**TESTIMONY OF RALPH IZZO**

**PRESIDENT, CHAIRMAN AND CEO**

**PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED**

**SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES**

**FEBRUARY 10, 2009**

Mr. Chairman, Senator Murkowski and Members of the Committee, my name is
Ralph Izzo and I am President, Chairman and CEO of Public Service
Enterprise Group. Our family of companies distributes electricity and
natural gas to more than two million utility customers in New Jersey,
and owns and operates approximately 17,000 megawatts of electric
generating capacity concentrated in the Northeast, Mid-Atlantic and
Texas.

I am pleased to appear before you this morning to express my strong
desire to see this Congress adopt a national Renewable Portfolio
Standard. I applaud you, Chairman Bingaman, for your leadership on this
issue over many years, and I also recognize the leadership of my
home-state Senator Robert Menendez.

I support a national RPS as a citizen who is deeply concerned about
climate change; as an investor who sees exciting opportunities in the
renewable sector; and as the head of a company concerned about its
customers and their ability to pay for green investments, particularly
in this economic environment.

The reports of how our climate is already changing are increasingly
alarming. Temperatures are rising, and the Arctic ice sheet and glaciers
around the world are melting even faster than anticipated.

Global warming is the most important environmental challenge of our
time. To avoid catastrophic impacts from climate change, most scientists
agree that we must achieve carbon emission reductions of 80% by 2050. To
reach this target, we urgently need decisive federal action -- not a
patchwork of state and regional fixes, but a strong, progressive
national energy policy.

PSEG has advocated a three-pronged approach to reduce carbon emissions.

-   Conservation through energy efficiency improvements.

-   Development of renewable energy resources.

-   And an expansion of clean, zero- and low-carbon central station
    electric generation, such as nuclear power.

Putting a price on carbon with a carbon cap-and-trade program is a
crucial step toward achieving all three of these strategies. But we need
a comprehensive package of policy solutions to achieve our goals. A
federal RPS is an essential component of that package, targeted
specifically at growing America's renewable energy industry. We cannot
only focus on short-term, least-cost carbon reduction measures; we also
need to create demand for technologies that will transform the way we
generate electricity. And from an energy security perspective, it is
crucial that we decarbonize our electric generation in tandem with
efforts to electrify transportation.

With America's skilled workforce and entrepreneurial spirit, we should
be leading this charge. But today we are playing catch up with other
nations in developing renewable energy industries. A key factor that
gives those countries a competitive advantage is a clear, pro-renewable
energy policy.

With the right national policy, America can develop the world's leading
clean energy industry. We will create jobs. And we will develop new
technologies that we can export all over the world. Investment in
renewable energy is a strategy for long-term growth.

As an investor and businessman, I believe the adoption of a federal RPS
would create tremendous opportunities. PSEG is already beginning to
invest heavily in alternative energy. Today, our utility filed a
proposal with New Jersey regulators to invest almost \$800 million in
solar generation over the next five years. This will include putting
solar generation on brownfields, low-income housing and government
buildings. It also will include roughly 200,000 solar installations on
top of our utility poles. This is in addition to the more than \$100
million our utility is already investing in solar generation.

Our merchant renewable generating company is also developing solar,
offshore wind and other alternative energy projects. Most notable among
these is a joint venture with Deepwater Wind to build a 350 megawatt
wind generation facility roughly 17 miles off the coast of South Jersey.
This project will use a patented technology that allows us to locate
wind farms in deep water, virtually out of sight from the shore. We also
recently created a joint venture called Energy Storage and Power to
develop compressed air storage facilities that can store energy. This
technology can be paired with intermittent renewable generation
resources to make them more reliable and competitive.

Projects such as these are just the starting point of what America must
build if we are going to combat climate change and grow a robust
renewable energy industry. A national RPS will send clear market signals
to companies like PSEG to increase their investment in renewable
electric generation.

Finally, as the head of a company with over two million customers,
including the majority of New Jersey's low- and moderate-income
families, I worry about customers' ability to pay for green investments.

