Energy Efficiency: Complementary Policies For Climate Legislation

ENERGY EFFICIENCY: COMPLEMENTARY POLICIES
FOR CLIMATE LEGISLATION
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

OF THE
COMMITTEE ON ENERGY AND

COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
FEBRUARY 24, 2009
Serial No. 1114
(
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CHRIS
COMMITTEE ON ENERGY AND COMMERCE

HENRY A. WAXMAN, California
Chairman
JOHN D. DINGELL, Michigan
JOE BARTON, Texas
Chairman Emeritus
Ranking Member
EDWARD J. MARKEY, Massachusetts
RALPH M. HALL, Texas
RICK BOUCHER, Virginia
FRED UPTON, Michigan
FRANK PALLONE, JR., New Jersey
CLIFF STEARNS, Florida
BART GORDON, Tennessee
NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois
ED WHITFIELD, Kentucky
ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois
BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York
ROY BLUNT, Missouri
GENE GREEN, Texas
STEVE BUYER, Indiana
DIANA DEGETTE, Colorado
GEORGE RADANOVICH, California
Vice Chairman
JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California
MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania
GREG WALDEN, Oregon
JANE HARMAN, California
LEE TERRY, Nebraska
JANICE D. SCHAKOWSKY, Illinois
MIKE ROGERS, Michigan
HILDA L. SOLIS, California
SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas
JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington
TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas
MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York
PHIL GINGREY, Georgia
JIM MATHESON, Utah
STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY MCNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont
(II)
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CHRIS
SUBCOMMITTEE
ON
ENERGY
AND
ENVIRONMENT
EDWARD J. MARKEY, Massachusetts

Chairman
MIKE DOYLE, Pennsylvania
DENNIS HASTERT, Illinois
G.K. BUTTERFIELD, North Carolina
Ranking Member
CHARLIE MELANCON, Louisiana
RALPH M. HALL, Texas
BARON P. HILL, Indiana
FRED UPTON, Michigan
DORIS O. MATSUI, California
ED WHITFIELD, Kentucky
JERRY MCNERNEY, California
JOHN SHIMKUS, Illinois
PETER WELCH, Vermont
HEATHER WILSON, New Mexico
JOHN D. DINGELL, Michigan
JOHN B. SHADEGG, Arizona
RICK BOUCHER, Virginia
CHARLES W. CHIP PICKERING,
FRANK PALLONE, JR., NEW JERSEY
Mississippi
ELIOT L. ENGEL, New York
STEVE BUYER, Indiana
GENE GREEN, Texas
GREG WALDEN, Oregon
LOIS CAPPS, California
SUE WILKINS MYRICK, North Carolina
JANE HARMAN, California
JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas
MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
JIM MATHESON, Utah
JOHN BARROW, Georgia
(III)
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CONTENTS
Page
Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachussetts, opening statement ...................................................
Hon. Fred Upton, a Representative in Congress from the State of Michigan,
opening statement ................................................................................................
Hon. Jay Inslee, a Representative in Congress from the State of Washington,
Hon. John Shimkus, a Representative in Congress from the State of Illinois,
Hon. G.K. Buttefield, a Representative in Congress from the State of North
Carolina, opening statement ...............................................................................
Hon. Greg Walden, a Representative in Congress from the State of Oregon,
Hon. Henry A. Waxman, a Representative in Congress from the State of
California, opening statement .............................................................................
Hon. Cliff Stearns, a Representative in Congress from the State of Florida,
Hon. Peter Welch, a Representative in Congress from the State of Vermont,
Hon. Steve Scalise, a Representative in Congress from the State of Louisiana,
Hon. Doris O. Matsui, a Representative in Congress from the State of California, opening statement ....................................................................................
Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth
of Pennsylvania, opening statement ...................................................................
Hon. Lois Capps, a Representative in Congress from the State of California,
Hon. Michael C. Burgess, a Representative in Congress from the State of
Texas, opening statement ....................................................................................
Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ...................................................................................
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WITNESSES
Philip Giudice, Commissioner, Massachusetts Department of Energy Resources ...................................................................................................................
Prepared statement ..........................................................................................
Answers to submitted questions ......................................................................
Tom King, President, National Grid USA .............................................................
Rich Wells, Vice President, Energy, The Dow Chemical Corporation .................
Iain Campbell, Vice President and General Manager, Johnson Controls, Inc. ..
John Anderson, President, Electricity Consumers Resource Council .................
Bryan Reichel, President and CEO, PureChoice, Inc. ..........................................
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VI
Page
SUBMITTED MATERIAL
Letter of February 24, 2009, from Pilkington North America, Inc., to Hon.
Fred Upton ...........................................................................................................
Chart entitled Total Electricity Use, per capita, 19602001 ..............................
OnPoint transcript, February 23, 2009 ..................................................................
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Mr. King did not respond to submitted questions for the record.
Mr. Wells did not respond to submitted questions for the record.
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ENERGY EFFICIENCY: COMPLEMENTARY

POLICIES FOR CLIMATE LEGISLATION
TUESDAY, FEBRUARY 24, 2009
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON ENERGY AND AIR QUALITY,
COMMITTEE ON ENERGY AND COMMERCE,
Washington, DC.
The subcommittee met, pursuant to call, at 9:38 a.m., in room
2322, Rayburn House Office Building, Hon. Edward J. Markey
(chairman of the subcommittee) presiding.
Present: Representatives Markey, Inslee, Butterfield, Matsui,
Welch, Green, Capps, Gonzalez, Baldwin, Matheson, Barrow, Waxman, Upton, Hall, Stearns, Shimkus, Blunt, Pitts, Walden, Burgess, Scalise, Barton, and Blackburn.
Staff Present: John Jimison, Melissa Bez, Joel Beauvais, Matt
Weiner, Lindsay Vidal, Greg Dotson, Andrea Spring, Amanda
Mertens Campbell, and Peter Kielty.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH
OF MASSACHUSETTS
Mr. MARKEY. Good morning.

When we look at the energy and climate solutions toolbox, we
tend to focus on exciting, new technologies like high-powered wind
turbines and thin-filmed solar cells or carbon capture and sequestration. Todays hearing is about the less-eye-catching but equally
important solutions that improve energy efficiency, better building
and appliance standards, energy efficiency resource standards, demand side management programs and a host of other policies and
technologies that enable us to use energy more intelligently.
The Department of Energy estimates that U.S. electricity demand will grow by 30 percent by 2030. There are two ways to meet
these rising demand, megawatts and negawatts. The first approach
is familiar to us, simply building more power plants. The second
uses efficiency measures to do more with less. It is based on the
reality that the cheapest and cleanest power plant is the one we
never have to build. Efficiency costs us as little as one-third per kilowatt hour of the cost of new electricity supply and emits no carbon.
Energy efficiency will also play a critical role in avoiding an excessive dash to natural gas, which many fear could damage the
competitiveness of U.S. manufacturing. A recent study by
McKenzie & Company concluded that in 2030 efficiency measures
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can cut U.S. global warming pollution by nearly 15 percent of current levels at a profit.
The 10 northeastern States participating in the RGGI, Regional
Greenhouse Gas Initiative, a cap and auction trade system, have
found that by auctioning 100 percent of the pollution allowances
and investing the proceeds in efficiency measures, they can achieve
their climate goals at virtually no additional cost to consumers.
Climate legislation can provide the resources to make efficiency
policies work, while efficiency cuts pollution at the lowest possible
costs. These solutions help us to work smarter and not harder.
Investing in efficiency is not just a cost-effective energy and climate solution. It will also pay major dividends in new jobs and economic growth. Americas efficiency industry already produces close
to a trillion dollars in annual revenues. By putting America in the
vanguard of the efficiency revolution, we can create high-quality
green jobs at home, while exporting high-quality green technology
to the world.
Unfortunately, increasing Americas energy efficiency is not as
straightforward it as may seem. As we will hear from our witnesses, many efficiency improvements can already be achieved
today at a profit but are not being implemented because of market
barriers and market failures. For this reason, simply putting a
price on carbon is not enough. Focused policies must be used to reward efficiency and to eliminate perverse incentives like those that
shackle utilities profits with the amount of electricity they sell.
Progressive States, along with innovative companies like Dow,
Johnson Controls, and National Grid, have taken the lead in tackling these challenges. We are grateful to have representatives of
these government and business leaders on our witness panel today.
They can help show us the way forward.
As Congress considers climate legislation it will be critical to include policies that make energy efficiency our first fuel. Efficiency
provides a vast zero carbon energy supply that can be deployed
right now with current technologies at a net savings. If we are to
cut global warming pollution as quickly and as deeply as the
science says it must, it is imperative that climate legislation must
be designed to capture efficiency gains immediately.
By making the potential of energy efficiency a reality, we can
save the planet, while simultaneously saving consumers money,
spurring job growth and meeting our Nations rising energy demand at the lowest possible cost.
NBA coach Pat Riley once said, a particular shot, a way of moving the ball, can be a players personal signature, but efficiency of
performance is what wins the game for the team. If we are going
to beat this energy climate and economic challenge, aggressively increasing Americas energy efficiency may be at the center of our
game plan.
That completes the opening statement of the Chair. I now turn
and recognize the ranking member, the gentleman from Michigan,
Mr. Upton.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
Mr. UPTON. Thank you, Mr. Chairman.
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Our hearing today is an important one. The environmental and
economic benefits of energy efficiency are truly significant.
Before I begin, I would like to submit a letter from Pilkington
North America for the record.
[The information appears at the conclusion of the hearing.]
Mr. UPTON. Pilkington is the leading U.S. manufacturer of glass,
and they have a facility in my district.
Pilkington makes some very interesting points about the nature
of energy efficiency. For example, certain building products like
windows that are most efficient in southern States are not nearly
as efficient in northern States. In the warm weather States of the
south, windows that block solar heat are the most energy efficient.
However, in the cold weather States in the north, with more heating days than cooling days, such as Massachusetts and Michigan,
windows with a higher solar heat gain are more efficient. The right
type of window on a cold winter day in Boston or Detroit or Chicago can take in heat from the sun, thus reducing the utility bills
and saving energy.
With a tax provision in the stimulus bill that promotes windows
that are designed primarily for warmer climates, the tax credit is
only available for windows that block over 70 percent of solar heat.
According to a Web site developed jointly by the Center for Sustainable Building Research, the Alliance to Save Energy, and Lawrence Berkeley National Lab, lower solar heat gains are best for
southern climates. The site also recommends for northern States to
reduce heating select the highest solar heat gain you can find so
that winter solar gains can offset a portion of the heating energy
need.
Pilkington said this about the tax revisions that favor southern
windows: It will result in northern homes using glass that blocks
70 percent of the suns free and renewable solar energy from entering the home. That in turn will result in unnecessary burning of
additional fossil fuels to heat these homes.
That means higher utility bills in northern States and more
greenhouse gas emissions. We must recognizes regional differences.
When it comes to energy efficiency in buildings one size fits all
doesnt always work. In fact, as we see in the window example, it
could actually have the opposite effect.
I have long been an advocate in spurring efficient technologies
into the marketplace. I was proud to work with my colleague, Ms.
Harman, in passing legislation that improved efficiency standards
of the light bulbs. Across the Nation, the environmental and economic benefits of more efficient bulbs will be, in fact, substantial.
Our work on light bulbs wasnt an arbitrary mandate. We didnt
just pick a standard out of the air and look for a catchy sounding
standard like 25 by 2025, not based on science or feasible. Instead,
we worked with the industry and environmental groups to come up
with a standard that made sense and doable, a standard that can
be met by bulbs manufactured in this country, a standard that will
include bulbs without any hazardous ingredients such as mercury.
If done correctly, increasing the energy efficiency standards can
reduce energy costs for consumers, help the environment, and have
a positive economic impact. These benefits can be gained without
a cap and trade program.
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The question is, what should the Federal Governments role be?
Well intentioned, it is possible for the government to get it wrong
and push policies that will have a detrimental impact on the environment and pocketbook.
I look forward to hearing from our witnesses today, and I yield
back the balance of my time.
Mr. MARKEY. The gentlemans time has expired.
The Chair recognized the gentleman from Washington State, Mr.
Inslee.
OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mr. INSLEE. Thank you.

I just want to make two points. One, we have started last week,
last Tuesday, down the efficiency road when President Obama
signed the economic recovery bill; and I think over the long term
one of the most productive things in that bill will be the provisions
that require governors to certify that they would move towards
more efficient building standards of about 30 percent improvement
and decoupling which will unleash great economic resources for the
efficiency industry. It was a small, quiet thing that was little noted
on but I think will unleash tremendous assets for the efficiency industry.
Number two, I want to make the point that the efficiency industry is an industry. People think of avoiding waste as something of
a void or vacuum. In fact, it is a tremendous profit and job creation
center.
I just want to note in my little neck of the woods up in Seattle
some companies are doing that right now, just so that people know
it is not a pipe dream.
We have got the MagnaDrive company in Bellevue, Washington,
manufacturing electrical transmission services that reduces the
electrical needs of generators by about 30 percent; Seattle Steam
that does cogent electrical, a heating that essentially almost doubles the efficiency of a heating plant; McKinstry, which is the
worlds leading company to help corporations reduce their electrical
usage, particularly on server forms; Boeing, which is making the
worlds energy efficient jetliners 20 percent more energy efficient
than any other competitive jetliner; the Verdean Company, which
is selling software which significantly reduces a corporations use
of energy in the computer industry.
I point those out because one of the largest job creation engines
we have in the United States is the efficiency industry, and we intend to continue to draft policies to help them grow.
Thank you.
Mr. MARKEY. Thank you. The gentlemans time has expired. The
Chair recognize the gentleman from Illinois, Mr. Shimkus.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. SHIMKUS. Thank you, Mr. Chairman.

First, I want to thank my ranking member for bringing up that
provision on windows. I am surprised I did not read it.
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Oh, I did not have enough time to read the bill. But had I read
the bill, I might have another window issue.
Mr. UPTON. You will have an extra hour because of daylight savings in a couple of weeks.
Mr. SHIMKUS. But let me thank the chairman on bringing up this
issue on efficiencies, and excuse me if I dont share in the enthusiasm. Because for many, many years we have been talking about
efficiency gains in the generation of electricity; and we have a Federal policy that does just the opposite. It is one that we have debated here for 12 years, and it is the issue of new source review.
And take a power generating plantI dont care if it is pulverized coal. I dont care if it is gasification. Say that we want and
have a new generator that can generate for the same amount of
power output, double the amount of electricity. Now, I would say
that many of us would say that that is an efficiency gain that
should be noted, not punished, not penalized. But what occurs
under new source review is the entire air permitting process has
to revolve itself, which is a disincentive. If the boiler is the same,
if the emissions is the same, if they are meeting air quality standards at the same time and there is no change, but you are going
to double the amount of output, that is what we are talking about
in efficiency gains. However, since I have been here for 12 years,
we continue to provide a disincentive in the new source review debate.
And you will hear the claim it promotes dirty air. Especially if
it is in a generator debate, it does no such thing.
So, Mr. Chairman, I hope you work with me in reforming the
permitting process and streamlining the procedures by which, if we
have the same emissions standards, whatever they are, and if we
are going to have increased efficiency and electricity gains, that we
change this capricious new source review program.
I yield back my time.
The Chair recognizes the gentleman from North Carolina, Mr.
Butterfield.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH
CAROLINA
Mr. BUTTERFIELD. Thank you very much, Mr. Chairman, for convening this hearing today and thank the witnesses for coming forward with your testimonies.
Mr. Chairman, you told us a few weeks ago that you were serious about moving this debate along; and you are absolutely right.
Today is evidence that we are ready to move boldly with this initiative.
With 40 percent of the U.S. Energy consumption coming from
commercial and residential buildings, raising efficiency and greening of our buildings provides a clear path toward lowering our
emissions in a relatively low cost yet highly scalable capacity.
In the Southeast, where I am from, making strides in energy efficiency represents the most readily available means of cutting
greenhouse gas emissions. North Carolina, my State, currently has
a renewable energy standard which is helping to drive innovation
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and deployment of new renewable technologies. However, we remain at a regional disadvantage for access to much of the existing
renewable energy options. As such, it is incumbent upon us that we
develop policies that place a value on the reduction of greenhouse
gasses, regardless of the means of achieving that goal. This means
focusing on a broader approach, including renewables as well as
energy efficiency.
I want to comment briefly on a project in my hometown of Wilson, North Carolina, that is saving energy and reducing emissions
using effective design and engineering changes. Wilson Community
College recently constructed a LEED building, which is a certified
green building, as a student center on the campus. I spoke for the
dedication, and what I saw exceeded my expectations.
We must invest in more green buildings. Studies using DOE assistance indicate that this building will use 50 to 60 percent less
energy than a normal new building of similar size, built to existing
codes. The centers efficiency improvements will pay for themselves
10 times over in energy savings during the buildings lifetime.
Energy efficiency is an issue, Mr. Chairman, that is and should
be universally supported.
Thank you, I yield back.
The Chair recognizes the gentleman from Oregon, Mr. Walden.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON
Mr. WALDEN. Thank you very much, Mr. Chairman. I appreciate

