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61–726 2010

NEGAWATTS: THE ROLE OF EFFICIENCY POLICIES 

IN CLIMATE LEGISLATION 

HEARING 

BEFORE THE

SELECT COMMITTEE ON 

ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

MAY 8, 2008 

Serial No. 110–36 

( 

Printed for the use of the Select Committee on 

Energy Independence and Global Warming 

globalwarming.house.gov 


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SELECT COMMITTEE ON ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

EDWARD J. MARKEY, Massachusetts, Chairman 

EARL BLUMENAUER, Oregon 

JAY INSLEE, Washington 

JOHN B. LARSON, Connecticut 

HILDA L. SOLIS, California 

STEPHANIE HERSETH SANDLIN, 

South Dakota 

EMANUEL CLEAVER, Missouri 

JOHN J. HALL, New York 

JERRY MCNERNEY, California 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

Ranking Member 

JOHN B. SHADEGG, Arizona 

GREG WALDEN, Oregon 

CANDICE S. MILLER, Michigan 

JOHN SULLIVAN, Oklahoma 

MARSHA BLACKBURN, Tennessee 

PROFESSIONAL STAFF

GERALD J. WALDRON, Staff Director 

ALIYA BRODSKY, Chief Clerk 

THOMAS WEIMER, Minority Staff Director 


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C O N T E N T S 

Page 

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 1 

Prepared Statement ......................................................................................... 3 

Hon. F. James Sensenbrenner, Jr., a Representative in Congress from the 

State of Wisconsin, opening statement .............................................................. 5 

Hon. John Hall, a Representative in Congress from the State of New York, 

opening statement ................................................................................................ 6 

Hon. Emanuel Cleaver II, a Representative in Congress from the State of 

Missouri, Prepared Statement ............................................................................ 7 

WITNESSES

Hon. Paul A. DeCotis, Deputy Secretary of Energy, New York State ................ 8 

Prepared Statement ......................................................................................... 10 

Answers to Submitted Questions .................................................................... 75 

Hon. Dian Grueneich, Commissioner, California Public Utilities Commission .. 16 

Prepared Statement ......................................................................................... 18 

Mr. George Sakellaris, President and CEO, Ameresco, Inc. ................................ 23 

Prepared Statement ......................................................................................... 25 

Mr. Steven Kline, Vice President, Environment and Federal Affairs, Pacific 

Gas and Electric Corporation .............................................................................. 33 

Prepared Statement ......................................................................................... 35 

Answers to Submitted Question ...................................................................... 82 

Mr. Robert Cowart, Director, Regulatory Assistance Project ............................... 43 

Prepared Statement ......................................................................................... 45 

SUBMITTED MATERIALS

Hon. Edward J. Markey letter of October 10, 2008 from Mr. Steven Kline ....... 88 

U.S. Climate Action Partnership Energy Efficiency & Buildings Legislative 

Recommendations, June 8, 2007 ......................................................................... 89 


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NEGAWATTS: THE ROLE OF EFFICIENCY 

POLICIES IN CLIMATE LEGISLATION 

THURSDAY, MAY 8, 2008 

HOUSE OF REPRESENTATIVES, SELECT COMMITTEE ON ENERGY INDEPENDENCE

AND GLOBAL WARMING, Washington, DC. 

The committee met, pursuant to call, at 10:10 a.m. in room 210, 

Cannon House Office Building, Hon. Edward J. Markey (chairman 

of the committee) presiding. 

Present: Representatives Markey, Hall and McNerney. 

Staff Present: Joel Beauvais, Jonathan Phillips. 

The CHAIRMAN. Good morning, ladies and gentlemen. Welcome to 

the Select Committee on Energy Independence and Global Warming and our very important hearing today. 

When we look into the energy and climate solutions toolbox, we 

usually focus on exciting new technologies like high-powered wind 

turbines, thin-film solar cells, or carbon capture and sequestration. 

Today’s hearing, however, is about the less eye-catching, but equally important solutions that improve energy efficiency, demand-side 

management, better building and appliance standards, lighting retrofits, and the host of other technologies and policies that enable 

us to use electricity more intelligently. 

The Department of Energy projects that U.S. electricity demand 

will grow by 30 percent by 2030. There are two ways to meet this 

rising demand, megawatts and negawatts. The first approach is the 

one we are familiar with, simply building more and more power 

plants. The second uses efficiency measures to do more with less. 

It is based on the reality that the cheapest and the cleanest power 

plant is the one that we never have to build. 

A recent study by McKinsey & Company concluded that in 2030, 

efficiency measures 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 cap, auction, and 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. 

Cap, auction and trade provides the resources to make efficiency 

policies work, while efficiency cuts pollution at the lowest possible 

cost. 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. 


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America’s efficiency industry already produces close to a trillion 

dollars in annual revenues. One recent study found that aggressive 

investment in efficiency policies could result in the creation of 32 

million new jobs and nearly $4 trillion in revenue by 2030. 

By putting America in the vanguard of an efficiency revolution, 

we can create high-quality, green jobs at home while exporting 

high-quality, green technology in the world. Unfortunately increasing America’s energy efficiency is not as straightforward as it 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. 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 couple utilities’ profits with the amount of electricity 

which they sell. 

Progressive States like California and New York, along with the 

innovative companies like PG&E and Ameresco, and organizations 

like the Regulatory Assistance Project have taken the lead in tackling these challenges. We are grateful to have representatives of 

these government, business and nonprofit leaders on our witness 

panel today. They can help show us the way forward. 

As Congress considers cap, auction and trade legislation to combat global warming, it will be critical to include policies that support efficiency. We have already taken an important step by enacting new vehicle and appliance efficiency standards under the Energy Independence and Security Act, but there is more that we can 

do, and we must do if we are to cut global warming pollution as 

quickly and as deeply as the science says we must. It is imperative 

that climate legislation 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, and spurring job growth, and meeting our Nation’s rising 

energy demands at the lowest possible cost. 

NBA coach Pat Riley once said a particular shot, a way of moving the ball, can be a player’s 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 America’s energy efficiency must be at the center of our 

game plan. 

So with that, the opening statement of the Chair is concluded, 

and I recognize the gentleman from Wisconsin, the Ranking Member of the committee, Mr. Sensenbrenner. 

[The prepared statement of Mr. Markey follows:] 


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Mr. SENSENBRENNER. Thank you very much, Mr. Chairman. At 

the outset let me say that we are due for a string of five votes, and 

I have another meeting that will be about 11:30, so I kind of apologize for not coming back when the hearing resumes, but we have 

no control over what goes on across the street. 

Improving energy efficiency is one of the most important steps 

that can be taken to confront climate change, and I am pleased 

that the Chairman has scheduled this meeting. As we all know, reducing CO2 emissions while protecting the health of the economy 

is a formidable challenge. Some may think this goal is not achievable, but I think that through significant advances in technology, 

we can make significant reductions in greenhouse gases while still 

growing the economy. 

Some of this technology is not yet available. The good example 

of this is carbon capture and sequestration, which is still on the 

drawing board, but has the potential to make tremendous reductions in greenhouse gas emissions in the future. And some advances are needed in renewable technologies to make them more 

cost-competitive. 

Another potent technology is nuclear power, which is ready now 

and can generate power without any greenhouse gas emissions 

whatsoever. Both of these technologies have the potential to reduce 

emissions in the long term; however, it is energy efficiency that 

gives us the best chance to produce emissions reductions in the 

short term. 

Studies shows that even simple improvements in energy efficiency standards create significant reductions in greenhouse gas 

emissions. Not only that, but increased energy efficiency also 

stands to create significant reductions in the power bill. 

Whether you are a big industry, a small business, a homeowner 

or even a renter, improvements in efficiency will help the bottom 

line. The cost of power is rising, and because of this there is clearly 

free-market pressure to adopt energy efficiency. In fact, the rising 

cost of power is without doubt the best possible argument for improving energy efficiency. 

I also believe that in some cases government can encourage efficiency through support of research and development and through 

certain tax credits. Industry standard setting is also useful. 

I do not support the government artificially imposing improved 

efficiency through mandates, regulations and rules. If the government tries to mandate or regulate efficiency, to most it will become 

a tax, and that will hold down economic growth. In fact, one study 

that forecasts enormous reductions in emissions also comes with an 

enormous price tag that raises questions as to whether reductions 

are even worth it. 

