vertically integrated electric utility," "covered utility action," and cross-references to Federal Power Act section 3 definitions (e.g., bulk-power system, electric utility).