the opportunity to participate in this hearing.
We also have a communications hearing that is going to take
place starting at 10:00, so I apologize to the witnesses ahead of
time. I will be bouncing back and forth between the two.
As I was reading through the testimony, I was struck by the
Johnson Controls testimony on the part about how energy efficiency is good for consumers and business. I believe it is, and I
come from a State that has pioneered energy efficiency and conservation. We believe in it strongly.
In the testimony, Mr. Campbell says, energy prices are escalating
and will continue to rise with the price on carbon. Energy efficiency
will reduce the impact of climate policies on consumers energy
bills. It will lower energy spending for American businesses large
and small, enabling them to better compete in the global economy.
Smarter, more efficient buildings not only have lower utility bills
but also improve health, safety and comfort.
I concur with all of that. Except that this committee just passed
something that none of uswell, at least those on the Republican
sidedidnt get a chance to see in advance, and that is this decoupling motion. Which, as I understand it, basically says the utilities
will have the right to come in and make up their lost revenue that
results from energy efficiency. And while some consumers maybe
think that is a warm idea, mine are pretty hot about it. They are
going to get hotter the more they find out about it.
I would like to know, Mr. Chairman, who wrote these positions?
Who was in the room when this was written in secret in this bill
since we never had a hearing and only learned about it as we went
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into markup? I would hope at some point wed know who were the
lobbyists in the room? Who were the legislators in the room? There
sure seem to be a lot of folks who know about this and how those
provisions came to be. But there sure was no public hearing on the
legislation.
And I would say, too, our area in Oregon is known for its wind
energy. And yet I have also seen the hour-by-hour energy production data that indicates that without some sort of peaking power
you cannot balance out that load. So gas does matter. Peaking
power is going to be more important the more we go to non-firm
power-based generators.
Thank you, Mr. Chairman. I realize I have run out of time.
The Chair recognizes the gentleman from California, the chairman of the full committee, Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. WAXMAN. Thank you very much, Mr. Chairman.

Todays hearing will explore how energy efficiency can meet our
power needs, save us money, create jobs and help slow global
warming. Sometimes, the simple solutions are overlooked. Energy
efficiency is both the most affordable and fastest source of energy,
even though many people dont think of it that way.
As several of our witnesses point out in their written testimony,
supplying a kilowatt through energy efficiency commonly costs half
as much as buying a kilowatt from power generators; and because
the cost of efficiency doesnt depend on oil or natural gas prices, efficiency reduces energy costs across the board and their volatility.
Businesses across the country find that when they focus on energy efficiency they can achieve significant cost savings, increasing
profits to invest in expansion and new jobs. We will hear about
some of those experiences today.
Homeowners find that they can make their houses more comfortable, lower utility bills, recoup their costs in a few years, and
then watch their savings grow.
Energy efficiency can also be deployed quickly, compared to planning, siting, financing, permitting, and constructing a new power
plant. And energy efficiency doesnt require any new or existing
transition capacity. That means efficiency can come on line without
waiting for transmission upgrades.
Energy efficiency is a job engine. Because efficiency gains come
in so many forms, efficiency creates opportunities for small businesses and big businesses throughout the economy. These range
from construction and engineering jobs, retrofitting buildings, manufacture of efficient products such as next generation windows and
lighting. In building a strong energy efficient economy for America,
we will help employ workers and give more jobs.
For all these reasons, promoting energy efficiency must be a key
element of climate legislation. We need substantial efficiency improvements to achieve large greenhouse gas emissions reductions
at a reasonable cost. That is why the International Energy Agency
concluded that more than half of the emissions reductions required
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by 2050 globally must come from improvements in energy efficiency.
And we know that the experiencesthat the market by itself
wont deliver all the available low-cost efficiency savings. Homeowners, for example, may know that they can save money by buying a more efficient furnace, but many dont have the capital to
make up-front investments. A landlord has little incentive to
weatherize an apartment when the tenant pays the utilities.
Local, State and Federal policies have helped successfully address some of those and other barriers. Building codes and appliance standards are two types of policies that saved us huge
amounts of energy and money in 1 year alone. For example, the
savings from the efficient appliances and qualifier for an ENERGY
STAR label save as much energy as required by 10 million American homes.
You can see the results in a State such as California, which
made energy efficiency a priority for decades. Since 1975, Californias energy efficiency standards for buildings and appliances have
saved residences and businesses $56 billion in energy costs and
avoided the need to build 24 major power plants. And today we will
hear about Massachusetts instructive experience in promoting energy efficiency.
I look forward to hearing from our witnesses and their recommendations on how we design climate change legislation to best
take advantage of the great benefits that energy efficiency offers
us. Thank you, Mr. Chairman.
The Chair recognizes the gentleman from Florida, Mr. Stearns.
OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
Mr. STEARNS. Thank you, Mr. Chairman. I thank you and the
ranking member for this hearing.
My staff just was able to get a copy of the stimulus bill that we
passed 11 days ago. So it is not humanly possible for us to read
it. So we didnt know of all the intricacies that were in the bill.
But for those homeowners that are installing those programmable thermostats, choosing ENERGY STAR qualified appliances
and things Mr. Waxman, the chairman, mentioned, additional attic
installation, and replacing all windows and doors with more efficient ones are all cost-effective renovations. Homeowners will be
very pleased with these renovations, hoping that will make their
house more modernized but also more cost efficient.
But because, my colleagues, of the decoupling provision that
passed in the stimulus bill which was supported by the majority
party, they will be surprised. Customers will be forced to pay more
energy after they have done all these things I mentioned.
The resulting high energy rates will be especially hard on those
elderly people that spend their hard-earned dollars to fix up their
homes. Because their incomes will be fixed; and these individuals
will think, well, gee whiz, my costs are coming down. But, lo and
behold, they will not be coming down. Because of the complex
structure of the energy utility bills, you hope to attain achievable
energy savings, but you will not see that.
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So I think that that is a very important part of this hearing. We
want to promote energy efficient technologies to reduce energy consumption, but, ultimately, I think the market has to play a spot
here, and not Congress, in determining the preferred cost-effective
technologies and effective and efficient building practices implemented.
So I look forward to this hearing and thank you, Mr. Chairman.
The Chair recognizes the gentleman from Vermont, Mr. Welch.
OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VERMONT
Mr. WELCH. Thank you, Mr. Chairman.

Global warming, as we all know, is real, and it is urgent, and
it requires immediate action. We cannot simply solve this crisis
without focusing, increasing our energy efficiency. For a Nation
that consumes more than 25 percent of the worlds energy, we simply can not afford anything that is less.
In Vermont, actually, we have shown that it can be done. We
have an energy efficiency utility. It is the Nations first Statewide
provider of energy efficiency services. And what this pioneering energy efficiency utility has demonstrated is really quite remarkable.
First, efficiency works. Thanks to a commitment to investing in
efficiency and the effectiveness of Efficiency Vermont, our Statewide energy requirements were reduced by 1.74 percent in 2007.
That exceeded the projected rate of low growth, making us the first
State to ever turn low growth negative. People said it couldnt be
done. Vermont has done it.
Second, efficiency is cost effective. The cost of efficiency, as you
pointed out, is about 2.6 cents per kilowatt hour, compared to 10.7
cents per kilowatt hour for comparable energy; and Vermonters
saved money. In 2007, this was an 88 percent increase savings over
2006.
Third, energy efficiency is the path to reducing our carbon emissions. For 2007, Efficiency Vermonts efforts resulted in 661,000
fewer tons of CO2, 562 fewer tons of nitrogen oxide, and 1,100
fewer tons of sulfur dioxide entering the atmosphere.
The goal of this committee is to reduce greenhouse gasses by 80
percent by 2050. Many models suggest that energy efficiency can
and must provide about 30 percent of that reduction, and to meet
that target we must have to have as a goal about 3 percent reduction through efficiency each year. Now Vermont had 2 percent last
year. We can and we must begin to build the on ramp towards a
global warming solution. That on ramp, simply put, is through efficiency.
I yield back.
The Chair recognizes the gentleman from Texas, Mr. Hall.
Mr. HALL. Mr. Chairman, I pass on questions. I reserve my time.
Mr. MARKEY. The Chair recognizes the gentleman from Louisiana, Mr. Scalise.
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OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA
Mr. SCALISE. Thank you, Mr. Chairman. I am looking forward to

the hearing that we are going to have and the testimony from our
panel.
As we develop a comprehensive national energy policy, efficiency
and conservation are definitely part of what needs to be a comprehensive plan that also needs to include the development of our
own natural resources to reduce our dependence on foreign oil. But,
also, it has got to include a provision that encourages the development of alternative sources of energy, the renewables like wind and
solar which are not commercially viable enough today to replace
the domestic energy that we have but ultimately we can use that
domestic energy as a bridge to get there.
But I think if you look at what people are doing in this country,
they are conserving. When gas was at $4 a gallon, people were cutting back dramatically; and they havent changed their habits to a
large degree, even though the price has dropped a significant
amount. So I think we need to encourage that conservation and the
efficiencies that they have been yielding.
One concern that some of us have is that we looked at the stimulation bill and there was a provision, the decoupling provision, that,
in essence, will penalize some people who go and do those things
to make their homes more energy efficient. And I think we have
to be very careful in this committee and in the Congress as a whole
that we dont penalize people who take those extra steps. If they
want to spend what is a large capital outlay to put solar panels on
the roof and to put insulation on the attic, they are not penalized
by having to pay higher utility rates for doing those things.
So we shouldnt discourage good behavior by policy; and, unfortunately, that was a provision that got into the stimulus bill. Hopefully, as people across the country realize that and senior citizens
realize they may be paying more for energy because they didnt
spend $40,000 to put those solar panels up, that is an issue we can
revisit. Because we should avoid policies that discourage people
from doing the right thing.
So, hopefully, we will look at all of those and all parts of that
three-legged stool, of a comprehensive policy, efficiency and conservation being one of those three.
Thank you, and I yield back.
The Chair recognizes Mr. Green.
Mr. GREEN. Mr. Chairman, I waive opening statement for additional questioning time.
Mr. MARKEY. The gentleman waives.
The Chair recognizes the gentleman from Georgia, Mr. Barrow.
Mr. BARROW. I thank the Chair. I will waive, also.
Mr. MARKEY. The Chair recognizes the gentlelady from California, Ms. Matsui.
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OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Ms. MATSUI. Thank you, Mr. Chairman. Thank you very much
for calling this hearing today.
I would also like to thank todays panelists. We all appreciate
your time and expertise on those matters.
Buildings in our country are responsible for more greenhouse gas
emissions than any other sector. Heating, cooling, lighting our
buildings, as well as powering our appliances requires vast
amounts of energy. But, thankfully, we currently possess the technology and knowledge needed to address a quarter of our Nations
carbon emissions.
Improved energy efficiency will be an essential element of any
climate change solution. My district of Sacramento, California, has
been a leader in adopting green building practices. We have the
first LEED platinum certified office building in the country. We
also have the second-most LEED certified square footage of any
city. We are also home to the California Energy Commission and
have been a leader in energy efficiency for over 30 years.
Under the leadership of Art Rosenfeld, who is really the godfather of energy efficiency in this country, our State energy commission has kept Californias per capita energy consumption flat.
Furthermore, Federal programs such as ENERGY STAR and
Build America are expending technologies and giving us concrete
ways to confront climate change.
Last Congress, I introduced a measure to assist homeowners
across the country with energy efficiency landscaping practices.
Even changing something as simple as how our buildings get sunlight can make a big difference in how much energy they consume.
I look forward to working with my colleagues on this committee
to examine and promote energy efficiency, while helping our constituents to do the same. By saving people money and reducing our
carbon emissions, energy efficiency is truly a win-win proposition.
Once again, Mr. Chairman, thank you very much for highlighting
this important issue; and I yield back the balance of my time.
Mr. MARKEY. The gentleladys time has completed.
The Chair recognizes the gentleman from Pennsylvania, Mr.
Pitts.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH
OF PENNSYLVANIA
Mr. PITTS. Thank you, Mr. Chairman. I want to thank you for
convening this hearing today on such an important issue.
Like all of us, I believe that sound energy efficiency measures
will certainly help decrease the amount of greenhouse gas emission
in our atmosphere. It will also encourage our country to strengthen
our energy security and end our dependence on foreign energy resources. However, if energy efficiency matters are not implemented
in a cost-effective manner, they will harm our economy.
In the recently passed stimulus bill, as has been noted that we
just were able to get a copy of, a potentially very harmful provision
was included, decoupling. Decoupling, the separating of utility
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rates from the amount of electricity or natural gas that utilities
sell, will inevitably harm our already damaged economy and those
least able to withstand more economic pressure, regular Americans
who are struggling to make ends meet during this recession.
Under the stimulus, if a State accepts Federal energy efficiency
grants, they will have to guarantee that utilities recover their lost
revenue when consumers dont use as much electricity; and this
forces the consumer, the rate payer, to keep utilities solvent, even
if their own energy use decreases.
With an anticipated decline in energy use in 2009, this policy
will force customers to pay more money for less energy; and the
government essentially will be punishing people for conserving energy. I believe we must instead create incentives for energy conservation and reward consumers when they save energy, not force
them to pay artificially higher utility rates.
Utilities have a legitimate concern that increased efficiency will
cost revenue, but if we learned anything from the mortgage crunch
it is this: Government policies that try to alter or ignore the fundamental laws of economics create more problems than they solve.
Penalizing consumers for using less energy doesnt seem like the
right solution. I hope we can all work together and come up with
a better alternative.
I look forward to hearing the witness today and thank you and
yield back.
The Chair recognizes the gentlelady from California, Mrs. Capps.
OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. CAPPS. Thank you, Mr. Chairman, for holding this very important hearing to explore the vital role energy efficiency will play
on reducing greenhouse gases and achieving our climate change objectives.
I remember so well the image of one of the CEOs of the big oil
companies when the gasoline prices were skyrocketing being challenged, what are we going do about these high prices? He said, I
have one word for you: efficiency. And it holds true in our topic
here today as well.
I thank our esteemed witness for their testimony on this very important matter.
Energy efficiency is a win-win. By reducing consumption of energy, we save money and we also cut greenhouse gasses. The chairman of our full committee as well as my neighbor from Sacramento, Doris Matsui, have highlighted what has been achieved
in California, my State as well, a long-time leader among other
States in energy efficiency. We use less energy per capita than any
other State in the Nation. As the chairman said, in 1995since
1975, rather, per capita energy consumption in California has held
steady, while in the U.S. as a whole it has grown by 50 percent.
Furthermore, by implementing green energy policies that lower
consumption and cut greenhouse gasses, we have managed to
spend less. On average, California families now spend $800 a year
less on energy than they would have without the efficiency advancements of the last three decades. We have managed to cut also
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per capita of carbon dioxide emissions by 30 percent over the last
30 years.
These successes have come as a result of strong standards combined with innovative regulations and innovative achievements. So
I thank you, Mr. Chairman, for the leadership of this committee
and of our administration for setting some high goals.
As we move forward to craft climate legislation, consider the
complementary policies necessary to reduce greenhouse gasses. I
hope you will recognize groundbreaking work that is already occurring in California, Massachusetts, and other places and that will
build smart policy on their achievements, on the achievements that
have been already accomplished in local communities.
Thank you very much, and I yield back.
Mr. MARKEY. The gentleladys time has expired.
The Chair recognizes the gentleman from Texas, Mr. Burgess.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. BURGESS. I thank you for holding this hearing. I look forward to hearing from our panel of witnesses today.
Energy efficiency is exactly the type of issue where we can work
together on this committee despite our clear differences on carbon
control regimes. Energy efficiency is the type of win-win scenario
that people seek in public policy decisions before Congress.
We need to ensure that the consumers of electricity receive the
cost savings from energy efficiency and that this does not accrue
to the electric utilities. The incentive to implement energy efficiency technology must provide direct benefits to the end users who
ultimately pay the rates to families of small businesses and to
manufacturers.
Unfortunately, the revenue-decoupling portion of the economic
stimulus bill redirected these benefits to the utilities so the consumers pay the same price no matter how much energy they consume or save. I hope that this committee can work together to correct this provision and redirect the benefits of energy efficiency
back to rate payers.
This is not just a hypothetical concern with me, Mr. Chairman.
A few years ago my wife and I found ourselves building a new
home, and the number of things that were available off the shelf
for energy efficiency really made an impression upon mewe already heard from a member on the other sidethings like siding
your house correctly to take advantage of passive solar heating if
you are in a climate where that will be of benefit; the ultra-highefficiency air conditioners that are available nowadays; foam insulation in the walls; Low-E glass; the tankless water heater; the Efficient Attic System.
Our electric utility rates dropped one-half the summer we moved
into this house which was the same square footage as the house
we had occupied the previous summer. Our natural gas consumption similarly declined by about half, demonstrating the powerful
effect of energy efficiency.
This is an area where we can all agree improvements can be
made. I want to be certain, though, that the decisions we make in
this committee do not increase the cost of development and in-
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crease the cost of manufacturing, because the economy right now
cannot tolerate that type of convulsion.
I yield back the balance of my time.
The Chair recognizes the gentleman from Texas, Mr. Gonzalez.
Mr. GONZALEZ. I waive opening.
Mr. MARKEY. The Chair recognizes the gentlelady from Wisconsin, Ms. Baldwin.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN
Ms. BALDWIN. Thank you, Mr. Chairman.