While I am glad the select committee is talking about energy efficiency, it seems that most of the testimony we expect to hear today 

will be nothing more than a call for more regulation. That is a mistake. We all may agree that improved efficiency holds tremendous 

promise, and there appears to be great differences in our beliefs 

and how to get there. I think that the pressure of energy prices will 

lead people to adopt energy efficiency on their own accord, which 

would result in cheaper energy prices. And cheaper energy is something all of us can support. Thank you. 


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The CHAIRMAN. The Chair now recognizes the gentleman from 

New York State Mr. Hall. 

Mr. HALL. Thank you, Mr. Chairman and Ranking Member Sensenbrenner. Good morning and welcome to our witness. 

I find it appropriate that as we enter the summer driving and 

home-cooling season, we are here today to discuss the positive impacts that energy efficiency can have on our economy and our environment. 

There is rightly much attention being paid right now to gas 

prices, but home electricity costs eat into family budgets, too. As 

the temperature rises, so does the power bill for families trying to 

keep their homes at a reasonable temperature. The Energy Star 

program has labeled appliances and empowered consumers to take 

the edge off their power demand. 

Earlier this year the Congress passed groundbreaking legislation 

to further this effort; however, the macro benefits of sweeping energy efficiency measures require that we go further. Quite simply, 

widespread efficiency in every sector of the economy is the fastest, 

simplest and most immediately achievable way to reduce demand, 

save money and cut greenhouse gas emissions. And more than 

that, I would say that energy savings by efficiency are the only 

truly impact-free form of generating or recovering a kilowatt or a 

calorie of energy, whatever unit you choose. 

By simply being smarter about the appliances we use, the materials we use in construction, and making slight adjustments to our 

patterns of use, we can make an impact which has a ripple effect 

that is orders of magnitude larger than the individual actions we 

take to conserve energy without forcing major changes to our way 

of life. By taking one action and implementing aggressive streamlining measures, we can forego billions of tons of greenhouse gas 

emissions, generate billions of dollars in economic opportunity, and 

create a stimulating effect that will lead to job growth and economic resurrection. That is truly efficient indeed. 

I am proud that my State of New York, a leader on this issue, 

is represented by Deputy Secretary DeCotis, and I look forward to 

his testimony as well as the rest of the panel’s views. 

I yield back. 

The CHAIRMAN. The gentleman’s time has expired. 

There are going to be a series of roll calls on the floor of the 

House. The bells announcing that can be heard in the background 

as I make that statement. We probably have the time to hear the 

opening statements of two of our witnesses, so I would recommend 

that we proceed in that fashion. Then we will recess and come back 

and hear from the rest of our witnesses and questions from the 

panel. 

[The prepared statement of Mr. Cleaver follows:] 


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The CHAIRMAN. So we will begin with our first witness, Mr. Paul 

DeCotis. He is the Deputy Secretary of Energy for the State of New 

York, where he heads up the State’s efforts to advance renewable 

energy and energy efficiency programs. We welcome you, sir. 

STATEMENT OF PAUL A. DECOTIS, DEPUTY SECRETARY OF 

ENERGY, STATE OF NEW YORK 

Mr. DECOTIS. Thank you. Good morning, Chairman Markey, 

Ranking Member Sensenbrenner and members of the committee. 

On behalf of Governor Paterson, I welcome the opportunity to 

present this testimony to this Select Committee on Energy Independence and Global Warming and look forward to working with 

the committee to ensure development of leading and effective climate policy. 

It is now widely accepted that energy efficiency is one of the lowest-cost options available for reducing greenhouse gas emissions. 

Many States throughout the country now have had almost 30 years 

of experience administering energy efficiency programs, all with 

similar results, providing conclusive evidence of the low cost of energy efficiency relative to new power generation, and of the economic and environmental benefits associated with reducing electricity use through energy efficiency improvements. 

So the question is not should we be supporting and investing in 

energy efficiency, it is instead to determine how we can do this 

most effectively with rapid penetration of existing commercially 

available technologies in the near term, and steady and continued 

development of better, more adaptable and cheaper technologies 

over the longer term. We need both an energy efficiency and a carbon reduction policy. 

A portfolio of low-carbon options on the demand side and the 

supply side will most definitely be necessary, as well as policies 

that address sectors beyond electricity. 

New York has a longstanding history of supporting energy efficiency that dates back nearly four decades. New York’s energy efficiency efforts began in the late 1970s with Federal funding provided to the States through the Energy Policy and Conservation 

Act of 1975 and the State Energy Conservation Program administered by the U.S. Department of Energy. 

While the funding was small relative to need, New York was able 

to develop a diverse portfolio of programs serving residential business and governmental customers. New York’s energy efficiency 

programs directed at the electric utility sector began in earnest in 

1984. At the time demand-side management programs were viewed 

by the State’s public service commission as potential alternatives 

to continued investment in new central station power generation. 

By the late 1980s, utilities in New York were reporting significant peak demand and electric energy reductions. By 1993, DSM 

spending by investor-owned utilities reached $280 million, which is 

equivalent to about $400 million today, a dramatic increase from 

the $25 million spent in 1984. Additional demand-side management spending by the State’s energy authorities raised the State’s 

annual investment in energy efficiency in 1993 to about $330 million, which is about $470 million in today’s dollars. 


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With the transition to wholesale electric market competition in 

1996, the responsibilities for administering energy efficiency programs in New York was transferred to the New York State Energy 

Research and Development Authority, or NYSERDA, and 

NYSERDA has been administering efficiency programs along with 

research and development programs in cooperation with the New 

York Power Authority and Long Island Power Authority since 

1998. 

Under the System Benefits Charge program, the level of annual 

energy bill savings has grown to almost half a billion dollars annually. The program is saving approximately 3,100 gigawatt hours of 

electricity, and the level of annual greenhouse gas reduction is 

equivalent to removing 400,000 cars from New York’s roadways. 

That is about 2 million tons annually. For every $1 invested in efficiency in New York, the program saved $2 and avoided energy 

costs. 

Last year New York embarked on its 15 by 15 Initiative, the goal 

of which is to reduce statewide electricity use by 15 percent from 

forecast levels for the year 2015. 15 by 15 represents a dramatic 

acceleration of New York’s energy efficiency commitment and results in more than offsetting annual electricity load growth in the 

State. 

In 2009, the State’s energy authorities alone have budgeted close 

to half a billion dollars for energy efficiency. The investor-owned 

utilities and new funding from the 15 by 15 Initiative could easily 

add an additional 400 million, bringing the total annual funding 

close to a billion dollars. 

New York’s energy efficiency policies have been framed, justified 

and developed with full recognition that energy efficiency is one of 

the lowest—— 

The CHAIRMAN. If you could summarize, please. 

Mr. DECOTIS. Sure. 

Regarding the cap-and-trade programs, which is one of the questions that was asked, New York is actively participating in leading 

in the Regional Greenhouse Gas Initiative. The proceeds from the 

sale of the auctions will be used for low-cost carbon abatement 

technologies, including energy efficiency, but it will also extend to 

other sectors of the economy, including transportation efficiencies, 

carbon capture and sequestration technologies, et cetera. So the 

funding will not be limited to simply electric energy efficiency. 

The CHAIRMAN. Thank you, sir. 

[The statement of Mr. DeCotis follows:] 


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The CHAIRMAN. Our next witness is Commissioner Dian 

Grueneich, who was appointed to the California Public Utility 

Commission by Governor Schwarzenegger in 2005. We welcome 

you. 

STATEMENT OF DIAN GRUENEICH, COMMISSIONER, 

CALIFORNIA PUBLIC UTILITIES COMMISSION 

Ms. GRUENEICH. Thank you. I very much appreciate the opportunity to testify today. 

I am the assigned commissioner in California at the California 

Public Utilities Commission overseeing the energy efficiency programs. We believe that the California program, which is currently 

funded at $1 billion annually, is the world’s largest energy efficiency program. I was happy to hear from my colleague that we 

may be in close competition now with New York, that we welcome, 

on expanding our programs. 

I am going to quickly cover today three items: first, an overview 

of what are the programs in California; second, some discussion of 

how we are trying to integrate our energy efficiency efforts into 

California’s global warming law; and third, to offer my thoughts on 

what could be done in terms of bringing together energy efficiency 

and Federal climate change legislation. 

If I could have the first slide very quickly. 

This is just an overview that California has adopted as a formal 

policy in California, what we call a loading order, and this loading 

order places energy efficiency as the top priority. It requires that 

there be investment in all cost-effective energy efficiency as the resource of first choice. We have come to this policy as a result of 30 

years of investments, both through our utilities, as well as building 

standards and appliance standards. 

Next slide, please. 

