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Statement of NRECA to the United States House of Representatives

Committee on Agriculture

Subcommittee on Conservation, Credit, Energy, and Research

**Testimony of**

**The Honorable Glenn English, C.E.O.**

Hearing on: Review of Electricity Reliability in Rural America

July 30, 2008

4301 Wilson Boulevard

Arlington VA 22203

www.nreca.coop

**[Executive Summary]{.underline}**

The nation is facing an unparalleled energy crisis and lacks a national
policy to handle the problems of electricity capacity, reliability and
rising prices. While it is important to find solutions to global climate
change, it is equally critical to establish policies that will ensure
there is enough electricity to assure consumers have a secure and
affordable energy future.

By 2030, according to the U.S. Department of Energy (DOE), even with
relatively aggressive efficiency gains, the nation will still need 264
new gigawatts of installed electricity capacity. To better understand
the magnitude of this need, consider that 264 gigawatts is roughly 2.5
times the power now generated in the state of Texas. Efficiency and
conservation are necessary and must be pursued wherever such projects
are economic, but efficiency and conservation alone cannot meet the new
capacity needs.

Working with the Rural Utilities Service (RUS), the nation's electric
cooperatives have, over the past 75 years, built incredibly reliable and
efficient systems for distributing electric power to 75 percent of the
nation's land mass. Although the smallest segment of the electric
utility industry, electric cooperatives are experiencing the highest
growth percentages. Because of our historic service footprint,
cooperatives also serve some of the nation's poorest consumers. We are
deeply concerned about the impact of rising electricity prices and
additional charges for new environmental programs on these consumers.

The obligation to serve our 41 million consumers drives us to tackle
these problems head on. Across our 47-state service territory, which
encompasses 75 percent of the nation's land mass, cooperatives are
actively engaged in discussions with our consumers and our elected
officials, seeking balanced solutions that will protect the environment
and assure consumers have a basic human right -- affordable electric
power.

Areas of discussion, study and policy advocacy where cooperatives are
engaged include:

-   Renewable energy, including formation of a "National Renewable
    Cooperative Organization"

-   Energy efficiency, with a focus on helping low-income consumers

-   Nuclear power, ensuring that cooperatives can access the latest
    technologies and partner with other utilities

-   Climate change solutions

-   Clean coal technologies such as Carbon Capture and Storage

-   Support for new transmission projects

-   The Rural Utilities Service's role in helping electric cooperatives
    meet these new challenges.

Chairman Holden, Ranking Member Lucas and Members of the Subcommittee:

My name is Glenn English, and I am the Chief Executive Officer of the
National Rural Electric Cooperative Association (NRECA). I appreciate
the invitation to appear before you today to discuss what our nation and
electric cooperatives can do to help ensure a secure and affordable
energy future. I had the distinct honor of Chairing this Subcommittee
during the latter part of my service in Congress. In a way, I feel like
I'm back home with you this morning.

**[Overview of Electric Cooperatives]{.underline}**

NRECA is a trade association consisting of nearly 1,000 cooperatives
providing electricity to 41 million consumers in 47 states. As
member-owned, not-for-profit organizations, cooperatives have an
obligation to provide a reliable supply of electricity to all consumers
in our service areas at the lowest possible price. We take our
obligation to serve very seriously - the personal and economic health of
our members, our communities, and our nation depends on it. Cooperatives
serve primarily the more sparsely populated parts of our nation but
cover roughly 75 percent of the nation's land mass.

Electric cooperatives are:

-   Private independent electric utility businesses,

-   Owned by the consumers they serve,

-   Incorporated under the laws of the states in which they operate,

-   Established to provide at-cost electric service, and

-   Governed by a board of directors elected from the membership.