Over the past 2 years, this subcommittee has heard about emerging technologies, necessary investments in research, and critical infrastructure that must be developed if we are to reduce our energy
use and lower our greenhouse gas emissions. We have focused on
carbon sequestration, cellulosic ethanol and plug-in hybrid vehicles
as solutions to our energy and climate change crises. These are important discussions to have.
In looking toward the future, we cannot lose sight of the significant energy savings that are currently available to us. Today, by
having a thorough discussion of energy efficiency opportunities, we
draw attention to low-cost strategies that can be used to reduce
greenhouse gas emissions.
I am particularly interested in how the industrial sector can optimize its energy use. In December, the Oak Ridge National Laboratory released a report saying that waste energy recovery is, One
of the most promising options in the U.S. energy efficiency portfolio. I am pleased with a number of the provisions included in the
Energy Independence and Security Act that encourage waste heat
recovery, and I look forward to hearing about our opportunities
that we may be able to make available.
Finally, I want to welcome all of our witnesses here today. But
one in particular, Mr. Iain Campbell, is here representing Johnson
Controls, which is headquartered just outside of my district in Milwaukee, Wisconsin. Johnson Controls is a leader in innovation,
building batteries for the next generation of plug-in hybrid vehicles
and addressing efficiency in buildings to help manage energy costs,
reduce environmental impacts and improve productivity and competitiveness.
I would add that Johnson Controls doesnt just talk the talk.
Rather, they have taken significant steps to improve their own efficiencies and reduce their own carbon footprint; and through it all
they have continued growing.
I thank you for your companys commitment to environmental
stewardship and corporate responsibility and welcome your testimony as well as the testimony of the entire panel that we are very
grateful to have before us today.
Thank you, Mr. Chairman. I yield back the balance of my time.
Mr. MARKEY. The gentleladys time expired.
The Chair recognizes the gentleman from Missouri, Mr. Blunt.
Mr. BLUNT. I think, Mr. Chairman, I will submit a statement
later for the record.
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Mr. MARKEY. Then that completes all opening statements by the
members, and we will now turn to our very distinguished panel
and hear from our first witness.
Our first witness is Phil Giudice, who is the Commissioner of the
Massachusetts Department of Energy Resources. He has over 30
years of experience in the energy industry and currently serves on
the boards of the Regional Greenhouse Gas Initiative and the Massachusetts Renewable Energy Trust.
We look forward to your testimony. Whenever you are ready,
please begin.
STATEMENT OF PHILIP GIUDICE, COMMISSIONER,
MASSACHUSETTS DEPARTMENT OF ENERGY RESOURCES
Mr. GIUDICE. Thank you, Chairman Markey and the committee,

on behalf of Governor Patrick, Secretary Bowles, all of Massachusetts and all of the State energy offices. I thank you not only for
your long-standing leadership on energy and climate matters but
for your aggressive support of the recently passed stimulus package.
Funding for the State energy program, the Weatherization Assistance Program, the energy efficiency conservation block grants
and the appliance energy rebates, among many other program in
the stimulus package, will be put to good use in Massachusetts and
elsewhere around the country.
In 1990, when the State Energy Efficiency Program Improvement Act was passed, you were the chief sponsor, Chairman Markey. This has allowed the SEP programs to serve as a ready-to-use
vehicle across the country for distributing a significant portion of
these stimulus dollars. Every year, you have led the effort in the
House of Representatives to increase funding for SEP, weatherization and LIHEAP. These are important for Massachusetts and our
country. Thank you.
Further, we are proud to strongly support your recently filed
Save American Energy Act; and we look forward to working with
you, the committee, the Massachusetts delegation, Congress and
the administration to advance boldly Federal energy and climate
policies this session.
If you take away only one thing from my comments today it is
this: Energy efficiency is a proven, reliable and extremely valuable
tool for building a greener energy future. It is also a tool that we
can quickly deploy to reinvest in our homes, businesses, starting
today, in ways that will begin to turn around our economy and in
the longer term put the United States at the hub of a 21st century
global clean energy economy.
As Governor Patrick has said about Massachusetts, if we get
clean energy right, the world will be our customer. And in the context of your consideration of Federal climate legislation it is also
clear, based on our long experience in Massachusetts with the efficiency programs and our short-but-valuable experience with carbon
caps through the Regional Greenhouse Gas Initiative, that energy
efficiency is the best climate mitigation tool that we have and a
powerful economic driver for our economies.
I know you are well acquainted with our existing efficiency policies in Massachusetts, but I want to take this opportunity to share
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for the record some of the lessons and provide a glimpse of the
transformation that is under way in Massachusetts.
Massachusetts has historically had some of the highest costs of
energy in the country, but our innovative people have combined to
establish us as a leader in efficiency. Our energy productivity of the
State is the one of the highest in the Nation, with our economy
generating $200 of gross State product for every million BTUs of
energy consumed. The U.S. averages $116 for million BTUs consumed.
The efficiency and economic growth can and do go hand in hand
in Massachusetts. Massachusettss long and distinguished record
investing in energy efficiency is delivering great results. We have
continuously invested for over three decades. We collect about a
quarter of a penny for every kilowatt hour. This is distributed by
our regulated utilities in wide-ranging and far-reaching energy efficiency programs, totals about $125 million a year, which is about
$20 per person in the State of Massachusetts. U.S. total through
regulated utility programs are spending about $2.5 billion or about
$8. So we are about 2.5 times the national average.
These programs result in saving energy at a cost of about 3.6
cents a kilowatt hour and contribute to an overall savings of 8 percent of the kilowatt hours that we would otherwise be consuming
in Massachusetts. So this is a great deal, especially when the annual cost of power from generation in the wholesale market averages 8 or more cents a kilowatt hour.
We are not resting on those accomplishments. In fact, we at this
moment are in the process of transforming our energy efficiency infrastructure in our approaches; and this effort is producing remarkable results.
The transformation began with Governor Patrick and our legislatures leadership to fundamentally change the equation for investing in efficiency. Instead of investing a prescribed amount of the
2.5 mills that they were collecting and getting as much energy efficiency as we could with this sum of money, we are now required
by law to invest in all energy efficiency that is less expensive than
supply sources. We expect this will double, triple or more our efficiency spending and the results that we will be getting from our
efficiency programs.
This transformation is largely being accelerated by investing the
revenues from our participation in the Regional Greenhouse Gas
Initiative. We have had two auctions, and we have generated almost $30 million that are going directly into these programs in
Massachusetts and will be further turbocharged by the recently
passed Federal stimulus. This will mean more G auditors, more
contractors working on insulation in air, ceiling and homes and
businesses and improving our building stock, more plumbers and
HVAC control technicians to change out the inefficient equipment
and put in much more efficient.
All kinds of organizations are taking charge of becoming energy
leaders. As you well know, Mr. Chairman, Massachusetts is proud
of its professional sports teams; and, in addition to winning six
championship banners in the last 7 years, each of our sports teams,
the Red Sox and New England Patriots, are doing fantastic things
from their energy consumption.
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So I ask you at this moment to go much bolder than we will necessarily be comfortable for. Because, in the future, we will look
back and wish we were taking bold steps at this time. Thank you.
[The prepared statement of Mr. Giudice follows:]
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Mr. MARKEY. Thank you very much. We appreciate it.
Our next witness is Mr. Thomas King, who is the President of
National Grid in the United States. Before joining National Grid,
Mr. King spent 10 years with Pacific Gas and Electric Company
where he was Chairman and CEO.
Whenever you are ready, please begin.
STATEMENT OF TOM KING, PRESIDENT, NATIONAL GRID USA
Mr. KING. Mr. Chairman, Ranking Member Upton and members