This is a slide that tries to graphically show what has been our 

experience in California on energy efficiency. You can see before 

1970 we were similar to the rest of the Nation, dramatic increases 

in electricity. In the early 1970s, that is when we began our programs, and you can see that we have been successful in keeping 

our per capita consumption constant while the rest of the country 

has grown very significantly. 

But let me tell you the economic story, which is what is very, 

very important. In looking at our State’s gross State product, we 

generate nearly twice as much gross State product per kilowatt 

hour than the U.S. average, and we have tripled our gross State 

product in the last 30 years. So we believe that this emphatically 

demonstrates that you do not need to sacrifice economic growth 

and development when you undertake energy efficiency. 

Next slide, please. 

This is another way that we are demonstrating how we are getting the energy savings. That is the question that we are often 

asked, where does it come from? In California there are three principle areas. Down on the bottom you will see the savings over the 

30-year history from our appliance standards. 

The second area in green is the savings over the same 30-year 

period from our building standards. And then the top, which you 

can see is very significant, are the efforts that my agency oversees 


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with regard to utility programs. These combination of codes and 

standards and utility programs supply approximately 15 percent of 

California’s total electricity supply. It is a very significant, a very 

successful way of meeting our electricity needs. Moreover we have 

a very aggressive program to be measuring and verifying to make 

sure that we are obtaining these savings because we use them in 

lieu of building power plants and transmission lines, and that is an 

absolutely necessary component of the programs. 

Next slide. 

This is what we are doing right now. For the period of 2004 

through 2013, the programs that my agency is overseeing. Relying 

upon the utilities in the State, we are going to be eliminating the 

need for 10 new power plants. We are eliminating 9 million tons 

of carbon dioxide emissions. And then very importantly we are 

looking at $10 billion in net savings. You heard from New York 

that you get an approximately—for a dollar you spend on energy 

efficiency, you are saving $2. Energy efficiency is one of the most 

important, if not the most important, economic development programs we have in California. 

Let me turn quickly to how we are looking at integrating AB 32, 

energy efficiency in AB 32. We have all of our State agencies, energy agencies, in California issued a decision earlier this year in 

which we have now made a unanimous recommendation that energy efficiency be the foundation upon which we rely for meeting 

our global warming efforts in California. 

We have made the recommendation that the ARB requires that 

there be a statewide mandate to pursue all cost-effective energy efficiency in California. We are looking at approaching this in three 

ways. The first is our current approach to energy efficiency, that 

is providing tremendous savings, but we are looking at expanding 

it beyond that; and then with that layering on top of it, our capand-trade program. 

The CHAIRMAN. I apologize, but your time has expired. 

Ms. GRUENEICH. Thank you. 

[The statement of Ms. Grueneich follows:] 


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The CHAIRMAN. You will get an opportunity in the question-andanswer period. 

Again, as I announced earlier, there are a series of roll calls on 

the House floor. At this point the committee will have to take a 

brief recess, and after the roll calls we will return. Thank you. 

[Recess.] 

The CHAIRMAN. We will reconvene our hearing. We apologize to 

our witnesses and the audience, but I think we can conclude the 

hearing now, hopefully, without any further interruptions. 

Our next witness is George Sakellaris, who is from my home 

State of Massachusetts. He is the president and chief executive officer of Framingham-based Ameresco, the largest independent energy services company in the country. We welcome you, sir. Whenever you are ready. 

STATEMENT OF GEORGE SAKELLARIS, PRESIDENT AND CEO, 

AMERESCO, INC. 

Mr. SAKELLARIS. Thank you, Mr. Chairman, distinguished members of the committee. Thank you for providing me this opportunity 

to testify before you this morning on the role of efficiency policies 

and climate legislation. I also want to commend you, Chairman 

Markey, for your leadership role in energy efficiency and energy 

independence. No one in Congress has taken a more active role on 

this critical issue than you, Mr. Chairman. 

As background, I am George Sakellaris, founder, president and 

chief executive officer of Ameresco in Framingham, Massachusetts. 

Ameresco presently is the largest privately held, independent energy services company providing energy savings through what is 

known in the industry as performance contracting services in 

North America, with over 500 employees in 52 offices located 

throughout the U.S. and Canada. 

Ameresco provides a full array of services for our clients, which 

include energy conservation and renewables, including landfill gas, 

biomass, wind and solar. 

Mr. Chairman, that is a brief description of Ameresco, and now 

I will directly address some of the questions posed in front of us 

today. 

The opportunity for energy efficiency savings in the United 

States is enormous. The United States is presently using approximately 47 million barrels of oil equivalent per day, or 17 billion 

barrels of oil equivalent per year. Based on our experience we have 

found that we as a Nation can save as least 20 percent of that energy and possibly 30 percent of our usage. And we say that because 

for the last 30 years that we have been in this business, we have 

achieved that result for each and every facility that we have implemented an energy savings program, and in many cases much more 

than that. 

If then we assume, and to be conservative, that we can only save 

20 percent, then the total U.S. productivity improvement is equal 

to over 9 million barrels per day, or the equivalent of 3.4 billion 

barrels per year. Now, if we assume at the cost of $100 per barrel, 

which is the price of oil, and today somebody can argue it is considerably higher than that, then the resulting annual savings are 

$340 billion per year. 


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Now, if we assume that we have a simple payback of 7 years, then an investment of $2.4 trillion would be required in order to 

achieve the savings. Then if we take it one step further and assume a 15-year plan for the implementation, is required $160 billion of investment each year, and that will create over 3.2 million 

jobs per year to 5 million jobs per year. 

Now, when we achieve these energy savings, of course, we will 

reduce greenhouse gas emissions by the corresponding 20 percent. 

In other words, for 5.9 billion metric tons of CO2 today that we 

have at 20 percent reduction would be 1.2 billion metric tons per 

year. 

So therefore, as we move forward in our national energy policies, 

we believe that it is extremely important that Congress should include energy efficiency as an integral and as the most important 

aspect of any climate change legislation. And the reason behind it 

is because it is the most economic, and it has the most immediate 

impact in our society. 

The legislation should further include energy efficiency renewable centers that include quantitative end use savings targets, specific targets for each and every year. This will accelerate the implementation of energy efficiency equipment. And the Federal Government should require all retail sellers—electrical utilities, gas utilities, oil dealers, et cetera—to make investments such as 1.6 percent per year reduction in their energy use. And I use the 1.6 per 

year so that by the year 2020, we will have achieved the 20 percent 

reduction in energy use and the corresponding 20 percent reduction 

in emissions. 

In addition, emission allowances should be held in trust for the 

public good. We are opposed to the grandfathering of emissions allowances to firms based on historical emissions. The allowances 

should be sold through what we call public auctions. Then Congress should describe exactly how the proceeds from these auctions 

will be distributed. We recommend that at least 50 percent of the 

proceeds be dedicated to energy efficiency investments. 

If we make this national commitment to energy efficiency, we 

can accelerate the realization of energy savings by buying down 

projects, let’s say, from 10 years to 7 years and then expand the 

opportunity and hopefully get from the 20 percent level to the 30 

percent level. 

Also, by investing in energy efficiency, the Congress can reduce 

overall energy costs for individual customers, business and institutions. This investment will also reduce energy demand, and, as I 

pointed out emissions, and substantially mitigate the overall capand-trade program costs. So you are using the energy efficiency in 

order to mitigate the cap-and-trade cost. 

Of course, associated with all of this, you will reduce substantially the foreign—dependence on the foreign oil, and the trade deficit, it will take it down by 20 percent. 

So, Mr. Chairman, again, thank you for allowing me the opportunity to come before you and the distinguished committee, and I 

will be glad to answer any questions that you may have. Thank 

you. 

The CHAIRMAN. Thank you very much. 

[The statement of Mr. Sakellaris follows:] 


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The CHAIRMAN. Our next witness is Steven Kline, who is the vice 

president of corporate environmental and Federal affairs for the 

PG&E Corporation. Welcome, sir. 

STATEMENT OF STEVEN KLINE, VICE PRESIDENT, ENVIRONMENT AND FEDERAL AFFAIRS, PACIFIC GAS AND ELECTRIC 

CORPORATION 

Mr. KLINE. Thank you, Chairman Markey, Ranking Member 

Sensenbrenner and members of the Select Committee. I am honored to be here on behalf of PG&E Corporation to share our experience and perspective on the role of energy efficiency policies and 

climate legislation. 

When we look at the options for addressing climate change, it is 

clear to us that energy efficiency has to be a front-line response. 

