To encourage the development of hydroelectric projects, and for other purposes.

Directs the Secretary of Energy to make incentive payments during a specified incentive period to the owner or operator of: (1) a turbine or other generating device owned or solely operated by a non-Federal entity which generates hydroelectric energy for sale and which is added to an existing dam or conduit (a qualified hydroelectric facility); and (2) hydroelectric facilities at existing dams for capital improvements that are directly related to improving their efficiency by at least three percent.

Describes payment limitations.