This bill, titled the Shared Utility Rewards for Grid Efficiency Act of 2026 (SURGE Act), aims to modernize the Federal Power Act by mandating the establishment of incentive-based rate treatments for electric utilities. It requires the Federal Energy Regulatory Commission (FERC) to issue rules within one year to create a shared savings framework for transmitting utilities under its jurisdiction. This framework is designed to encourage utilities to invest in operational improvements and technologies that enhance grid efficiency and reduce costs for consumers. Under the FERC-mandated framework, covered transmitting utilities can recover a portion of verified cost savings resulting from specific "qualifying actions," such as deploying advanced conductors or grid-enhancing technologies that reduce transmission physical losses. FERC must develop standardized methodologies for determining baseline performance, calculating cost savings, and establishing a recoverable percentage (between 10% and 60%) and a rate recovery timeline (between 2 and 5 years). These incentives are intended to be performance-based, transparent, and cost-effective, with independent evaluators verifying initial estimates and annual reports of savings. The bill outlines a clear process for utilities to claim these incentives, starting with an initial filing detailing expected savings and followed by annual reports on actual performance and cost savings. FERC will provide rate adjustments based on these filings, with provisions for reconciliation if over-recovery occurs. This mechanism ensures that utilities are compensated for their efficiency improvements while protecting ratepayers from excessive charges. For electric utilities not subject to FERC's jurisdiction, the Department of Energy (DOE) is directed to develop guidance within two years to assist state regulatory authorities in establishing similar incentive frameworks. This guidance will cover methodologies for determining baseline performance and cost savings, as well as measurement and verification processes, tailored to different utility market structures like vertically integrated utilities or those focused on transmission or distribution. The goal is to promote consistent and effective incentive programs across all utility types. Furthermore, the bill establishes a grant program, administered by the DOE, to support state regulatory authorities in developing, implementing, and overseeing these incentive frameworks. It also mandates regular studies, every five years, on the effects of existing rate treatments and alternative incentive frameworks, such as revenue decoupling or multi-year rate plans. These studies will inform future policy recommendations aimed at lowering costs, enhancing grid reliability, and encouraging the deployment of cost-effective grid-enhancing technologies.