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24–965 PDF 2017

S. HRG. 112–962 

INNOVATIVE PRACTICES TO CREATE 

JOBS AND REDUCE POLLUTION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON GREEN JOBS 

AND THE NEW ECONOMY 

OF THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

October 13, 2011 

Printed for the use of the Committee on Environment and Public Works 

( 

Available via the World Wide Web: http://www.fdsys.gov 

(II) 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

BARBARA BOXER, California, Chairman 

MAX BAUCUS, Montana 

THOMAS R. CARPER, Delaware 

FRANK R. LAUTENBERG, New Jersey 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

SHELDON WHITEHOUSE, Rhode Island 

TOM UDALL, New Mexico 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

JAMES M. INHOFE, Oklahoma 

DAVID VITTER, Louisiana 

JOHN BARRASSO, Wyoming 

JEFF SESSIONS, Alabama 

MIKE CRAPO, Idaho 

LAMAR ALEXANDER, Tennessee 

MIKE JOHANNS, Nebraska 

JOHN BOOZMAN, Arkansas 

BETTINA POIRIER, Majority Staff Director and Chief Counsel 

RUTH VAN MARK, Minority Staff Director 

SUBCOMMITTEE ON GREEN JOBS AND THE NEW ECONOMY

BERNARD SANDERS, Vermont, Chairman 

THOMAS R. CARPER, Delaware 

JEFF MERKLEY, Oregon 

BARBARA BOXER, California, (ex officio) 

JOHN BOOZMAN, Arkansas 

JEFF SESSIONS, Alabama 

JAMES M. INHOFE, Oklahoma, (ex officio) 

(III) 

C O N T E N T S 

Page 

October 13, 2011 

OPENING STATEMENTS 

Sanders, Hon. Bernard, U.S. Senator from the State of Vermont ....................... 1 

Boozman, Hon. John U.S. Senator from the State of Arkansas .......................... 3 

Boxer, Hon. Barbara, U.S. Senator from the State of California ........................ 4 

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma .................... 5 

Whitehouse, Hon. Sheldon, U.S. Senator from the State of Rhode Island ......... 7 

Merkley, Hon. Jeff, U.S. Senator from the State of Oklahoma ........................... 8 

WITNESSES 

White, Edward, Jr., Vice President of Energy Products, National Grid ............. 9 

Prepared statement .......................................................................................... 11 

Responses to additional questions from Senator Boxer ................................ 16 

Kempf, Kyle W., Senior Director, Government Affairs, National Small Business Association ................................................................................................... 17 

Prepared statement .......................................................................................... 20 

Schoen, Phil, CEO, GEO-Enterprises .................................................................... 31 

Prepared statement .......................................................................................... 33 

Responses to additional questions from Senator Boxer ................................ 37 

Smith, Anne, Senior Vice President, Nera Economic Consulting ........................ 38 

Prepared statement .......................................................................................... 40 

Rowlan, Steven, General Manager, Environment, Nucor Corporation ............... 48 

Prepared statement .......................................................................................... 50 

Responses to additional questions from Senator Boxer ................................ 52 

(1) 

INNOVATIVE PRACTICES TO CREATE JOBS 

AND REDUCE POLLUTION 

THURSDAY, October 13, 2011 

U.S. SENATE, 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, 

SUBCOMMITTEE ON GREEN JOBS AND THE NEW ECONOMY, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10 a.m. in room 

406, Dirksen Senate Office Building, Hon. Bernard Sanders chairman of the subcommittee) presiding. 

Present: Senators Sanders, Boozman, Boxer, Inhofe, Sessions, 

Whitehouse, and Merkley. 

OPENING STATEMENT OF HON. BERNARD SANDERS, 

U.S. SENATOR FROM THE STATE OF VERMONT 

Senator SANDERS. Good morning and welcome to an important 

hearing sponsored by the Green Jobs Subcommittee. We will begin 

with opening remarks from Members of the Senate on the Committee, and then we will go to testimony from panelists, and we 

very much thank our distinguished panelists for being here. 

The issue that we are discussing today is not exactly a sexy 

issue. It is not going to appear on the front pages of newspapers 

all over this Country, but in my view it is a very, very important 

issue. And it is an important issue because it addresses at least 

three major concerns that we have in our Country. 

No. 1, obviously all of us are concerned about the recession and 

the significant amount of unemployment that we have. This bill 

creates jobs. 

No. 2, many of us are concerned about the kinds of expenses and 

costs that businesses, homeowners accrue. This concept will help 

make small businesses run their enterprises more cost-effectively. 

It will help homeowners save substantial sums of money on their 

electricity and their fuel bills, and do the same for municipalities. 

So to the degree that we want to save consumers money, make 

our businesses more competitive, this bill does that as well. And for 

those of us who are concerned about the crisis of global warming 

and cutting greenhouse gas emissions, this concept is also very important because it will do just that. 

On-bill financing, which is the subject of discussion today, refers 

to a program run by a utility where customers can get a loan to 

pay for energy efficiency or sustainable energy at their home or 

small business and use the energy savings from those measures to 

pay back the loan over time on their utility bill. 

2 

It is a simple and straightforward concept and it presents a huge 

opportunity to cut energy bills, and we will hear some testimony 

as to how that has occurred; an opportunity to create jobs, we will 

hear testimony about that; and also to slash greenhouse gas emissions and other pollutants. 

Just consider for a moment the potential for energy savings. The 

National Small Business Association, one of our witnesses here 

today, issued a report finding that if small businesses were able to 

improve energy efficiency by 25 percent, not an unrealistic goal, we 

could cut greenhouse gas emissions equivalent to 51 coal-fired powerplants and save the average small business nearly $5,000 per 

year on their energy bills. For a small business, $5,000 is not an 

insignificant sum of money. 

The White House Middle Class Task Force estimates that existing technologies can reduce home energy consumption 40 percent 

on average, and I can tell you in Vermont, we do see that, which 

would yield $21 billion annually in energy bill savings. 

Both the National Small Business Association and the White 

House Middle Class Task Force identified the need for up-front 

funds to pay for these cost-effective energy projects as a major barrier. In other words, all over this Country, small businesses, public 

institutions, homeowners want to make the investment, but they 

don’t have the $5,000, $10,000, $15,000 that they need to save 

money in the future. That is the challenge we are dealing with 

today. 

If you are a large business or a State or local government, you 

can get access to what is called energy performance contracting. 

That is where a private contractor provides you with up-front 

money for cost-effective energy upgrades and you pay back the loan 

through your energy bill savings. And I think many of us are familiar with one of the major examples of that, and that took place at 

the Empire State Building. We have heard a lot of discussion about 

that. 

Johnson Controls, a major corporation, did an energy performance retrofit that will save 38 percent on energy consumption, $4.4 

million annually in energy costs at the Empire State Building, 

meaning the payback for the project is 3 years. That is just an extraordinary investment, I think we can all agree on that. 

These types of saving opportunities exist for small businesses 

and families, too, but at this moment in many cases small businesses and families simply cannot get the kind of financing that an 

entity like the Empire State Building is able to get. 

So that is where innovative programs like on-bill financing come 

in. On-bill finance lets small businesses and homeowners access 

funds to make energy improvements pay for themselves over time. 

These programs are available to at least some customers in 17 

States across the Country. And today we will hear from National 

Grid, which operates a successful on-bill finance program in the 

northeast. 

In Vermont, we have led the Nation in energy efficiency, although I know my colleague from California occasionally disagrees 

with me on that. And we have actually cut electric consumption by 

14 percent over the last 10 years compared with projected demand. 

3 

I am pleased that our Governor’s new energy plan endorses onbill financing as a way to help Vermonters access the funds to 

make our homes and businesses more efficient and move us toward 

more solar and geothermal and sustainable energy. What we know 

in Vermont we know nationwide. We can do more. We surely can. 

And on-bill finance programs can help. 

We know, too, that according to research from the University of 

Massachusetts and the University of California-Berkeley, investments in energy efficiency and sustainable energy create more jobs 

than investments in fossil fuels. So we are talking about a real jobcreating machine here. 

And that is why I am announcing today that my office will soon 

be introducing legislation to support utilities that want to go forward on on-bill financing for their customers. We have 17 States 

that are doing it. I want to see 50 States in this Country doing it. 

When you have a program that cuts energy bills, makes small 

businesses more competitive, creates jobs and slashes greenhouse 

gas emissions, this is a win-win-win situation and Congress should 

be supportive of those efforts. 

I look forward to working with all of my colleagues on this legislation and I thank all of our witnesses for being here today for this 

important discussion. 

Senator SANDERS. I now want to introduce Senator Boozman for 

his remarks. 

Senator. 

OPENING STATEMENT OF HON. JOHN BOOZMAN, 

U.S. SENATOR FROM THE STATE OF ARKANSAS 

Senator BOOZMAN. Thank you, Mr. Chairman. And I am glad 

that we can hold this hearing and really do look forward to the testimony. I appreciate all of you all being here. I have had the opportunity to read your testimony and it really is very helpful. 

With high unemployment and economic hardship hitting many 

families, in fact I think almost all families, I believe today’s hearing is very timely and it will help us answer a number of questions, 

such as: At what point do regulations become counterproductive by 

driving blue collar jobs, manufacturing jobs, energy sector jobs 

overseas to countries with lower standards and more pollution? Are 

we properly analyzing regulations to make sure we count all the 

costs and the benefits? And how can we best support market-driven 

incentives like on-bill financing to increase energy efficiency and 

renewable energy? 

I think today’s witnesses will give helpful answers to some of 

these questions from their perspectives. Let me also say again good 

public policy will lead to net job creation, while at the same time 

promoting conservation, clean air and clean water. 

Job creation should include, but not be limited, to green jobs. 

Bad policies may create jobs, but they will lead to greater losses 

in other areas. We must consider which policies actually work and 

which policies have severe unintended negative consequences. 

I have said before, Congress should not rubber-stamp every policy that is labeled green. There are a lot of steps we can take to 

make sure our companies are successful. One of our witnesses that 

we are happy to have, for example, is in the steel industry. His 

4 

company, Nucor, has approximately 1,500 employees in Arkansas. 

They have the capacity to recycle 6 million tons of steel annually 

in our State. The U.S. steel industry has significantly reduced its 

energy intensity and its emissions over the last 20 years, and our 

domestic industry is the cleanest steel industry on the planet in 

terms of energy intensity and emissions. 

We need to make sure industries like this can afford to comply 

with new regulations that could drive up the cost of energy and 

give their overseas competitors an unfair advantage. 

Again, Mr. Chairman, thank you very much for holding this very 

timely hearing. 

Senator SANDERS. Thank you very much, Senator Boozman. 

Senator Boxer is the Chair of the full Environment and Public 

Works Committee. We are pleased that she is here with us today. 

Senator Boxer. 

OPENING STATEMENT OF HON. BARBARA BOXER, 

U.S. SENATOR FROM THE STATE OF CALIFORNIA 

Senator BOXER. Senator Sanders, thank you so much. 

The title of this hearing is Innovative Practices to Create Jobs 

and Reduce Pollution. And I think it is very important because as 

we expand our economy, we want to make sure we continue to 

make progress on clean air. I have often said if you can’t breathe, 

you can’t work. And that is a fact. So I thank you for this. 

This hearing is focusing on policies to expand the use of energy 

efficiency, such a win-win, and renewable energy technologies, 

which includes financing of these technologies by utilities companies that the customers pay back over time on their bill. 

What we have happening in California now, Senators, I think it 

is interesting, is the private sector has moved in and they do the 

same thing that your utilities are doing, the private sector comes 

in and they put the solar roof on and then the customer saves the 

money and that pays back the company for the capital investment. 

It is working very well, creating a lot of jobs and doing what you 

want to do, Mr. Chairman. You are creating jobs and reducing pollution at the same time. 

So innovative financing can provide incentives to customers to 

improve energy efficiency of their homes and businesses and increasing the use of renewables. Expanding the use of these technologies will put people to work, including construction workers 

who retrofit structures with insulation and weatherization, workers 

who install and maintain heating and air conditioning systems, 

and people who manufacture energy efficient products. 

And since we have a very successful businessman here, when I 

visited my businesses in Silicon Valley and they are high-growth. 

They use a lot of energy, they have saved so much money from 

their costs because they have installed a lot of the latest energy efficiency technologies. They have moved to all the new innovations 

that are making us, frankly, a leader in this area. 

By the way, we have $48 billion a year of exports, clean-tech exports. It supports, by the way, 1.7 million jobs, which is very, very 

important. 

5 

So again, I think this focus of yours today is so important as we 

work for jobs, jobs, jobs. And also work to protect the health of the 

American people. 

We know that since the Clean Air Act’s inception in 1970, the 

U.S. gross domestic product has risen by 207 percent. Now, that is 

the best in the developing world. So not only is clean tech a critical 

job creator, it provides such important health benefits that, according to a study that was demanded by Congress, we find that if we 

continue to turn back efforts to roll back Clean Air Act protections 

and keep on moving toward those protections, by 2020 the Clean 

Air Act is projected to prevent, listen to this, 230,000 premature 

deaths; 2.4 million asthma attacks; 200,000 heart attacks; 120,000 

emergency room visits; 17 million lost workdays; and 5.4 million 

lost school days. 

So when we talk about the importance of jobs, let’s remember 

that fair regulation that makes sense means that we protect the 

health of the people. We keep them productive. We don’t have people dying of heart attacks and missing school and work. This is a 

very important benefit that we should keep in mind and why this 

hearing is so critical. Because what we are talking about in this 

hearing is making sure we have expansion of clean energy. And it 

is just a win-win for everybody. 

So I again say to Senator Sanders, I am so pleased that you 

brought us together. I think what you are trying to do is put people 

to work. You are going to keep American families healthy and we 

are going to save a lot of money for the average family that gets 

a chance to take advantage of the kinds of weatherizaton programs 

and alternative energy programs that you are seeing in your State 

and I am seeing in my State. 

And right as we speak, my staff is checking to see who has the 

best record in their State for energy efficiency, and we will get back 

to you on that. We will leave the record open, with your permission. 

Is that all right? 

Senator SANDERS. Without objection. 

Senator BOXER. Well, thank you. 

[Laughter.] 

Senator SANDERS. Senator Jim Inhofe is the Ranking Member of 

the full Committee. 

Jim, thanks for being here. 

OPENING STATEMENT OF HON. JAMES INHOFE, 

U.S. SENATOR FROM THE STATE OF OKLAHOMA 

Senator INHOFE. Thank you, Mr. Chairman and Senator 

Boozman, for having the hearing today. We have some familiar witnesses here, Mr. Rowlan and Dr. Smith, and Phil Schoen. 

Mr. Chairman, you may not be aware of this, I have to interrupt 

you there. In 2003, Mr. Schoen presented me with an award for my 

work in promoting the use of geothermal heat. Oklahoma is a leader in the geothermal area. 

Senator SANDERS. Jim, we invited him notwithstanding that. 

[Laughter.] 

Senator INHOFE. Well, I know that and I appreciate that. I will 

remember that a year from now, too. That is good. 

6 

[Laughter.] 

Senator INHOFE. In fact, in 2007, I worked with then-Senator 

Clinton to pass the Federal Buildings, along with Senator Boxer, 

Energy Conservation Act, a bill that encourages use of geothermal. 

So it is something that is there. It is good and we are the leaders 

out in Oklahoma. 

With the low financing rates dominating the marketplace today, 

on-bill financing is a good tool to encourage investment in energy 

efficiency. Although I don’t see the Federal role in expanding capital access, I welcome discussions on the topic. More pressing at 

this time, however, is the havoc the EPA is wreaking upon our 

manufacturing sector. 

Whether we are looking at Solyndra, the debacle with that, or 

the EPA train wreck, it is clear that the EPA is waging war on affordable energy that is undermining economic growth. Ironically, 

the President himself has now publicly acknowledged the connection when he stopped the agency from tightening the national ambient air quality standard. Prose on his statement could not have 

been clearer. EPA rules create regulatory burdens and uncertainty 

that stifles job growth. 

Yet, the EPA continues to push regulations that harm the economy. The cross-State air pollution rule, the so-called utility MACT 

rules, they are primary examples of that. These rules are specifically designed to force companies to abandon affordable energy resources like coal. 