The potential greenhouse gas reductions from energy efficiency are 

substantial. The technology is in almost all cases available today, 

and the investments are highly cost-effective, especially relative to 

supply-side options. In addition, customers like it. The highest 

marks we get from our customers are relative to our interactions 

with them around energy efficiency programs and procedures. In 

fact, aggressively pursuing energy efficiency could increase overall 

economic productivity. 

I am not going to go into details on the McKinsey study, which 

others have mentioned, that are in my written testimony, but move 

to a few comments on the strategic levers that we found in California which may be hopefully helpful. One is that using financial 

and regulatory mechanisms to align energy efficiency with utility 

business interest is critical. This includes eliminating the traditional link between earnings in energy sales, and it removes the 

disincentive to promote energy efficiency. 

By also establishing multiyear program periods with aggressive 

goals, combined with the financial incentives for achieving energy 

efficiency savings, regulators can drive utilities to aggressively pursue savings and partnership with their customers. 

Another important strategic lever is establishing building codes 

and appliance standards. These provide the foundation for all other 

energy efficiency efforts and serve as a catalyst for new technologies, programs and practices. 

Another strategy is providing incentives and reforming tax policies to facilitate deployment of new highly efficient, smart technologies in distributed generation. The utility industry is poised to 

make approximately $900 billion in transmission and distribution 

infrastructure investments over the next 20 years. We should look 

to ensure that these investments are channeled to help build the 

good of the future, one that is itself efficient, and that also facilitates utility customers being more efficient. 

Comprehensive climate change legislation can also use allowance 

allocation and auction revenues to advance energy efficiency and 

dismantle market and regulatory barriers. For example, the 

Lieberman-Warner bill uses allowances and auction revenues in 

this manner. The bill includes numerous incentives for States, utilities, manufacturers and consumers to aggressively pursue energy 

efficiency. Examples include targeting of auction revenues to buy 

down costs of new efficient end use technologies, and providing alVerDate Mar 15 2010 22:59 Nov 05, 2010 Jkt 061726 PO 00000 Frm 00037 Fmt 6633 Sfmt 6602 E:\HR\OC\A726.XXX A726

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lowances to serve load-serving entities for the amount of electricity 

their customers save. 

The bottom line is that energy efficiency is the deepest untapped 

reservoir of cost savings, avoided air emissions and greenhouse gas 

reductions available in our Nation today. Any prudent climate 

strategy must look to fully harvest this resource as quickly as possible. 

Thank you again for the opportunity to be here today. 

The CHAIRMAN. Thank you, Mr. Kline, very much. 

[The statement of Mr. Kline follows:] 


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The CHAIRMAN. And our final witness is Mr. Richard Cowart, 

who is the director of the Regulatory Assistance Project, which is 

a nonprofit organization that provides research analysis and educational assistance to public officials on public electric utility regulation. 

We welcome you, Mr. Cowart. Please go ahead. 

STATEMENT OF ROBERT COWART, DIRECTOR, REGULATORY 

ASSISTANCE PROJECT 

Mr. COWART. Thank you. Chairman Markey, I appreciate the opportunity to speak with you today about the critical role that end 

use energy efficiency can play to reduce greenhouse gas emissions, 

contain the cost of climate legislation and to protect the environment. 

The most important message I can deliver today is that national 

climate legislation absolutely must be designed to call forth to the 

greatest degree possible low-cost end use efficiency investments, a 

message you have heard now from, I think, all of us today. The 

good news is that this actually can be done. The challenging news 

is that most climate legislation, including most cap-and-trade legislation, is badly designed to deliver efficiency. 

We have seen great attention to delivering price signals and on 

supply-side investments, but much less attention to cost containment through efficiency. So one of the key questions facing Congress is going to be, how can cap-and-trade systems be designed to 

accelerate investments in energy efficiency? 

My written testimony addresses four points which I will touch on 

here. First, echoing the comments of the other panelists, energy efficiency is the low-cost equivalent of the carbon scrubber for the 

electric power sector and the most important resource we need to 

look to as the bridge fuel to a low-carbon power sector in the coming decades. 

Secondly, the cap-and-trade architecture used in the Acid Rain 

program and copied in other systems like the European carbon 

trading system, is frankly not optimal for carbon management. It 

focuses on smokestacks, and by awarding carbon allowances to 

emitters on the basis of historic pollution, they cost consumers 

more than they should, and they miss crucial opportunities to enhance end use efficiency. 

I work with air regulators quite a lot, and I often ask them what 

did the Acid Rain program do to advance energy efficiency? And 

most of the time they just sort of look at me quizzically. And then 

they say, well, it didn’t do anything for energy efficiency. Cap and 

trade wasn’t designed to deliver energy efficiency in customer locations. It was designed to change behavior at power plants. 

But energy efficiency happens at customer locations. So if we are 

going to use cap and trade for carbon, we are going to have to 

change the architecture of cap and trade to do a much better job 

for efficiency. 

My third point is about prices, sure a timely topic in today’s 

economy. And as the others have said, efficiency is the best costcontainment strategy we can think of as part of cap and trade. 

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is going to be much more costly, and it will actually save less carbon than a cap-and-trade program that builds efficiency through its 

architecture and relies less on price pressure. This is a point that 

is often overlooked by regulatory economists, but I can tell you, Mr. 

Chairman, that it has not been overlooked by the Governors and 

legislators in the 10 RGGI States that actually studied the issue 

and tried to design a cap-and-trade program. 

People are often surprised to learn how hard it is to reduce 

power-sector carbon through price signals, whether delivered 

through carbon taxes or through auctions. At the consumer level 

demand, as we know, is highly inelastic, and higher power prices 

alone are not going to reduce demand enough to meet our carbon 

goals. 

We have the same problem for different reasons at the generator 

level. It requires a very high carbon price to make a meaningful 

change in greenhouse gas emissions through the redispatch of the 

existing U.S. generation fleet. This is true in coal regions and in 

gas regions. An EPRI study in the Upper Midwest found that carbon prices would be high enough to double the wholesale price of 

power. It would lower emission by only 4 percent. Studies in California right now are finding that even at $90 a ton, carbon prices 

cause very little change in California’s dispatch. 

Fortunately there is a way out of this high-cost approach. A crucial design, a crucial fact is that the same dollar cost in rates, efficiency programs will save five to seven times more carbon than 

would result from carbon taxes or credit markets alone. We need 

to integrate that kind of thinking into the design of cap-and-trade 

programs. 

How can we do this? Two suggestions. The experience of the 

RGGI States provides a great lesson for us. After studying this 

issue extensively, the RGGI States realized that the best results for 

consumers and the environment would be to auction allowances 

and invest the money in energy efficiency. 

The CHAIRMAN. If you could summarize, please. 

Mr. COWART. I have one sentence. 

Congress has the opportunity to build on this experience through 

a national performance-based efficiency allocation in which a significant fraction of national allowances would be awarded to States 

or entities appointed by States on the basis of their performance 

over time in reducing emissions from their own historic baselines. 

Thank you very much. 

The CHAIRMAN. I thank you. 

[The statement of Mr. Cowart follows:] 


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The CHAIRMAN. Again, I apologize to you. 

While you were testifying, three more votes were called out on 

the House floor, and while we were out there on the floor for those 

last series of votes, Senator Obama came out on to the House floor, 

which created a little bit of a delay in the operation of the House 

floor. Again, I apologize to you. 

I have time for one question right now, and then we will have 

to recess and come back again. Logistically this is going to be a 

very difficult day. That is all I can tell you. 

I will tell you what I have to do. I think it is better right now 

if we take another recess, and we will reconvene as soon as these 

roll calls have been called. 

[Recess.] 

The CHAIRMAN. Well, the hearing is reconvened. And again, I 

apologize to our witnesses. And hopefully we will get a little bit of 

a break right now. 

Let me ask of all of our witnesses, if Congress were to use emission allowances or auction revenues under a cap auction and trade 

program to promote efficiency measures, would it be better to channel allowances or funds through the States or directly to the utilities? Mr. Sakellaris. 

Mr. SAKELLARIS. As I indicated in my testimony, I thought that 

it might be best for the Federal Government to set up a program 

and administer the distribution of those funds. But if I were to 

choose, though, between the States or the utilities, I would probably go with a State route. 

The CHAIRMAN. With the States. Mr. Cowart. 

Mr. COWART. As I said in my statement, I think there should be 

a large performance-based allocation to States. And the method of 

distribution has to be carefully managed, frankly, because we really do want to see the funds spent on investments in energy efficiency. 