Electric cooperatives were born in the 1930s, when few rural Americans
could access electricity at all. President Franklin Delano Roosevelt,
champion of the Rural Electrification Administration (now the Rural
Utilities Service or RUS), observed that "electricity is no longer a
luxury, it is a definite necessity." Seventy-five years later, RUS loan
programs are still an essential ingredient in bringing affordable,
reliable electricity to all parts of America. Investor-owned and
municipal utilities have access to substantial federal support for
infrastructure development through the tax code. Electric cooperatives,
as private not-for-profits, do not have this access to this level of
support and instead rely on lower-cost loans that must be paid back.

Today, electric cooperatives continue their work, based in the strong
belief that affordable, reliable electric power is a fundamental right
for all Americans. However, this right has never been more in question
than it is today.

**[The U.S. Faces a Daunting Energy Crisis: Reliability, Capacity and
Prices]{.underline}**

A serious energy challenge faces this nation. Frankly, I believe that
many in Congress are focused on only one half of the looming challenge -
global climate change. But the other half is just as critical, though it
has not received the same spotlight, and that is the fundamental
question of whether the nation will have enough electricity capacity to
meet consumer energy needs.

Some background facts are essential. EIA has projected, taking
reasonably expected efficiency improvements into account, that
electricity demand will grow 30 percent by 2030, requiring 264 new
gigawatts of electric generating capacity. To better understand the
magnitude of this need, consider that 264 gigawatts is 2.5 times the
capacity now in the state of Texas. The more critical and immediate
problem will come in the next ten years. The Department of Energy, again
taking reasonably expected efficiency improvements into account,
forecasts that U.S. economic and population growth will drive a 17
percent increase in demand between 2006 and 2020, requiring a capacity
increase of 118,000 MW.

Among electric cooperative consumers, demand growth is projected at
about double the national average. Additionally, cooperatives serve some
of the nation's poorest consumers, including several Native American
reservations. Electric cooperatives take seriously our responsibility to
meet our consumers' electricity needs, while also taking a leadership
role in the development of renewable energy, energy efficiency and the
portfolio of new technologies and approaches needed to solve our
nation's energy challenges.

Section 6103 of the Senate Farm Bill would have allowed cooperatives to
continue, as they have for 75 years, accessing RUS financing to
construct baseload generation. Unfortunately, this provision was dropped
in the Farm Bill Conference. However, NRECA thanks the many members of
the Agriculture Committee who supported the provisions. Without RUS
financing for baseload generation, co-ops will have to buy increasing
amounts of power on the open market because they cannot generate enough
power to meet their consumers' needs. With this significant policy
shift, only electric cooperatives, among the three utility sectors, have
been denied their primary source of federal support for generation.
Preventing cooperatives from accessing the RUS program places an
additional heavy burden on their efforts to build generation that will
reduce carbon emissions.

Without significant changes in our national energy policy to meet
capacity demands, in the next decade, U.S. consumers will be
significantly exposed to rising and volatile electricity prices beyond
anything experienced to date. In the absence of a true national energy
policy, some advocacy groups are proposing piecemeal solutions,
recommending over-reliance on their preferred technology or fuel. The
reality - there is no one silver bullet and all the technologies at our
disposal must be used to both meet our capacity needs and achieve new
environmental goals.

The reliability problems posed by a lack of adequate capacity will begin
to manifest as early as 2009, according to the North American Electric
Reliability Corporation (NERC), the self-regulatory organization
responsible for monitoring and strengthening the bulk power system's
reliability. In some regions, demand will soon outstrip capacity unless
generation and transmission are added. Rapidly thinning capacity means
that technicians and operations personnel, whose daily behind-the-scenes
efforts keep the electric grid intact, are already seeing reliability
"near-misses" when key lines or power plants go down. These events
haven't resulted in widespread blackouts and so far, haven't received
attention in the press or from policymakers. But, if we fail to address
our growing energy infrastructure and technology development needs, some
regions face increasing probabilities of brownouts and blackouts in the
near future. (See attached NERC map of U.S. regions facing near-term
reliability threats.)