Remember, President Obama wants electricity rates to skyrocket 

as he told the San Francisco Chronicle recently, ‘‘If somebody 

wants to build a coal-fired plant, they can, it is just that it will 

bankrupt them.’ 

What this President fails to realize is that affordable, reliable energy is the lifeblood of a healthy economy and the foundation of our 

global competitiveness. The Maguire Energy Institute points out in 

a recent report that even modest electricity price increases for energy-intensive American manufacturers depress economic growth 

and make firms less competitive vis-a-vis China, worsening our 

trade deficit in the process. 

This is ominous, given that NERA is projecting that the cumulative effect of EPA’s rules on electric utilities may result in electricity costs increasing as much as 19 percent in America’s manufacturing heartland. In fact, NERA projects these costs could translate into a loss of 1.6 million jobs by the end of the decade, even 

though the so-called green jobs are taken into account. 

So in my State of Oklahoma, the effect of the EPA rules is already being felt with two powerplants being idled as a result of just 

the EPA’s rules. 

So I applaud the efforts of the House of Representatives to direct 

the EPA to move forward in a sensible manner. It is unfortunate 

that we are kind of ignoring that over here on this side, the plight 

of the business community. And you know, this isn’t unique to 

Oklahoma. You can go anywhere and they will tell you that the 

regulations are just killing us. 

The Senate leadership is a major obstacle to relief. Recently, we 

learned from the EPA’s Inspector General, a request that I made 

some 16 months ago, that the agency circumvented its own peerVerDate Aug 31 2005 08:41 Jul 06, 2017 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\24965.TXT VERNE
7 

review process in the rush to issue the climate regulation. We are 

talking about the endangerment findings. And I can remember so 

well in I think it was December 2009, right before Copenhagen, 

when we knew that they were going to have an endangerment finding. 

And I said when you have this endangerment finding, what 

science will it be based on? And they said it would be on the IPCC 

science, which has been debunked. And now we find out just recently this last week from the Inspector General that they had, in 

fact, cooked the science. 

So, just last week, I might add also, the Majority Leader, Harry 

Reid, changed longstanding Senate rules to protect EPA’s authority 

to regulate farm dust. Now, with all these regulations, all the 

MACTs, the boiler MACTs, and farm dust, I had a news conference 

in my State of Oklahoma in the far southwestern part, southwest 

of where you and I were shooting birds the other day, and a lot of 

people came. We had some people there who had never been west 

of the Mississippi. 

And so I said, now, see this brown stuff down here? That is dirt. 

Now, see that round green thing? That is cotton. Now, put your finger in the air. That is wind. Are there any questions? 

There is no technology that is going to regulate farm dust. And 

this is a problem. I know we are a farm State and people are just, 

it is just, the regulations are killing our farmers. 

So I am glad we are having the hearing. I hope we will get to 

some reasonable response. Green jobs are fine. I love green jobs. 

When the technology is there, we are all for it. In the meantime, 

you have to run this machine called America and we need our current available energy. 

Geothermal is doing a wonderful thing. I am real excited that we 

are at the cutting edge of that. But also just recently we have been 

acknowledged as having the largest recoverable reserves of coal, oil 

and gas of any country in the world, and that is what is going to 

keep us going during the time that we are working on our technology. 

Thank you, Mr. Chairman. 

Senator SANDERS. Thank you. 

Senator Whitehouse. 

OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, 

U.S. SENATOR FROM THE STATE OF RHODE ISLAND 

Senator WHITEHOUSE. Thank you, Mr. Chairman. 

Senator INHOFE. Oh, could I interrupt for a minute? I have to 

apologize. I have a Senate Armed Services meeting, so I would like 

to stay for all of this. I will be coming back. I am sorry for the 

interruption. 

Senator WHITEHOUSE. Thank you, Mr. Chairman, for the opportunity to introduce Edward White of National Grid, which is the 

company that provides virtually all of the electricity and natural 

gas service in my home State of Rhode Island. This is a company 

that, dating back to its time as Narragansett Electric, has been a 

real leader in energy conservation efforts back in the 1980’s. 

I want to say that Narragansett Electric was the first company 

to engage in conservation-based rates. I was a young attorney for 

8 

the Attorney’s General Office. And together with the business community and the environmental community, we agreed on conservation-based rates, demand-side management, cogeneration rates, 

things that were a novelty at the time. 

So I would ask both of my Chairmen, both the Chairman from 

Vermont and the Chairman from California, to recognize that 

Rhode Island has actually shown a lot of leadership in this area. 

I think we may have been first off the mark. 

And that tradition continues with National Grid today through 

their programs like the least-cost procurement program which supports cost-effective gas and electric energy efficiency; programs 

where they are cost-justified. And as you have mentioned, Mr. 

Chairman, the on-bill repayment program which gets around a sort 

of capital obstacle with its reliance on economics and allows corporations, communities, businesses, municipalities and individuals 

to reap the savings that new technologies permit. 

So I am delighted to be here with him. I have to go to the floor 

so I am not going to be here through the whole hearing, but let me 

close by thanking the men and women of National Grid for the effort that they have put in the storm that Vermont felt so harshly 

recently, to make sure that power came back fairly quickly to 

Rhode Island. 

So those who were three, 4 days without power, obviously it was 

a very frustrating time, but I think that National Grid and their 

employees worked terribly hard to get people back as quickly as 

they could. We had folks from the Federal Government in and they 

described how National Grid had performed well above expectations, well above what the national averages are for this, and they 

really put their heart and soul into trying to get people back online 

as quickly as they could. 

So both for their long tradition of leadership in conservation 

focus in the utility community and for their recent work, it is great 

to be with you, Ed, and thank you for being here today. 

Senator SANDERS. Thank you, Senator Whitehouse. 

Senator Merkley. 

OPENING STATEMENT OF HON. JEFF MERKLEY, 

U.S. SENATOR FROM THE STATE OF OREGON 

Senator MERKLEY. Thank you, Mr. Chair. I am going to pass on 

an opening statement so we can get right on to witnesses. 

Senator SANDERS. Now we are going to hear from the panelists. 

We are going to begin with Mr. Edward White, Jr. Mr. White 

serves as the Vice President of Energy Products in the Customer 

Energy Solutions Group at National Grid. He has provided his expertise in energy to the National Grid, one of the largest and bestknown energy companies in the world for 15 years. Prior to his role 

as Vice President of Energy Products, he led development of a large 

distributed solar installation and served as U.S. lead for the National Grid’s Energy Management System. 

Mr. White, thanks for being with us. 

9 

STATEMENT OF EDWARD WHITE, JR., VICE PRESIDENT OF 

ENERGY PRODUCTS, NATIONAL GRID 

Mr. WHITE. Great. Thank you. And thank you to Senator 

Whitehouse, who I know had to step out. 

Good morning, Chairman Sanders, Chairman Boxer, Ranking 

Members Boozman and Inhofe and Members of the Subcommittee. 

It is an honor to appear before you today on behalf of National 

Grid to discuss our customer energy efficiency program. 

My name is Ed White. I am the Vice President of Energy Products for National Grid. One of my key areas of responsibility, as 

the Senator just outlined, is to develop and get approved through 

our State regulators efficiency programs to help our customers 

where they live, work and play. 

I have seen first-hand where energy efficiency programs help 

customers become more competitive, create jobs and reduce emissions. We support the Subcommittee’s efforts to advance energy efficiency. 

National Grid is an international energy delivery company based 

in Waltham, Massachusetts, with other key offices in Providence, 

Rhode Island, Albany, Brooklyn, Buffalo and Syracuse, New York. 

National Grid provides electricity to approximately 3.3 million customers in Massachusetts, New York, New Hampshire and Rhode 

Island and manages the electricity network for the Long Island 

Power Authority. 

We are the largest distributor of natural gas in the Northeast, 

and we are one of the largest investor-owned utilities in the United 

States as measured by customer count. 

In these uncertain and difficult economic times, making smart 

investments in energy is of critical importance. Our Country and 

the local communities we serve need job creation, energy security 

and cleaner ways to power our economy. Investing and promoting 

energy efficiency has the potential to help address each of those important challenges. 

Studies have shown that energy efficient investments typically 

produce three to four dollars in savings for every dollar invested. 

We have seen that in Vermont. We have seen that in California 

and we have seen that in other States. 

As an example, over the last 3 years, our total savings through 

new energy efficiency investment in Massachusetts is expected to 

save over 1 million megawatt hours. This is as much electricity as 

would be used to power 92,000 average homes for a year. 

As our energy efficiency programs grow and our customers’ desires to participate grow, we need to advance the tools used to deploy these programs. These tools come in many forms, shapes and 

sizes, from emerging technologies like LED lighting, to advanced financing and payment options like what we are talking about here 

today. 

On-bill financing, or as we call it on-bill repayment, provides our 

customers a way to enjoy energy savings today, but pay for those 

savings over time. It encourages customers to make the capital improvements that they otherwise would not make, which helps them 

to create jobs, remain competitive, conserve energy and reduce 

emissions in our communities and in our regions. 

10 

Here are just a couple of examples where our on-bill repayment 

program has helped our customers directly. Specifically, in Warwick, Rhode Island, National Grid worked on a large lighting replacement job with a major hotel. By replacing their inefficient 

lighting fixtures with 1,900 LED lamps, the hotel saved over 1 million kilowatt hours per year, and that will be for years to come. 

That translates to significant savings that help go to their bottom 

line. 

In Cranston, Rhode Island, the city was lacking the necessary 

funds, just like a lot of communities around all of our territories, 

to do an efficiency lighting project for their School Department. 

With on-bill repayment, the city is now able to pay for the projects 

from the savings on their electric bill. 

On-bill repayment has helped numerous other projects become 

possible across the States we are so proud to serve. From the local 

florist to the grocery store owner, who both replaced outdated inefficient lighting, these jobs would not have moved forward without 

our on-bill repayment program. 

On-bill repayment programs help create economically sound 

projects that pay for themselves, put Americans back to work and 

reduce emissions. We welcome the efforts of the Subcommittee to 

evaluate the appropriate Federal involvement for energy efficiency 

programs and respectfully encourage you to consider complementary policies that would maximize the economic impact of the existing State programs. 

Thank you for your consideration and I look forward to questions. 

Thank you. 

[The prepared statement of Mr. White follows:] 

11 


24965.001

Written Testimony 

Edward White, Jr. 

Vice President, Energy Products 

National Grid 

To 

United States Senate 

Committee on Environment and Public Works 

Subcommittee on Green Jobs and the New Economy 

In re 

Innovative Practices to Create Jobs and Reduce Pollution 

October 13, 2011 

Good morning Chairman Sanders, Ranking Member Boozman, and Members of the 

Subcommittee. It is an honor to appear before you today on behalf of National Grid to 

discuss our energy efficiency programs. My name is Edward White, and I am Vice President 

of Energy Products for National Grid. I manage National Grid's energy efficiency initiatives 

and have seen first-hand the potential for efficiency-focused investment to create jobs and 

reduce emissions. National Grid supports the Subcommittee's efforts to advance energy 

efficiency. 

About National Grid 

National Grid is an international energy delivery company based in Waltham, 

Massachusetts, and Brooklyn and Syracuse, New York. Our parent company, National Grid 

plc, is based in the United Kingdom. National Grid provides electricity to approximately 3.3 

million customers in Massachusetts, New Hampshire, New York and Rhode Island, and 

manages the electricity network on Long Island, New York under an agreement with the 

Long Island Power Authority (LIPA). In 2009, our electric utilities delivered close to 32 

million megawatt-hours of electricity to power homes, schools, businesses, and factories 

across our service territories. We are the largest distributor of natural gas in the 
12 


24965.002

northeastern United States, serving approximately 3-4 million customers in Massachusetts, 

New Hampshire, New York, and Rhode Island. National Grid also owns over 4,000 

megawatts of contracted electricity generation that provides power to over one million LIPA 

customers. We are one of the largest utilities in the United States, as measured by total 

customers. 

We welcome the opportunity to speak about energy efficiency before this Subcommittee. 

In these uncertain and troubling economic times, making smart investments is of paramount 

importance. Our country needs job creation. Our country needs energy security. Our country 

needs cleaner ways to power our economy. Investing in energy efficiency has the potential to 

help address each of these challenges. 

National Grid has been at the forefront in the push to implement energy-savings programs. 

The three states that incorporate the largest portions of our service territory- Massachusetts, 

New York, and Rhode Island- have each set goals of reducing energy use by as much as two 

percent per year. These states, along with 23 others, have recognized that energy efficiency 

is the cheapest way to meet new and existing demand. Many utility regulators have 

established rules that require utilities, such as National Grid, to invest in cost-effective 

energy efficiency before investing in new power plants. 

Working with our regulators at the state level, and with local energy efficiency services 

contractors, we have deployed programs to invest millions of dollars to enable our customers 

to make cost-effective energy efficiency improvements. These projects have yielded positive 

returns for our customers, created jobs for thousands of workers, and saved millions of 

megawatt-hours of electricity. 

Cost-effective energy efficiency measures allow us to provide customers with one kilowatthour of energy savings for between three and five cents. In comparison, customers around 
13 


24965.003

the United States pay between 6.5 cents and 16.5 cents for their electricity, depending on 

where they live. As a result, investing in energy efficiency can typically produce three to four 

dollars of savings for each dollar invested. In 2012, our total savings through new energy 

efficiency investment in Massachusetts is expected to be over one million megawatt-hoursas much electricity as 92,000 typical homes would use in a year. 

National Grid's energy efficiency programs have been growing steadily in each of the states 

where we operate. Working with the state regulators in Massachusetts, New Hampshire, 

New York, and Rhode Island, we have established a total budget of over $1 billion for energy 

efficiency programs from 2010 through 2012. As with many utility-sponsored efficiency 

programs, this money comes from both public and private sources. We have a variety of 

ways to deploy the funds, ranging from rebates to interest rate subsidies to customer loans. 

As our efficiency programs undergo rapid growth, we rely increasingly on customer payment 

plans that allow our customers to make energy efficiency improvements and pay for them in 

installments on their electric bill. We have seen this to be a highly effective way to spur 

energy efficiency investment. In essence, this so-called "on-bill" repayment method provides 

customers a way to enjoy energy savings today, but pay for those savings over time. It 

encourages customers to make capital improvements that they would not have otherwise 

made. Every new project means additional jobs, additional reductions in energy use, and 

fewer emissions. Energy efficiency provides these benefits while at the same time it delivers 

long-term savings to customers by reducing individual electric bills and bringing down the 

cost to procure electricity for our customers. 

Most of National Grid's on-bill repayment programs have focused on the small commercial 

customer segment, but we are likely to expand to other segments as our programs evolve. 

Our experience shows that on-bill repayment arrangements have low default rates. 

Customers are already in the habit of paying their monthly electric bill, and the energy 
14 


24965.004

savings from efficiency measures often exceed the amount added to their bill. The structure 

is very easy for customers. We have measured default rates of between zero and 3·5 percent, 

depending on the customer class. These rates would be considered well \\'ithin the range of 

"investment grade" using current credit rating systems. 

Another benefit of on-bill repayment programs is that they can incorporate funding from 

outside lenders. In fact, much of the projected growth in our three-year plan relies on 

outside funding sources: $180 million of it, to be precise. This money comes from thirdparty lenders - not from the utility, customers, or the public benefit funds overseen by the 

utility commission. Our on-bill programs mobilize this capital to create immediate economic 

benefits. 

On-bill repayment programs have been used successfully by National Grid to fund capital 

investments in an array of state-of-the-art, energy efficient technologies. We and our 

customers have invested in water heaters and boilers, pumps and drives, lighting, insulation, 

and air sealing. Each project draws a long list of implementation partners: local contractors 

and installers; equipment manufacturers and distributors; engineering firms; architects and 

many others. 

Here are some examples of how our energy efficiency programs have worked: 

National Grid worked on a large lighting project with a major hotel in Warwick, Rl. The 

hotel replaced out-of-date halogen and incandescent light fixtures and installed approximately 

1,900 LED lamps along with fluorescent lamps and ballasts. The project saved the hotel over 

one million kilowatt-hours per year. The use of on-bill repayment enabled the hotel to defer 

the initial capital expense and generate immediate positive cash flow. 