of the committee, I want to thank you for including National Grid
in this very important hearing on energy efficiency.
May I first congratulate you and your congressional colleagues
for your focus and success with important initiatives on energy efficiency renewables, infrastructure such as smart grid, and other
critical energy support in last weeks stimulus bill.
Mr. Chairman, we are also pleased with the directional approach
you have introduced with initiatives that address both Energy Efficiency Resource Standard and renewable energy.
There is no single solution with the overall energy policy. We
need more expansive, robust energy efficiency programs. We need
new sources of renewable energy, wind, solar biomass, geothermal.
We need a comprehensive strategy to address our transmission infrastructure, including policies that will enable us to bring renewable energy to load centers; and we need smart grid technology and
smart meters to maximize the potential of current and future energy technologies through efficiency and automation. All of those
actions play a critical role in an effective National energy policy.
While the National energy strategy must be multifaceted, my
comments today will focus on energy efficiency. Energy efficiency
uniquely addresses many of our Nations core energy issues. It is
more cost effective than building new power plants, has the potential to dramatically lower greenhouse gas emissions, and provides
consumers with long-term savings on their energy bills.
Let me begin with some simple facts on the cost effectiveness of
energy efficiency.
Energy efficiency can cost as little as $0.03 per kilowatt hours
saved, while electricity costs $0.06 to $0.12 per kilowatt hour. As
a country, we spend about $215 billion annually on production of
electricity, but we only invest $2.6 billion on energy efficiency. For
natural gas, efficiency costs range $1 to $2 per thousand cubic foot
consumed, compared to a typical market cost ranging from $6 to
$8 per Mcf. Yet we spend approximately $91 billion annually on
natural gas and only $500 million on efficiency of natural gas.
This country must take better advantage of this opportunity and
prioritize energy efficiency. National Grids experience with energy
efficiency programs in Massachusetts can be a model for the rest
of the country. The successful programs include comprehensive
whole house efficiency approaches, energy audits, high efficiency
lighting, HVAC installation to ensure efficiency, energy efficiency
services to low-income customers, business customer assistance to
implement energy savings, and weatherization initiatives.
On the gas side, the programs include high efficiency appliances;
weatherization; and system controls, including automatic thermostats.
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I congratulate Governor Deval Patrick and the Massachusetts
Executive Office of Energy and Environmental Affairs for passing
comprehensive energy legislation in Massachusetts, the 2008 Green
Communities Act. This provision will allow National Grid to expand our efficiency programs by 300 to 400 percent over the next
5 years.
National Grid, in partnership with other leading energy companies such as PG&E, DT&E, environmental groups such as the Natural Resources Defense Council, and Environmental Defense,
worked together with McKenzie & Company to look at energy efficiency. The landmark study found that the U.S. can make substantial emissions by 2030 without damaging the economy with the
help of energy efficiency.
The Electric Power and Research Institute recently introduced its
own energy efficiency savings analysis. By analyzing the impacts of
codes and standards as well as market-driven efficiency, the study
shows measurable reductions in energy consumption.
In addition to energy efficiency, we will need a national policy
such as a mandatory cap and trade program. As consumers bear
the cost of addressing climate change in the form of higher energy
prices, climate change policies must be designed to mitigate that
impact. One of the most effective and transparent ways to simultaneously address consumer costs and energy efficiency is to distribute allowances to local distribution companies with the mandate that the value be returned expeditiously to the customers to
reduce their energy bills.
Current State enforcement power and rigorous open reporting
will ensure that all allowance values allocated to the LDCs do benefit the customers. LDCs are uniquely positioned to administer
community based energy efficiency programs because they already
have the necessary experience, communication channels, marketing
expertise, funding and oversight processes and access in place in
the market to move things quickly.
National Grid already has efficiency programs in place that are
saving customers in New England over $250 million a year. As a
result of these programs, National Grids customers have saved
more than $3.6 billion in energy costs. In 2007 alone, our gas program saved 4.6 million thermal units and avoided 27,000 tons of
CO2; and our electricity program saved 380,000 megawatts, avoiding 218 tons of CO2. This is a total carbon emission equivalent of
taking 48,000 cars off the road a year. Expansion of such programs,
as a result, creates energy efficiency jobs.
Energy efficiency should act as the foundation of our national energy policy; and, importantly, we need to move quickly. I commend
your work and thank you.
Mr. MARKEY. Thank you, Mr. King, very much.
[The prepared statement of Mr. King follows:]
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38
Mr. MARKEY. Our next witness is Rich Wells, who is the Vice
President of Energy for the Dow Chemical Company. He is a member of the board of directors of the Alliance to Save Energy and in
2008 was appointed to the Michigan Climate Change Action Council by Governor Jennifer Granholm.
Thank you for being with us today.
STATEMENT OF RICH WELLS, VICE PRESIDENT, ENERGY, THE
DOW CHEMICAL CORPORATION
Mr. WELLS. Chairman Markey, Representative Upton, and members of the committee, thank you for the opportunity to provide our
views on energy efficiency and its role in the future energy and climate change policies in our country.
First, I would like to address the role energy plays for Dow. As
one of the largest chemicals and plastics producers, Dow uses the
equivalent of 850,000 barrels of oil every day in its global operation. Of this total, approximately half is in the United States. Energy used by Dow is converted into a wide variety of products essential to our economy and our citizens quality of life. Those products serve as building blocks for everything from pharmaceuticals,
insulation, electronic materials, infrastructure and much more.
With energy being a key enabler for all of our products, it is no
surprise that the volatility of energy prices over the last 6 years
has had a dramatic impact on Dow. In 2002, our total annual energy and feedstock bill was $8 billion. In 2008, that number
climbed to over $27 billion.
Dow has an energy efficiency and conservation program which
has been refined over the past two decades. This program, through
its energy savings, has allowed us to sustain our operation despite
these raising energy costs. Let me give you some examples of the
impressive results from that program.
We have saved over 1,600 trillion BTUs of energy since 1994,
which is enough energy to power every home in California for 1
year. We have saved $8.6 billion in energy costs over the past 14
years, and these energy savings have prevented 86 million metric
tons of CO2 from entering our atmosphere.
Dows efforts in energy efficiency have been recognized by the
EPA, who named our company an ENERGY STAR partner of the
year in 2008. We have been involved in energy efficient outreach
efforts both in the U.S. and internationally, including China.
Despite being a very energy intensive company, Dow provides
products that helps consumers save energy and reduce greenhouse
gas emissions. In fact, the emissions avoided by use of Dow thermal insulation are seven times greater than our total corporate
emissions.
As you can see, Dow is committed to energy efficiency. It is the
quickest, cheapest, cleanest way to extend our Nations energy supplies and reduce carbon emissions. That is why we recommend
Congress implement the following complementary policies for energy efficiency:
First, strengthen building energy codes by 30 percent starting in
2012 and 50 percent by 2020.
These building code improvements could save up to 6 billion metric tons of CO2 emissions by 2050.
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Second, implement a Federal energy efficiency resource standard.
Estimates show that by 2020 a Federal EERS could reduce peak
electrical demand by 90,000 megawatts, cut CO2 emissions by 260
million metric tons, and create 260,000 net jobs.
Third, increase the payback periods on low-interest loans to industry for energy-efficiency projects. These projects would improve
energy efficiency within the private sector, stimulate the economy,
and lower greenhouse gas emissions.
And finally, re-energize the DOE Industrial Technologies Program. Strengthen the program by placing greater emphasis on
early-stage R&D, as well as expanding focus on cogeneration and
recycled energy.
Dow supports the prompt enactment of an environmentally effective and economically sustainable cap-and-trade program. As a
member of USCAP, Dow supports an 80 percent reduction in CO2
emissions by the year 2050. However, we need to be thoughtful
when designing climate policy. Too strong a price signal on carbon
in the short term could accelerate fuel switching from coal to natural gas in the power generation sector. Such a movement could
trigger a steep demand for natural gas, dramatically driving up
prices and harming manufacturers, including Dow. Combined with
other well-designed climate policy elements, complementary energy
efficiency measures can lessen the impact of fuel switching under
a cap-and-trade program.
In conclusion, Congress should pass cap-and-trade legislation
with complementary measures in order to drive energy efficiency
through all phases of climate policy. If we fail to do so, we risk negative impacts and burdens on all sectors of our economy, including
our manufacturing base.
I thank you for the opportunity to speak with you today, and I
will be happy to answer your questions when it is appropriate.
Thank you.
[The prepared statement of Mr. Wells follows:]
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52
Mr. INSLEE. Thank you, Mr. Wells. And I know about your great
work. There is an interesting book that has said really good things
about Dow. I will tell you about that later.
Mr. Campbell?
STATEMENT OF IAIN CAMPBELL, VICE PRESIDENT AND
GENERAL MANAGER, JOHNSON CONTROLS INC.
Mr. CAMPBELL. Chairman Markey and members of the subcommittee, thank you for the opportunity to provide testimony on
complementary policies for climate legislation.
Johnson Controls is a world leader in providing energy-efficiency
products, technologies, and services for buildings, and we would
like to share an on-the-ground view of the opportunities and barriers to energy efficiency.
Some refer to energy efficiency as the fifth fuel, a new source of
energy that we can tap to drive economic growth. We believe that
energy efficiency should be considered the first fuel, as it saves consumers and businesses money through lower energy consumption
and represents the lowest-cost source of energy using technologies
widely available today.
In the first of three key points that we wish to make, we believe
that a variety of complementary policies are needed to drive energy
efficiency. In addition to putting a price on carbon, we support
time-of-use pricing and smart-grid investments to give energy users
and their building management systems the information that they
need to make smart decisions.
We support energy-efficiency resource standards, such as the legislation Representative Markey has recently introduced. Such a
standard would dramatically ramp up efficiency investments while
providing a path for utilities to cost-effectively decrease their overall emissions.
Building codes and equipment standards represent important
policy levers. We support policies to provide incentives for the purchase of the highest-efficiency equipment to drive innovation and
enable manufacturing scale. We also support the introduction of a
system to label building performance to help better inform current
and perspective building owners and ultimately increase demand
for high-performance buildings.
With approximately 1 billion square feet of annual new construction, establishing complementary policies to enhance energy efficiency in new buildings is an important step. But, to the second of
our three key points, these opportunities are dwarfed by the prospects of enhancing energy efficiency in the approximately 72 billion
square feet of existing nonresidential building stock.
There are a range of barriers that prevent raising of energy-efficiency levels in existing buildings that have effectively been addressed in the public sector using an approach known as performance contracting. Performance contracting is a competitive, marketbased approach to delivering energy and operational savings that
leverages public funding with private investment. This programmatic approach to retrofitting buildings can combine energy
efficiency and renewable energy in a single, cost-effective project.
The energy performance guarantees provided under these contracts
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ensure transparency and accountability for project outcomes, a critical element of any successful energy and climate policy.
Performance contracting has been successfully applied in the
public sector for over 20 years. Examples include the University of
Massachusetts in Amherst, where a $42 million investment, funded
through public and private sources, delivered $56 million in guaranteed energy and operational savings as well as an improved
learning environment for students and faculty alike. And Wyandotte Public Schools in Michigan implemented a combination of energy-efficiency retrofits, technology upgrades, and solar PV installation that delivered significant savings and helped the school district become the first in Michigan to be fully certified under the
EPAs ENERGY STAR program.
While performance contracting has been successful in the public
sector, there are barriers to the adoption of this model in the private sector: the mismatch of incentives between property owners
and tenants, the frequency of turnover in building ownership, and
the requirement to use building assets as collateral to secure loans.
To address this, we recommend establishing a program that
would encourage large-scale, deep retrofitting of privately owned,
commercial buildings. The program should provide incentives for
efficiency improvements, in the form of rebates provided to building
owners or their agents in proportion to verified and sustained performance improvements, and loan guarantees to help attract capital from private sources to fund those improvements.
A third and final point is that these complementary energy-efficiency policies have the potential to create a substantial wave of
new green-collar jobs across the country. Developing this workforce
will require a combination of public and private investment, along
with the creation of certification programs to ensure that workers
have the right skills and training to engineer, install, and maintain
energy-efficiency projects.
Finally, let me note that included in my written testimony are
a number of consensus recommendations from a coalition of energyefficiency organizations, including Johnson Controls, entitled,
Reducing the Cost of Addressing Climate Change Through Energy
Efficiency.
In closing, Johnson Controls believes in the need to increase the
Nations focus and investment in energy efficiency. Energy efficiency must be the first priority in addressing climate change as
a way of containing the cost of climate protection and creating new
jobs. It is imperative as a Nation that we focus on efficiency now.
It has never been more important.
On behalf of Johnson Controls, thank you again for the opportunity to testify.
[The prepared statement of Mr. Campbell follows:]
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112
Mr. INSLEE. Mr. Campbell, excuse my failure to introduce you to
the group.
Mr. Campbell, who just gave us a really interesting discussion,
is vice president and general manager of the North America Service and Global WorkPlace Solutions for Johnson Controls.
Thank you very much.
The next witness is Dr. John Anderson, president and CEO of
the Electricity Consumers Resource Council. His organization represents large industrial electricity consumers from virtually every
sector of the manufacturing community.
Thank you, Dr. Anderson.
STATEMENT OF JOHN ANDERSON, PRESIDENT, ELECTRICITY
CONSUMERS RESOURCE COUNCIL
Mr. ANDERSON. Thank you very much, Mr. Chairman and Mr.
Upton and members of the subcommittee, for the opportunity to be
here today.
I dont have to tell the members of this subcommittee that we are
in troubled times. And these times are especially troubling for
manufacturers. Speaking personally, I dont see a light at the end
of this very dark tunnel in the near future.
As this subcommittee and Congress debate energy policy, I urge
you to think very carefully about what the proposed policies will do
to the electricity cost for consumers, whether industrial consumers
will be able to bear these costs, and if instead they will have to
close additional manufacturing facilities and move to lower-cost locations. We want to avoid that situation.
Which brings me to the subject of this hearing, energy efficiency.
At the outset I emphasize that ELCON does not doubt that many
opportunities exist to improve energy efficiency of manufacturing
processes and that such improvements would help reduce greenhouse gases. However, most large industrial facilities are beyond
the point where substantial savings can be achieved with plug-andplay measures, such as high-efficiency lightbulbs or insulation or
motors. The next level of efficiency gains are achieved when entire
industrial processes are retooled or rebuilt and options are explored, such as combined heating and power. These are big-ticket
items requiring very large outlays of capital over long periods of
time.
Further complicating this problem is the current credit crunch.
The core issue is, can utility financing of energy-efficiency investments compete with large industrials own ability to raise capital
on its own in normal capital markets? A question we ask consistently, are utilities better banks than banks are? And that may be
a difficult question to answer today, but we dont think so.
Again, I emphasize the industrial customers are strong advocates, even activists, of cost-effective energy efficiency. Such manufacturers are in a constant quest to reduce the operating cost to increase competitiveness. But, at the same time, large industrial customers have historically not supported legislative or regulatory
mandates for utility-implemented energy efficiencies. Such programs are both costly and not designed in a manner that would
achieve maximum efficiency gains.
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I raise four other related issues that are often discussed in the
context of achieving greater energy efficiency, and I address them
in much more detail in my written statements.
First is the energy-efficiency resource standards that has already
been mentioned today. ELCON has not taken a formal position on
the EERS. We certainly support measures that result in the implementation of cost-effective energy efficiency. However, there are
some very basic questions that any EERS would raise, and those
I touch on in my written comments. If an EERS is actually implemented, we strongly urge that industrial facilities be exempt, recognizing that they already have taken significant energy-efficiency
steps and knowing that this is not the time to layer additional
costs on manufacturers.
The second issue I raise is revenue decoupling, which is one that
has been mentioned several times here already. The debate over
the stimulus bill demonstrated the great opposition to federally
mandated revenue decoupling from both small and large customers
alike. We disagree with the advocates of revenue coupling for several reasons.
First, we believe that revenue decoupling disrupts and distorts
the utilitys core business functionsto produce and deliver electricity in an efficient mannerand is not a particularly effective
way of promoting energy efficiency. Moreover, there are better
ways to deliver cost-effective energy efficiency, such as with a
third-party entity rather than a utility. There is no basic conflict
between implementation of energy efficiency through an independent third party and the loss of revenues for a utility.
Second, several States have found decoupling to be a failure once
policy recognizes that a cool summer or a warm winter or an economic downturn triggers increased revenues to the utility even if
no efficiency gains are made.
Third, we question why a regulated public utility that has been
given a monopoly service territory by a State should be rewarded
for implementing an efficiency program that is required by either
Federal or State mandates. We believe they have an obligation to
serve and should be given an opportunity to recover prudently incurred costs and earn a return that reflects risk they incur but no
more.
And, finally, many proponents of decoupling hold California up
as a poster child for energy efficiency, at least partially because decoupling advocates assert that per-capita consumption of kilowatt
hours in California was reduced. However, California also implemented an inverted rate structure that may have, in and of itself,
brought about more energy efficiency than decoupling that was implemented and then taken away and then put back. And Californias very high electric rates have contributed to the tremendous
loss of manufacturing in the State. It is not hard to reduce electricity consumption if you take away your manufacturing base and
put people out of work.
The third issue I raise is demand response. And I am not going
to go into that in detail in my oral statements, but I urge to you
look at it. We think it has a tremendous potential, and it ought to
be considered along with energy-efficiency measures.
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And the fourth issue is the utilization of combined heat and
power, which was mentioned at least once. Manufacturing industries have been leaders in this effort. Unfortunately, companies
planning to increase their CHP production have been disappointed
by a recent rulemaking process at the Federal Energy Regulatory
Commission, or FERC.
Specifically, ELCON worked with members of this subcommittee,
led by Representatives Barton, Boucher, and others, in drafting
compromise language, the intent of which was to continue certain
incentives for combined heat and power as provided for under
PURPA until truly competitive markets were established. Unfortunately, things just didnt work out as expected. FERCs rule, in essence, discontinued those incentives for any facility operating in
one of the FERC-approved RTOs or ISOs.
This rule will clearly hinder CHP growth. We strongly urge Congress to either reconsider the language in EPACT 2005 to more accurately reflect congressional intent or address this issue in an
oversight hearing.
In conclusion, I return to where I started. Basic manufacturing
in the U.S. is in terrible shape. Despite the well-intentioned stimulus package, I have seen no projections that manufacturing output
will increase in the near future. Yet many in Congress and elsewhere seem intent on implementing several new and substantial
energy initiatives. All have noble goals, but many will work to the
detriment of industrial companies and their employees.
I applaud the subcommittee for seeking to make our energy market more efficient, but I ask the subcommittee, when considering
energy legislation, to examine the total impact of its proposals, including its impacts on the manufacturing sector. I urge you to consider several specific recommendations that are in my written testimony.
I thank you again for the opportunity to be before you today and
look forward to your questions.
[The prepared statement of Mr. Anderson follows:]
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And our last witness is Mr. Bryan Reichel, who is president and
CEO of PureChoice, Incorporated. PureChoice provides building
performance reporting software and helps organizations with their
energy efficiency.
Thank you, Mr. Reichel.
STATEMENT OF BRYAN REICHEL, PRESIDENT AND CEO,
PURECHOICE, INC.
Mr. REICHEL. Thank you, sir.