The Electric Power Research Institute (EPRI) has researched and written
extensively on the need to have a full portfolio of solutions in order
to ensure adequate capacity and achieve carbon reduction goals. EPRI
conducts research and development on technology, operations and the
environment for the global electric power sector. EPRI, a non-profit
organization, brings together its members, the institute's scientists
and engineers, along with experts from academia, industry and other
research centers to meet challenges in electricity generation, delivery
and use. EPRI supports multi-discipline research in emerging
technologies, which drives long-range research and development planning.
EPRI\'s members represent more than 90 percent of the electricity
generated in the United States. (See attached EPRI "prism.")

This spring, NRECA brought over 3,000 co-op advocates to Washington,
D.C. to talk with their federal representatives about the nation's
energy challenges and the types of bold ideas needed to solve these
problems and provide Americans with a secure and affordable energy
future. Congress will need to make significant policy decisions soon to
address the coming electricity crisis and provide options for shifting
the nation's generation fuels while minimizing costs. It is important
that these issues be reconciled before a formal national policy to tax
and regulate carbon is set in place. Working together, government and
industry can make the investments and plans that are critical to
ensuring that any carbon reduction policy is sustainable over the
decades.

**[Many Pieces of an Energy Policy Solution: All Require Concerted,
Long-Term Efforts]{.underline}**

*Energy Efficiency*

NRECA supports efficiency and conservation as a least-cost means of
reducing some of the need for increased capacity over the next decade.
But consumers and policymakers are receiving a great deal of information
about efficiency and it is very difficult to determine precisely how
much energy savings efficiency technologies and measures can yield. Some
advocacy groups believe that increased energy efficiency can absorb up
to 80 percent of the projected growth in electricity demand. Others see
potential for a 20 percent savings in total electricity demand.

EIA has projected a need for 347,000 new megawatts of electricity
capacity by 2030. EIA believes that allowing for the efficiency
improvements we can reasonably expect, the new capacity demands will
still equal, as I stated earlier, 264,000 megawatts by 2030. The 2005
California residential and commercial building code is said to have the
potential to save 180 megawatts in annual energy demand. Judging from
the cited capacity needs projection (without efficiency measures ) of
347,000 new megawatts, the nation would have to identify and develop and
then consistently fund, operate and verify nearly 2,000 projects on the
scale of California's to meet one hundred percent of the new 2030 needs
with efficiency and conservation. Utilities with an obligation to
provide electric power would still be required to own generation
sufficient to meet consumers' needs in case efficiency programs could
not be consistently maintained.

Electric cooperatives are engaged in many efforts to increase
efficiency, conservation and demand response. For instance, NRECA is a
member of the Energy Efficiency Codes Coalition (EECC), which is
actively working to strengthen model building codes. Existing buildings
are responsible for over 40 percent of the world's total primary energy
consumption and account for 24 percent of the world's CO~2~ emissions.
Energy efficiency is often the most cost-effective way to increase
energy security, reduce energy costs, and cut emissions. While Congress
took some steps toward improving standards for appliances and
manufactured housing in the Energy Independence and Security Act of
2007, even more gains are needed.

NRECA is also working to ensure that efficiency and conservation
programs reach the people who can least afford to pay for efficiency
improvements but whose homes are often most in need of new appliances,
insulation and other measures. Personal income tax credit incentives
can't help large segments of the population whose income is too low to
pay significant taxes.

Studies of successful low-income efficiency programs show that
investments of about \$2500 per household to replace or upgrade
components such as windows, refrigerators, lighting and HVAC systems,
can lower energy bills as much as 32 percent. Therefore, the nation
should get started and provide the poorest fifth of American households
even \$500 dollars of direct assistance with energy efficiency -- at a
cost of over \$12 billion a year. Such a program would give
[immediate]{.underline} help to reduce growth in national power demand
and keep their electric bills affordable.