On-bill repayment was instrumental in helping the city of Cranston, Rl undertake an energyefficient lighting project in the school department. The project involved the replacement of 

48 inefficient gymnasium light fixtures with energy efficient fluorescent fixtures at a middle 

school. The project would not have happened without the on-bill repayment program, 

because the city lacked the funds needed to make the capital investment. The city is now able 

to pay for the project out of savings on its electricity bill. 
15 


24965.005

In Massachusetts, five schools in a southeastern Massachusetts school district saw energy 

savings potential but had no capital budget. National Grid provided technical assistance and 

set up an on-bill repayment arrangement that ensured the school district would see positive 

cash flow from energy savings due to upgrades to lighting and building systems. 

• On-bill repayment has made numerous other projects possible for building owners that lacked 

the capital reserves to make the necessary up-front investment. In Providence, RI a grocery 

store replaced outdated, inefficient lighting. In Cumberland, RI an architectural 

woodworking company, also undertook a project to replace inefficient area lighting. 

Through on-bill repayment programs we are creating economically sound projects that pay 

for themselves -putting Americans to work, modernizing our buildings, schools, and homes, 

and reducing emissions. Energy savings and economic growth are consistent. From 1999 

through 2009, Massachusetts' economic output grew by nearly four percent per year, but the 

state's electricity consumption only grew less than one percent per year. 1 This is exactly the 

sort of trend we need at a national leveL 

Therefore, we welcome the efforts by the Subcommittee to evaluate appropriate federal 

incentives for energy efficiency programs. We also respectfully encourage you to recognize 

existing state-level energy efficiency programs and consider complementary policies that 

would maximize their economic impact. 

National Grid would be pleased to work with the Subcommittee to identify and evaluate 

options for federal legislation. Thank you for your consideration. I would welcome any 

questions you may have. 

Department of Commerce, Bureau of Economic Analysis; Energy Information Administration 

2009. ' 
16 


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nationalgrid Edward H. White 

Vice President, Customer & Business Strategy 

National Grid 

Follow up questions from Chairman Barbara Boxer to Ed White regarding the Environment and 

Public Works Subcommittee Hearing of October 13, 2011 entitled, "Innovative Practices to Create 

Jobs and Reduce Pollution.'' 

l. Mr. White, your testimony states that National Grid's innovative financing and repayment 

programs have been used to fund an array of state-of-the-art, energy efficient technologies. Could you 

describe some of these technologies and the types of partners that your company has worked with to 

implement and maintain these investments? 

National Grid's financing (on bill repayment (OBR)) provides our customers the option to pay for the 

energy efficient installations on their energy bins. The alliances that we work with to implement and 

maintain these investments are our customers, engineering firms that analyze the energy savings, start-up 

companies that develop new innovative technologies, contractors that perform the energy efficient 

installations, and distributors and manufacturers who supply the equipment. These alliances lead into energy 

efficient sustainable environment and job growth in the sector. 

Some of the technologies we promote are indoor lighting utilizing light emitting diodes ("LED lighting") 

which replace older technologies such as compact fluorescent or incandescent lighting; LED lighting for 

food and beverages refrigerated cases in supermarkets and convenience stores; ductless air conditioning 

equipment for small size businesses; building energy management systems to optimize the temperature set 

points as well as the start and stop of heating and air conditioning equipment; and refrigeration controls 

especially in supermarkets and convenience stores. Through OBR, National Grid promotes new 

technologies for municipal waste water treatment plants such as fine bubble aeration and technologies for 

hospitals, universities, and food processing facilities such as combined heat and power (CHP) systems. In 

addition to generating on-site electricity, the heat generated from CHP is utilized to generate domestic hot 

water or provide heating during cold weather. 

2. Mr. White, could you please describe some of the work your company has done with schools to 

increase their energy efficiency with the use of innovative financing and repayment programs? 

National Grid's on-bill repayment (OBR) has provided assistance to countless school systems that do not 

have the funds in their capital budgets to move forward with energy efficiency projects. These projects 

include innovative lighting designs that are coupled with occupancy and day lighting sensors to optimi7.e the 

desired lighting in a classroom. Also the installation ofhuilding energy management systems, to optimize 

the temperature set points as well as the start and stop of heating and air conditioning equipment, are major 

contributors to energy savings in schools. National Grid works with school departments on the installation 

ofthesc systems. In many cases the energy savings on a monthly basis are greater than the OBR cost, 

meaning the school finds themselves in a net positive cash flow basis. Schools increased their participation 

in energy efficiency projects dramatically (by a factor of2 -3 times participation rates) once OBR was made 

available to them. 

40 Sylvan Rd. Waltham, MA 02451 

T: {781) 907-1614U Edward.Whlte@us.ngrid.com. ·.I W\NW.natlonalgrid.com 
17 

Senator SANDERS. Mr. White, thank you for your testimony and 

for what you are doing. 

Our next panelist is Kyle Kempf. Mr. Kempf is the Senior Director of Government Affairs for the National Small Business Association, serving over 150,000 small businesses. Kyle advocates on energy, environmental, regulatory and economic development issues 

on behalf of small businesses. He currently administers the National Small Business Association Political Action Committee. After 

graduating from Boston University summa cum laude, he served 

offices in the U.S. Senate, British Parliament, and European Parliament prior to joining the National Small Business Association. 

Mr. Kempf, thanks for being with us. 

Mr. KEMPF. Thank you. And the PAC is mostly dormant, so 

please don’t call. 

[Laughter.] 

STATEMENT OF KYLE W. KEMPF, SENIOR DIRECTOR, GOVERNMENT AFFAIRS, NATIONAL SMALL BUSINESS ASSOCIATION 

Mr. KEMPF. Good morning, Chairman Sanders, Chairwoman 

Boxer, Ranking Member Boozman and Members of the Committee. 

Thank you for inviting me here today to discuss the benefits of innovative practices that have great benefit to small businesses, to 

the U.S. economy, and the environment, on-bill financing. 

My name is Kyle Kempf. And Chairman Sanders, I am Senior 

Director of Government Affairs for the National Small Business Association, America’s oldest small business advocacy organization. 

Since 1937, NSBA has worked in a nonpartisan manner to promote 

policies beneficial to the small business community. 

On-bill financing is a collaborative mechanism among utilities, 

contractors and customers aimed at making it as easy as possible 

for small business owners to invest in energy efficiency upgrades, 

alternative energy sources, and to save money. 

To be honest, this is the main attraction for most small business 

owners. On-bill financing saves them a lot of money. Energy is a 

very high-overhead expense for many small businesses, one for 

which most have little to no control. In fact, many small businesses, particularly those with fewer than 35 employees in the 

manufacturing sector, pay 35 percent more per unit for their electricity than their larger counterparts. 

Given the situation, one might surmise that small business owners have rushed in to invest in energy efficiency upgrades or alternative energy production, but this is not the case. Only 40 percent 

of the respondents to NSBA’s 2011 energy survey reported investing in energy efficiency improvements in the last 18 months or 

plan to do so; and only 16 percent conducted an energy audit in the 

previous 2 years. 

Small business owners obviously are eager to cut costs whenever 

and wherever they can, so what is holding them back? When asked 

why they had not conducted an energy audit, 30 percent of the respondents cited the cost; 22 percent identified a lack of information 

on service providers or the auditing process; and 18 percent said 

a shortage of time; 40 percent of the respondents cited cash-flow as 

the main obstacle to making their small business more energy efficient. 

18 

In short, small business owners lack the necessary money, time 

and reliable information to invest in energy efficiency upgrades and 

alternative energy production. On-bill financing resolves each of 

these impediments. 

In 2009, NSBA issued a report, On-Bill Financing: Helping Small 

Businesses Reduce Emissions and Energy Use While Improving 

Profitability, which highlighted how much small business owners 

could save by using on-bill financing programs. On-bill financing 

program administrators report the utility bill savings of 15 to 30 

percent are highly typical, usually by the simple adoption of existing energy efficiency strategies. Although energy cost savings will 

vary greatly from one small business to another, the report found 

that an average small business could save $4,932 each year on its 

energy bills, with many saving much more. 

To illustrate, I would like to share some specific examples of actual small business owners who used on-bill financing to reduce 

their energy costs. In West Haven, Connecticut, Chick’s Drive In, 

a small family owned restaurant known for its hot dogs and lobster 

rolls, used the on-bill financing program at United Illuminating to 

improve its energy efficiency. 

Following the energy audits of an improved U.I. vendor, obsolete 

fluorescent interior lighting was replaced with high-efficiency lighting, occupancy sensors were installed in work areas where there 

generally was little activity and high-intensity exterior lights were 

replaced with more efficient pulse-start technology, while motor 

and evaporator fan controls were upgraded. In total, the improvements cost about $32,000, although the utility subsidized approximately $15,000. 

The upgrades are expected to provide Chick’s with remarkable savings of approximately $9,000 per year, which means that the 

loans should be paid off in about 2 years. 

A small grocer in California used the on-bill financing program offered by San Diego Gas & Electric to invest about $20,000 in improved lighting and refrigeration efficiency. The grocer received a 

rebate of nearly $6,000, leaving him with just more than $14,000 

to pay back. The estimated annual energy costs savings resulting 

from these improvements were nearly $6,000. 

For the 31-month loan term, this result in a customer fixed 

monthly loan payment of $463.73, which should go unnoticed given 

that the grocer is expected to realized over $475 per month in 

monthly energy savings. Following the 31-month payback period, 

this small grocer simply will get to keep these savings. 

Firms located in areas that do not offer on-bill financing programs are significantly less likely to make these sorts of investments. In addition to significant financial savings for small business owners, NSBA’s on-bill financing report found that the environmental outcome of the widespread adoption of similar programs 

would be enormous. 

The report found that small businesses, as a whole, could reduce 

greenhouse gas emissions by 250 million tons each year if they improved their energy efficiency by 30 percent. Incredibly, this is the 

equivalent of emissions from 31 coal-fired powerplants. 

On-bill financing represents an effective way to help small businesses afford critical energy upgrades. These improvements benefit 

19 

small business owners’ bottom lines, the sizable sector of the small 

business community engaged in energy audits, efficiency retrofits, 

and alternative energy production, and the environment. 

Thank you again for the opportunity to appear before you today. 

I welcome any questions. 

[The prepared statement of Mr. Kempf follows:] 

20 


24965.007

NSBA~ National Small Business Association:[{ 

TESTIMONY 

OF 

KYLE W. KEMPF 

Senior Director, Government Affairs 

NATIONAL SMALL BUSINESS ASSOCIATION 

"Innovative Practices to Create Jobs and Reduce Pollution" 

Before the U.S. Senate Committee on Environment and Public 

Works Subcommittee on Green Jobs and the New Economy 

October 13, 2011 
21 


24965.008

Good morning Chairman Sanders, Ranking Member Boozman, and members of the committee; 

thank you for inviting me here today to discuss the benefits of an innovative practice that is of great 

benefit to small businesses, the U.S. economy, and the environment: On-Bill Financing. 

My name is Kyle Kempf and I am the senior director of government affairs for the National Small 

Business Association (NSBA), America's oldest small-business advocacy organization. Since 

1937, NSBA has worked in a nonpartisan manner to promote policies beneficial to the smallbusiness community. 

On-Bill Financing: How It Works 

On-Bill Financing is a collaborative mechanism among utilities, contractors. and customers aimed 

at making it as easy as possible for small-business owners to invest in energy-efficiency upgrades 

and alternative-energy sources, while realizing immediate financial benefit. 

Before an On-Bill Financing program is enacted, a utility must identify a source of capital for the 

program. While some utilities are able to use their own capital, most rely on ratepayer funds to 

finance them. Unfortunately, such ratepayer funds are not available in all areas. The scarcity of 

capital sources has significantly impeded the spread of On-Bill Financing programs around the 

country. 

Once a utility has located a capital source, it must identify and certify a network of contractorsusually with backgrounds in remodeling, lighting, heating. ventilation, or air conditioning-who 

will perform energy audits. 

It is worth noting that that vast majority of these contractors are themselves small businesses. In 

fact, small firms provide most of the services now offered in any utility-operated energy-efficiency 

program, usually including everything except program administration and quality assurance, which 

the utilities operate. For example, more than 92 percent of the Air Conditioning Contractors of 

America membership base (providing services to the HV AC industry) has fewer than 50 

employees-and 96 percent has less than 100 employees. 

Testimony of the National Small Business Association 
22 


24965.009

Frequently, these contractors then help identify the smail-business urility customers who would 

most benefit from the program. Having identified a potential participant, the contractor perfonus an 

energy audit of the business premises to identify possible cost-effective efficiency measures. These 

audits typically take from one to four hours. At the end of the audit. the contractor sets an 

appointment with the small-business owner to return and present his results. 

The contractors usually then enter the data they gathered during the energy audit into a 

standardized program and database, which produces a report detailing the measures and potential 

energy and cost savings for the small-business owner. 

At this point. the contractor also usually works with the utility to evaluate the loan application. 

Ordinarily, this evaluation is based on factors such as how many years the applicant has been in 

business and his or her bill-payment history. 

Once the application has been evaluated. the contractor once again visits the small-business owner 

to outline the specific improvements that could be achieved. The small-business owner may choose 

some or all of the measures. depending on how large a project he or she financially wants to 

commit to, how significant the financial benefit is, etc., but at this point he or she commits to the 

On-Bill Financing program. 

The terms of the existing On-Bill Financing programs differ but utilities generally offer smallbusinesses loans at a zero percent interest rate for two to five years. Utilities also usually offer 

rebates ranging from 10 percent to as high as 70 percent of the total project cost. 

Subsequently, the contractor-again, normally another small business-performs the upgrades and 

submits his invoice to the utility for payment. The utility oftentimes conducts a post-installation 

inspection; with the contractor remedying any identified deficiencies. 

The utility then pays the contractor and begins placing a new energy-service charge for repayment 

on the small business's bill. The charge generally should be less than the energy cost savings. 

While small-business energy-efficiency projects vary greatly according to a variety of factors. they 

generally range from $8.000-$12,000. 

Testimony of the ,Vational Small Business Association 
23 


24965.010

Why On-Bill Financing is Attractive to Small-Business Owners 

Energy is a very high overhead expense for many small businesses, one for which most have little 

control. This is most obviously reflected in the fact that small businesses often pay more for energy 

than comparable large firms. 

A 2008 report, "Characterization and Analysis of Small Business Energy Costs," from the U.S. 

Small Business Administration Office of Advocacy found "significant price differentials between 

what the smallest and largest entities paid for energy in the commercial and manufacturing 

sectors." Many small businesses-particularly those with fewer than 35 employees in the 

manufacturing sector-pay 35 percent more per unit for their electricity than their largest 

counterparts. 

Given this situation, one might surmise that small-business owners have rushed to invest in energyefficiency upgrades or alternative-energy sources for their firms. This is not the case. Only 40 

percent of the respondents to NSBA' s 2011 Energy Survey-which will be released next weekreported investing in energy-efficiency improvements in the last 18 months or plans to do so: and 

only 16 percent said they had conducted an energy audit in the previous two years. 

Small-business owners obviously are eager to cut costs whenever and wherever they can, so what 

is holding them back? When asked why they had not conducted an energy audit, 30 percent of the 

respondents cited the cost, 22 percent identified a lack of information on service providers or the 

auditing process, and 18 percent said a shortage of time. Forty percent of the respondents cited cash 

flow as the main obstacle to them making their small business more energy efficient 

In short, small-business owners lack the necessary money, time, and reliable information to invest 

in energy-efficiency upgrades and alternative-energy production. On-Bill Financing resolves each 

of these impediments. 

The Potential Benefits of On-Bill Financing 

In 2009, NSBA issued-conducted with funding from the Bipartisan Policy Center-the report, 

"On-Bill Financing: Helping Small Business Reduce Emissions and Energy Use While Improving 

Testimony of the National Small Business Association 
24 


24965.011

Profitability.~' The repott outlined hovv On-Bill Financing progran1s work and explored their track 

record of success. 