In the long term, these investments will be a net benefit to customers.
In addition to reduced carbon emissions, benefits include job creation,
economic development, cleaner air and greater energy security. Moreover,
modeling by the Energy Information Administration has shown that the
renewable generation spurred by a national RPS will likely displace
older and less efficient fossil fuel plants, placing downward pressure
on fossil fuel prices and the wholesale price of electricity. And over
time, renewable technologies will become competitive with traditional
sources of generation.

In the short term, however, these investments generally increase
customer costs because today electricity from renewable generation is
more expensive than electricity from fossil fuel generation. We must be
candid with our customers about these higher costs as we emphasize the
important benefits.

The most effective way to minimize costs is through a national approach.
A federal program will create economies of scale, and it will reduce the
cost of capital once developers can rely on a stable, national market
for renewable energy credits, or RECs. I believe that by establishing a
robust national RPS program, we will begin to move toward a single REC
market as state policymakers eventually elect not to maintain separate
regional renewable energy "currencies."

For example, New Jersey has an RPS that must be met with renewable
energy generated within PJM, our regional electric grid. Energy from a
wind farm in Illinois may count, but energy from a wind farm in Nebraska
does not count, even though it may be a more affordable compliance
option. Once a strong federal program is in place, state policymakers
may decide that making that distinction no longer makes sense for their
ratepayers.

Of course, states will always be able to go above and beyond the federal
standard and set a higher RPS target. And states will likely want to
maintain targeted efforts to promote specific renewable industries in
their state, as New Jersey is doing with solar and offshore wind. But
with a strong national program, we will begin to see more stability and
uniformity in the market place.

Let me address a few more specifics in the latest draft RPS legislation.
The target of 20 percent by 2021 is consistent with the target set by
New Jersey. It is aggressive but achievable, and the alternative
compliance mechanism of 3 cents per kilowatt hour provides reasonable
assurance that costs will not spiral out of control ahead of
technological breakthroughs.

I also appreciate the effort to promote small distributed generation by
awarding it triple federal credits. However, by defining distributed
generation as being "at a customer site," you may exclude certain types,
such as the solar panels on utility poles that we are proposing to
install. We think a small change in the definition could address this
issue.

As for the inclusion of energy efficiency as a compliance mechanism, I
believe the RPS should be used exclusively to promote renewable energy.
Investments in conservation and efficiency are crucial, as they are
currently the most affordable way to reduce carbon emissions. But
Congress should promote energy efficiency through separate initiatives
rather than allowing investment in efficiency to displace investment in
renewables. Given the steep decreases in carbon emissions that we must
make over the next 40 years, we need to pursue both efficiency and
renewables at full speed.

In addition, it is worth noting that certain emerging renewable
technologies will need additional federal incentives, particularly
through the tax code. A market driven approach like the RPS will
appropriately drive investment toward what are currently the most
cost-competitive forms of renewable generation. However, developing
promising industries, like solar and offshore wind, is an important part
of our long-term climate change solution.

Finally, as I said earlier, the development of clean, central station
power is a critical element to a coherent climate change policy.  PSEG
is a nuclear company, with over half of our generation output coming
from our three nuclear units in South Jersey and a unit we partially own
in Pennsylvania.  Investment in new nuclear generation needs federal
support.  This should include fixing the loan guarantee program and
supporting the manufacturing of key nuclear components.  But I do not
believe a federal RPS is the appropriate mechanism to provide incentives
for new nuclear generation.

In closing, Mr. Chairman, as you know, America faces daunting
challenges. We must reduce carbon emissions 80% by 2050. We must
transform our energy economy and establish America as the world's leader
in innovative and clean energy technologies. And as the Senate considers
the American Reinvestment and Recovery Act this week, we face rising
unemployment and an unprecedented economic crisis. We can begin to
address all of these challenges by implementing a strong, national RPS
program and sending a clear signal to investors that a true shift has
occurred in our approach to national energy policy. Let us encourage
sustainable investments to power our way out of this economic downturn.
The time to act is now.

Thank you and I'd be pleased to answer any questions.