*Nuclear Power*

Nuclear power can provide significant amounts of the clean capacity we
need by 2020 and 2030. EPRI estimates four new plants will need to come
online each year from 2015 to 2020 for nuclear power to make its
contribution to meeting electricity needs and reducing carbon emissions
to 1990 levels by 2030. This projection will not be met. The new fleet
of baseload nuclear plants is progressing slowly, with virtually none
expected to come online before 2020. These new plants also face
opposition and substantial financial risks. In some cases, cost
estimates for proposed plants match or exceed the entire value of the
utilities proposing to build them. A 30-year U.S. hiatus from the
business has resulted in suppliers, industry expertise and workforce
being largely located overseas.

Still, these plants are needed as soon as possible to achieve reliable
and affordable power and reduced greenhouse gas emissions. In order to
move past the many bottlenecks, policymakers must recognize: a) the need
for innovative funding which minimizes risks; and b) that safe, on-site
waste storage and reprocessing are possible for the next century until
long-term storage is available. A comprehensive energy policy should
also recognize the contributions cooperatives can make to nuclear
projects and allow RUS to continue making baseload loans for generation,
including nuclear generation. Electric cooperatives should also be able
to lower their construction costs by accessing the nuclear tax
incentives provided in the Energy Policy Act of 2005 and other bills.

Cooperatives see these delays in increasing our nuclear capacity as a
situation so urgent that federal involvement is necessary in the form of
incentives and new partnerships. For instance, the Defense Department
has the capability to manage the construction of large projects and to
protect sensitive sites. It also has priority access to materials,
decommissioning expertise and many other skills which make the Defense
Department a suitable partner. When the nation faced other serious
electricity roadblocks, there was no hesitation to build these kinds of
partnerships. We are at such a point in the nation's history again.

*Renewable Energy*

The small amount of renewable generation in the current electricity fuel
portfolio is welcome and needed. Including hydropower, renewable
generation is 8 percent of the overall portfolio. Non-hydro renewable
generation (primarily bio-mass and wind, with smaller contributions from
solar and geothermal) is only 2.5 percent of the overall portfolio, up
from 2.2 percent in 1995. The growth percentages in non-hydro renewables
are positive developments, but create misperceptions. Polls show that
many mistakenly believe that renewable energy alone can satisfy
increased demand for power and that non-hydro renewable energy is now a
large percentage of the nation's electricity generation. Even wind
generation, the primary source of recent renewable energy additions, is
a tiny fraction of overall U.S. generation - 0.6 percent in 2006 and an
estimated 0.8 percent in 2007.

Like all electricity power sources, renewable energy generation growth
faces large hurdles in the next decade. Without large federal subsidies,
investment virtually stops. Construction costs, especially for wind, are
rising rapidly and there are bottlenecks for equipment delivery -
current wait times exceeding two years. Since wind and solar are
intermittent resources, current projects are only commercially viable
where conventional resources, usually gas, are sufficient to back them
up. Finally, public opposition to siting projects, such as offshore wind
farms and farms on public land, has stopped many renewable developments.

Transmission capacity is inadequate to deliver renewable power from
remote areas where renewable resources are located to the population
centers where power is needed. Cooperatives are strong advocates for a
strengthened and expanded transmission grid. For example, NRECA supports
the Federal Energy Regulatory Commission's new rules for siting
transmission lines in national interest corridors. In addition, NRECA
believes the federal government must be willing to develop policies and
funding mechanisms for transmission lines that could exceed \$2.5
million per mile.

Electric cooperatives across the country recently formed the National
Renewable Cooperative Organization (NRCO) to accelerate the development
and deployment of renewable energy resources. Formed in March 2008,
NRCO's membership already represents approximately 500 distribution
cooperatives, collectively serving 23 million Americans in 36 states.
NRCO reflects the commitment of cooperatives around the country to the
responsible development of cost-effective renewable resources in a
manner that benefits their consumers, their communities, and the nation
as a whole. NRCO will allow cooperatives to pool expertise in developing
renewable energy, share access to sites that are conducive to renewable
production, and potentially lower the high capital costs of these
projects. National energy policy must recognize that renewable energy is
more cost-effective and available in some regions than in others. For
example, NRCO will permit southeastern cooperatives to invest in solar
and wind where these resources are cheaper and more plentiful.