The study highlighted how much small-business owners could save by using On-Bill Financing 

programs to invest in their firms. 

On-Bill Financing program administrators report that utility bill savings of 15-30 percent are highly 

typical-usually by the simple adoption of existing energy-efficiency strategies. Lighting alone can 

represent up to 40 percent of typical energy consumption in a commercial building and improved 

lighting is a simple and easy way to improve a small-business·s efficiency. 

Although energy cost savings will vary greatly from one small firm to another. the report found 

that an average small business could save $4.932 each year on its energy bills-with many saving 

much more. 

Specific Examples 

To illustrate. I would like to share some specific examples of actual small-business owners who 

used On-Bill Financing to reduce their energy costs. 

In West Haven. Connecticut, Chick's Drive In-a small, family-owned restaurant known for its hot 

dogs and lobster rolls-used the Energy Efficiency Fund's Small Business Energy Advantage 

(SBEA) program at United Illuminating (UI) to improve its energy efficiency. 

The UI SBEA program is designed to provide cost-effective energy-saving services for small 

commercial and industrial customers lacking the financial resources or in-house expertise to 

analyze and reduce their energy usage. 

Following the energy audit from an approved UI vendor, obsolete Tl2 fluorescent interior lighting 

was replaced with high-efficiency T8 lighting, occupancy sensors were installed in work areas 

where there generally was little activity, high-intensity exterior lights were replaced with more 

efficient pulse-start technology, and motors and evaporator fan controls were upgraded. In total, the 

upgrades cost about $32,000-although the Energy Efficiency Fund subsidized approximately 

$15,000. 

Testimony of the Nalional Small Business AssociaJion 
25 


24965.012

The upgrades are expected to reduce Chick's annual electricity consumption by approximately 

48,639 kilowatt-hours a year, however, This equals a remarkable savings of roughly $9,000 per 

year, which means that Chick's loan should be paid off in about two years. 

A small grocer in California used the On-Bill Financing program offered by San Diego Gas & 

Electric to invest $20,292 in improved lighting and refrigeration efficiency. The grocer received a 

rebate of $5,916.50, leaving him with $14,375.50 to pay back to the utility. The estimated annual 

energy costs savings resulted from the improvements were $5,73 7.45. 

This translates into a payback period of 30 months. The loan term extended to the grocer by San 

Diego Gas & Electric was 31 months. This resulted in a customer fixed monthly loan payment of 

$463.73. This will loan go will practically unnoticed, given that the grocer is expected to realize 

$478.12 in monthly energy savings which will be used for loan repayment. Following the 31-

month payback period, this small grocer simply will get to keep all of his savings. 

A small retailer used San Diego Gas & Electric's On-Bill Financing program to invest 

$7,512.70 in lighting-efficiency improvements. This small-business owner also received a rebate 

for $817, leaving a total customer loan of$6,695.70. The loan term extended by the utility was 29 

months. This left the small retailer with a fixed monthly Joan payment of $230.89, but expected 

monthly energy savings of$236.43. 

A health care center in Santa Ana, California installed $18,900 worth of Ozone Technology at its 

laundry facility to reduce the use of hot water and dryers' gas consumption. With a $9,450 

incentive, this left the small-business owner with a total loan amount of $9,450. This investment 

left the owner with an estimated annual energy savings of $17,217 and a payback period of only 

ten months. 

In areas that lack On-Bill Financing programs, the decision to invest in energy-efficiency upgrades 

or alternative-energy production is more difficult--even when potential cost savings are evident. 

Walco, a remanufacturing company located in Providence, Rhode Island took advantage of an 

energy-savings initiative sponsored by its local utility. Through the program, Walco was able to 

update the lighting system in its 40,000 sq. ft. production area with energy-efficient lighting. 

Roughly 50 percent of the approximately $52,000 cost was underwritten by the utility. The balance 

Testimony of the National Small Business Association 
26 


24965.013

\Vas covered by \Valco. Although the net energy costs saved by the new lighting allowed for a i 2 

month return on investment, Walco was unable to upgrade the lighting of the entire plant because 

of cash-flow issues. Opportunities like this need not be squandered. 

Conclusion 

In addition to significant financial savings for small-business owners, NSBA's ''On-Bill Financing: 

Helping Small Business Reduce Emissions and Energy Usc While Improving Profitability" report 

found that the environmental outcome of the widespread adoption of On-Bill Financing would be 

enonnous. 

The report found that small businesses as a whole could reduce greenhouse gas emissions by 259 

million tons each year if they improve their energy efficiency by 30 percent. Remarkably, this is 

the equivalent of the emissions from 5 J coal-fired power plants. 

On-Bill Financing represents an effective way to help small business afford critical efficiency 

improvements. These improvements benefit: small-business owners· bottom lines; the sizable 

sector of the small-business community engaged in energy audits, efficiency retrofits, and 

alternative energy production: and the environment, 

Thank you again for the opportunity to appear before you today. I thank you for your time and 

welcome any questions. 

Testimony '!lthe .Vational Small Business Association 
27 


24965.014

On-Bill Financing 

Helping Small Business 

Reduce Emissions and Energy Use 

While Improving Profitability 

Prepanod for the 

National Small Business Association 
28 


24965.015

fOREWORD 

Since 1937, the National Small Business Association (NSBA) has been the nation's leading smallbusiness advocate. As parr of NSBA's mission to address the needs and represent the concerns of 

the small business community, we are pleased to provide you with tbe findings of the 2009 

NSBA report: "On-Bill Financing: Helping Small Business Reduce Emissions and Energy Use 

While Improving Profitability." 

Contrary to the antiquated paradigm that economic growth must run counter to environmental 

conservation, this study-conducted with funding from the Bipartisan Policy Center-takes an 

in-depth look at a program that successfully bridges that gap. Currently implemented in several 

stares, "on-bill financing" is a method by which small businesses can improve their energy 

efficiency through a financing mechanism offered by their utility company. 

Among the many eye-opening conclusions you'll find in this report, small businesses as a whole 

could reduce greenhouse gas emissions by 259 million tons million tons each year if they 

improved their ener!,'Y efficiency by just 25 percent. Furthermore, through energy efficient 

upgrades, the average small business could save $4,932 each year on its energy bills. And many 

could save much more! 

The report also makes recommendations on how the federal government can help facilitate 

additional on-bill financing programs across the country. We believe that improving America's 

energy efficiency must be a central component of any national energy plan. We also believe that 

any such plan must incorporate Americis small firms. The first step in this process must be 

devising a mechanism to help small business afford critical efficiency improvements. According 

to an April 2009 NSBA survey, rhe number one reason small-business owners cite for their 

inability to make their firms more energy efficient is cash-flow. 

NSBA has long held the belief that energy efficiency and entrepreneurial growth can and do go 

hand-in-hand. The current srate of the U.S. economy makes it absolutely crucial to have 

government policies that foster, not hinder, entrepreneurial growth. The findings of this report 

are presented to members of the media and policy makers so that they can make informed 

decisions when working on energy and small-business issues. With 29.6 million small firmscomprising 99.7 percent of all U.S. employer firms-small businesses stand to make significant, 

positive and Lasting improvements to both the economy and the environment. 

We hope you find this report useful, and welcome your feedback as we plan future surveys and 

research projects. 

~J)LT:Zkracken 

President and CEO 

;.::4~/~ Keith Ashmus 

2009 Cbair 

On-Bill Finandng: Helping Small Business Reduce Emissions and Energy Use While Improving Profitability 
29 


24965.016

I. EXECUTIVE SUMMARY 

The importance of small businesses to the U.S. economy is difficult to overstate; small businesses 

represent 99.7 percent of all the firms in the U.S. that have employees, and have generated the 

oveiV~helrning majority of new jobs over the past 15 years. As a result of the prominent role that they 

play in the economy; small businesses also turn our robe critically important to any U.S. strategy to 

reduce greenhouse gas emissions. This repon focuses on a method to not only help small bu.'iinesses 

reduce their greenhouse gas emissions, but to help them upgrade their lighting, refrigeration and 

other energy-consuming equipment while simultaneously increasing their profitability. This method 

uses financing for energy-efficiency measures that we describe as on-bill financing. 

This report finds that small businesses as a whole could reduce greenhouse gas emissions by 259 

million tons each year if rhey improve their energy efficiency by 25 percent-the equivalent of 

the emissions from 51 coal-fired power plants. Energy cost savings for small businesses wiJl vary 

tremendously from one small business to another; however, on average, a small business that 

marches the national average will save approximately S411 per month or S4,932 per year on the 

combination of natural gas and electricity bills. 

These energy cost savings are critical to small businesses because they often pay more for energy 

than comparable large firms. Many small businesses-particularly those with fewer than 35 

employees in the manufacturing sector-pay 35 percent more per unit for their electricity than 

their largest counterparts. 

Despite the benefits of efficiency investments, challenges remain. These include: 

Cash flow: With tight margins and relatively small revenues, many small businesses find it 

challenging to undertake new capital investments, even if they will save money over time. 

Fifty-nvo percent of small-business owners see cash flow as the primary barrier to investing 

in energy efficiency. 

Up-front capital required: A typical enert,;y-efficiency project might cost from $7,500 up to 

more than $20,000, with some projects costing a bit less and a few costing far more. 

Energy efficiency is only one priority among many: Small-business owners are heavily 

focused on the business at hand: managing inventory, maintaining payroll, providing health 

insurance, etc. They rarely have the time to focus on their energy bills, on energy-efficiency 

measures, or on their greenhouse gas emissions profile. 

In order to overcome these challenges, any successful strategy to help small-business owners to 

reduce their greenhouse ga..;; emissions must be simple, easy-ro-use, and resolve the first-cost 

barrier. It must be effective, yet not divert from the core competencies and concerns of smallbusiness owners. On-bill financing for energy efficiency is one such financing mechanism that 

has proven to be highly effective. 

On-Bill Financing: Helping Small Business Reduce Emissions and Energy Use While Improving Profftability 

iii 
30 


24965.017

On-bill financing reduces small businesses' upfront costs for energy-efficiency investments to zero 

by financing all costs not covered through rebates. Most importantly, it stretches out rhe financing 

costs over a sufficiently long period and uses low enough interest rates that the result is cost savings 

from day one of the agreement. Small businesses actually see lower utility bills, not to mention 

improved energy efficiency and newer equipment-all while reducing greenhouse-gas emissions. 

Lighting upgrades dominate the list of measures financed through on-bill programs todayrepresenting as much as 75 percent of such measures-but they arc by no means the only 

manner with which small businesses achieve increased efficiency. Improved refrigeration, heating 

and air conditioning systems, insulation and motors also are common. 

On-hill financing efficiency programs are under development in lllinois and Michigan and now 

operate in several states including Arkansas:, California, Connecticut, Hawaii, Kansas, 

Massachusetts, New Jersey and Rhode Island. Connecticut and California utilities operate the 

largest on-bill financing programs and have seen successful and rapidly growing programs. 

This paper concludes that two barriers are worthy of particular attention. 

1. The two most established on-bill financing programs are running up against their state 

regulatory commission-imposed caps on outstanding loans, This problem is caused by 

the programs' success, indicating that they are popular with small businesses. One 

constraint that these programs will face, and a constraint that others are likely to 

encounter in the fi1turc, is the availability oflow cost or zero cost capital to fund a 

revolving on-hill loan program. 

2. Although default rates for loan programs have been lower than one percent, default risk 

and credit risk remain a critical concern for lenders, for utilities and for the state utility 

commissions that oversee utility rates. On-bill financing programs will nor be able to 

raise private capital without a dear definition of who bears the risk for potential loan 

defaults. 

A .. 'i a result, nvo options and steps should be considered: 

1. Make a pool of capital available to utilities that agree to match federal funds with their 

own loan capital. This approach would have the effect of expanding the capital available 

to fund small-business on-bill loans, thus helping to overcome to provide a barrier of a 

lack of capital for such programs. 

2. Make funding available upon application and approval, as a guarantee of new on-bill 

loans that meet specific requirements. Such a guarantee could be structured to take into 

account the historically low default rates with on-bill finance programs, and be set based 

upon a maximum amount of funding for each lending utility. 

On-Bill Financing: Helping Small Business Reduce Emissions and Energy Use While Improving Pro(!tobility 

iv 
31 

Senator SANDERS. Thank you very much, Mr. Kempf. 

Mr. Philip Schoen is the founder of GEO-Enterprises, a leader in 

the geothermal industry with more than 30 years of industry experience. He currently serves on the Advisory Council of the International Ground Source Heat Pump Association and sits on the 

Board of Directors for the Geothermal Heat Pump Consortium. 

Mr. Schoen has designed and installed various types of ground 

heat exchangers, including systems used by the Department of Defense, U.S. embassy housing, and the 2008 Olympics in Beijing. 

Mr. Schoen, thanks very much for being with us. 

STATEMENT OF PHIL SCHOEN, CEO, GEO-ENTERPRISES 

Mr. SCHOEN. I am Phil Schoen, CEO of GEO-Enterprises, an 

Oklahoma-based company that I founded in 1997, which specializes 

in design and application of geothermal heating and cooling solutions. 

GEO-Enterprises has 24 employees and our company provides a 

wide range of services, as thermal conductivity testing, modeling of 

heat exchangers, and complete turn-key installations for residential 

and commercial projects. 

I am pleased to participate in today’s hearings on behalf of the 

GEO, the Geothermal Exchange Organization, a nonprofit trade association representing the U.S. geothermal heat pump industry. I 

serve on the Board of GEO and I have worked in the industry for 

30 years. 

Before I offer some thoughts about innovative strategies that can 

expand our industry, lower energy costs for consumers and reduce 

emissions, let me briefly describe how our technology works. A geothermal heat pump is a 50-State clean energy renewable technology that uses solar energy stored beneath the Earth’s surface to 

heat and cool residential and commercial buildings and provide hot 

water at a rate 40 percent to 70 percent cheaper than conventional 

heating-cooling technologies. 

While conventional furnaces and boilers burn fuel to generate 

heat, geothermal heat pumps use minimal amounts of electricity to 

transfer heat between the Earth and the building, allowing for 

higher efficiencies and more efficient than fuel-burning heaters 

which can burn at efficiencies of 95 percent, but geothermal heat 

pumps leverage that by over 400 percent. 

Geothermal heat pumps use 25 percent to 50 percent less electricity than conventional heating and cooling systems. According to 

the Environmental Protection Agency, they can reduce consumption and corresponding emissions by 44 percent to 72 percent as 

compared to traditional heating and cooling equipment. 

Despite this well-documented energy efficiency, our industry still 

is relatively small, with less than 5 percent of the market penetration for new construction. And the primary barriers to expanding 

our industry include high initial installation costs, lack of consumer 

awareness, the need for more qualified design and installation professionals, and the need for builders, developers, realtors and lenders and appraisers to value energy savings. 

While these barriers present unique challenges that we must address, our No. 1 challenge is the high initial cost, primarily due to 

the installation of our underground loop. One strategy that is very 

32 

promising is on-bill financing, which allows residential and commercial energy-efficient projects to be financed directly on the utility bill. 

The advantage of this approach is that the up-front costs are converted into small monthly payments that is more than offset by the 

monthly energy savings realized by the project. Several States, including Illinois and California, have initiated on-bill financing programs. Many utilities are reluctant to participate, though, because 

of the concerns of default risks and added complexity of administering the financing. Some utilities have turned to third-party financing programs as a solution, particularly in the residential market. 

By creating a Federal program that would reduce financial exposure of utilities through a loan-loss fund, for example, I am confident that more utilities would implement on-bill financing programs. A Federal loan-loss backstop would offer utilities a major 

incentive that would not be very expensive. The default rate of onbill financing programs is very low, and the loan is tied to the utility bill, and not the homeowner, and the loan would continue to be 

paid as long as the building is occupied. 

If you are looking for a relatively inexpensive way to create jobs, 

improve energy efficiency to our homes and buildings, lower energy 

costs for consumers, and reduce greenhouse emissions, I can think 

of no better approach than encouraging more utility companies to 

offer on-bill financing for installing geothermal heat pumps. 