The CHAIRMAN. States or utilities? 

Mr. COWART. I am saying States or load-serving entities or other 

consumer trustees appointed by States. 

The CHAIRMAN. Okay. Mr. Kline. 

Mr. KLINE. I would say load-serving entities under the direction 

and supervision of the State bodies. 

The CHAIRMAN. Ms. Grueneich. 

Ms. GRUENEICH. I would say either the State or the utilities loadserving entities under the supervision of the State. 

The CHAIRMAN. Mr. DeCotis. 

Mr. DECOTIS. Yes. I would recommend that the funding be provided directly to the States to ensure proper oversight, and they 

can use their discretion to appropriate portions of the funding to 

the utilities. 

The CHAIRMAN. What is the risk that allowances or funds sent 

to the States for efficiency measures would get tied up in the State 

appropriations process? Mr. Cowart. 

Mr. COWART. I think there is a great risk. I say this as a former 

State official. And that is the reason why I think crafting this carefully is important, number one. Number two, I believe the allocation should be performance-based so that the States are confronted 


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constantly with the reality that if they siphon the money off for 

other purposes, then next year’s allocation is going to be affected. 

The CHAIRMAN. Mr. Sakellaris. 

Mr. SAKELLARIS. I like that idea, if it is performance-based, then 

they have an incentive to make sure that the money goes directly 

to the three projects. 

The CHAIRMAN. And in that way, the appropriations process and 

the State legislature can’t control it? 

Mr. SAKELLARIS. That is why the Federal Government somehow 

has to be involved in order to make sure that they do not get involved, yes. 

The CHAIRMAN. I see. Mr. Kline. 

Mr. KLINE. I think I would favor the Public Service Commissions 

or Public Utilities Commissions, simply because I think they are 

one step removed from the budget discussions that occur at State 

levels. 

The CHAIRMAN. Ms. Grueneich. 

Ms. GRUENEICH. We certainly would be happy to accept the 

money. I would say—I would require at least two prerequisites for 

the State, whoever it is, or the utilities to get the money. The first 

is that the State itself on some level—and it could be decided who 

it is, whether it is Public Service Commission or the State Energy 

Office or the Governor—but that there is an actual plan that the 

State has not just for spending the money that year, but a longerterm strategic plan on where they are moving with energy efficiency. 

And then the second requirement that I would have is that there 

is some program with some confidence for measuring and verifying 

that you are actually getting the savings in energy efficiency. I am 

a State. We love to get money. But if we are really going to get 

energy efficiency, we want it to be successful, and I think those two 

are required. 

The CHAIRMAN. Mr. DeCotis. 

Mr. DECOTIS. I would agree with both of those conditions, and 

add further that I think that the risk of misappropriating the funds 

is less now than it might have been in the past. And I think that 

is because the ground swell support for efficiency and for investments in clean energy technology is at a precipice that it has never 

been at before, and I think the public would just not allow it. 

The CHAIRMAN. That is absolutely not accurate. All the tobacco 

awards that went to the States, the States just use it as a big 

piggy-bank and they essentially wind up not actually spending the 

money on prevention, which it is supposed to, targeting children so 

that they don’t get into it. 

Now, who doesn’t want to stop children from smoking? Everybody. The public would demand it, except all this money gets looted 

so it gets drained down to a shadow of what it is. And that would 

be one of the concerns that is obviously, analogously, with energy 

efficiency renewables, et cetera. You have to be realistic in terms 

of the safeguards you put into place. And I would say that in both 

instances it is kind of dealing with prevention, you know, it is 

something that—there is no trophy on the wall. It is stuff that 

never happens because you were smart, you know, kid doesn’t 

smoke, energy is not consumed. It is hard to build a big 


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groundswell around it, as you can tell from the size of the audience 

at this hearing. 

So if this was on the future of nuclear power, which is only going 

to be 1/1,000 role of this, the room would be packed and people 

would be hanging from the chandeliers. So politically, realistically, 

you know, we just have to deal with that. 

So let me now turn and recognize the gentleman from California, 

Mr. McNerney, for a round of questions. 

Mr. MCNERNEY. Thank you, Mr. Chairman. First of all, I want 

to say, prior to what I ask questions on, since I missed the testimony, I hope I don’t ask questions that have already been answered. And if I do, please show a little patience. 

My underlying question here is, how quickly can we scale back 

fossil fuel consumption and CO2 emissions with efficiency measures? One of the ways to measure that would be if we could offset 

the rising costs of energy by implementing efficiency standards or 

implementing efficiency measures in our State. And I would like to 

know if anyone thinks that that is possible, starting with Ms. 

Grueneich from my home State of California. 

Ms. GRUENEICH. It is possible. The great thing about energy efficiency is we have the technologies, we have the knowledge. This is 

not an R&D program that we are going to get the results 5, 10 

years from now. I just returned from a trip to China last month 

on energy efficiency. And China is very interested in energy efficiency, and they are ramping up very quickly at the provincial level 

to do it. It is a matter of thinking it through, making sure that you 

have got, you know, it set up in a way that you are delivering it. 

But energy efficiency, once I believe there is the policy, the leadership, and the funding, you can get programs ramped up very quickly. 

Mr. MCNERNEY. Anyone else care to take a stab? Mr. Sakellaris? 

Mr. SAKELLARIS. Based on the experience that we have, I think 

you can do about 1 on the low end side to 2 percent of the annual 

consumption. Right now I would say in the United States, we are 

probably reducing the demand by maybe a quarter to a half a percentage point. So if we get a little bit serious about this and get 

the Federal and the State governments behind it with taking some 

of the money back to the consumer, I think we can get up to 1 to 

2 percent of annual consumption. That is why in my testimony I 

have said that we establish a target of 1.6 percent per year. 

Mr. MCNERNEY. Per year. 

Mr. SAKELLARIS. By year 2020, we will be at 20 percent reduction 

of the energy consumed in the United States. 

Mr. MCNERNEY. And that is the entire spectrum of energy consumed. 

Mr. SAKELLARIS. Correct. And there will be some cases—for example, if you take some of the housing infrastructure, et cetera, 

that you will save as much as 30 percent. But there are some other 

sectors that you will save only 10 percent. But the aggregate, based 

on the experience we have, you can achieve 1 to 2 percent annual 

reduction of the energy consumption. 

Mr. MCNERNEY. So where do you see the sort of low-hanging 

fruit? Is that with utility production of energy or automobiles? 

Where do you see the easiest—— 


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Mr. SAKELLARIS. I think it is with the end users. The residential 

sector has tremendous, tremendous potential for energy savings 

where you can reduce the consumption by 30 to 40 percent. 

Mr. MCNERNEY. But that is going to require subsidies or some 

sort of government intervention, isn’t it? 

Mr. SAKELLARIS. Not that many. You buy back the projects from 

a 7-year project down to a simple 5-year payback. In the industrial 

sector, tremendous potential for energy savings, as much as 30-percent. And then you have the commercial, the industrial, the institutional sector. The Federal Government, for example, tremendous 

potential. In each and every facility we go, we save 30 to 40 percent. If I take 1 minute, we were in Elmendorf Air Force Base. We 

invested in a $50 million project and we did a complete energy savings retrofit. We estimated we will save them 30 percent. The 

project is up and running for the last 3 years, and we have saved 

them over 40 percent of the energy savings. So there is tremendous 

potential on the institutional sector for energy savings. So it can 

happen. 

Mr. MCNERNEY. Well, one of the things that I have been hearing 

and I understand to be true, is that the buildings produce more 

than 50 percent of our Nation’s greenhouse gases. Where is the majority of that energy coming from? Is that to heat and HVAC, or 

is it building materials or where does that energy go? 

Mr. SAKELLARIS. A substantial amount in on the heating, ventilating and air conditioning. But even though, if you took the light 

and retrofit alone in the United States, if you go from the 

incandescents to florescents, they say it is as much as $10 to $15 

billion investment a year. And that is less than a simple 1-year 

payback. So just that conservation measured alone—— 

Mr. MCNERNEY. So that is going to take a substantial—I mean, 

realistically to get building owners, including homeowners, to get 

invested in this, they are going to have to have some incentive. 

Mr. SAKELLARIS. That is correct. And that is why we say some 

of this money goes back into the States or whichever administrative body has control, and simply buy back the paybacks. 

Mr. MCNERNEY. Yes, Mr. Kline. 

Mr. KLINE. Congressman, that is the way we structure programs 

in California where basically the utility designs programs. We have 

about 85 separate programs that are designed to do exactly what 

you described, to pay down the cost of some of these investments, 

facilitate a faster payback and to get over some first-time hurdles. 