I would like to thank Chairman Markey and Ranking Member
Upton and the members of the subcommittee for inviting me here
today. My name is Bryan Reichel. And I am president of
PureChoice, Burnsville, Minnesota. We are an ENERGY STAR
partner.
I will summarize my testimony, but I ask that it be included in
the record as submitted. But what I am going to do is tell you a
little bit different story today. Instead of telling you what I think
we can do, I am going to tell what you we are doing today as a
small company in Minnesota. There has been talk about looking for
shovel-ready projects, and we are about as shovel-ready as they go.
The main reason for energy use in commercial buildings is to
condition the space for human occupancy. There are approximately
5 million existing commercial buildings in the U.S. today, totaling
well over 70 billion square feet. Consider then that, according to
the Department of Energy, about 33 percent of the energy used in
those buildings is used specifically for heating, ventilation, and air
conditioning. The average cost of that is about $1.23 a square foot,
or about $86 billion annually.
There has been talk of increasing the energy-efficient goals up to
10, 20, 30, now I hear up to 50 percent. But I ask the question,
without first measuring the building for the performance of the
building, how do you know that that building can even attain better energy efficiency? We need to somehow measure the performance of the building. I can achieve 100 percent energy efficiency in
this particular building. If somebody would show me to the breaker
panel, I will shut all the switches off. However, we screw up the
interior environment of this building. So there has to be a balance
somehow between energy-efficiency goals and our indoor air quality
goals, which is the reason a lot of these codes were put into place
in the first place.
PureChoice takes a bit of a different approach. We actually measure the interior performance of the building. We measure temperature and humidity and carbon dioxide and carbon monoxide and
VOCs, which are basically odors and gases.
I brought with me today one of our mechanical pieces; it is called
The Nose. The Nose houses all these particular sensors on a single platform, and it is delivered every 20 seconds back to our server
in Minnesota that is on a secure site. We then put it out with our
building performance software, which is called PureTrac. PureTrac
is a Web-based data collection software that functions very much
like a continuous energy audit. Essentially, we are continuously
commissioning the building all the time.
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Every building has an operating strategy. On a continuous basis,
the software checks the overall performance of the building against
that particular operating strategy. And, at the end of the month,
we generate a report, and we tell you how efficient your building
is to that particular operating strategy.
I can tell you we have no customers that are 100 percent. We
have some customers in the 15 to 20 percent range, and they had
no idea. And, on a simple basis, if you are spending $10,000 a
month on energy, and you are 50 percent efficient, that is $5,000
that you have room to find.
I will give you an example of what we have done. We recently
partnered with the Federal Government at the Bishop Henry
Whipple Building in Minneapolis. It is located at Fort Snelling. The
GSA, the Department of Energy, and the Minnesota Department of
Commerce were our partners on the project. We monitored the
building for 1 year. The partners identified opportunities for energy
savings, and we modified the operation strategy. We realized a savings in excess of 20 percent in 1 year without compromising indoor
air quality and without purchasing any additional HVAC equipment. The energy saving opportunity was in excess of $144,000.
The payback was less than 2.2 years, fully funded.
Now, the GSA was so pleased with that study thatyou may
have seen this beforethey have included it in their
Sustainability Matters document. I have submitted some of those
for the subcommittee, and I have just an excerpt to show you. On
page 94 to 99, it is the center of their bible going forward on how
they achieve green and high-performance buildings.
The President has placed a priority on this. Congress recently
passed $4.5 billion in the stimulus for energy conservation. We can
achieve that in a very simplistic format. And I will tell you, if the
GSA just wanted to do all their Federal buildings, they would
spend less than $40 million and save approximately $60 million a
year. And that is the bottom line, just to give you how much of this
is available.
I will give you another example. We recently partnered with a
big-box retailer in the city of Chicago. Chicago has got some of the
strictest building codes in the country, as far as ventilation is required. The major retailer couldnt meet their energy-efficiency
goals and achieve their indoor air quality goals at the same time.
They used our PureTrac data, and the city gave them a variance
on the ventilation rate, and they were able to cut ventilation by
over 54 percent. But because they were able to electronically prove
that they matched the indoor air quality guidelines of the code,
that 54 percent averaged into $2,500 a month per store in realtime
savings. They didnt disqualify the indoor air quality of the building, and they met all the requirements of the code.
Currently, the technology is being used by Tulsa University. It
is being taught in the engineering program at Stout University. We
have partnered with Secretary Chus old company, Lawrence
Berkeley Labs. We have done three school studies with them. Dr.
Michael Aptee has been our project partner out there. The study
that we did in the schools found that the worse the air quality was
in schools, the higher the absenteeism. For every thousand parts
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per million of carbon dioxide, absenteeism went up 10 to 20 percent.
Minnesota Power and the Minnesota Department of Commerce
had us do another program called SAMPLE2, School Air Monitoring Program for Learning and Energy Efficiency. We did three
schools in Minnesota, and the findings averaged that we could save
an average of 14 percent of energy conservation, which was approximately $30,000 per school. If we take that across what Senator Boxer has proposed, we would save in excess of $580 million
annually, using 2003 energy numbers, on all the public schools in
this country.
This technology works. We are here today talking about how do
we do energy efficiency. You need to measure the performance of
the building, and we can turn everything else around. We have
some suggestions. I look forward to your questions. Thank you for
your time.
[The prepared statement of Mr. Reichel follows:]
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Mr. INSLEE. Thank you very much.
We would like to go to Mr. Upton first, in recognition of his great
work on lighting last year.
Mr. UPTON. Thank you. Thank you, Mr. Vice Chairman.
I would like to make a couple points.
First of all, when we dealt with the energy title as part of the
stimulus bill, that moved through this committee, and those provisions actually passed by voice. I dont think there was any opposition to having incentives for improving on our energy efficiency in,
really, any sector of our economy.
However, there was one rather contentious item that we debatedand, Mr. Anderson, you touched on itand that was the decoupling issue. And I want to just pass a chart out to my colleagues
and members of the panel on both sides here. This was printed by
the Department of Energy, and it appeared in CQ Today back last
month, and it talked a little bit about decoupling.
And, Mr. Wells, I have Western Michigan University in my district, and I want to think that every one of our rooms in the 50some buildings on campus now have a Johnson Controls sensor,
and it works. It savings the university hundreds of thousands of
dollars every year in heating costs that we are able to see. We have
schools in my district that have now achieved the ENERGY STAR
rating. It is terrific, in terms of what we have.
And, as you look at the strides that we have made on appliance
standards, building standards, lightbulbsone of the issues that
this subcommittee worked on and was able to pass in the Congresswind turbineslast week, in my district, again, we looked
at both residential and some of the giant, 80-meter types that are
therewe can save great amounts of energy.
But if you impose this decoupling on Statesand this chart illustrates that, again, from the Department of Energyyou dont actually, at least my reading of it, you dont actually see the savings,
the incentives to purchase that additional equipment. At the end
of the day, the utilities are able to add increases in that rate, and
you dont see the same savings. I mean, it would be like buying a
hybrid automobile, and instead of paying the normal gas price, you
just say, well, you drive a hybrid, so we are going to charge you
another 25 cents a gallon at the pump to make up for what you
are not giving the Exxon or BP or somebody else.
And I would like each of you maybe to just comment. It is a fairly simple chart here that was printed by the Department of Energy. But, as you can see, it has the original billing for residents,
office buildings, and industrial buildings. And then it has the decoupled buildings, where the high users pay a little bit less but the
low users pay considerably more. And I just think that it takes
away the incentive for folks, businesses or homeowners, to actually
install the devices that are going to save energy and make us less
energy-reliant on other sources.
Mr. Reichel, if you would like to just start and make your comment based on this chart, and we will just go down the line in the
time that I have remaining.
Mr. REICHEL. Thank you, sir, but I dont have any position on the
decoupling. In fact, the last time I heard the word decoupling was
at my dog breeders. So I cant speak to that.
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Mr. UPTON. OK. I am glad this isnt in the big house downstairs,
live on C-SPAN.
Mr. Anderson?
Mr. ANDERSON. Thank you, Mr. Upton. I have not seen this chart
before, so I cant really respond to it.
Let me say a couple things about decoupling that I said a little
more in my written statement. And we actually have a publication
on it that I would like to ask if it can be inserted into this record.
Mr. ANDERSON. Decoupling, as you said, it does increase rates.
That is what it does. Now, the increased rates may bring about reduced consumption. And for some customers, there could be a reduced bill. But for other customers, there wont be a reduced bill.
Mr. UPTON. That is right. It rewards the folks that dont do as
much as the folks that may invest in energy conservation.
Mr. ANDERSON. Precisely. Precisely. And that, to me, boils it
down to
Mr. UPTON. That is a good answer.
Mr. Campbell?
Mr. CAMPBELL. I am not sure I can comment deeply around the
decoupling provisions. But what I can say is that, for energy efficiency to work, there has to be alignment of incentives so that
when energy efficiency is being driven and achieved there has to
be incentives appropriate to that.
Mr. UPTON. I am running out of time, so we have to go fast. Mr.
Wells?
Mr. WELLS. I will echo what Mr. Campbell says. A lot of us have
talked about the energy-efficiency improvements we have done at
our companies. The question is, why hasnt that happened in the
public sector? It is because we have split incentives. We have to
find a way to break that.
Mr. UPTON. Mr. King?
Mr. KING. Thank you. There are numerous issues associated with
rate design. I think the incentive component is critical, as well as
there is an ability, through the rate design, to mitigate some of the
low-income, low-user impacts. That can be dealt with State by
State as we deal with decoupling.
Mr. UPTON. Mr. Giudice?
Mr. GUIDICE. Yes, from my perspective, decoupling is neither the
panacea or the cause of what ails us. It is just one of the tools that
can be useful, done right, to help make sure we move forward.
And the stimulus bill does not require decoupling, in my read. It
requires Governors to assert that they are going to work towards
minimizing disincentives for efficiency as well as move to better
building codes.
Mr. MARKEY [presiding]. Great. The gentlemans time has expired.
That is an important point that you made, Mr. Guidice, that it
is not mandated. Just elaborate upon that for another 30 seconds,
please.
Mr. GUIDICE. Sure. The national State energy officials actually
worked with committee members when looking at this issue, because decoupling is a third-rail, hot issue across the country. Lots
of different States look at decoupling in different ways. Massachu-
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setts has recently, last year, chosen to move forward with decoupling, and we are going to be looking at our first utility rate cases
in a long time.
And the parameters of looking at those rate cases and how that
decoupling is going to be done in Massachusetts, it is going to have
all of the normal sort of processes to assure that extraordinary returns are not being generated by utilities. There are protections to
make sure that rates are set appropriately.
The stimulus bill recognizes all of the various ways that different
States are dealing with this issue and allows for Governors to simply assert that they are going to work towards building codes and
towards disincentivestake away disincentives to maximize efficiency. And there are lots of ways that we can make that happen
across the country.
Mr. MARKEY. Thank you.
Mr. King, Mr. Anderson has raised some criticisms of utilitybased efficiency programs, such as those used in Massachusetts, arguing that they are bad for industrial consumers. Could you respond briefly to those criticisms?
Mr. KING. We have had great success with our industrial energyefficiency programs. And a critical component is that we have the
consistency and the targets that we set with our State, and then
we execute accordingly within the various energy-efficiency programs. So it has proven to be an effective tool for us to achieve our
energy-efficiency goals.
Mr. MARKEY. OK. Thank you.
Mr. Campbell, you testified that an energy-efficiency resource
standard could create 260,000 new jobs. Can you talk about some
of those job opportunities, how they would be created?
Mr. CAMPBELL. We believe those job opportunities get created
very quickly, as energy-efficiency projects and energy-efficiency activity starts to increase. Some of the numbers that we see is just
for every million dollars worth of projects, we are probably looking
at five to seven direct jobs associated with that activity.
And these are well-paid jobs. I mean, these are things like energy engineers, controls engineers, software engineers, project managers, construction managers, construction crews, technicians, mechanics. These are good, solid, domestic jobs that get created with
energy efficiency.
Mr. MARKEY. OK.
Mr. King, what is the average rate of return on each dollar you
invest in energy-efficiency projects?
Mr. KING. Our overall energy-efficiency projects are not the utility investment. It is programs that are funded through our various
State programs. And it is the most efficient low-cost investment
with other alternatives, because we do view it as a resource. So as
you deal with energy efficiency, demand reductions, et cetera, those
are the most effective investments from an overall return standpoint.
Mr. MARKEY. OK. Thank you.
Mr. Anderson, under my EERS bill, electric and natural gas distribution companies are required to meet certain energy savings
targets each year. Under that bill, utilities could satisfy those targets in part by buying from members of your organization the en-
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ergy savings that your members achieve at their own facilities, for
example, through combined heat and power, waste heat recovery,
or other efficiency measures.
In other words, this is a major opportunity for your members to
profit through energy-saving projects. Isnt that something that you
could actively support?
Mr. ANDERSON. Mr. Chairman, your bill has quite a few very
good things in it. I mean, I compliment you. It goes beyond utilities
into building codes. It uses cost-effectiveness throughout the bill. It
talks about the need for measurement and verification. It talks
about, you know, taking into account weather and the economy and
oversight and CHP, as you mentioned.
But the way we look at the bill is, it mandates energy efficiencies
across the board. This is probably going to put a layer of cost
across the board. Yes, there are some opportunities involved for
some manufacturers who might be able to sell through a bilateral
contract, which your bill does allow, but it also is going to affect
other industrials in a different way.
We think, at least, that industrials, through their competitive
forces, have had to implement energy efficiency in a great amount.
And we just think they ought to be exempt from the
Mr. MARKEY. All right. Let me let Mr. Wells respond to that.
What do you think about that?
Mr. WELLS. Could you repeat the question, please?
Mr. MARKEY. Just respond to Mr.
Mr. WELLS. About the EERS?
Mr. MARKEY. Yes, please.
Mr. WELLS. We have reviewed the bill. We support the bill.
When you look at the energy-efficiency opportunity, we look at our
own company. It is in line with the performance that I talked
about, and it is in line with the opportunities that we see going forward.
Mr. MARKEY. OK.
And I will give you the final word, Mr. Guidice.
Mr. GUIDICE. I think that the bill will actually unleash all kinds
of opportunities, in industrial facilities and commercial and governmental facilities. And I am quite excited about it. I think many
folks across the country will be able to
Mr. MARKEY. Do you agree with that, Mr. King?
Mr. KING. Yes. Again, if you go back to some of my comments,
our view is this is the foundation of a strong energy policy. And if
we can build energy policy on the foundation of energy efficiency
as one of the top resources, I think it is the right way to go.
Mr. MARKEY. Thank you, Mr. King.
The Chair recognizes the gentleman from Illinois, Mr. Shimkus.
Mr. SHIMKUS. Thank you, Mr. Chairman.
Let me follow up on this. Would anyone who supports the EERS
support it without decoupling?
Mr. GUIDICE. Yes, I would support EERS
Mr. SHIMKUS. Without decoupling?
Mr. GUIDICE [continuing]. Without decoupling as a specified requirement, absolutely. But, to be clear, we would require different
States dealing with the utility-by-utility issues for that one.
Mr. SHIMKUS. Mr. King?
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Mr. KING. We are operating in States that are moving on a progressive path towards sound energy policy, and decoupling is an
issue that they are willing to tackle. So we are going forward without it being a part of the
Mr. SHIMKUS. So you dont need decoupling to support EERS?
Mr. KING. Within the States we are operating in, the States are
supportive of moving in the direction
Mr. SHIMKUS. Anyone else want to add on to this debate?
Let me follow up on this decoupling debate, because this is pretty
telling. Major users were thrown out, but this chart by the Department of Energy that my colleague, Mr. Upton, brought out talks
about the additional cost to low users.
Now, I represent parts of 30 counties in southern Illinois. We
wish we had more manufacturing. We wish we had big users. We
are producers of electricity through coal and through coal-fired operations. I have talked about that last hearing, where a thousand
jobs in my district were lost through the Clean Air Act. I can point
to the specific mine, and I showed pictures of that mine in the last
hearing. But this is talking about the effect to low users and residential small businesses of decoupling. So I would hope we didnt
just disregard this.
And I would want to ask Mr. Guidice and Mr. King, The Boston
Globe in an article, January 18, 2008and this is the second paragraph: Massachusetts manufacturers pay the highest electricity
prices in the continental United States, and the gap between their
costs and those of competitors in other States is widening, according to the Energy Department. In 2006, the most recent annual
data available, industrial users in Massachusetts paid more than
double the average U.S. rate, compared to 60 percent more in 2005.
Only Hawaii has higher industrial rates.
And you are telling us that that is a standard that we should
have? Higher industrial rates?
Mr. GUIDICE. No.
Mr. SHIMKUS. The Massachusetts model?
Mr. GUIDICE. I am not saying that our rates are the model for
the country. I would actually love to bring our rates down, and we
are working hard to do thatand our spending down on energy.
And I suspect that the efficiency initiatives that we are taking are
the ones that are going to drive that down most dramatically. And,
to be clear
Mr. SHIMKUS. Let me add to this debate the international scope,
because this is really an international debate, and we are competing internationally with countries around the world.
If China and India do not fall into some climate change regime
on cap and trade, can we ever compete with them in the manufacturing sector again?
Mr. GUIDICE. In my view, the world needs to get involved in the
carbon issues.
Mr. SHIMKUS. No, that is not the question. The question is, if
China and India does notwhich I believe they will not, based
upon discussions I have had with senior Chinese officialsif they
do not, will we ever be competitive in major manufacturing in this
country again?