By tackling the up-front cost, we expect our industry would rapidly expand and we would create thousands of new jobs. These are 

U.S.-based jobs in the manufacturing and drilling equipment and 

installation. We estimate that a new job would be created for every 

18 heat pump system installations. That is a very conservative estimate. From my perspective, I would expect installations would 

more than double if we had a robust on-bill financing program. 

This would allow me to grow my work force by one-third, from 24 

to 32 workers. 

We will also drastically reduce emissions. On an average 20-year 

lifespan, the installation of 100,000 units of residential geothermal 

systems can reduce greenhouse gas emissions by almost 1.1 million 

metric tons, the equivalent of removing 58,700 cars from our roads 

or planting more than 120,000 acres of trees. 

Thank you again for the opportunity to testify in your hearing. 

[The prepared statement of Mr. Schoen follows:] 

33 


24965.018

Testimony of Phil Schoen 

Chief Executive Officer, GEO-Enterprises 

On "Innovative Practices to Create Jobs and Reduce Pollution" 

Before the 

Subcommittee on Green Jobs and the New Economy 

October 13, 2011 
34 


24965.019

Good morning, I am Phil Schoen, CEO ofGEO-Enterprises, an Oklahoma-based company 

founded in 1997 that specializes in the design and application of geothermal heating and cooling 

solutions. GEO-Enterprises has 24 employees, and our company provides a range of services 

from thermal conductivity testing and modeling to complete turnkey loop field installations for 

residential and commercial projects. 

I am pleased to participate in today's hearing on behalf of GEO- the Geothermal Exchange 

Organization, a non-profit trade association representing the U.S. geothermal heat pump 

industry. I serve on the board ofGEO and have worked in the industry for more than 30 years. 

Before I offer some thoughts about innovative strategies that could expand our industry, lower 

energy costs for consumers, and reduce emissions, let me briefly describe how our technology 

works. 

A geothermal heat pump is a 50-State, clean, renewable technology that uses solar energy 

naturally stored just beneath the earth's surface to heat and cool residential and commercial 

buildings and to provide hot water at rates 40 to 70 percent cheaper than conventional heating 

and cooling technologies. 

While conventional furnaces and boilers burn a fuel to generate heat, geothermal heat pumps use 

minimal amounts of electricity to transfer heat between the earth and a building, allowing much 

higher efficiencies. The most efficient fuel-burning heater can reach efficiencies around 95 

percent, but geothermal heat pumps operate at 400 percent efficiency. 

Geothermal heat pumps use 25 to 50 percent less electricity than conventional heating or cooling 

systems, and according to the Environmental Protection Agency, they can reduce energy 

consumption- and corresponding emissions- by 44 to 72 percent compared to traditional 

heating and cooling equipment. 
35 


24965.020

Despite this well-documented energy efficiency, our industry is still relatively small, with less 

than 5-percent market penetration for new construction. The primary barriers to expanding our 

industry include: 

(I) high initial installation cost; 

(2) lack of consumer awareness; 

(3) the need for more qualified design and installation professionals; and 

( 4) the need for builders, developers, realtors, lenders, and appraisers to value energy 

savings. 

While each of these barriers presents unique challenges that we must address, our number one 

challenge is the high initial installation cost, primarily due to the installation of the underground 

loop. 

One strategy that is very promising is on-bill financing, which allows residential and commercial 

energy efficiency projects to be financed directly on the utility bill. The advantage of this 

approach is that the up-front costs are converted into a small monthly payment that is more than 

offset by the monthly energy savings realized by the project. 

Several states, including Illinois and California, have initiated on-bill financing programs. But 

many utilities are reluctant to participate because of concerns about the default risk and the 

added complexity of administering the financing. Some utilities have turned to third-party 

financing programs as a solution, particularly in the residential market. 

By creating a federal program that would reduce the financial exposure of the utilities -through 

a loan-loss fund for example- I am confident that more utilities would implement on-bill 

financing programs. A federal loan-loss backstop would offer utilities a major incentive and 

would not be very expensive. The default rate for on-bill financing programs is very low, and 

since the loan is tied to the utility bill and not the homeowner, the loan would continue to be paid 

as long as the building is occupied. 
36 


24965.021

If you are looking for a relatively inexpensive way to create jobs, improve the energy efficiency 

of our homes and buildings, lower energy costs for consumers, and reduce greenhouse gas 

emissions, I can think of no better approach than encouraging more utility companies to offer onbill financing programs for installing geothermal heat pumps. 

By tackling the upfront cost issue, we expect our industry will rapidly expand and we will create 

thousands of new jobs. These are U.S.-based jobs- from the manufacturing to the drilling to the 

installation. We estimate that one new job will be created in this country for every additional 18 

heat pump installations- and that is a very conservative estimate. From my perspective, I would 

expect that my installations would more than double if we had a robust on-bill financing 

program. This would allow me to grow my workforce by one-third- from 24 to 32 workers. 

We will also dramatically reduce carbon emissions. Over an average 20-year lifespan, the 

installation of 100,000 units of residential geothermal systems can reduce greenhouse gas 

emissions by almost 1.1 million metric tons- the equivalent of removing 58,700 cars from our 

roads or planting more than 120,000 acres of trees. 

Thank you again for the opportunity to testify at today's hearing. 
37 


24965.022

QUESTION l: Mr. Schoen, as your testimony mentions, my state of California allows 

utilities to finance energy efficiency improvements that customers, including for large 

institutional and industrial operations, pay back over time. Can you describe the benefits 

of this Innovative financing and repayment program for these types of operations? 

While I am not an expert in the California program, on-bill financing programs can be game 

changing for our industry. The largest barrier that limits the growth of our industry, in both the 

residential and commercial markets, is the significant upfront installation cost. On-bill financing 

allows energy efficiency projects to be financed directly on the utility bill, converting the upfront 

costs into a smaller monthly payment that is more than offset by the monthly energy savings 

realized by the project. We believe that the California program is a model that should be 

replicated across the country. We recognize that some utilities have concerns about the default 

risk and the added complexity of administering these programs. That is why we strongly support 

efforts at the federal level to provide utilities with incentives, such as a loan-loss backstop fund, 

to make on-bill financing more attractive. Focusing on improving the efficiency of our homes 

and buildings makes sense. Buildings dominate U.S. energy use and carbon emissions. It is 

estimated that buildings account for 39 percent of energy consumed in the U.S. and are 

responsible for 43 percent of carbon emissions. If we expand on-bill financing programs, we 

will create thousands of jobs, improve the energy efficiency of our homes and buildings, and 

dramatically reduce carbon emissions. 

QUESTION 2: Mr. Schoen, do some utilities use third-party financing agreements to 

reduce the risk of default with some innovative finaneing and repayment programs? If so, 

can you please describe how these third-party agreements work and their overall benefit? 

It is my understanding that some utilities rely on third-party lenders to help run their on-bill 

financing programs, but these programs are more common in the residential sector than the 

commercial sector. An advantage of third party financing is that utilities can avoid the added 

complexity of administering the program, including assessing credit risk and exposure to 

nonpayment. I believe these programs have merit and are worth exploring. Another model that 

should be considered is the Property Assessed Clean Energy Program (PACE), which California 

also adopted. Regardless of the approach, we are confident that by helping reduce the upfront 

costs, we will see a dramatic increase in the number of consumers and building managers that 

invest in energy efficiency initiatives. We strongly support an amendment recently adopted by 

the Senate to direct the Economic Development Administration to implement a pilot program to 

look at mechanisms to encourage more utilities to offer on-bill financing programs. Let's figure 

out what works and the lessons we can learn from existing programs and then put in place the 

right incentives to ensure that this funding mechanism is available to all homeowners and 

commercial building managers. 
38 

Senator SANDERS. Thank you very much, Mr. Schoen. 

Dr. Anne Smith currently serves as Senior Vice President of 

NERA Economic Consulting. She is an economist and a specialist 

in environmental policy. Prior to joining NERA, she served as a 

practice leader in climate and sustainability at Charles River Associates; Vice President at Decision Focus, Incorporated; and served 

as economist for the Office of Policy Planning and Evaluation at 

the U.S. Environmental Protection Agency. 

Dr. Smith, thanks for being with us. 

STATEMENT OF ANNE SMITH, SENIOR VICE PRESIDENT, NERA 

ECONOMIC CONSULTING 

Ms. SMITH. Thank you, Mr. Chairman, Members of the Committee. My name is Anne Smith and I am an economist and Senior 

Vice President at NERA Economic Consulting. My testimony is my 

own and does not represent the positions of my employer or any 

of its clients. 

Today, I wish to summarize the results of a study in which my 

colleagues and I evaluated the combined economic impacts of four 

major environmental regulations now affecting the electric power 

sector. 

EPA assesses the cost of these regulations individually, but we 

saw a gap in EPA’s analysis because they failed to take into account the effects of how these four regulations interact when implemented simultaneously. This interaction may create cumulative impacts on business decisions that are different from the sum of the 

individual impacts that EPA estimates. 

Also, we saw a need to better understand the interplay between 

so-called green jobs that would result from spending on environmental controls, and job losses from higher electricity and energy 

prices that can result from that same spending. We assessed the 

net job impact, taking into account both the positive and negative 

effects of jobs on different sectors of the economy. 

The four environmental regulations that we analyzed in combination are, one, the final cross-State air pollution rule; two, the 

proposed utility MACT rule; three, the proposed coal combustion 

residuals regulations; and four, the proposed cooling water intake 

regulations. 

Very soon, utility company executives will have to either invest 

large sums of money to install new pollution controls at their coal 

units or retire them. Retirements imply spending, too, to build new 

replacement capacity and increase costs for cleaner replacement 

generation. 

Whether retirements are few or many, total spending will be 

large even using EPA’s own technology cost assumptions, and electricity rates will have to raise paying for both forms of spending 

and for any fuel cost increases. Most replacement capacity is likely 

to be fired by natural gas, given today’s realities in markets, technologies and policy, thus total unit retirements may put upward 

pressure on natural gas prices, even given the now-recognized 

abundance of potential domestic shale gas supplies. 

Using U.S. Government assumptions, data and models, we developed estimates of the likely mix of types of spending in the next 

few years, given the anticipation of all four types of regulations 

39 

combined. We also assessed impacts on electricity rates and electricity prices. Then, using a well-established macroeconomic model, 

we assessed the overall impact on the U.S. economy of these many 

simultaneous changes in spending and rates. 

And our key finding was that the net impact on jobs will be negative. On average, during the period 2012 to 2020, we do project 

at least 55,000 added green jobs. However, we also project that the 

increased costs of compliance with these four regulations reduced 

other jobs in other sectors by at least 238,000, four times as many. 

Most of those job losses occur in retail and other sectors that have 

no direct impact from these four regulations. The result is a net reduction of 183,000 jobs nationwide over that time period. 

We also estimated that the four regulations would result in an- nual compliance costs of $21 billion per year, which includes $104 

billion in capital spending, most of it for a very large number of 

retrofit controls. 

Nevertheless, we also projected that natural gas prices would increase by about 11 percent on average over this period due to many 

coal units being replaced with natural gas-fired electricity supplies. 

Given all these costs, nationwide average retail electricity prices 

are projected to increase by about 7 percent over the period, with 

the increase varying considerably by region. That is the average, 

the 7 percent. When billions are spent on investments in cleaner 

energy, somebody has to pay it back. When we also account for 

those repayments, we find these regulations cause a greater loss in 

jobs across the entire economy than the boost that they give to 

green jobs in some sectors of the economy. 

Thank you for the opportunity to testify. I would be glad to answer any questions you might have. 

[The prepared statement of Ms. Smith follows:] 

40 


24965.023

Prepared Statement of 

Anne E. Smith, Ph.D. 

at a Hearing on 

"Innovative Practices to Create Jobs and Reduce Pollution" 

by the 

Subcommittee on Green Jobs and the New Economy 

Committee on Environment and Public Works 

United States Senate 

Washington, D.C. 

October 13, 2011 

Mr. Chairman and Members of the Committee: 

Thank you for your invitation to participate in today's hearing. I am Anne E. Smith, and l 

am a Senior Vice President ofNERA Economic Consulting. I am a specialist in the analysis 

and design of cost-effective policies, which was a core element of my Ph.D. thesis at 

Stanford University in economics. l have performed work in the area of air quality benefitcost analysis and economic impact analysis over the past thirty years, including as an 

economist in the U.S. Environmental Protection Agency's Office of Policy, Planning, and 

Evaluation, as a consultant to the EPA's Air Office, and in many consulting engagements 

since then for government and private sector clients globally. I have also served as a 

member of several committees of the National Academy of Sciences focusing 

on management of risks from environmental contamination. I have analyzed costs, risks 

and benefits of many key U.S. air policies, including fine particulate matter, ozone, mercury 

and other air toxics, regional haze, N02, S02, and greenhouse gases. 

The topic oftoday's hearing is the potential impacts on jobs of environmental regulations. I 

have analyzed the employment impacts of many different types of regulations over the 

years, but I would like to focus my testimony today on our recent analyses and research 

related to environmental regulations affecting the electric power sector. I am a co-author 

of a recent study that evaluated the cumulative energy and economic impacts of four major 

environmental regulations affecting the electric utility sector.! I thank you for the 

opportunity to share our findings. My written and oral testimonies reflect my own 

opinions and do not necessarily represent the position of NERA Economic Consulting or 

any of its clients. 

Harrison, David, Andrew Foss, James Johndrow. Eugene Meehan, Bernard Reddy and Anne Smith, Potential 

Impacts of EPA Air. Coal Combustion Residuals, and Cooling Water Regulations, report prepared for American 

Coalition for Clean Coal Electricity, September 2011. 

http://www.americaspower.org/sites/detimltlfiles/NERA Four Rule Report Sept 21.pdf 
41 


24965.024

Motivation for the Study: Fill a Gap in Information on the Cumulative Energy and 

Economic Impacts of Environmental Regulations 

A key motivation for the study was to fill a gap in information on the combined energy and 

environmental impacts of environmental regulations. The U.S. Environmental Protection 

Agency (EPA) typically proposes regulations individually and provides estimates of each 

one's social costs and benefits (and other impacts} individually. That is, while EPA's 

analyses generally include previously-promulgated regulations in the baseline of its 

regulatory impact analyses, it does not usually consider the implications of other potential 

future regulations that are simultaneously under consideration. This can create a gap in 

the insights that the analysis can identify, particularly when there may be interactions 

between the new regulation in question and one or more other likely future regulations. 

There has been concern with just such a gap in the understanding of the impacts of 

regulations presently facing the electricity generating sector of the U.S., of which there are 

quite a few, including the just-promulgated Cross-State Air Pollution Rule (CSAPR), the 

Electric Generating Unit MACT rule, and major regulations to address coal combustion 

residuals {CCR), and regulation of cooling water intake structures under Section 316(b) of 

the Clean Water Act. Each of these regulations increases future costs for coal-fired power 

plants, and they will inevitably- in combination- affect utility decision making about 

whether to keep retrofitting more controls, or to retire certain units. Thus, these 

regulations must be analyzed in a combined, or cumulative, manner in order to provide a 

credible assessment of their overall costs, energy market impacts, and macroeconomic 

impacts. Providing that missing cumulative assessment of the macroeconomic impacts of 

these four rules was the central purpose of our analysis.2 

In addition, in recent years policymakers have taken interest in additional impact of 

environmental regulations that is not part of the classical analyses of benefits and costs 

that are included in regulatory analyses: "green jobs." Some studies have noted that 

environmental mandates will increase employment in pollution control and clean 

technology sectors.3 However, other researchers, including myself, have noted that these 

results ignore the jobs lost in the rest of the economy due to other impacts of the 

Several other studies have analyzed these rules. but have focused instead only on whether these regulations pose 

reliability concerns. These studies include the following: Bipartisan Policy Center. Environmental Regulation 

and Electric Svstem Reliahilitv. Washington. D.C.: 2011: Brattle Group. Potential Coal Plant Retirements Under 

Emerging Environmental Regulations. Cambridge, MA: 2010; Charles River Associates. Prospects.foran EPADril·en Capital Crisisfor Utilities. Boston, MA: 2010: Edison Electric Institute. Potential Impacts of' 

Environmental Regulation on the U.S. Generation Fleet. Report prepared by ICF International. Washington, 

D.C.: 20 II: ICF International. Clean Air. Ash and Water Regulations: Potential Impact of EPA Proposed Rules. 