For example, a lot of commercial buildings are built by people 

who are just going to flip them and not own them or who won’t pay 

the HVAC costs because those are charged to the tenants. So tying 

to get—as those buildings are built, get them built to high standards of energy efficiency means that you know you are going to 

have a higher comfort level and you are also going to have a much 

cheaper, better building. 

Mr. MCNERNEY. Do you see any opportunity with leads to create 

a tax incentive for building efficiency? Mr. DeCotis? 

Mr. DECOTIS. Yes. We have a tax incentive in New York for leadcertified buildings. And it has been very effective. I would like to 

add also that I would concur that I think electric and gas efficiency 

programs could save on the order of at least a half to 1 1⁄2 percent 


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per year. I also believe—I believe this is the experience in California, and I know it is in New York because we have been offering 

efficiency programs for nearly 3 decades now. There is an industry 

that has been developed that is poised and ready and waiting to 

take on a competitive market for energy efficiency. And it is really 

quite a robust market. It is disparate in different States, but I have 

seen the industry grown from infancy to what it is today. And it 

is quite a robust market. 

Mr. MCNERNEY. Am I imposing on my time, Mr. Chairman? 

The CHAIRMAN. I wouldn’t use the word ‘‘imposing.’’ You have exceeded your time. With the brilliance of your questions, I would not 

allow the word ‘‘imposition’’ to be used. 

But if you don’t mind, perhaps your time could expire right now. 

I will ask some questions. 

Mr. MCNERNEY. I will yield. 

The CHAIRMAN. And come right back to you again. 

Mr. MCNERNEY. Great. 

The CHAIRMAN. And by the way, the gentleman from California 

actually founded a renewables company out in California. So he 

has got some background in it as well. 

Let me go to you quickly, Mr. Sakellaris. You said that we consume in the United States the equivalent of 47 million barrels of 

oil a day; is that correct? 

Mr. SAKELLARIS. That is correct. 

The CHAIRMAN. So 21 million barrels of the 47 million is oil. 

Mr. SAKELLARIS. That is correct. 

The CHAIRMAN. Approximately 10 million would be coal, about 10 

million would be natural gas. Is that basically in the ballpark? 

Mr. SAKELLARIS. Correct. 

The CHAIRMAN. So that is about 41 million of the 47 million. And 

then the remainder in equivalence of oil would be nuclear 

power—— 

Mr. SAKELLARIS. It is others. 

The CHAIRMAN. Hydropower, solar, whatever, the smaller 

sources; is that correct? 

Mr. SAKELLARIS. That is correct. 

The CHAIRMAN. So as you are breaking down the 47 million, including where it goes in the transportation sector, the building sector, you know, commercial, industrial and home, where do you see 

the biggest potential gains? That is, out of the 47 million barrels 

of oil equivalent, which one of those categories is where the biggest 

gains can be reached and which is the smallest? 

Mr. SAKELLARIS. I think the fastest one, it will be the residential 

sector followed by the industrial sector. 

The CHAIRMAN. Okay. And what can happen in the residential 

sector? 

Mr. SAKELLARIS. Changing out the lightbulbs, changing out the 

heating ventilating, air conditioning. 

The CHAIRMAN. Of the 47 million barrels of oil equivalent, how 

much of that is in the residential sector? 

Mr. SAKELLARIS. It is about 20 percent. 

The CHAIRMAN. So about—you are saying about 11 million? Well, 

no, about 10 million. 

Mr. SAKELLARIS. About 10. 


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The CHAIRMAN. About 10 million. And in that sector of 10 million 

in the residential sector, you think that you can reduce it down to 

8 million? 

Mr. SAKELLARIS. That is correct. And probably—actually, I think 

it is a little bit higher. It is somewhere between 20 to 30 percent 

of the residential sector. 

The CHAIRMAN. So you think 2 to 3 million you think could 

be—— 

Mr. SAKELLARIS. I would say so. 

The CHAIRMAN. And you said the total reduction could be 9 million that could be reached. So let’s go to the next sector. In the industrial sector, how many millions of barrels of oil? 

Mr. SAKELLARIS. Over 30 percent. Somewhere between 30 and 40 

percent. 

The CHAIRMAN. So another 2 to 3 million barrels a day? 

Mr. SAKELLARIS. Uh-huh. 

The CHAIRMAN. How about in the transportation sector? 

Mr. SAKELLARIS. That is one of the soft numbers that we have 

in our analysis. 

The CHAIRMAN. You say it is one of the soft numbers? 

Mr. SAKELLARIS. Soft numbers, because how much mileage improvement we can get per car and so on? 

The CHAIRMAN. Okay. So when my amendment was adopted and 

signed into law by the President—— 

Mr. SAKELLARIS. And that is the one, by the way, that we used 

to estimate what potential would come from that sector. 

The CHAIRMAN. Your company used my amendment and its results in your company’s analysis? 

Mr. SAKELLARIS. We used some of—— 

The CHAIRMAN. What a great honor for me. Thank you. Thank 

you. 

So when you factor in that by law now, the fuel economy standards have to go from 25 to 35 miles per gallon, how many barrels 

of oil does that save per day, do you—— 

Mr. SAKELLARIS. I don’t recall right now the exact number. 

The CHAIRMAN. The answer is 2 million. You can build that into 

your report. And you are saying—and the remaining couple of million barrels comes from everything else that we do in society, to get 

it up to 9 million? 

Mr. SAKELLARIS. The rest of it is Federal Government buildings 

and some of the other institutional markets. 

The CHAIRMAN. I see. Let me ask this: 

We bring in all the good students. So you are all sitting down 

here. And we are all giving you gold stars today for the excellent 

work, which you are already doing. And we are trying to hold you 

up as an example to all of the States and all of the utilities, other 

companies that aren’t quite meeting the same standards that you 

are right now, huh? 

And so the first question is—well, I guess the most important 

question is, we really don’t have to give you any more incentives. 

They are like the kids at Brown University that they don’t even 

give exams to. You are just doing it. But a lot of people need exams 

just so they can do the work, they can study, they buy the textbook 


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like 2 days before the exam. But at least they know there is an 

exam coming up. 

So there are many States, many utilities, that really aren’t doing 

any of this in a significant way. So what do we have to do in order 

to get other States to adopt the policies that are existing in the 

States that we see here? What do we have to do about 

decoupling? What do we have to do—how do we create this dynamic whereby these other States and other utilities adopt the policies in New York, in Massachusetts, in California? We will begin 

with you, Mr. Cowart. 

Mr. COWART. Well, I will just emphasize what I said in my opening testimony. I will make two points. The first is that if carbon 

legislation, climate change legislation enacted by Congress is going 

to—has the potential to cause significant price increases that we 

hope we can avoid by better design, that is the first part of the answer. So even—— 

The CHAIRMAN. What I am saying to you is, a lot of utility executives already know that, but they are still not doing it. So what do 

we do to them? Just get down to the answer. We know the problem. What do we have to do? 

Mr. COWART. Well, I think we have to create a performancebased allocation of a significant fraction of carbon credits that 

would be available to every State and would be available to States 

in proportion to the degree to which they meet their own State’s 

baseline. So Indiana isn’t competing with California. Indiana, in 

order to earn allowances under a performance-based system, has to 

beat Indiana’s past performance. 

The CHAIRMAN. Okay. Mr. Sakellaris. 

Mr. SAKELLARIS. Part of that might be the carrot and the sticktype of an approach, you know, if we have all this allowance 

money, how we send it back to the State, provided that they are 

doing something in energy efficiency. But if we press progressive 

commissions around the country, like California or New York or 

the State of Massachusetts, for example, that they promote energy 

efficiency projects, and then maybe take it down to the level with 

the utilities where we have incentives in the rate-based making 

and how will they earn back their—let’s say the allowable rate of 

return is 8 percent. If they do energy efficiency projects, they get, 

say, 9 percent of an incentive rate of return. But if they don’t, they 

get maybe 7 percent. But they have some kind of incentive on the 

rate making. 

The CHAIRMAN. Okay. Mr. Kline. 

Mr. KLINE. I agree with that. I think decoupling is critical—mandate, or bribe States to do it. Because if you don’t accomplish that, 

then fundamentally you are not going to change the mindset of 

utilities. It is the first step, and then the second step, as my colleague has just stated, is to build in incentives in a performance 

based way that will encourage and create metrics that will allow 

you to judge whether it is happening. 