Co-op planned and owned renewable energy projects are already underway
in many of your states. The 2005 Energy Policy Act established, for the
first time, a financing tool for renewable energy that gave cooperatives
a level playing field with investor-owned renewable energy developers.
The Clean Renewable Energy Bond (CREB) allows not-for-profit
cooperatives access to low-cost financing, much as the production tax
credit provides low-cost financing for profit-making entities. So far,
40 electric cooperatives have developed or are developing \$430 million
worth of renewable energy projects using this program. I thank the many
members of the Agriculture Committee who have supported legislation to
continue and expand the CREB program.

As historic customers and champions of the federal hydropower program,
cooperatives are actively speaking out on the need to upgrade the dams
and other key infrastructure under the jurisdiction of the Bureau of
Reclamation and Corps of Engineers. A study conducted jointly by the
Departments of Interior, Defense and Energy concluded that 2,500 MW of
new generation could be produced through rehabilitating and upgrading
federal facilities.

*Research, Development and Deployment of New Clean Energy Technologies*

Technology is the key to retaining our nation's diverse menu of electric
generation fuel options and for lowering the costs of carbon reduction.
The sooner an array of clean energy and efficiency technologies are
commercial, the sooner we will pass through this dangerous period.
Congress can speed the arrival of that day by substantially increasing
funding to \$2 billion per year for the next decade for carbon capture
and storage (CCS) technology and all other options for low- or no-carbon
technology solutions.

EPRI has assessed the economic impact of reducing carbon emissions to
1990 levels by 2030, assuming the availability of different fuel
portfolios. EPRI emphasizes that new advanced clean coal plants are a
critical part of a resource mix needed to provide adequate electricity
and achieve aggressive carbon reductions. Based upon the EPRI analysis,
if the U.S. adopts carbon reduction goals and builds new nuclear power
plants as well as new highly efficient coal plants equipped with CCS
technology, utility rate increases attributable to a climate strategy
would average about 10 percent in real dollars. Electric rates would
increase drastically by 2050*,* however, if the U.S. relies solely on
natural gas, renewables and energy efficiency to meet capacity needs,
and fails to invest in new nuclear and clean coal technologies*.*

Some advocates mistakenly assert that CCS is already commercial and
ready to be deployed on a wide scale. To ensure that coal will remain
part of the nation's electricity fuel mix, a significant technology
"push" is needed to make applications like CCS commercially feasible.
Scientific experts agree that CCS will not be available until 2020 at
the earliest -- even *with* significant investments in research and
development. Extensive testing is needed for all phases -- capture,
transportation and long-term storage. The federal government, along with
industry, must wrestle with complex issues of carbon ownership and
liability.

Recently, cooperatives worked with Congress to introduce the Carbon
Reduction Technology Bridge Act of 2008 (S. 3208), which seeks to
establish much-needed tax incentives for an array of CCS and efficiency
technologies for clean coal. I anticipate this bill will also soon be
introduced in the House and I ask for your support. Cooperatives brought
this legislation to Congress in a good-faith showing of our willingness
to partner with the federal government to solve our nation's energy
crisis. We are proud, that as the smallest segment of the electric
utility industry, we brought this forward and are actively gathering
support for it.

**[Conclusion]{.underline}**

Seventy-five years ago, the federal government, helped greatly by your
predecessors on the Agriculture Committee, created the Rural
Electrification Administration so that all Americans could one day have
safe, reliable and affordable electric power. Today, virtually all U.S.
citizens enjoy this basic right, but it may slip away from future
generations unless we all act now to reconcile energy needs and climate
goals. Electric cooperatives are committed to developing wise and
balanced energy and climate plans now and in the future. We will do this
by continuing to work with Congress, RUS and thousands of locally
elected cooperative leaders. Thank you for the opportunity to talk with
you today. I look forward to answering your questions.

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