Fairfax. VA: 20 I O: M.J. Bradley & Associates and Analysis Group. Ensuring a Clean. Modern Electric 

Generating Fleet while Maintaining Electric System Reliability. Concord, MA: 2011: and North American 

Electric Reliability Corporation. Sf.Jecial Reliability Scenario Assessment: Resource Adequac}' Impacts qf 

Po1ential U.S Em·iromnental Re&:rularions. Princeton: 2010. 

See Ceres. Ne11· Johs---C/eaner Air: Emplorment Effects Under Planned Changes to the EPA "s Air Pollution 

Rules. Report prepared by the University of Massachusetts Political Economy Research Institute. Boston: 

February 201 J. 
42 


24965.025

regulations, including increased electricity and other energy prices.4•

5 Our recent analysis 

also sheds light on the mix of job impacts from these regulations, including the potential 

increase in "green jobs" and the net impacts on jobs in generaL 

Objectives and Methodology of the Study 

Our study develops a set of models to evaluate the potential effects of certain 

environmental regulations on energy markets and economic activity. This methodology 

thus complements those that have been developed to estimate the costs and benefits-and 

other impacts-of individual regulations. 

Specifically, our study provides projected effects over the period from 2012 to 2020 of four 

environmental regulations affecting the electric utility sector-the final Cross-State Air 

Pollution Rule (CSAPR) and proposed regulations for Utility MACT), coal combustion 

residuals (CCR), and regulation of cooling water intake structures under Section 316(b) of 

the Clean Water Act-in three major areas: 

1. Coal unit retirements and retrofits. These are estimates of the effects of potential total 

retrofit costs on the decisions regarding coal unit retirements. 

2. Electricity and other energy market impacts. These impacts include the potential effects 

on energy markets-including coal, natural gas, and electricity-as well the increased 

technologies to achieve compliance and overall compliance costs. 

3. Economic impacts. These effects include impacts on the U.S. economy, including 

employment, gross domestic product (GDP), and disposable personal income (i.e., 

personal income after taxes). 

The modeling framework begins with a set of detailed estimates of the likely compliance 

technologies-and the costs of retrofitting them-associated with the individual 

regulations. These assessments are based upon the requirements of the individual 

regulations, including taking into account the potential flexibility provided under CSAPR.6 

For the CCR and Section 316(b) regulations, we use EPA estimates of retrofit costs for the 

various affected units. The result is a set of estimates of the potential technologies and 

costs to individual electricity generating units under the four policies. 

The next task is to estimate the effects of these projected costs on future retirements of 

coal-fired power plants. The retirement model we develop is a Monte Carlo uncertainty 

4 Smith, Anne E. "CRA Analyses of Federal Bills," presented at Nicholas Institute for Environmental Policy 

Solutions Workshop on Estimating Employment Impacts of Energy and Environmental Policy: Lessons Learned 

and Future Directions, October 8. 2010 (http://nicholasinstitute.duke.edu/envenergy). 

Montgomery, W. David. Prepared Testimony ofW. David Montgomery, Ph.D., before the Senate Committee on 

Environment and Public Works, Subcommittee on Green Jobs and the New Economy. February 15,2011. 

" The implications of the emissions trading provisions of CSAPR for technology choices at individual units are 

developed through an initial run of the NEMS model (a model that is described in the text). 
43 


24965.026

model designed to predict potential economic retirements based upon comparisons of the 

future costs of the coal-fired unit in comparison to the costs of the likely new generation 

that would be added in the future. The model incorporates uncertainties in key parameters 

affecting this comparison, including control costs and electricity and fuel (notably natural 

gas) prices; the model also takes account of the feedback effects of coal unit retirements on 

electricity and fuel prices. 

The estimated coal unit retirements and the estimated compliance costs for non-retiring 

units are then input to the U.S. Department of Energy's National Energy Model System 

(NEMS) model, a well-established modeling framework used by the Energy Information 

Administration (EIA) to evaluate energy and environmental policies. To develop estimates 

of changes in employment and other economic impacts, the NEMS results are input to the 

Policy Insight Plus model developed by Regional Economic Models, Inc. ("REM! PI+"), a 

model used extensively by numerous government agencies and private groups to assess 

the economic impacts of public and private policies. 

Although we have attempted to develop comprehensive assessments, the results should be 

viewed as subject to uncertainties beyond those incorporated in the analyses. Projected 

coal unit retirements, for example, do not include the effects of other potential regulatory 

requirements-for example, those related to greenhouse gases-and the impacts do not 

include potential effects of coal unit retirements on (or constraints related to) electricity 

system reliability. These omitted factors could lead to additional impacts beyond those 

projected in this study. 

Overview of Study Results 

I summarize the results of the study in the three major areas noted above. 

1. Coal Unit Retirements and Remaining Retrofit Requirements 

The potential retrofit costs of the four policies, when considered from a cumulative 

perspective, are estimated to lead to 39 gigawatts (GW) of prematurely retired capacity by 

2015 among the current coal-fired power plants. This estimate represents additional 

retirements above those in the reference case (i.e., retirements predicted without the four 

regulations in place) and accounts for about 12 percent of the 2010 U.S. coal-fired 

electricity generating capacity.? As noted, this projection does not include the potential 

effects of other requirements or concerns related to detailed electricity system reliability. 

The retrofit control technologies that would need to be put in place in order for nonretiring units to comply with the four environmental regulations are large. In comparison 

to the reference case, we estimate that the following additional controls would need to be 

put in place to meet the two air emission regulations: 13 GW of wet scrubbers, 53 GW of 

7 This level of retirements is estimated in the retirement model and is not influenced by utility retirement 

announcements. 
44 


24965.027

dry scrubbers, 13 GW of selective catalytic reduction (SCR), 171 GW of activated carbon 

injection (ACI), 163 GW of fabric filters, and 12 GW of dry sorbent injection (DSI). These 

estimates of the amount of capacity that will need to be retrofitted after accounting for 

units projected to retire instead have accounted for the flexibility provided in the 

regulations. Our estimates of the costs of these retrofits are based upon the costs that EPA 

has developed for the various technologies. 

Our energy and economic impact analyses assume that all of these retrofits and 

retirements can be effectuated by 2015, and that the costs would not increase to response 

to difficulties that might be encountered in installing these technologies in such a limited 

time frame. We believe there is a risk that his tight timetable for retrofits cannot 

realistically be met, but we have not performed the requisite studies to assess what rate of 

combined retrofitting and retirements is viable. We do note, however, that if our 

assumption that all of these changes can occur during this brief period of time is unrealistic, 

then the energy and economic impacts of the regulations will be greater than projected in 

our analyses, as summarized below (assuming the regulations will be imposed on their 

currently proposed schedules). 

2. Energy Market Effects 

As noted, the energy market impacts of the various regulations were estimated using the 

National Energy Modeling System (NEMS) model based on estimates of the coal units that 

retire and the compliance costs for units that do not retire. The NEMS output includes 

estimates of overall compliance costs for the electric sector, as well as detailed impacts on 

energy markets. Table 1 summarizes the potential costs for the electricity sector based on 

the level of coal retirements predicted in the retirement model. These costs include 

compliance costs for coal units that do not retire, capital costs for new capacity that would 

replace retiring coal units, and changes in fuel costs. Costs are projected to be 

approximately $21 billion (in 2010$) per year over the period from 2012 to 2020. The 

costs represent a total of $127 billion (present value in 2010$ as of january 1. 2011) over 

the period from 2012 to 2020. Capital costs for environmental controls and replacement 

capacity are about $104 billion. A 

The retirement of coal units and construction of replacement capacity affect electricity 

sector fuel consumption, fuel prices, and electricity prices. Table 2 summarizes the average 

potential energy market effects of the four regulations from 2012 to 2020. The report 

provides information on the annual effects for 2012-2020, with effects that are both higher 

and lower than these average values. 

' Capital costs exceed the total for environmental controls and replacement capacity because of net reductions in 

operating and maintenance costs. 
45 


24965.028

Table 1. Electricity Sector Costs, 2012-2020 (billion 2010$) 

Environmental Controls 

Replacement Capacity 

Fuel 

Total 

AnnuaiAvg PV 

$15 $89 

$2 $11 

j§ w 

$21 $127 

Note: Compliance costs from 2012 through 2020 are discounted to january 1, 2011 using a real annual 

discount rate of 7 percent. 

Annual average costs are based on the present values and discounting. 

The cost of environmental controls includes net cost savings for operating and maintenance {O&M) 

expenses, 

Source: Table ES-1 in Harrison, David, Andrew Foss, james Johndrow, Eugene Meehan, Bernard Reddy and 

Anne Smith, Potentia/Impacts of EPA Air, Coal Combustion Residuals, and Cooling Water Regulations, 

report prepared for American Coalition for Clean Coal Electricity, September 2011. 

Table 2. Average Annual Energy Market Impacts, 2012-2020 

Coal Coal-Fired Coal Price at GaswFired Gas Price at Avg Retail 

Retirements Generation Minemouth Generation Henry Hub Elec Price 

(GW) (million MWh) 

Reference 

CSAPR+MACT +CCR+316(b) 42.2 1,699 $31.61 765 $4.95 $92.52 

Note: Coal retirements are cumulative from 2010 through 2020. 

Source: Table ES-2 in Harrison, David, Andrew Foss, James Johndrow, Eugene Meehan, Bernard Reddy and 

Anne Smith. qfEPA Air, Coal Combustion Residuals, and Cooling Hlater Rc;,ru/ations, 

Coalition for Clean Coal Electricity, September 20!1. 

Coal-fired generation is projected to decrease by an average of 11.1 percent over the period 

from 2012 to 2020. The reduction in coal demand is projected to decrease coal prices by 

5.7 percent on average. In contrast, the regulations are predicted to increase natural gasfired generation by 19.7 percent on average over the period and increase Henry Hub 

natural gas prices by 10.7 percent on average. The increases in natural gas prices would 

lead to an estimated average increase in costs of about $8 billion per year for residential, 

commercial and industrial natural gas consumers, which translates into an increase of 

$52 billion over the 2012-2020 period (present value in 2010$ as of 2011 discounted at 7 

percent). Average U.S. retail electricity prices are projected to increase by an average of 

6.5 percent over the period. 
46 


24965.029

3. Economic Impacts 

The potential economic impacts of the four policies were estimated using the REM! PI+ 

model. Table 3 summarizes the potential economic impacts. The table shows both the 

average annual changes over the period from 2012 to 2020, as well as the cumulative 

effects over the same time period. These net figures take into account jobs that would be 

created in some sectors as a result of spending on pollution controls (i.e., "green jobs"), as 

well as jobs lost due to higher electricity prices and other negative impacts. The sectors that 

gain are dominated by several sectors that tend to gain direct employment as a result of pollution 

control spending-notably machinery manufacturing and construction-and by the natural gas 

sector that gains from increased demand for its output on the part of the electricity sector. The 

sectors that lose employment include mining, reflecting the decreased demand for coal. But the 

bulk of the job losses arc accounted for by retail trade and the many other sectors that are 

indirectly affected by the regulations as a result of the effects of higher electricity and natural gas 

prices on consumer demand and U.S. industrial competitiveness-not by the sectors such as 

utilities and mining that are directly affected. 

Table 3. U.S. Economic Impacts, 2012-2020 

Employment 

Gross Domestic Product 

Disposable Personal Income 

Disposable Personal Income per Household 

Note: All dollar values are in 2010$. 

Annual Average Cumulative 

-183,000 jobs -1.65 million job-years 

-$29 billion -$190 billion 

-$34 billion -$222 billion 

-$270 -$1,750 

The cumulative employment impact is an undiscounted sum from 2012 to 2020; the cumulative GDP and 

disposable personal income impacts are present values as of January I, 2011 using a real annual discount 

rate of 7 percent 

Disposable personal income impacts per capita from REM! were converted to disposable personal income 

impacts per household based on a current average U.S. household size of2.58 people (Census 2011). 

Source: Table ES-3 in Harrison, David, Andrew Foss, James Johndrow, Eugene Meehan, Bemard Reddy and 

Anne Smith, Potentia/Impacts of EPA Air, Coal Combustion Residuals. and Cooling Water Regulations, 

report prepared for American Coalition for Clean Coal Electricity, September 2011. C/eancoa/usa.org 

Over the period from 2012 to 2020, about 183,000 jobs per year are projected to be lost on 

net due to the effects of the four regulations. The cumulative effects mean that over the 

period from 2012 to 2020, about 1.65 million job-years of employment would be lost. As 

noted, these net employment losses reflect net gains in some sectors and net losses in 

others. Of the 70 sectors in the REM! PI+ model, sectors that would gain jobs (primarily 

machinery manufacturing, construction and oil and gas) account for about 55,000 added 

jobs per year on average, and sectors that would lose jobs (represented by retail trade and 

the vast bulk of the other services sectors) account for about 238,000 fewer jobs per year 

on average. On a cumulative basis over the period from 2012 to 2020, the sectors that 

would gain jobs represent about 499,000 job-years, and the sectors that would lose jobs 

represent about 2,149,000 job-years. 
47 


24965.030

Table 3 also shows the potential near- to medium-term impacts on GOP and disposable 

personal income. U.S. GOP would be reduced by $29 billion each year on average over the 

period, with a cumulative loss from 2012 to 2020 of $190 billion (2010$). U.S. disposable 

personal income would be reduced by $34 billion each year on average over the period, 

with a cumulative loss from 2012 to 2020 of $222 billion (2010$). The average annual loss 

in disposable personal income per household is $270, with a cumulative present value loss 

of about $1,750 (2010$) over the period from 2012 to 2020. Annual economic impacts 

from 2012 to 2020 are provided in the report. 

Summary 

My testimony has focused on the potential cumulative impacts on the U.S. energy system 

and the U.S. economy of four major environmental regulations overthe period from 2012 

to 2020. A key feature of our assessment is its comprehensiveness-we include the 

positive effects on the economy of increased demand for pollution control equipment (so 

called "green jobs") and natural gas, as well as the negative effects on the economy of 

higher energy prices and the need to finance increased expenditures. Our results indicate 

that these four regulations would have substantial impacts on the energy sector and that 

the net economic impacts would be negative. 
48 

Senator SANDERS. Thank you, Dr. Smith. 

Mr. Steve Rowlan currently serves as the Director of Energy and 

Environment at Nucor Corporation. He joined Nucor almost 20 

years to lend his expertise in engineering to all aspects of environmental affairs and energy utilization. Mr. Rowlan sits on the Board 

of Managers for PIZO Technologies North America and has chaired 

both the Steel Manufacturers Association and the American Iron 

and Steel Institute Environment Committees. 

Thanks for being with us, Mr. Rowlan. 

STATEMENT OF STEVEN ROWLAN, GENERAL MANAGER, 

ENVIRONMENT, NUCOR CORPORATION 

Mr. ROWLAN. Thank you, Chairman Sanders and Ranking Member Boozman for the invitation to testify today regarding the significant impact energy policies and proposed EPA regulations have 

on job creation and electricity costs. 

Nucor is the largest steel producer and recycler in the United 

States. We employ over 20,000 teammates in 23 States. The steel 

industry, like many industries in this Country, was significantly 

impacted by the Great Recession. Steel capacity utilization dropped 

from 90 percent to 36 percent in a matter of a few months at the 

end of 2008. 

Despite how bad the market got, Nucor did not lay off a single 

worker. Economic conditions have improved for the steel industry, 

but the continued weakness in the economy is very concerning. On 

top of this economic uncertainty and persistently high unemployment is a rash of new and proposed regulations by the EPA, including ozone standards, utility MACT, cross-State air pollution rule, 

and the greenhouse gas emissions rules. 

This regulatory uncertainty and the threat of significantly increased costs are holding back capital investment and the jobs that 

investment would create. The impact is real. We recently received 

a permit under the new greenhouse gas rules for a direct reduced 

iron facility in Louisiana. This is a $750 million project that will 

create 500 construction jobs and 150 permanent manufacturing 

jobs. It is a great job-creating investment, particularly in this economy. But this project is not as large as the $2 billion investment 

we initially intended. 

