A bill to amend the Powerplant and Industrial Fuel Use Act of 1978 to prohibit the use of oil or natural gas by certain existing powerplants, and for other purposes.

Amends the Powerplant and Industrial Fuel Use Act of 1978 to direct the Secretary of Energy to prohibit specified powerplants from using petroleum and natural gas as a primary energy source by December 31, 1990. Authorizes such powerplants to use coal with a sulfur content of up to 2.5 percent notwithstanding other provisions of law.

Requires any powerplant which seeks an exemption from a prohibition on the use of petroleum or natural gas on the basis of its plan to cease operations to also demonstrate that it will be replaced by a powerplant which does not use such fuel sources. Repeals the authority of the Secretary to grant a temporary exemption in the public interest. Repeals the authority to extend a temporary exemption granted to maintain reliability of service. Prohibits any temporary exemption from extending beyond 1989.

Requires the Environmental Protection Agency or the appropriate State pollution control agency to certify that the use of coal by a powerplant would cause regional pollution to exceed national standards despite the use of the best available control technology in order for such powerplant to be eligible for a permanent exemption on the use of petroleum. Requires any exempted powerplant to reduce its use of petroleum and natural gas.

Directs the Secretary to extend grants to the operators of the powerplants required by this Act to cease using petroleum and natural gas in order to defray ten percent of the cost of their converting to an alternate energy source. Prevents any value received under a Federal or State grant or tax credit from being included within an operator's conversion costs. Authorizes appropriations for such grants, limiting such authority to advance provisions in appropriations Acts.

Amends the Internal Revenue Code to allow a taxpayer to treat such fuel conversion expenses as deductible, noncapital expenditures. Prohibits a taxpayer from including any amounts received through a grant by the Secretary within such conversion expenses. States that any such election shall not affect the determination of a taxpayer's entitlement to an investment tax credit.