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Mr. GUIDICE. We will have gigantic problems if China and India
do not get involved in carbon issues.
Mr. SHIMKUS. Thank you.
Let me follow up withand I dont believe they will, obviously.
Let me goMr. Campbell, this is a greatin your testimony
and this is, again, on this decoupling. And you could have been
stronger based upon your written testimony, because you say this:
Improving efficiency is good for everyone. Efficiency improvements
not only reduce emissions but also save consumers and businesses
money. Energy prices are escalating and would continue to rise
with a price on carbon. This is what we say all the time: Energy
prices are escalating and would continue to rise with a price on
carbon. That is climate changeputting a price on carbon.
Energy efficiency will reduce that impact of climate policies on
consumers energy bills. It would lower energy spending for American business large and small, enabling them to better compete in
the global economy. Smarter, more efficient buildings not only have
lower utility billsand that is the one I want to highlightbut
also improve health, safety, and comfort.
If consumers do not see lower utility bills by efficiencies, will
they move to a new efficiency world?
Mr. CAMPBELL. I would say that for consumers and businesses to
take on those energy-efficiency improvement measures, they have
to see the incentive. There has to be an incentive for that.
Mr. SHIMKUS. And just for my Massachusetts friends at the
panel, we debated decoupling here in the hearing. And you are correct that the stimulus bill strongly implies for the Governors to
move their PUCs to a decoupling regime. And if you followed the
debate here, there was no confusion that decoupling is a major
issue. And, as we see, it is going to cost individual consumers, and
it is not going to provide the incentives for the individual consumers.
And I yield back.
Mr. MARKEY. The gentlemans time has expired. The Chair recognizes the gentleman from Washington, Mr. Inslee.
Could the staff put upwe have a chart with California rates,
or California usage. If you could put it up on the screen, please.
I just want to make reference to that.
It is a little difficult to see, but I think it does help visually to
look at how stunningly different the per-capita usage is in California, which is the lower blue line, and the average per-capita
usage of the American, the upper red line, and how they have diverged. And they have diverged in no small part because of some
efforts in California to inspire efficiency.
And I just want to note that the numbers are pretty stunning.
As a result of that difference, together with the rate structures in
California, that has saved Californians somewhere between$4.1
billion between 1997 and 2004. And basically it is the difference between a flat per-capita usage in California and about a 40 percent
increase per capita in the United States.
Now, as I understand what has happened in California, they
have followed sort of a commonsense provision. Their measures
they have adopted basically say that if a consumers energy needs
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can be met with a 3-cent-per-kilowatt investment in energy efficiency, essentially California has required utilities to go in that direction, where, instead, a 10-cent-per-kilowatt investment in a new
power plant would be an alternative way to go about that.
Now, our efforts in the stimulus bill would essentially, in one
way or another, ask utilities to adopt that same type of strategy,
which, to me, seems a relatively commonsense provision. If you can
achieve your consumers goals, which is a warm house, with a less
expensive investment in efficiency rather than a more expensive investment in power generation, then we want you to go in that direction.
Now, I think the language of the stimulus bill, in fact, meets that
sort of goal. And that is why the president of the National Association of Regulatory Utility Commissioners just last week basically
expressed acceptance of the language that we put in the stimulus
bill.
So I just want to ask Mr. Guidice, if I pronounced your name
right, to comment. Is that a fair assessment of what we are doing
in that bill?
Mr. GUIDICE. Yes, that is a fair assessment. And I think it is a
good case example of what is possible here for the whole country
to move forward with.
Mr. INSLEE. Do any of the panel disagree with that assessment?
Mr. ANDERSON. I would like to add a couple of things to it. I happen to have been looking at the same chart that you have put up
there, and just add a couple of things to it.
The vertical line right thereit is hard to seeit was 1976. My
understanding is that California decoupled in 1982. They got rid of
decoupling in 1996. They instituted recoupling again in 2004. They
implemented inversed ratesin other words, the more you consumed, the higher the cost per kilowatt hourthat I think, at
least, went farther than anything else in bringing this about. And
I conclude from this, if you have high rates, you are going to have
lower consumption.
Now, climate helps too. You know, when you are on the coast of
California, you have a wonderful climate. It is truly Gods country,
and you dont need air conditioning a lot of the time, or heating.
So there is a lot of other factors here besides it.
But what my main point is is that business flight out of California has exceeded, I believe, just about any other State for a considerable length of time. And if we, as a society, like that as a
modelhigh prices, flights of businesses awaythen I think we
can get into this.
I dont think this chart, though, tells us that decoupling is good
or bad or whatever because it just is far more complicated than
that.
Mr. INSLEE. So do you have any assessment ofare you familiar
with any studies that have tried to parse out the relative contributions to the California experience?
Mr. ANDERSON. I dont know of any particular ones, no.
Mr. INSLEE. Very well.
Let me ask in general, regarding Mr. Markeys bill, do any of you
have any suggestions on changes to the bill, other than what you
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have already articulated? I just want to give you an opportunity if
you have any suggestions for us in that regard.
Mr. Markey, of course, thinks that this is a perfect Mona Lisa,
which we would normally start with a presumption in that regard.
But I just wanted to give anybody an opportunity.
Mr. GUIDICE. I would look at even more aggressive targets in the
EERS, both on the gas side and on the electric side. I think those
are understandable as to those why those are the sets that we are
starting with. But I think, as we think about the climate challenges that we are facing and the economic opportunities that we
will unleash, that we could ramp those targets up more significantly and quicker.
Mr. INSLEE. Anyone else?
Mr. ANDERSON. We would like very much to see the bill have the
ability for industrials to opt into it. Clearly, there are cases where
there could be real advantages if an industrial was involved to sell
some energy-efficiency savings. But we also think that one size
does not fit all, and we think it would be very difficult. So we
would prefer to see them excluded otherwise.
Mr. MARKEY. Great. The gentlemans time has expired. The
Chair recognizes the gentleman from Texas, Mr. Barton.
Mr. BARTON. Thank you. Thank you, Mr. Chairman. We have go
a hearing going on downstairs, too, so I have been running back
and forth.
I want to ask Mr. Inslee a question, although he is not on the
panel. What is the retail cost of your constituents for electricity in
Washington?
Mr. INSLEE. Well, that violates the rule against embarrassing
any of your colleagues. So I will decline to answer, both because
it violates that rule and, secondly, I dont know.
Mr. BARTON. Oh. Well, I am not trying to embarrass you. I think
it is around 7 cents a kilowatt hour.
Mr. INSLEE. I honestly do not know the answer to that question.
Mr. BARTON. OK. It is very low. You have some of the lowest
utility
Mr. INSLEE. That is correct. That is correct.
Mr. BARTON. What is the average retail rate in California, Mr.
Anderson or Mr. Reichel? They have some of the highest rates.
Mr. ANDERSON. I am sorry, Mr. Barton, I dont know the numbers. I know that it is very, very, substantially
Mr. BARTON. Well, I know in San Francisco their highest rate is
37 cents a kilowatt hour.
Now, spare me the California modelyou know, brownouts,
havent built any new power plants in probably decades; this decoupling, which I am going to ask Mr. Anderson about. I want the Jay
Inslee-Washington State model, Bonneville Power Administration
generating clean hydropower because God blessed his region of the
country with great hydro resources, and the Federal Government,
during the New Deal, built some of the most efficient hydroelectric
power dams in the world. So his constituents get power at probably
the lowest rate in the country. That is a plus for them; it is not
a negative. And I am not trying to embarrass Mr. Inslee at all, because that is just the way it is.
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But, you know, this hearing on energy efficiency is a good hearing. I am for what Mr. Markey is trying to do. But dont gag me
by saying that we need to emulate the great State of California,
who is almost single-handedly doing everything they can to destroy
their economy on almost a daily basis and which has the largest
State budget deficit in the history of the Nation, $42 billion this
year alone. To put that in perspective, the entire budget of the
State of Texas, on an annual basis, which is the second most populous State, is, I think, $75 billion.
So, anyway, Mr. Anderson, what is your opinion of decoupling?
I asked Mr. Anderson, but I will let Mr. Reichel answer it if he
wants to.
Mr. REICHEL. I yield to Mr. Anderson.
Mr. ANDERSON. As I said very briefly in my oral remarks, and
I have much more detail
Mr. BARTON. Oh, I got the nametags wrong. I am sorry. Go
ahead, Mr. Anderson.
Mr. ANDERSON. We are very much opposed to revenue decoupling
for a variety of reasons.
First of all, we agree that there needs to be incentives for costeffective energy efficiency; there is no doubt about that. But trying
to pay extra amounts to utilities to have them implemented just
doesnt make sense. The dollar that you give to a utility for energy
efficiencyand, remember, utilities dont spend their money; they
spend customers money. So you give a dollar to a utility to implement energy efficiency, they take a sizable portion of that in overhead and whatever else, and then they give what is left back to
some customers. This is an income redistribution. It probably
doesnt really reduce the disincentive of a utility anyway. Eighty,
90 percent of the utilitys revenues are still going to come from generation, no matter what you do.
So we have a whole variety of reasons why we are strongly opposed to revenue decoupling.
I would also like to say that I was surprised to hear someone say
that NARUC, the Natural Association of Regulatory Utility Commissioners, supported the provision in the stimulus bill. I was
working very closely with NARUC throughout that debate, and I
thought that they were opposed. I cannot speak for them, but I
think we ought to find out where they stood on the final
Mr. BARTON. Is there a better way to incent a utility to do these
energy-efficiency programs than decoupling?
Mr. ANDERSON. I think a far better wayif you are going to have
a utility involved at all, I think a far better way is to have the utility be basically a tax collector; they collect money from customers
however you specify that they are going to do it. And they turn the
money over to a third party, whose sole objective is to implement
energy efficiency. Their business model is to implement energy efficiency.
I believe Vermont has one, North Carolina has one, New York
has one. There is a variety of examples. And we think, at least,
that they work a whole lot better than trying to have an interim
conflict within a utility. One side wants to sell more power; another
side wants to sell less power. And it is an internal conflict inside.
Have a business model of a utility to produce and sell and dis-
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tribute energy efficiently, and have a third party whose sole business it is to implement energy efficiency.
Mr. BARTON. My time has expired. Thank you, Mr. Chairman.
Mr. MARKEY. Great. The gentlemans time has expired.
Mr. INSLEE. Mr. Chair?
Mr. MARKEY. The gentleman from Washington.
Mr. Anderson brought up an issue about the Chair of the National Association of Regulatory Utility Commissioners, and I had
made a reference to, essentially, that they had said that they are
comfortable with the final product. With your permission, I will put
his statement in the record, and I think it will clarify that. They
basically had concerns about the original product. He expressed
comfort with the final product.
Mr. MARKEY. If I may, I am going to ask the gentleman from
Texas if he would mind having this clarification be part of a 1minute extension that is granted to the gentleman from Texas.
Mr. BARTON. Sure. Sure.
Mr. Anderson, if you want to respond?
Mr. ANDERSON. Yes, I was at the meetings where they did this,
and I didnt understand the final, so I may be incorrect with it. But
I know that there was tremendous concern that a public utility
commission is supposed to be an independent body. And the way
I read the language, the way they were reading the language was
the Governor is supposed to be, in essence, trying to tell the independent commission what to do. And they thought this caused tremendous amounts of internal conflict, maybe ex parte kinds of concerns and that sort of thing.
But if I am incorrect, I need to stand corrected. I apologize if I
am.
Mr. INSLEE. We will just put this in the record and let people
draw their own conclusions. Thank you.
Mr. MARKEY. I thank the gentleman.
The Chair recognizes the gentleman from Vermont, Mr. Welch.
Mr. WELCH. Thank you, Mr. Chairman.
Mr. Anderson, I am from Vermont. We do have decoupling, and
we do have a separate energy efficiency utility. And they both seem
to be successful. The decoupling was a process that was widely debated with our utilities and worked out. And I want to get back to
what we can do and not get just bogged down in whether this question of decoupling should get in the way of an aggressive frontal
assault on efficiency.
Mr. Guidice, as a State official, you obviously have some sense
of the importance of State autonomy. And some are arguing that
setting a Federal floor for building energy efficiency imposes a onesize-fits-all approach that interferes with autonomy at the State
level. Yet you are arguing very aggressively for strong Federal
building standards. And I want you to elaborate on that.
Mr. GUIDICE. Thank you.
Yes, it is clear that the market alone is not working on our efficiency around the country. There are market failures. There are
market barriers. And so we need to stimulate the right decisions.
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But it isnt one size fits all. And what does work in the Southeast
in terms of windows, as Mr. Upton was speaking of earlier, is different than what works in the Northeast. But that doesnt mean
that all of us dont have an opportunity to go much, much more significantly towards energy efficiency. And I do think that this kind
of approach, as laid out in the proposed act, will enable us to do
that.
Mr. WELCH. OK, thank you.
Mr. Campbell, it is tremendous to hear about the success that
you have had at Johnson Controls. And one of the big dilemmas
that we face, and it is being argued here, I think, largely around
this question of decoupling is, what is the dislocation that occurs
when you go from one energy policy to a new one?
And you have been successful, as I understand it, in achieving
efficiency and also creating jobs. And I want you to elaborate on
that, in your point of view about how aggressive we should be,
using efficiency as a tool to create jobs.
Mr. CAMPBELL. I mean, our view is that energy efficiency is the
number-one opportunity for managing emissions, for managing
some of the capacity issues that we have on the generation side.
And, clearly, energy efficiency creates significant jobs. There is a
significant industry behind that. But there are a mismatch of incentives that are out there today.
So, as we look at this, we really do see significant value coming
from a whole series of complementary measures that need to be introduced, both around building codes, equipment standards, and
also the energy-efficiency resource standards that have been introduced. But, in addition to that, we believe that there does need to
be a very clear alignment of incentives for people that are making
energy-efficiency improvements on their buildings.
Mr. WELCH. All right. What would you say would be the, say, two
or three incentive alignments that would be the most helpful?
Mr. CAMPBELL. Well, the first one has to be to save money. I
mean, that is ultimately what you want to see with any efficiency
improvement measures, that you have to have a return for undertaking that activity. And depending on the set scale of the return,
which can be complemented with specific incentives, depends how
deep you can go with an energy-efficiency project.
So you can see energy-efficiency projects without incentives, especially in the private sector, that go very shallow, maybe look at
lighting, maybe look at recommissioning, constant commissioning
of a building. But to do the deep energy-efficiency improvement
measures that go 30, 40 percent energy-efficiency improvement in
a building, people have to either have a very long-term perspective
on that building or there have to be incentives attached to taking
those measures.
Mr. WELCH. OK, thank you.
You know, in Vermont, we spend about a billion dollars a year,
which for our small State is a lot of money, on energy that is
money that goes straight out of the State. A lot of interest in doing
combined heat and power or other means of local generation of
electricity, in order to keep that energy dollar recirculating as
much as possible in Vermont.
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Mr. Wells, what specific things could we do, as you see it, to encourage local generation of power, to keep those dollars at home?
Mr. WELLS. When you talk specifically to combined heat and
power or cogeneration, it is finding a means to utilize the waste
heat that comes off power generation. Todays power generation,
pulverized coal efficiencies are in the high 30s, and some of the cogeneration units that we run are in the high 70s, if not approaching 80, because of our ability to capture that heat. We have a ready
heatsink right there to use it. So, distributive heating, finding a
way to take the heat off of a power plant and using it to heat
homes in a neighborhood or in some sort of way, or finding an industry that needs that heat and coupling that up with a power
plant. When electricity is sold on the grid, the heat is used.
The problem is, heat cant be transported like electricity can. So
it has to be something local, it has to be something distributed
right nearby.
Mr. WELCH. And then, how do you deal with the impact that it
has on the local utilities that would potentially lose customer base
or lose revenues? And anybody on the panel can answer that.
Mr. KING. Just to put a couple of things in perspective, first of
all, when you look at the total energy bill, both the transmission
and distribution costs and other key important programs are basically at inflation or below. The bigger problem is the energy costs.
And what we need to do is focus on how can we most efficiently
reduce consumption and help reduce those overall energy costs.
That is the fundamental driver on why bills are the way they are.
Mr. WELCH. Thank you. I think my time has expired.
Thank you, Mr. Chairman.
Mr. MARKEY. The gentlemans time has expired. The Chair recognizes the gentleman from Oregon, Mr. Walden.
Mr. WALDEN. Thank you very much, Mr. Chairman.
Mr. Campbell, as you know, in my opening remarks I cited the
comments in your testimony. And I apologize for having to leave
to go to the Communications Subcommittee, so you may have addressed this. But it appears to me that you are arguing against decoupling in those comments, because you are saying that energy
prices are escalating and would continue to rise with a price on
carbon. Energy efficiency will reduce the impact of climate policies
on consumers energy bills. It will lower energy spending for American business.
You talk about doing all these controls to lower energy bills on
consumers as a good thing, as an incentive, I would assume, to do
energy conservation. I mean, you know, I think the average person
in my district says, Gee, I want to cut my costs. My budget is constrained right now. I am afraid of losing my job. They are not
going to be really excited if the State moves forward on decoupling
and says, Yeah, you do all that stuff. But, oh, by the way, you are
going to pay the same amount.
Isnt that really what happens under decoupling?
Mr. CAMPBELL. Yeah, I mean, I am not arguing against decoupling, but I am arguing for energy efficiency and ensuring that
there is aligned incentives associated with those energy-efficiency
measures to drive energy efficiency so we bring true economics to
the consumer or the business so they can make smart decisions.
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Mr. WALDEN. All right.
Mr. Anderson, let me go to you, because it seems to me, from
your testimony, you would be arguing against decoupling. And I