Due to the uncertainty created by these regulations, we made the 

difficult decision to delay the $2 billion investment, also delaying 

the creation of 2,000 construction jobs and 500 permanent manufacturing jobs. This is one example, but we should also be concerned with the examples we cannot cite. 

The reality is that because of burdensome permitting requirements and rising energy costs, increasingly industrial projects are 

no longer even being considered for development in the United 

States. The additional regulations EPA is considering will only continue and intensify that trend. 

The other threat these regulations pose is to energy prices. Economical and abundant energy supplies are the lifeblood of industry. 

These new and proposed regulations put these at risk. Energy 

must be priced at a level that will allow energy-intensive industries 

to be competitive with international producers of their products. 

Because energy is perceived as being cheap, since it costs just penVerDate Aug 31 2005 08:41 Jul 06, 2017 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\24965.TXT VERNE
49 

nies per kilowatt hour, we fail to understand the full impact energy 

costs have on profitability. 

You will often hear that a proposed regulation will only cost a 

few cents per kilowatt hour. That is a true, but very misleading 

statement. If industry is paying only five cents per kilowatt hour, 

for example, for electricity and the price increases by one cent, that 

is a 20 percent increase in energy costs. For homeowners paying 

approximately 10 cents, that is a 10 percent increase. These increases, coupled with other regulations that will force the closure 

of coal-fired electrical generation facilities will result in lower supply, with further upward pressure on prices. 

The impact of these seemingly small increases on industry is 

staggering. At Nucor, we use electric arc furnaces to recycle over 

20 million tons of scrap metal annually into usable steel products. 

For Nucor, a one cent increase in electricity costs translates into 

a cost increase of more than $120 million per year. The question 

is: Where will that money come from? 

And increase like that leaves industry with few good options. The 

steel industry has reduced the energy intensity required to produce 

a ton of steel by 30 percent since 1990. We did this to remain competitive in a global market. At the end of the day, any energy cost 

increases stop with us. We do not have the luxury of passing these 

costs along. 

As a large consumer of natural gas, we are also concerned that 

as gas replaces coal, our natural gas costs will increase. On top of 

fuel-switching, the EPA is also attempting to expand its regulatory 

authority to include hydraulic fracking. We risk under-developing 

this important domestic resource by strangling it in regulations. 

We have seen in recent weeks the peril of creating green energy 

in defiance of basic market fundamentals. In many mature industries like steel, technological innovation and markets are driving 

increased energy efficiency, greater recycling and lower emissions. 

These jobs may not fit the conventional wisdom of what constitutes 

a green job, but they are good-paying and hopefully long-lasting 

blue collar jobs that are using innovation to become cleaner, more 

efficient and reduce environmental impact. 

These are the kinds of jobs we need to be creating, not eliminating, in pursuit of mandating a green economy on industry. 

[The prepared statement of Mr. Rowlan follows:] 

50 


24965.031

Testimony of Steve Rowlan 

General Manager of Environmental Affairs 

Nucor Corporation 

Hearing on Innovative Practices to Create Jobs & Reduce Pollution 

Subcommittee on Green Jobs & the New Economy 

United States Senate 

October 13, 2011 

I am Steven Rowlan, General Manager of Environmental Affairs for Nucor Corporation. Thank 

you, Chairman Sanders and Ranking Member Boozman for the invitation to testifY today 

regarding the impact energy policies and proposed EPA regulations have on job creation and 

electricity costs. Unfortunately, current regulatory proposals and the push for green energy is 

stifling job creation and threaten to significantly increase energy costs, jeopardizing U.S. 

manufacturing. 

Nucor is the largest steel producer and recycler in the U.S. We employ over 20,000 teammates 

in 23 states and produce steel products for use in roads, bridges, automobiles, appliances, 

commercial buildings and a range of other markets. 

The steel industry, like many industries in this country, was significantly impacted by the Great 

Recession. Steel capacity utilization dropped from 90 percent to 36 percent in a matter of a few 

months at the end of2008. Despite how bad the market got, Nucor did not lay off a single 

worker. Economic conditions have improved for the steel industry, but the continued weakness 

in the economy is very concerning. 

On top of this economic uncertainty and persistently high unemployment is a rash of new and 

proposed regulations by the EPA, including ozone standards, utility MACT, the cross-state air 

pollution rule and greenhouse gas emissions standards. This regulatory uncertainty and the 

threat of significantly increased costs are holding back capital investment and the jobs that 

investment would create. 

The impact is real. We recently received a permit, under the new greenhouse gas rules for a 

direct reduced iron facility in Louisiana. This is a $750 million project that will create 500 

construction jobs and !50 permanent manufacturing jobs. It is a great job-creating investment, 

particularly in this economy. But this project is not as large as the $2 billion investment we 

initially intended. Due to the uncertainty created by these new regulations, we made the difficult 

decision to delay the $2 billion investment, also delaying the creation of 2,000 construction jobs 

and 500 permanent manufacturing jobs. 

This is one example, but we should also be concerned by the examples we cannot cite. The 

reality is that because of burdensome permitting requirements and rising energy costs, 

increasingly industrial projects are no longer even being considered for development in the 

United States. U.S. locations are typically passed over during the initial evaluation and 

consequently are never even considered for projects unless all other options fall through. The 

additional regulations EPA is considering will only continue and intensifY that trend. 

The other threat that these regulations pose is to energy prices. Economical and abundant energy 
51 


24965.032

supplies are the lifeblood of industry. These new and proposed regulations risk increasing 

energy prices and lowering energy supply. 

Energy must be priced at a level that energy-intensive industries can consume it while making a 

product that they will then be able to sell for a profit. Because energy is perceived as being 

"cheap," since it costs just pennies per kilowatt hour, we fail to understand the full impact energy 

costs have on profitability. 

You will often hear that a proposed regulation will only cost a few cents per kilowatt hour. That 

is a true but very misleading statement. If industry is paying only 5 cents per kilowatt hour for 

electricity and the price increases by I cent, that is a 20 percent increase in energy costs. For 

homeowners paying around 10 cents, that is a 1 0 percent increase. These increases, coupled 

with other regulations that will force the closure of coal-fired electrical generation facilities, will 

result in lower supply with further upward pressure on prices. 

The impact of these seemingly small increases on industry is staggering. At Nucor, we use 

electric arc furnaces to recycle over 20 million tons of scrap metal annually into usable steel 

products. For Nucor, a 1 cent increase in electricity costs translates into a cost increase of more 

than $120 million dollars per year. The question is, where will the money come from? 

An increase like that leaves industry with few good options. We might be able to spend valuable 

capital to increase efficiency in hopes of offsetting the cost increase, but as a large energy user 

we already have plenty of incentive to do energy efficiency projects that generate a decent 

return. The steel industry has reduced the energy intensity required to produce a ton of steel by 

30 percent since 1990. We could increase the cost of goods sold to maintain our margin, but in 

an international market, we will lose market share to competitors in other countries that do not 

have these energy cost increases. Finally, we can absorb the cost increase and decrease our 

profitability, but the result of that is potential job loss, contracting markets and lost tax revenue. 

We are also a large consumer of natural gas. In recent years, we have seen natural gas-fired 

power plants built instead of new coal generation. Power companies have indicated that these 

new regulations will result in the closure of many coal-fired power plants. Fortunately, 

technological innovation has opened up vast amounts of natural gas reserves in this country. But 

regulations threaten this energy source as welL EPA is attempting to expand its regulatory 

authority to include hydraulic fracturing. We risk under developing this important domestic 

resource by strangling it in regulations. If these proposed air regulations encourage fuel 

switching, while regulations on hydraulic fracturing discourage natural gas production, it will 

drive up natural gas costs for industrial consumers. 

We have seen in recent weeks the perils of creating "green energy" in defiance of basic market 

fundamentals. In many mature industries like steel, technological innovation and markets are 

driving increased energy efficiency, greater recycling and lower emissions. These jobs may not 

fit the conventional wisdom of what constitutes a "green job," but they are good-paying and 

hopefully long-lasting blue-collar jobs that are using innovation to become cleaner, more 

efficient and reduce environmental impact. These are the kind of jobs we need to be creating, 

not eliminating in the pursuit of mandating a green economy on industry. 
52 


24965.033

L Mr. Rowlan, you mention the difficulty in raising prices in an international marketplace. Can 

you elaborate further on the role that energy efficiency projects, undertaken to date by Nucor, 

have played in maintaining Nucor's ability to compete against foreign manufacturers in the steel 

industry? 

Nucor has pioneered many projects such as thin slab casting, strip casting, various EAF 

innovations and other projects that continually give us the ability to lower our costs of production, 

increase our efficiencies, and improve our quality. We implement these projects based upon 

their ability to provide us with a return on the investment of capital that is required. When we 

increase m1r margins or improve our quality, we also have the oppmiunity to expand our markets. 

When this happens, we are growing; and this is because we are more competitive. Our foreign 

competitors must then follow our lead and make improvements or give up market share. The 

inverse ofthis is when our costs arc increased hy govemment regulation. When this happens, we 

are simply struggling to maintain, and consequently, are not growing. Our competitors do not 

need to improve themselves because we are inflicting damage on ourselves; and they arc simply 

waiting to take advantage of the situation. 

2. According to your website, the steel industry has nearly fully achieved the energy efficiency and 

emission reduction possible using today's best technology. Can you describe the decisionmaking process Nucor generally unde1takes before deciding to move forward on an energy 

efficiency project? What are the most important criteria Nucor uses in determining if it should 

start a project? 

The U.S. iron and steel sector has outperformed al! other sectors in reducing their carbon 

footprint while maintaining a presence in the United States. Since 1990 our GHG emissions have 

dropped nearly 30% while we have maintained or increased slightly our production of steel in the 

United States. This has been done by implementing myriads of small and large projects that 

improve quality and efficiency. As previously noted, these projects then allow the industry to 

expand its markets. There are, however, theoretical limits to how efficient a process can become. 

A good example of this would be that it seems logical to use the electric arc furnace (EAF) 

technoiogy to recycle steel in quantities sufficient to meet aU domestic demand, which would 

further reduce GI IG and otl1er impacts. This cannot, however, happen because there is not 

enough scrap metal produced in the United States to provide recycled steel tor all domestic 

consumption. We are limited by the amount of scrap metal that is produced and must, therefore, 

produce some percentage of steel from virgin materials. Without these virgin materials being 

used to produce new steel, the amount of scrap generated in the future would likely also fall 

further. In theory this souilds wonderful and effective; in practice it is impossible. 
53 


24965.034

3. With the impending suite of regulations called the "train wreck" can you describe the difference 

in projects Nucor may have to take to remain competitive and the return you expect those projects 

to generate (positive or negative). Would these projects be undertaken without the regulations? 

As noted in the preamble example, the "train wreck" will increase energy prices significantly, and 

consequently, have a very negative impact on Nucor. Some unknowingly believe that the 

regulations somehow make efficiency projects with marginal returns become projects with 

acceptable returns. As pointed out in the preamble, the only reason these projects have a return is 

because of the cost avoidance related to the regulation. A cost avoidance return docs not improve 

margin or marketability it usually maintains the market position that was disrupted by the 

regulation. Without regulations these projects do not have enough of an economic return to 

typically justify their implementation. Even with the regulation, the net impact of the project 

after increased regulatory cost avoidance has been removed is marginal at best. This is why the 

project was not implemented in the first place. 

4. Can you fm11Icr elaborate on the role of energy prices in Nucor's operations and, given tlmt prices 

cannot be raised on the commodity you manufacture, provide a high-level description of the 

sources for funds to make up the higher cost of electricity you will face? 

Nucor is an energy intensive industry. Nueor is also the largest recycler in N011l1 America. To 

recycle steel we use tremendous amounts of electrical and natural gas energy. While a one-cent 

per kilowatt hour price increase sounds like a small amount, it will cost Nucor well over 

$100,000,000 per year in addiiional energy costs. If the price of steel on the open market remains 

the same because other countries do not have to absorb higher energy costs, Nucor is forced to 

pay these increased energy costs through reduced profitability. The irony in this situation is that 

if energy prices are increased in order to have "greener" energy, the higher prices will have an 

extremely negative impact on a very "green" industty-namcly, Nucor and the steel recycling 

industty. To further exacerbate the problem, if the steel is not recycled in the United States 

because of high-pdccd energy, the emissions for the manufactul'ing of the steel will be cxpotted 

to another country with economical energy prices. These countries will also have less restrictive 

emissions regulations; and cmtsequently, the global emissions fi·om the manufacturing of steel 

will increase; the amount of energy consumed globally to recycle steel will also likely increase; 

and finally, the United States will have expotted its steel making indushy and the associated jobs 

to another country in relum for no global environmental benefit. 

5. Energy intensive industl'ies have long expressed concern with regulations that increase input 

costs due to the effect it has on their ability to compete internationally. In the context of the cap 

and trade debates, it was a mnjor conccm for manufacturers. But the effect of the EPA 

regulations we're now facing is the same: manufacturers will face higher costs that will 

undermine their ability to compete. Wouldn't you agree? 
54 


24965.035

There is no doubt, and I wholeheartedly agree, that these regulations arc intended to increase the 

price of energy, which was one of the main drivers in the cap and trade legislation. It is also true 

that energy intensive industries were effectively offered all of the allowances they would need in 

order to keep operating. The problem was not the operating allowances. The problem was the 

indirect impacts that the industries would have to absorb when the price of energy began to climb. 

This was also evidenced by the fact that the utility sector was given allowances to sell in order to 

subsidize energy fbr the poor. It was widely recognized that the cap and trade would have a very 

negative impact on residential energy consumers; and large volumes of allowances were set aside 

to soften this impact. This is also ve1y evident today as airlines are objecting to the cost of flying 

into the EU because they are being charged for the emissions fi·om their planes. This is having 

the effect of making flying in Europe more expensive than in other pa1ts of the world. 

6. Do you think energy efficient projects arc adequate to ameliorate the effects of EPA regulations 

known as the "train wreck" in terms ofmanufacturingjobs? 

I do not think that energy efficiency projects will be able to ameliorate the cfl'ccts of the 

regulations. The fact of the matter as pointed out in the preamble is that these projects arc "make 

work" projects in reality because they nrc only viable because of the regulations impact. Capital 

properly allocated goes to projects that have definitive retums that foster market expansion and 

profitability. Regulatory avoidance projects that require capital take capital away from these 

projects and produce only cost avoidance returns that do not expand markets or profitability. 

They in fact usually lower profitability because more capital is invested to maintain the same 

margins that were previously obtained with less capital invested before the regulation. By 

diverting capital from better uses, the jobs that this capital might have created arc lost in f\tvor of 

avoiding a regulatory cost. 

Thank you, Mr. Aronchick, for the opportunity to respond to Senator lnhofb's request Should you have 

any questions regarding my responses listed above, I may be contacted at 704-367-8685 or 

srowla11@nucor.com. 

Sincerely, 

NUCOR CORPORATION 

General Manal(er, Environmental Affairs 
55 

Senator SANDERS. Mr. Rowlan, thanks very much. 

Let me begin with the questioning, and then we will go to Senator Boozman and Senator Boxer. 

Let me start with Phil Schoen. Mr. Schoen, last year, I held a 

town meeting in Vermont on geothermal, and I was surprised. We 

had hundreds of people coming out. What you are suggesting, if I 

understand you correctly, is there is real potential there and you 

are just beginning to tap it, and you are seeing as a major obstacle 

the fact that geothermal heat pumps are a fairly expensive proposition and people don’t have the capital to make that investment. 

All right. Answer two questions, if you might. No. 1, what do you 

see the potential of geothermal heat pumps in this Country? What 

kind of significance will it have? And No. 2, what role do you see 

the government playing in helping make that happen? 

Mr. SCHOEN. Thank you for that question. My response is that 

in the lower housing, in the areas of lower housing, our technology 

is more expensive because when we install this heat exchanger, 

which by the way is 100-year life product, it has initial first cost. 