The CHAIRMAN. So here we are, we are in California and New 

York, Massachusetts. People do it because they say, hey, we are 

going to make money. And then you are using the phrase bribe. I 

mean, it is in parenthesis for anyone that is watching. They don’t 

really mean it. They are just talking about what kind of incentives 


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do we have to give to a State for them to figure out that it is in 

their interest anyway to move in this direction? So why do we have 

to do that? 

Can you explain that, Mr. Kline, so we can just get your perception of what is it about these other States that don’t move in this 

direction, that we have to figure out a way, quote-unquote, to bribe 

them to do what is in their best interest? 

Mr. KLINE. I apologize for that poor choice of words. 

The CHAIRMAN. That is okay. I have already explained it to the 

listening public that you don’t mean it. 

Mr. KLINE. If you think about a mindset of an industry that for 

over 100 years has made money by selling more, and all of a sudden you are coming to them and saying, we are going to flip this 

on its head—— 

The CHAIRMAN. I know what you are saying, Mr. Kline. But it 

is not 1968 anymore. It is 2008, you know? And why don’t these— 

you know, California started in the seventies, Massachusetts, New 

York, Minnesota other States have already moved. What is holding 

these people back? Is it just the power of these local utilities and 

they don’t want a change at all? Because they must obviously know 

that this is working for you. Why don’t they move in that direction? 

Mr. KLINE. I think, honestly, because many of them make a lot 

more money selling more. 

The CHAIRMAN. Okay. But couldn’t they make just as much 

money by selling less? 

Mr. KLINE. Potentially. 

The CHAIRMAN. Potentially. 

Mr. KLINE. But not in the short term, probably. 

The CHAIRMAN. Okay. Ms. Grueneich. 

Ms. GRUENEICH. Let me just quickly—what you have just said. 

I was just at a National Governors Association meeting in Kansas 

City this week, talking with a number of utility executives. And, 

you know, they know if they can still—if it is still legal in the 

United States or in their State to build a conventional coal plant, 

and they can put it in the rate base, they will make a profit. And 

there are great uncertainties still. So they know they can get that 

coal plant in, they can make a profit. They know how to build coal 

plants. There is still great unfamiliarity with how to run energy efficiency programs on the scale of an equivalent of a power plant. 

The CHAIRMAN. So in telecom law, everything just kept going 

along, never changed. And then we put price caps in. And all of a 

sudden, huh, you a saw a huge change in utilities across the country. They realized they had to start modernizing, right? 

Ms. GRUENEICH. Yes. 

The CHAIRMAN. So that is the equivalent here with decoupling. 

You have to find a way here of just changing the mindset legally 

so that they are forced in the same way price caps did it in—and 

so even a cap-and-trade system here is kind of the equivalent of 

the—once you set the cap, then all of a sudden new thinking has 

to occur. 

Ms. GRUENEICH. And I think the challenge is, is that there isn’t 

going to be one item that Congress can do in terms of here is one 

line in the bill that is going to get energy efficiency at the level we 


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need to have it. If we are going to deal with it, it is going to be 

a series of fairly complex different things to think through. 

I mean, I would say in addition to everything else I have heard, 

a statement in whether it is another law on energy or in the climate change that literally does say energy efficiency is the number 

one top priority policy, or among them, that we are going to pursue 

in that sort of clear statement. 

The CHAIRMAN. My time has expired. Let me turn back to Mr. 

McNerney and recognize him again. 

Mr. MCNERNEY. Thank you, Mr. Chairman. And I feel like I neglected in my manners to thank the panel for coming, especially 

Mr. Kline from PG&E, which is my home district. In my home I 

use PG&E power and gas. So thank you for coming, all the Members, and for Commissioner Grueneich for coming today. 

One of the things that excites me the most about global warming 

is the opportunity for us to create jobs and prosperity in our own 

country if we follow a sensible path. And Ms. Grueneich mentioned 

that I think in China—I think you were the one who mentioned 

it—you were there, and they are very excited about energy efficiency. Where do you think we are with regard to technology that 

we could export to China or other countries of the world, creating 

jobs here in this country vis-a-vis where they would be able to create industries that would take those jobs away from us? Mr. 

Sakellaris, could you take a stab at that? 

Mr. SAKELLARIS. We have the intellectual capital in order to help 

them substantially. As a matter of fact, our company, we get at 

least once a month an invitation to a partnership with some Chinese company. They are looking for—I think we can—especially 

with the product where we finance the projects, because that is one 

of the products that we have where we finance the particular energy savings project, and then we guarantee that the savings will 

be there. And they are looking for help to see how we can do this 

project. 

So we could create some jobs in the United States by promoting 

energy efficiency. Because in China when a per capita—on per unit 

of economic output, they use more than twice the energy that we 

are using. So the potential for them for energy efficiency is substantially more than us. 

Mr. MCNERNEY. Yes, Mr. Cowart. 

Mr. COWART. Well just speaking to the jobs question, I think 

there are an enormous number of jobs to be had by accelerating energy efficiency in the United States. Most of them will be jobs deploying energy efficiency in the United States as opposed to producing products that we will ship to the rest of the world. I just 

didn’t want to overlook the fact that this is a very big potential 

area of job growth economy-wide, to implement all the measures 

that my colleagues here have been talking about. 

Mr. MCNERNEY. Well, the hope is that we have technology we 

can ship overseas that would help them make their buildings more 

efficient or—but especially what I want to avoid is having them do 

the reverse to us. 

Mr. COWART. Of course. 

Mr. MCNERNEY. So we must have manufacturers or technology 

that is on this edge. 


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Mr. SAKELLARIS. We do have technology. But implementing energy efficiency in the United States for what we are talking about, 

the numbers earlier, will create between 3 to 5 million jobs per 

year anyway here, because most of those jobs, over 50 percent, it 

is labor. You need the electricians, you need mechanical contractors 

and so on besides the engineers and construction managers and the 

financiers. So the jobs will be created here. 

Ms. GRUENEICH. Let me give you—again, I am going to—we can 

boast together about California, that some of the most exciting innovations in technology on energy efficiency, frankly, are happening in California. 

I had the opportunity to do a tour of Silicon Valley about 6 weeks 

ago. And there is a company that is starting up making, for example, zero net-energy cement. They took the brightest of the brains 

and said, Here is what we are going to do. Here are the parameters. We want to have a product that has as close to zero net carbon emissions as possible. We want to have a product that performs as well or better in terms of quality. We want to have a product that, right out of the box, it is as cheap as what is the existing 

product on the market. And we want to have it scalable because 

we know we need to be using it throughout the world. They have 

been able to literally now develop a process that is close to zero net 

energy production for cement. 

Another company is working on drywall that you put in the 

buildings. So we are really seeing—and these are also setting up 

some factories in California to produce the products. So I think it 

is another example of—we can be creating the jobs, and we can be 

creating the industry. And we in the United States have the opportunity to be the world leaders in doing this. 

Mr. MCNERNEY. All right. 

Mr. DECOTIS. Can I add to that briefly? 

Mr. MCNERNEY. Sure. 

Mr. DECOTIS. We have a green collar workforce training program 

in New York that is fairly well-funded in partnership with the colleges and universities in New York to train the next generation of 

worker in green energy technology and efficiency—— 

Mr. MCNERNEY. Is that focused on community colleges? 

Mr. DECOTIS. Yes it is. It is. And it is growing in its recognition 

and its certification of employees. And we coupled that with a research and development program that New York runs which is developing and working with industry in New York to create that 

technology that they are then trained on. And as the technology is 

developed and we have workforce training and certification, we 

then deploy those technologies through our energy efficiency programs with exactly the point in mind that you made: That we need 

to be the State or we need to be the country that exports the technology. We don’t want to be importing it. 

Mr. MCNERNEY. Mr. Chairman, I have one more question. But 

I will defer to you at this point. 

The CHAIRMAN. And I am going to in turn defer back to you so 

you can ask your question. 

Mr. MCNERNEY. Okay. This one is for Mr. Kline. I have noticed 

with PG&E that the company is fairly receptive to energy efficiency 

measures which will reduce the need to put in new power plants. 