dont know what theit seems to me it is a really perverse incentive to tell businessesand I was a small-business owner for 21
yearsthat you use less, pay the same. I dont know how that is
going to help our economy.
Tell me the stimulative effect on a small business by having
them pay the same utility rates because they conserve their energy
consumption.
Mr. ANDERSON. As I have said earlier today also, I agree with
you completely, and it is a disincentive. We also look at it for, why
are the utilities guaranteed anything? I mean, my members right
now would love to be decoupled from their customers. I assure you,
my auto companies today would love to be making the same
amount of money that they used to make.
Mr. WALDEN. You know, I was in the radio business for 21 years,
small-market radio stations. And I always thought it would be
great for every time we didnt sell an ad and had time to run it
that, you know, maybe we should have gotten paid. That would be
the ultimate form of decoupling. My sales people would have loved
that, too, I suppose. But it is not the way it works.
Mr. ANDERSON. Correct.
Mr. WALDEN. It is not the way it works.
Mr. King, I noticed in your testimony that you congratulated the
Congress for passing the stimulus with $3.1 billion in State matching grants for energy efficiency and assistance for low-income consumers to weatherize their homes.
Wont low-income consumers be hurt, as well, if they do all this
weatherization and the utility company comes back and gets to
charge them the same amount?
Mr. KING. The intent behind the low-income consumer program
will be to ensure that we are doing what we can to reduce their
overall energy bill. And all that goes into how overall rates are
Mr. WALDEN. And who pays for that subsidy to the low-income
energy consumers who have reduced their consumption because
they have taken advantage of weatherization, of which I am a big
advocate of, who subsidizes them? Where does that money come
from?
Mr. KING. All of those types of decisions are rolled into the overall rate design. And our customers, as a whole, as a community,
support those kinds of programs.
Mr. WALDEN. Now, community is a wonderful term to use. But,
at the end of the day, it is everybody paying their power bill, right?
Mr. KING. That is absolutely
Mr. WALDEN. Do higher power rates affect the economy?
Mr. KING. No, they dont. That is a cost of living and doing business.
Mr. WALDEN. Have you ever been in small business?
Mr. KING. No, I have not.
Mr. WALDEN. I have. And I have to tell you, in the radio business
I did everything I could, as I could afford to, to replace old tubetype transmitters with solid-state ones so I could cut my energy
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bill, be more efficient. That savings amounted to something in my
bottom line.
Mr. KING. I can understand that. And we have spent a tremendous amount of time with our customers trying to find ways to help
them reduce it.
Mr. WALDEN. But how can you say that the higher energy costs
dont affect the economy? I am struggling here.
Mr. KING. I dont think I said that. I think I said, yes, I understand how it impacts the economy. And it is part of living within
a certain area and trying to help manage overall energy bills on a
day-in, day-out basis.
Mr. WALDEN. But dont you think the best incentive is the good
old marketplace that says, if I can cut the use of my power, I can
save myself a little money and put it towards something else?
Mr. KING. That is exactly what energy efficiency and demand reduction is about.
Mr. WALDEN. It is, except when you add the decoupling to it that
says the utility gets to charge me the same amount regardless of
how much I save.
Mr. KING. Decoupling doesnt necessarily equate to that sentence.
Mr. WALDEN. What does it equate to then?
Mr. KING. The overall issue that we are trying to deal with from
decoupling is to make sure that we understand the cost to deliver
the energy and that we have the ability to recover those costs. That
is it.
Mr. WALDEN. Which is why the utilities love decoupling.
Mr. KING. The overall issue with why we support decoupling is
to make sure that, again, as you heard from the panel today, is the
incentives are aligned and we are making sure that we are doing
what we can to support the policy to reduce energy demand.
Mr. WALDEN. I wish we would have had a single hearing on this
issue as it was related to the language in the bill that everybody
voted on and very few got a chance to read in advance. I am trying
to figure out now what this language that is now law means in
terms of assuring that the governors get assurance from their
PUCs to implement it.
I know my time has expired. Thank you.
The Chair recognizes the gentleman from Texas, Mr. Gonzalez.
Mr. GONZALEZ. Thank you very much, Mr. Chairman.
I guess I should start off with my own observation of Texas government and Texas budget as compared to California. I am not
here to defend California, but, by the same token, I know how
State governments can save a lot of money.
Texas has been able to do it by simply not investing in infrastructure, on maintaining what they have and making no real investment in health care and education. You can save a lot of money
that way. There is a greater price down the road, and I believe that
my analysis would be supported by any study of what Texas has
done in the past few years.
As we go through this debate today, you would think that we
have made some real progress. Because you think in terms of the
first year of the Bush administration in 2001and I know it is getting into the partisan, but lets figure that we made some progress.
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Because, in 2001, it was Vice President Cheney who commented
on efficiency and conservation that conservation may be a sign of
personal virtual, but it is not a sufficient basis for a sound, comprehensive energy policy.
I think we all acknowledge todayeven my colleagues on the
other side of the aislethat conservation efficiency does in fact
have a place in the overall energy policy of this country. At least
that is what I am hearing. I have heard it referred to as not necessarily the fifth fuel but the first fuel. I have heard it as being
one of the legs of the three-legged stool and so on. But what I am
really hearing here is that we acknowledge it is out there, its
value, but it cant be done, whether we say it is about decoupling
or are talking about exemption for the industrial sector and so on.
So, on one hand, I think we recognize certain things like, well,
we recognize that global warming is real, but I am not real sure
that we can do anything about it. But at least we have the acknowledgment. So I feel hopeful that we have finally acknowledged
a fundamental fact, and we move forward.
The question to the panel, and I am going to ask Mr. Anderson,
during your testimony, I wasnt real sure if I heard you correctly
about an industrial sector exemption. Is that what you stated?
Mr. ANDERSON. In Mr. Markeys bill, that is what we were suggesting, yes.
Mr. GONZALEZ. All right. And do you wish to elaborate at all? Because I am going to ask the other witnesses to comment on that
proposal and what they believe might be the impact.
Mr. ANDERSON. Our companies operate in worldwide competitive
markets; and the tremendous competition requires them, we believe, to implement cost-effective energy efficiency already. And we
are concerned that if another layer gets put on top of that, it adds
another layer of cost while doing more on the energy efficiency is
quite difficult. So we are asking that industrials have the option of
opting in if they want to be but otherwise being left out of the Federal mandates.
Mr. GONZALEZ. I think our industrial base does operate at a terrible disadvantage with other countries. India and China, of course,
come to mind. The problem is we are not India and China, and
much of our progress was based on some pretty bad experiences,
and it doesnt mean that we continue or revert back to practices
that should have been unacceptable under any circumstances.
I do not want to go too far back, but lets go back to child labor
and working conditions and such. That will give us a tremendous
advantage. Maybe we will be able to compete with practices in
other countries. I dont think we do that.
When it comes to global warming and practices, I think there is
a certain responsibility not to sink our economy but to do the responsible thing. I am not you are sure if you say it is a moral imperative and all that. Look, this is the real world. My constituents
want jobs and a quality of life, also. So it does not fall on deaf ears.
But I am not sure if you are advancing an argument that simply
says we just cant do it under the present economic circumstances
and we never will be able to do it. But lets just talk about the exemption. Is that a viable choice? Is that something Mr. Markey
should be considering?
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And I will ask the other witnesses to make their remarks and
to address that particular statement by Mr. Anderson.
Mr. WELLS. I think when you look at competitive that is a very
good point; and in my case the competition is not labor cost, it is
energy cost. So we are competing with places like the Middle East,
where they can get natural gas out of the wellhead for a dollar
BTU. And as recently as last summer we were paying $14 for that
same.
For this reason, we have done sort of the efficiency improvements
that I talked about, 1,600 trillion BTUs that Dow Chemical saved
since 1994. And for this reason the opt-out may make some sense.
Because we have done a lot of things that are out there, and for
us to go the next step gets us out of what would be defined as cost
effective and into much more costly.
However, having said that, having looked at the bill and looked
at the numbers, at least for our particular company, we feel the bill
as introduced is something we can live with.
Mr. CAMPBELL. Let me just add to that. With the targets within
the bill I would concur. Personally, on behalf of the company, I believe we need to get serious about energy efficiency; and having exemptions is not getting serious about energy efficiency. I think the
numbers are very attainable from all businesses, and I think that
it really is a significant opportunity to drive competitiveness of our
industrial base, to get more competitive in relation to energy efficiency and energy consumed.
Mr. GIUDICE. I strongly support no opt-out for anyone. We are all
in this together, and there is opportunities for all of us to do so
much more.
In Texas, the PUC there in the State energy offices recently
looked at the efficiency potential in Texas and determined there is
upwards of 20 plus percent of reduction of energy consumption possible and the economy would grow without any shrinkage. It would
grow jobs in Texas by reducing energy consumption by upwards of
20 percent.
Mr. KING. Our industrial base is very interested in finding every
way they could to reduce their energy consumption. We spend a
great deal of time with them. We have had great success in reducing the overall energy consumption; and if we set goals and objectives in this bill, we need to find every way we can to achieve those
goals and objectives. I would highly recommend that we stay with
as large of a market impact that we can to ensure that we are
achieving the efficiency goals.
Mr. GONZALEZ. Mr. Reichelis that correct? The pronunciation?
Mr. REICHEL. Yes, sir.
As my expertise here today is pretty much with energy, once it
is inside the building I would support anything that we can do
from the energy efficiency side on the outside of the building.
Mr. GONZALEZ. Thank you very much.
Yield back, Mr. Chairman.
Mr. MARKEY. The Chair recognizes the gentleman from Louisiana, Mr. Scalise.
Mr. SCALISE. Thank you, Mr. Chairman.
Mr. King, in your testimony that you submitted, I think on the
first page, you talked about the various strategies that you em-
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brace; and I think your comment was we need law. And I agree
with that. I know a lot of us last year in the big energy debate we
were having in Congress proposed an all-of-the-above strategy,
which encompasses efficiency conservation but also production and
natural resources as well as renewables.
One of the thingsand we had this debate on the stimulus bill
that we consider a renewable option is nuclear power; and there
was an attempt to include nuclear power, which has no carbon
emissions, in that renewable definition. Unfortunately, that was an
unsuccessful attempt.
Do you support including nuclear power in that we-need-it-all
strategy that you envision in your testimony?
Mr. KING. I think it is important that we look at all the alternatives.
Mr. SCALISE. And consider that as one of the alternatives.
Mr. KING. So it is important that we look at all the alternatives
and make sure that we understand and have a comprehensive view
of the national energy policy.
Mr. SCALISE. Clearly, many other countries are already pursuing
that in a very aggressive way; and our country seems to be lagging
behind. Hopefully, that changes as the technologies advance. It is
clearly working well for many who are using it. So I appreciate
that.
Mr. Wells, in some of your testimony as you talk about natural
gas prices and the effectsand, obviously, we have some large facilities with your company and others in south Louisianaas gas
prices increased, it had a stifling affect on growth in the industry.
As companies are trying to be more efficientand, of course, the
biggest incentive is the profit incentive, and there is a profit incentive to be more efficient.
But as you squeeze efficiencies out and then you get to a point
where decoupling and other things would potentially increase rates
for those who have done all they canin terms of job losses, every
time you have a 1 percent increase in natural gas prices, for example, what does that mean in terms of your ability to continue keeping the people employed that you have employed, looking at moving
more operations overseas? How many jobs are lost for every 1 percent increase in natural gas prices?
Mr. WELLS. I dont have the number for the 1 percent, but the
chemical industry in the last 8 years we have lost over 100,000 jobs
in this country in large part due to what has happened in natural
gas pricing, where we were in an area where we paid a pretty constant price in this country and we built a large chemical infrastructure around that and became an export base for much of the world.
When natural gas did what it did in the late 90s and the early
part of this decade, then we started looking for other, cheaper
sources and found them. My own company, we are looking at building plants in Saudi Arabia, places like Libya, Egypt, because we
can get that very cheap feedstock.
It is important to know for the chemical industry natural gas is
not just a source of energy. We dont just burn it in a turbine and
just combust it to make steam. We also use it to make our feedstocks.
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I talked about in our company alone the bill last year was over
$27 billion for our energy costs. Not only do they rise because of
increasing demand and supply that is starting to fall offwe have
seen some new discovery that has helped, but we think that just
at best will delay the inevitable. But we also when we think about
the climate change and what could happen with climate change
and climate legislation, which we support, the easy answer is to go
to natural gas for power generation and to combust natural gas
over coal and lead to this dash to gas which could even further exasperate the situation.
Mr. SCALISE. I just hope as we go forward wea lot of us have
concerns about exporting jobs overseas and job losses. You talk
about 100,000 jobs lost, in a way, because of a failed energy policy.
I just hope we are very cautious in how we proceed, that some of
the things we do, where we all agree that efficiency is important,
where we dont have penalties on the other side that actually cost
us more jobs. And your industry is a good example of there is a
point of, if you exceed that level, your ability to continue employing
the people you have is going to diminish.
So, hopefully, we keep all of that in mind as we entertain legislation to address the concerns that I think a lot of us have. But how
we get there, we have to be cautious that we dont have those consequences which I dont think would be unintended, because we are
well aware, as you point out, that those have direct impacts on
businesses ability to continue operating profitably here or looking
at other options in other countries which have definitely been
taken by companies over years and hopefully wont in the future.
And, hopefully, we wont do anything in this Congress that encourages people to move those jobs overseas.
Thank you.
The Chair recognizes the gentleman from Texas, Mr. Green.
Mr. GREEN. Thank you, Mr. Chairman.
And it is interesting I follow our new colleague from Louisiana,
because I have a district in Houston thatI have the petrochemical
complexes there. When you talk about losing jobs because of the
high price of natural gas, we have seen that in our district, and
particularly in the recent with our own economy with what is happening. Because a lot of the things our chemical industry does actually goes into home buildings for weatherization and things like
that. That is why this last bill was a success, I think, to try to do
some of the things that we want to do.
I want to follow up on that line of questioning, Mr. Wells. I know
Dow Chemical is a member of the U.S. Climate Action Partnership.
Like I said, your biggest plant in my area is in Freeport. It is not
in our district. But I have Channelview, Houston and Pasadena, so
I have a number of your facilities.
In your testimony, you mentioned that one of the likeliest ways
to meet short-term carbon emission reduction targets called for in
climate changes that fuel switching from nat coal to natural gas.
And, again, with my accent, you would think I would love natural
gas. And that is not a problem. It is just that in the chemical industry it is not only a fuel but it is a feedstock, and that is what
caused us to lose those jobs.
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I can tell you 3 years ago Shell Chemical moved jobs from Deer
Park, Texas, in my district to the Netherlands for two reasons. The
price of natural gas in the North Sea was cheaper, but also the
price of health care for the Netherlands was cheaper per employee
than their plan in Deer Park. So our committee has jurisdiction
over both of those; and, hopefully, we will make it a little more
competitive.
But the so-called dash to gas could be ruinous for the industries
that are dependent on it, like the chemical industry. So I have significant concerns about any impact the climate change would have
on affordable and reliable supplies of clean natural gas.
I have to admit even in Washington we see Boone Pickens ads.
If we all did what Boone Pickens wanted us to do, not only with
wind and solar but natural gas, we might not be having this concern.
Since I represent a great deal of the manufacturing facilities, Mr.
Wells, do you believe that enacting energy efficiency measures
would be enough to offset the job losses in particularly your manufacturing sector due to the increased demand for natural gas from
the fuel switching?
Mr. WELLS. No, there would not be enough. They are an important step. They are an important easy step, an important economical step, but we have to go further, and we have to look at increased supply, what we can do to get more supply in a situation.
We have to manage both sides of the supply and demand equation. We have to manage demand by the efficiency measures and
other complementary measures we talked about today. We also
have to manage the demand side and make sure the countrywe
can get at the source of natural gas and oil that we have available.
We are the only country in the world that is not allowed to look
for our own resources right off our shores.
Mr. GREEN. The last Congress made exceptions, and we took off
the moratorium on Outer Continental Shelf drilling. There may be
some adjustments to that, and we dont want to drill in national
parks and sanctuaries and things like that, but there are areas
that we can get natural gas.
Natural gas is site based. Dow put in an LNG facility in Freeport, but that is not the way to solve the problem. We really need
to have it much closer. You can pipeline it closer, because the cost
gets so extravagant.
Mr. WELLS. We didnt put it in. It is another company that put
it next to ours, and we are a user to clear that up.
Mr. GREEN. You probably wouldnt be there without Dow in Freeport. In fact, in the 2005 energy bill, Congressman Terry and I
both championed that we would import natural gas when possible.
But that is not our solution, either.
What design elements for a cap and trade program where there
is reduction of targets and timetables or cost containment mechanisms or complementary policies would be most effective and lessen
the impact of fuel switching? Does Dow have
Mr. WELLS. Absolutely. As a member of U.S. CAP, they recently
came out with their blueprint for legislative action. In there it talks
about complementary measures for coal, complementary measures
for transportation, things we would like to see. Certainly carbon
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capture and storage. The ability to continue to use coal in a responsible way will would go long way to keeping the dash for gas.
What will happen if we dont do something like that, natural gas
becomes the bridge as we invent the carbon free energy infrastructure. That will take time, and to bridge that time the easy choice
is to go to natural gas. It creates half the amount of CO2 as coal
does in a power generation situation, and our industry cannot afford for that to happen because of what I talked about.
Mr. GREEN. Also, when you happenand carbon capture and sequestration, that will help, particularly with coal. I know from your
response to the earlier question about nuclear power, again, that
is 15 years away, if we are lucky, maybe 12.
Mr. WELLS. We certainly think nuclear is part of it, both the traditional light water reactors and next generation, the high temperature reactor. We see lots of potentialalthough technology has
a long way to go, lots of potential for that also to come to bear.
Mr. GREEN. Last year, the natural-gas-council produced a model
that predicted demand for natural gas to increase by as much as
10 trillion cubic feet per year under climate change legislation.
The first question is, even with measures to increase energy efficiency, do you believe it is still necessary to increase environmentally responsible reduction of natural gas, domestic natural gas
supplies in order to meet short-term carbon reduction targets called
for in the climate change legislation and to keep those good-paying
manufacturing jobs in the United States?
Mr. WELLS. Yes, absolutely.
Mr. GREEN. Could congressional efforts to hinder the domestic
production of clean natural gas inhibit the U.S. from achieving the
short-term carbon reduction targets while protecting our manufacturing base?
Mr. WELLS. Yes.
Mr. GREEN. So it is compatible as a member of both U.S. CAP
to be a supporter of efforts to reduce carbon emissions as well as
the increased domestic supplies of clean natural gas?
Mr. WELLS. Yes.
Mr. GREEN. Thank you.
Dr. Anderson, you mentioned the importance of utilizing combined heat and power technologies and petroleum chemical industries expressed disappointment with FERCs recent rulemaking regarding incentives for CHP as called for under the Energy Act of
2005. Can you further elaborate on why you believe that rulemaking would discontinue CHP incentives in certain FERC-approved regional transmission organizations?
Mr. ANDERSON. The FERC order rule that came out basically
said that the PRPA incentives granted in 1978 for combined heat
and power for cogeneration would go away in those markets that
FERC has approved as being an RTO or an ISO. That is an independent system operator or a regional transmission system. So in
those areas, which covers a significant portion of the country, the
incentives that have been there since 1978 are going away. A utility can simply file with FERC and ask that they go away, and they
are beginning to do that.
We did not think that was the intent of the Act in 2005. In fact,
we worked with Representatives Barton and Boucher and others
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when that language went through. And so what we are asking is
that you all take another look at that and see if this really was the
intent. We at least believe, as manufacturers that do a lot of cogeneration, that it is a big detriment.
Mr. GREEN. Thank you, Mr. Chairman. I know my time has expired.
I appreciate that. I know that wasnt the intent in 2005.
Mr. ANDERSON. Thank you very much.
The Chair recognizes Ms. Baldwin.
Ms. BALDWIN. Thank you.
Mr. Greens questioning dovetails well with the direction I want
to go in.
In my opening remarks, I cited the December Oak Ridge Natural
Laboratory report stating the manufacturing facilities and commercial buildings are sources of waste energy that can be captured and
converted into useful electricity and steam productions.
Further, it said that waste energy recovery is one of the most
promising options in the U.S. energy efficiency portfolio and that
if the U.S. adopted a high deployment strategy, combined heat and
power development could generate $234 billion in new investments
and create nearly 1 million new high-skilled technical jobs throughout the country.
The report goes on to say that the U.S. could avoid 60 percent
of potential growth in greenhouse gas emissions between now and
the year 2030 if we increase the amount of electricity produced
from distributed energy sources from 9 percent today to 20 percent
by the year 2030. We have had some questioning about this, but
I would like to, with this potential out there, sort of have a little
bit more of a discussion about the various incentives and barriers,
the regulatory environment, as we just talked about, the technological hurdles and cost.
I guess I want to start in with cost. There was some testimony
suggesting that this isnt cost effective but cost prohibitive. I have
certainly heard from many industrial waste experts, waste energy
experts, who say that much of the technology is readily available
without further R&D. Required heat exchangers, turbines, piping
are all off the shelf, not requiring additional R&D. And that there
are other things that create hesitation in making investments in
the industry sector.
I guess, to Mr. Wells and Mr. Anderson, if you might comment
first on the cost barriers and additional incentives that we could
be looking at.
Mr. WELLS. I can only speak for the industrial sector and for our
own, and we dont see any cost barriers for the Dow Chemical Company. A vast majority of the power that we use is self generated,
well over 70 percent; and of this power well over 90 percent comes
from cogeneration. So in our application it makes a lot of sense, an
awful lot of sense for us. We make maximum use of it.
Mr. ANDERSON. First, I am not familiar with the studies. I apologize for that. But one of the big barriers to cogeneration is the ability to get backup maintenance and standby power. If your generator does go down, you have to buy in a non-discriminatory way.
We are concerned that when the incentives of PRPA were taken
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away that has taken those things away, and that is why we are
asking that you look at those things again.
I agree that there is a tremendous potential for combined heat
and power. I am not as familiar with distributed generation. It is
much smaller and applies to commercial and residential entities.
But I understand that there is a potential there, also.
Ms. BALDWIN. Let me follow up on that answer.
In designing the Energy Independence and Security Act, I know
that I worked with energy efficiency experts in my own district to
craft the waste energy incentive grant program really to incentivize
owners and operators of industry facilities to successfully produce
electricity from recovered waste energy. Specifically, it provides a
financial incentive of $10 per megawatt hour; and it is authorized
at the $200 million level, although not yet appropriated. Is this in
your mind sufficient financial incentive from manufacturers to invest in capturing waste energy and converting it to useful energy?
Mr. ANDERSON. We are strong supporters of the program. I cant
say whether that is sufficient or not, but it is definitely a significant step in the right direction, and I hope the money does get appropriated. As you said, it has not been appropriated yet. We have
been working with the Department of Energy as they are trying to
implement this, and we think it is a great idea.
Ms. BALDWIN. I recognize there is controversy over whether manufacturers should be able to convert waste heat to energy and then
sell any excess back onto the grid. How essential is the ability to
sell excess energy to the success of harnessing waste energyindustrial waste energy?
Mr. ANDERSON. I think it varies significantly by application, by
industry, even down to the individual plant.
Mr. Wells just mentioned they consume most of the power that
they consume, and that certainly is a model that many others use,
but others have the opportunity to produce more power than they
can consume. And you have to be able to sell it at a price that
makes sense.
Once again, it gets into the review of it, but that is an important
area for many applications.
Ms. BALDWIN. Mr. Wells.
Mr. WELLS. When you look at how we use cogeneration, that is
a very important thing for us. Because we balance on steam. We
make all the steam we need; and then whatever power that comes
along through the cogeneration process, if it is more than we need
at a location, being able to sell on the grid is very helpful to us.
If we dont make enough, being able to buy off the grid is helpful
to us.
Mr. MARKEY. The gentleladys time has expired.
The Chair recognizes the gentleman from Utah, Mr. Matheson.
Mr. MATHESON. Thank you, Mr. Chairman.
One observation before I ask questions.
As I listened to the discussion on decoupling that was taking
place, whether people think they are for it or against it, I detected
a lack of understanding about it during this discussion. I heard
people comparing decoupling issues relative to regulated utilities
with how it applied to private-sector competitive businesses. I
sense the discussion, quite frankly, diverted into a lot of extraneous
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issues that werent relevant; and so it may be helpful for members
of this committee to get a primer on decoupling and what it means
and what it doesnt mean. Because, as I said, as I listened to that
discussion I think there was a lot of confusion, a lot of apples and
oranges comparison that were not necessarily appropriate or productive to the conversation.
Mr. MARKEY. I think that is a good idea. Thank you.
Mr. MATHESON. I want to address the issue briefly of appliance
standards in the Act that was developed between the House and
the Senate. The House version in 2007 had some provisions that
allowed multiple efficiency standards for a single appliance. During
the conference negotiation in the Senate, some of the provisions
were dropped. Anyone on the panel, I would like to ask what room
you think there is for further improvement in energy efficient appliances regulations.
Mr. GIUDICE. Gigantic room for improvement. We are consuming
electricity in devices that are not producing any useful product for
us. Our set top boxes, TVs that are on standby, plug power, vampire power in our homes is consuming 10 or 15 percent of the electricity that our residence is consuming for no useful output. There
is technologies off the shelf that once we put them in place can go
back down to 1 watt standbys on all those devices and still come
alive at 4:00 in the morning when you want to record a show if
need be. We just havent spent enough time on those matters
across the board.
As we look at it in Massachusetts, and we have seen similar
studies across the country, just taking energy efficient devices off
the shelf that exist today, ENERGY STAR and better, and putting
them in across the Nation would save on the order of 20 or 25 percent in our residential electricity consumption. So tremendous opportunities. We havent unleashed all the potential from design and
marketplace to really drive that. And I would call for very high
standards.
Mr. MATHESON. All right.
Mr. KING. The other element I would add is we need to also
think about the future as we deal with intelligence on the grid,
smart meters, et cetera. If we could start developing the standards
for appliances where we could automate demand reduction, energy
efficiency, et cetera, it will have a significant impact when you
have a broad-scale deployment of energy efficiency in those appliances.
Mr. MATHESON. I think being forward looking makes some sense.
Currently, the law does not allow for use of multiple standards
for appliances like if you have a dual electric gas furnace. Are those
changes Congress ought to be looking at try to create some of those
multiple standards?
Mr. GIUDICE. Yes. I think we have to look at all the standard setting very differently than we have to date. SEER rating standards
on air conditioners are seasonal electricity consumption, not peak
electricity consumption. Some of the air conditioners actually have
a small compressor that when it gets really hot it is very inefficiently producing that cooling to kind of boost it. It looks like a
good SEER rating, but it actually hits us the hardest on those peak
days when we are trying to meet the electric load. So looking at
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the standard setting and doing it on a very accelerated time path
I think is very appropriate for national attention.
Mr. MATHESON. The committee learned in 2007 the DOE process
for appliance standards takes a long time. And other countries such
as Japan use a top runner program where the standard is updated
every 3 years based on the top technology at the time. That technology becomes a standard for the next 3-year period. My question
is, is this type of model realistic for the United States and how do
we address concerns that manufacturers may express about making that a challenging time frame for them to adopt new standards? Any thoughts on that?
Mr. GIUDICE. I am a little familiar with the program in Japan,
and I think it is a very interesting model. I think it stimulates innovation and creativity in their design, and I think it would do the
same here. I think that we have been so comfortable in our absence
of attention on this and our manufacturing folks have not spent
sufficient attention to these matters that any kind of a change to
a new regime is really hard, and so the initial reaction is to resist
it. But I think working collaboratively, under very clear deadlines
and very clear outcomes, that we could get to very similar models;
and it would be beneficial to all of us.
Mr. KING. Just to quickly add to that, the opportunity that the
bill provides us is a Federal standard. So once we have absolutely
set that target, then youll get a lot of expertise to jump in and help
move to help not only from a State standpoint but over from a Federal policy. So that is a big opportunity you have as you debate the
bill and support it.
Mr. MATHESON. Thank you, Mr. Chairman.
Mr. CAMPBELL. I would add a comment. I think aggressive standards drive innovation; and they also ultimately help with manufacturing scale, which gives us more cost-effective appliances going
into the market.
Mr. MATHESON. Thank you. I yield back.
Heres what were going to do. We will give each one of you one
minute to tell us when you want us to remember from your testimony. What is your highlight? What is your takeaway message?
What is it that you want us to be factoring into the development
of energy and client change legislation this year in terms of efficiency?
We will begin with you, Mr. Reichel.
Mr. REICHEL. Thank you, Mr. Chairman.
I dont want you to remember me for my expertise on decoupling.
Mr. MARKEY. It is the joke of the day. Though. Well done.
Mr. REICHEL. Our technology that we have brought before the
panel today and the committee works with every control system
and every HVAC system in the country. I would encourage this
committee to set up a performance efficiency standard. For every
building has different controls and different HVAC systems, but
they all have an operating strategy. Building performance software
can help these buildings calibrate the buildings to actually achieve
that energy efficiency goal. This was probably one of the last bastions of energy efficiency available in operation and maintenance.
The Federal buildings I would encourage as strongly. We are work-
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ing with the GSA, but I would encourage them, because private
practice will follow what the Federal buildings do.
I would also look at setting this for schools. There is $13 to 15
billion of savings if we did this across the country. I think it is very
important, and I commend you for your work here.
Thank you.
Mr. MARKEY. Thank you very much.
Mr. Anderson.
Mr. ANDERSON. I just hope that you will look very carefully at
what the impacts of whatever you do will be on the manufacturing
community. Nearly every one of these proposals will raise rates
that we see. Some will bring about lowering consumption; and if
the two offset, then that is great. But have a very realistic look at
what it is going to do to the manufacturing community. Because
many are right on the edge, and they are going to close the plant
here. And they are not going to reopen it here but somewhere else.
Mr. MARKEY. Mr. Campbell.
Mr. CAMPBELL. We do believe that energy efficiency should be
considered the first fuel, because it does save consumers and businesses money. And we do have the technology available, widely
available today to deliver energy efficiency. We dont believe there
is a silver bullet to energy efficiency. We believe there is silver
buckshot. There will be complementary measures like the ones we
have been discussing this morning, and they are going to give us
the opportunity to drive energy efficiency to the level that I think
as a Nation we need to drive it.
I think that energy efficiency is the most important thing that
we can focus on when it comes to climate change. We need to make
sure that there is alignment of incentives from the utilities to the
users of energy. And I dont think it has ever been more important.
We have to focus on it now.
Mr. MARKEY. Mr. Wells.
Mr. WELLS. When we think about the triad of economic success
and environment performance and energy security, energy efficiency hits the sweet spot of those three things. It is a win-win-win.
So why arent we doing more of it?
We talked about the barriers today. It is clear we need a nudge
or a push of some sort. So the complementary policies that we
talked about today can form this nudge, give us the push we need
to do the right thing with respect to energy efficiency and to help
our economy.
Mr. King.
Mr. KING. I would start with energy efficiency is a resource, and
it is a critical resource to meet Americas overall energy needs. Secondly, that it is one of the least expensive investments that we
have as an alternative to us. So we should be aggressive both on
the targets to achieve as well as the time lines to achieve them,
and we stand ready to help deploy and deepen its impact.
Mr. MARKEY. Mr. Giudice.
Mr. GIUDICE. I encourage the committee and Congress and the
administration to be very, very bold at this time. I cannot imagine
but I suspect that decades in the future we will be looking back
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and wishing we were bolder about what we will be accomplishing
right now. And I thank you for your leadership on these matters.
Mr. MARKEY. Thank you, Mr. Giudice; and we thank all of you.
Just an excellent panel today.
I just want to, in closing, say that there has been a lot of talk
this morning about the stimulus bill and decoupling; and it was
raised by Mr. Matheson as well. So I just thought I would read the
language from the stimulus bill so that people can hear it and it
is on the record.
What it says is that, as enacted, the language requires the Governor of a State, as a condition for receiving the allocation for State
energy program funds, to notify the Secretary of Energy, in writing that the Governor has obtained necessary assurances that the
applicable State regulatory authority will seek to implement in appropriate proceedings for each electric and gas utility with respect
to which the State regulatory authority has rate making authority,
a general policy that ensures that utility financial incentives are
aligned with helping their customers use energy more efficiently
and that provide timely cost recovery and a timely earnings opportunity for utilities associatedwith cost-effective, measurable and
verifiable efficiency savings in a way that sustains or enhances
utility consumers incentives to use energy more efficiently.
The language does not mandate decoupling. It simply asks States
to pursue policies to align utilities initiatives with the pursuit of
efficiency while insuring that consumers have incentives to pursue
efficiency as well. NARUK does support the final language, and
there are many ways to satisfy this requirement. It does not require decoupling and allows States to innovate in order to protect
their own consumers.
So I thank the panel very much for being here today. It is incredibly helpful.
Unfortunately, historically, this subject and its discussion is only
exceeded by watching grass grow in terms of the level of enthusiasm that it brings to a room. But, as you are all saying, it is the
sweet spot. It is the first fuel. It is the whole key to how we can
put a dent in climate change and energy industry issues and economic growth simultaneously. It is important for us to ensure that
this year we put the laws on the books that telescope the time
frame it will take for us to reach that day.
We thank each of you for being here today.
This hearing is adjourned.
[Whereupon, at 12:16 p.m., the committee was adjourned.]
[Material submitted for inclusion in the record follows:]
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Energy Efficiency: Complementary Policies For Climate Legislation

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Energy Efficiency: Complementary Policies For Climate Legislation

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ENERGY EFFICIENCY: COMPLEMENTARY POLICIES

FOR CLIMATE LEGISLATION

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

COMMITTEE ON ENERGY AND

FEBRUARY 24, 2009

Serial No. 1114

For sale by the Superintendent of Documents, U.S. Government Printing Office

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10:51 Jun 24, 2011

P:\MY DOCS\HEARINGS 111\111-4

COMMITTEE ON ENERGY AND COMMERCE

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10:51 Jun 24, 2011

P:\MY DOCS\HEARINGS 111\111-4

EDWARD J. MARKEY, Massachusetts

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