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And I think that is basically the business model, if you can avoid 

putting in new power plants, you are going to make more money 

in a sense. So how effective a message is that to other utilities to 

get them onboard with that? I mean it seems like ultimately if you 

give up all the power the energy supply needs, that you are going 

to be a distribution company and a transmission company rather 

than a generation company. Is that—— 

Mr. KLINE. I think you described the model correctly. With the 

addition that if we can avoid transmission, there is a financial benefit to customers there also. I think that there is a set of companies 

in the Edison Institute, which is the trade organization for the electric utility industry, has created a new Institute for Energy Efficiencies. So I think there is increasing interest in wanting to know 

more. I think that one of the issues you identified is that if companies extrapolate, and it means that they never build generation, 

then they don’t want to shrink necessarily. So there needs to be a 

mechanism to assure that that doesn’t happen. And part of it may 

be simply that there is enough customer growth and distribution, 

smart-grid kinds of additions to rate base that make that not a 

problem. 

Mr. MCNERNEY. Is there a concern about competitiveness? If you 

continue this business model with neighboring utilities, it might 

offer communities an alternative to your business? 

Mr. KLINE. I think it has been an issue in some cases where we 

compete for customers with irrigation districts, for example, who 

aren’t under the same requirements and don’t provide the same 

services. But on the whole, I would say it is not a big problem. 

Mr. MCNERNEY. Thank you. With that, I yield back. 

The CHAIRMAN. I thank the gentleman. And the gentleman’s 

time has expired. 

What I am going to do right now is ask each one of you to give 

us the 1 minute, 1 minute that you want to be on the record for 

eternity as we look back in history and they come to this hearing 

and they say, there, it was there in that 1 minute that those five 

people in their 1 minute summarized all you needed to know about 

the future, about energy efficiency, about economic growth, about 

saving the planet from catastrophic climate change. And they, they 

in their 1 minutes, explained how we can do it. 

And we are going to go in reverse order. And you, Mr. Cowart, 

will have the first opportunity to give us your 1 minute on that. 

Mr. COWART. All right. Well, thanks for the opportunity. And 

thank you for hosting this hearing. 

Energy efficiency is the low-cost carbon scrubber and it is going 

to be the essential cornerstone of our Nation’s climate strategy. It 

must be. And the Congress has to think about the ways to build 

energy efficiency attainment into any carbon program, including a 

cap-and-trade program, that Congress enacts. And that requires 

thinking creatively about what it takes to motivate the delivery of 

energy efficiency, which is different from the architecture that we 

have historically used for carbon cap-and-trade. 

The CHAIRMAN. Thank you. Mr. Sakellaris. 

Mr. SAKELLARIS. I will be very specific; 20 percent savings, 3.4 

billion barrels of oil savings per year. Corresponding, 1.2 billion 

metric tons a year of emissions reductions, creation of 3 to 5 milVerDate Mar 15 2010 22:59 Nov 05, 2010 Jkt 061726 PO 00000 Frm 00075 Fmt 6633 Sfmt 6602 E:\HR\OC\A726.XXX A726

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lion jobs per year, and we need the trade allowances to be auctioned. Thank you. 

The CHAIRMAN. Thank you. Mr. Kline. 

Mr. KLINE. I would start by referring folks to the supply curve 

that the McKinsey Global Institute put together for greenhouse gas 

abatement in the U.S. I think it is very instructive about what we 

can do today, what we can do at—in many cases, negative cost. To 

the extent that the Federal Government can start by putting building standards in place, minimum standards that States can rise 

above, I think that would be an amazing start because we continue 

to be building buildings that, for the life of the facility, are going 

to be drags on our efficiency and are much more expensive to retrofit. 

The CHAIRMAN. Ms. Grueneich. 

Ms. GRUENEICH. Two things. First the two-to-one rule. For every $1 you invest in energy efficiency, you are saving $2. You accelerate that up. In California $1 billion a year in energy efficiency. 

That is $10 billion over 10 years. We are saving $10 billion. That 

is going into California’s economy. It is not going overseas at all. 

It is growing our economy. That is the message I think that wins. 

Secondly, please act. Buildings are going up, appliances are being 

bought, and that just makes it more difficult to go back and fix 

things. 

The CHAIRMAN. Thank you. And Mr. DeCotis. 

Mr. DECOTIS. Yes. Thank you. And I would echo that in terms 

of taking action. I think if anything came out of this session today, 

it is that there is a need for leadership at the Federal level to bring 

the States together toward clean energy policy. And I think it is 

important to create what we call in New York an energy efficiency 

ethic so when people make decisions, purchase decisions, we could 

change the way they think, we could change the way they live, we 

could change the way they work, and we change the way they play, 

while working within private markets to create a profit potential 

for clean energy technology. 

The CHAIRMAN. Thank you, Mr. DeCotis, very much. And we 

thank all of you for your testimony. Absolutely fascinating and central. This is the most exciting, least glamorous hearing that is 

going to be conducted in the Congress this year. But like many 

other nonglamorous subjects, herein lies the truth that will create 

the path to saving the planet and reducing dramatically the 

amount of energy. 

And again, we turn to California for the formula. You know, back 

in 1962 the Beach Boys and Surf City. They had a two-for-one formula too. Which is at Surf City, there were two girls for every boy. 

And that to someone in a blue collar down in Malden, Massachusetts, that was a dream—California—that almost seemed too good 

to be true. And it turns out it was too good to be true. It never did 

exist there or anyplace else. 

However, here the new two-for-one rule coming out of California 

and Massachusetts and out of New York, for every dollar you invest in energy efficiency, you get back two additional dollars. Kind 

of a miracle, huh? No, not a miracle. Just how my mother used to 

say, my mother used to say, Eddy, always try to work smarter, not 

harder. She would say that immediately, immediately before she 


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said, Eddy, I am donating your brain to Harvard Medical School 

as a completely unused human organ. And that was because I 

wasn’t thinking smarter. 

Now we have many utilities and many States whose brains collectively should be donated to Harvard Medical School because this 

is obviously the way to go. It is proven. It is a money maker. And 

yet people still resist it. Why? Because it is not the way they have 

done business in the past. And so this is a tremendous opportunity 

for us. We saw in the telecommunications revolution from the 1996 

Telecommunications Act where not one single home had 

broadband, not one home in America, 1996. But once we got that 

policy right on the national level, we move to a point where now 

11 years later, 12 years later, broadband is almost ubiquitous in its 

deployment. Companies like Amazon, Google, YouTube didn’t even 

exist 3 years ago, but are only possible because we got the policy 

right, revolutionizing these issues. 

And so that same kind of technological revolution is possible here 

in the energy sector as well. It is all there. As Mr. Kline said, the 

technologies are already there. They are ready to go. But we need 

the will and political policies put in place so that we unleash this 

revolution in a way that isn’t just isolated to individual utilities, 

individual States; but that the United States is the leader, looking 

over its shoulder at number two and three and four and the world 

as we export these products, export these ideas all around the planet. And so that is what this hearing really represents to me. Because in a lot of ways, efficiency is the whole key to solving the 

problem of global warming, to reducing our energy dependence. 

And—and this is hard to believe—creating the new major economic 

driver in our whole society. The job creator. The way in which we 

kind of revolutionize the way in which we look at these issues. 

Now, it was hard for the telephone companies to change. You 

know, AT&T had 1.2 million employees. We all still had our black 

rotary dial phone. Why would you want to change? It is working 

out great. Each one of you is renting for $3 a month every single 

month for your whole life a black rotary telephone. That is a good 

business, and the utilities, you know, loved it. And the regulators 

let them get away with it. 

My mother paid $1,200 for renting it for 40 years, a black rotary 

dial phone. But no innovation, no new phones, no new devices, no 

Google, no Amazon, no YouTube. But yet you could always dial 

that phone, huh? Well, that is what we are still doing in energy, 

huh? That is what we are still doing. We are still relying on old 

ways of generating electricity. 

So who would have thought that in the old days when you got 

on the phone and somebody called from another State, you know, 

your grandmother was calling in, they would hand around the 

phone saying, you have got to talk fast, it is long distance. Because 

it was going to be so expensive, huh? And AT&T made so much 

money on the long distance call. 

Now you talk long distance like you are talking across the street 

because through new technology and new ways of looking at the 

issue, we have lowered the price dramatically. All that happened 

in one technological generation. We are going to be able to do the 

same thing here in energy efficiency. And it is going to become the 


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new source—the major engine for economic growth in the United 

States in the next generation. Millions of jobs, economic growth, export opportunities for us. 

Your insights are valuable. We need to get you more allies in this 

fight. But I think ultimately the truth of your testimony will set 

the Congress free. And we will be able to pass the legislation before 

Copenhagen in December of 2009 that will make it possible for us 

to see this revolution in all of its full flower. We thank you for the 

leadership you have shown. This hearing is adjourned. 

[Whereupon, at 1:13 p.m., the committee was adjourned.] 


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