The good news is you can’t export drilling or excavating. 

Senator SANDERS. Let me ask you this. In practical terms, I am 

a homeowner or contemplating a new home in the State of 

Vermont, what is it going to cost me? What are my savings, et 

cetera, roughly? 

Mr. SCHOEN. In a new home in Vermont, you might expect to pay 

$15,000 to have a system put in in a conventional sense. This product would probably cost $27,000, something like that, or an additional 50 percent cost increase to put in the heat exchanger. The 

inside machinery is the same, but it is 100-year life. And when you 

look at lower-cost housing, that is people with less means to pay 

for housing, where a dollar they save has much bigger impact, they 

don’t have the resources to go to some of the conventional routes, 

and that is the big expansion of the marketplace. 

Senator SANDERS. You mentioned in your testimony that geothermal was a 50-State proposition. 

Mr. SCHOEN. Yes, sir. 

Senator SANDERS. You see the application for geothermal all over 

the Country. 

Mr. SCHOEN. Yes, sir. We have put in geothermal in Alaska. We 

have put in geothermal in Barbados. And so it spans all the areas 

of this Country and it almost has an application everyplace. 

Senator SANDERS. And what kind of savings? I know this is average. 

Mr. SCHOEN. An example would be in the State of Arkansas, 

when we did Farm Home Administration homes, we were able to 

achieve $1 a day for the utility costs of heating and cooling a home; 

$1 a day. 

Senator SANDERS. So you are saving people $360 a year in their 

heating. 

Mr. SCHOEN. Yes. 

Senator SANDERS. OK. That is not insignificant. 

All right, let me ask either Mr. White or Mr. Kempf, tell me 

what you see the potential of on-bill financing to be if we were 

making capital available to those businesses, municipalities, homeVerDate Aug 31 2005 08:41 Jul 06, 2017 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 S:\_EPW\DOCS\24965.TXT VERNE
56 

owners who wanted to move aggressively in energy efficiency or 

sustainable energy? What do you see the potential out there? 

Why don’t you start, Mr. White? 

Mr. WHITE. Sure. Great question. One of the things that we have 

seen in the States where we already offer it is customers having 

the ability to move forward with these projects that they otherwise 

wouldn’t normally do. So they are worried about running their florist shop or their hotel or their small business. They just want the 

ease of implementation. 

So the vendor comes in, offers up the project, shows them what 

their savings could be, and it is as simple as paying a line item on 

the bill. 

Senator SANDERS. What might a typical, I am a slow business 

person, I have a shop, what might a typical savings be? 

Mr. WHITE. It is thousands of dollars each year that they will 

save going forward. It is kind of hard to answer the question directly because it depends on the size of the project. But we have 

some projects where the payback is less than a year or less than 

2 years, within that range. So it is very much a great proposition 

for a lot of our small businesses. 

Senator SANDERS. Mr. Kempf, would you take a shot at that 

question, please? 

Mr. KEMPF. One of the benefits also is that a lot of small business owners are rightly wary of independent energy auditors. And 

the on-bill financing has the added benefit that it is the utility approving contractors for coming in and doing it, so they accept the 

audit more willingly and proceed. 

Senator SANDERS. You mentioned, I think, Mr. Kempf in your 

testimony that almost by definition, the contractors are themselves 

small business people. 

Mr. KEMPF. Yes, by and large, the entire industry which does 

these sorts of things are small. 

Senator SANDERS. So these are people who come in with weatherization efforts, with new lighting. 

All right, my last question for Mr. White or Mr. Kempf, talk 

about lighting a little bit. What is the potential that you see? Are 

there savings in transiting to more energy-efficient lighting? 

Mr. WHITE. Yes, and that is an area where we see the technology 

advancing quite significantly. And a lot of folks care about LED 

lighting. You can get it for your homes, your businesses. 

As we have gone in and installed, in the project I mentioned with 

the hotel, their payback is going to be a little over a year and their 

annual cost savings for those 1,900 LED bulbs is around $222,000 

for annual savings. So think about that big hotel and all the savings they are going to get from that technology, that lighting technology. 

Senator SANDERS. And they are happy with the quality of the 

lighting? 

Mr. WHITE. They are. They are. 

Senator SANDERS. OK. 

Senator Boozman. 

Senator BOXER. Thank you. 

57 

Let me thank Senator Boozman for this courtesy. I have a meeting about the highway bill, so I wanted to make sure I could get 

there and do this. 

I would like to put into the record this terrific, part of this document which is The On-Bill Financing: Helping Small Business Reduce Emissions and Energy Use While Improving Profitability. 

This is a document by the National Small Business Association 

echoing everything that you said, Mr. Chairman, and everything 

that you three have said, and everybody says they are for small 

business. 

So I want to put in the executive summary into the record without objection, if that is OK, Mr. Chairman. 

Senator SANDERS. Without objection. 

[The referenced document was not recieved at the time of print.] 

Senator BOXER. OK. 

I was a little taken aback by Ms. Smith’s testimony because she 

really didn’t address the issue at hand. But Ms. Smith, you said 

you were speaking for yourself, yet you really were quoting from 

a report, were you not? Because you kept saying we found, we examined four rules. Is that correct? 

Ms. SMITH. I am speaking for myself today, but you are quoting 

co-authors on the report that I collaborated with. 

Senator BOXER. Yes, and here is the report. We have it here. And 

so this is essentially a coal company report and I would ask unanimous consent to put in the record the names of the companies and 

how much they contributed to the report that you have cited, if I 

might put that in the record. 

Senator SANDERS. Without objection. 

[The referenced document was not recieved at the time of print.] 

Senator BOXER. Which is all fine, but everything you said and 

also the gist of Mr. Rowlan’s testimony is refuted in this report. I 

would love you to read it. It is a special staff report, says a strong 

EPA protects our health and promotes economic growth. And I am 

going to quote from it in a bit. 

But one thing that, Mr. Rowlan, you didn’t talk about which is 

something terrific that has gone on in your business that we got 

from your webpage does fit into this hearing. It is Nucor has developed a manufacturing process that increases energy efficiency and 

reduces carbon pollution, and it is very exciting. You say that these 

mills consume 84 percent less energy than a conventional mill with 

a 75 percent reduction in greenhouse gases. That is in your 

Crawfordsville, Indiana and Blytheville, Arkansas facilities. 

So I just wanted to thank you, even though you didn’t talk about 

that, something that I think we should take note of. It is very exciting that you, too, in that you are continuing, even though you 

are opposing new regulations. You are moving to energy efficiency. 

And I think that is an important point. 

Energy efficiency is something that should get us all together, 

whether we demean the EPA or we support the EPA. It is dollars 

and cents, whether you are a Democrat or Republican, you save 

money and that is why the small business people love this. And 

that is why I am so proud of this hearing. 

And I am going to close with a few quotes from this report that 

really totally contradict what Ms. Smith and Mr. Rowlan said, and 

58 

these are all fact-based analyses that you can get when you get 

this. 

And they are also quotes. Here is a great quote. ‘‘Clean air, clean 

water, open spaces, these should once again be the birthright of 

every American,’ Richard Nixon, January 22, 1970 in his State of 

the Union. 

Christie Todd Whitman and Bill Ruckelshaus, Republicans who 

worked for Republican Administrations at the EPA, they wrote an 

op-ed together and it said, ‘‘It is easy to forget how far we have 

come in 40 years. We should take heart from all this progress, and 

not as some have suggested in Congress, seek to tear down the 

agency that the President and Congress created to protect America’s health and environment.’ 

Gerald Ford said, ‘‘Nothing is more essential to the life of every 

single American than clean air and pure food and safe drinking 

water.’ 

And then in the area of job creation and economic growth, I have 

said before, since the Clean Air Act’s implementation, we have 

grown faster than any other developed country, 207 percent. And the Clean Air Act is projected to provide $2 trillion in annual health benefits by the year 2020. I defy anyone to come up 

with anything better than that. 

And I am going to give you some more quotes of companies. OK? 

Companies that aren’t here today: PG&E, CalPine Corp., NextEra 

Energy, Public Service Enterprise Group, National Grid is in this, 

Excelon, Constellation Energy. Austin Energy in a letter to the editor of The Wall Street Journal in 2010, ‘‘Our company’s experience 

complying with air quality regulations demonstrates that regulations can yield important economic benefits, including job creation, 

while maintaining reliability.’ General Motors said just the other 

day, July 2011, ‘‘General Motors Company recognizes the benefit 

for the Country of continuing the historic national program to address fuel economy and greenhouse gases that the EPA has begun.’ 

It goes on and on. And because my time is running out, I do 

want to give you what the American people say about the EPA. 

And Grant, you found it for me before. Now I have to just take a 

second. Here it is. Here it is. The American people, and by the way, 

this is an old poll. It is a few months old. There is a new poll that 

came out which has even better numbers for the EPA from the people of this Country. The Clean Air Act enjoys broad support from 

the American people. The public supports stricter limits on air pollution and believes scientific experts should be responsible for setting pollution standards. 

And just to back up the numbers, this is a February 2011 bipartisan poll conducted for the American Lung Association: 69 percent 

of likely voters think EPA should update clean air standards with 

stricter limits on air pollution. They don’t say what Mr. Rowlan 

said and what Ms. Smith said, or Dr. Smith, excuse me, Dr. Smith, 

that we should walk away from these regs; 68 percent of the people 

of this Country feel Congress should not stop the EPA from updating Clean Air Act standards, and yet that is what we are faced 

with, Mr. Chairman. 

They have rolled back three to four to five regs over there in the 

House, and they think that is going to gain traction. Not only does 

59 

it hurt job creation and threaten a $48 billion export industry of 

clean tech; not only does it threaten 1.7 million jobs and future 

growth. 

And we hear from these folks here who are making money from 

this; 69 percent believe that EPA scientists, not Congress, should 

set pollution standards. 

So all I can say is I am very familiar with California and I just 

will close with this, and I am so sorry to do this to you, Mr. Chairman, but you are used to this. The latest report, it is a California 

report, so you could question it, says that California uses the least 

amount of energy per capita of any other State in the Nation. And 

I say that to you, but I do believe our climate would lead us to that. 

I think you do face a little bit chillier winters and a little bit less 

sun. We have lots of it there, and more solar energy at this point. 

But I did want to put that into the record, subject to your confirmation. 

Senator SANDERS. I don’t know about that. I don’t know if we 

will put that into the record. 

[Laughter.] 

Senator SANDERS. But we will continue that discussion. 

Senator BOXER. Thank you. I thank all of our witnesses. 

Senator SANDERS. OK. Thank you very much. 

Senator Boozman. 

Senator BOOZMAN. Thank you, Mr. Chairman. And I agree. I 

think conservation is something that we all agree is very, very important and it is good for business. One of the low-hanging fruits 

out there is energy-efficient motors, getting rid of some of these old 

motors; giving incentives to do that; and certainly that is good for 

your business, Mr. Rowlan, and many other businesses. 

On on-bill financing, Mr. White, is there a limit to, if Mr. 

Rowlan’s company wanted to get efficient, is there a limit to the 

amount of money, how big can the company be to participate? How 

big can the loan be? Is there a limit? Or how do you do that? 

Mr. WHITE. Yes, so specifically to your question or as it relates 

to our small business program, typically we would give a 70 percent incentive and then the financing would be on the rest of the 

30 percent. So it is a proportion of the overall project costs. 

Senator BOOZMAN. Up to how many dollars? 

Mr. WHITE. I don’t have the answer to that question right now. 

What we see in our different customer types is some of those customers will select, Mr. Rowlan’s company would actually work with 

an ESCO and get better, more attractive holistic projects which it 

sounds like from their website they are already doing. 

So we don’t have a specific cap that I am aware of, but our programs are more focused on small businesses and municipalities. 

Senator BOOZMAN. No, I think it is a great program, a great idea, 

and it seems to be very successful. 

Are you allowed to add the administrative costs to the program? 

Mr. WHITE. Yes. Our energy efficiency programs are State regulated, and the administrative costs associated with those projects 

are all included in our budgets. 

Senator BOOZMAN. Very good. 

I appreciate your testimony, Mr. Kempf. I was surprised, really 

in both of yours, well, all three, that the payback in some cases was 

60 

pretty significant and pretty quick. So I think it is a great program 

and I think it is something that we need to support. I look forward 

to working to strengthen that. 

Mr. White, you have heard the concern from Mr. Rowlan and Dr. 

Smith. Are you concerned about the impact of the four things? How 

much does an entity, a lot of natural gas, are you concerned about 

the increase in electricity cost? Or better yet, are your customers 

concerned if natural gas does go up 11 percent as predicted? 

Mr. WHITE. Yes, so what I would say is interacting with our customers, which is the part of the National Grid that I work with, 

our customer is always concerned with the rising cost of energy. 

And the solutions or the tools that we provide are the energy efficiency programs. I can’t really speak to the specific items that were 

addressed by the other panelists. 

Senator BOOZMAN. But you have discussed that in meetings and 

things. Give us, I mean, the reality is if all four of those go into 

effect, your costs are going to go up significantly. And what percentage are in the on-bill financing program? What percentage of 

your customers are on the on-bill financing program? Very small, 

I would suspect. 

Mr. WHITE. Well, but it is a growing percentage. 

Senator BOOZMAN. But the reality is, if the four did go into effect, 

the vast majority of your customers would be impacted by an increase in their utility rates. 

Mr. WHITE. Yes, I am not familiar with the impacts or the measurements that were discussed here. What I can speak to is sort of 

the customer facing or customer interaction programs that we have 

with our energy efficiency programs. The impact of proposed legislation is not really my area of responsibility. 

Senator BOOZMAN. OK. But you do deal with customers. 

Mr. WHITE. Yes. 

Senator BOOZMAN. And if your customers’ electricity bill went up 

significantly, your businesses and your individuals, the single 

moms, and then it was realized that that was due to these four 

things going into effect, I doubt that the polling would be very good 

as far as support for the four things that were put in place. 

Mr. WHITE. Yes, again, I can’t speak to the polling or the impact 

of the four things that were mentioned. 

Senator BOOZMAN. But in dealing with customers, they would be 

concerned about the increase. 

Mr. WHITE. Yes. 

Senator BOOZMAN. And I don’t want to beat a dead horse. You 

understand what I am saying. 

Mr. WHITE. I do. Yes. 

Senator BOOZMAN. And these are big things. They really are, I 

know in Arkansas. One of my frustrations is we are losing our 

manufacturing and it is a huge deal. And we have to as a Nation 

address how do we do that. But one of the bases of that is certainly 

reasonably priced energy. And so we do have to figure this thing 

out where we are able to provide reasonably priced energy, but also 

to meet the environmental needs that we need to do. 

So thank you, Mr. Chairman. I apologize. I have another meeting 

with a major manufacturer that is scheduled to come up, this meeting with our entire delegation. They are in a situation of needing 

61 

some encouragement, and so I am going to sneak out. Senator Sessions is going to be around for a while. 

Thank you very much. 

Senator SANDERS. Thank you, Senator Boozman. 

Senator Sessions. 

Senator SESSIONS. Thank you. 

Let me just say right up front, I think we have, I don’t think, 

we do have a difference of opinion about green jobs. We just do. We 

have had an world experiment in Spain. They have been one of the 

most ambitious countries in the world in trying to create jobs by 

creating a green energy program. For over a decade, they pursued 

the policy through green energy. But recent studies have shown 

that Spain spent over 500,000 euros, $680,000 dollars to create 

each green job. 

Those studies also indicate that Spain lost 2.2 jobs for every 

green job created. This is because Spain’s focus on green energy resulted in substantially higher electricity prices that affected the 

cost of production. 

And Nucor Steel, which has plants in Alabama, they have to 

compete worldwide. If they have lower energy costs, they are more 

competitive and can hire more people. If their energy costs are 

higher, they are less competitive and they can be less successful 

and hire less people. 

In fact, Spain has acknowledged their error and have backed 

away from much of what they have been doing. 

We also have this idea that somehow we can create jobs by re- versing the law of markets. Solyndra, $530 million, we are not 

going to have any more jobs there, it looks like, filed for bankruptcy. You have the plant in Massachusetts that also went belly 

up that have huge State support, not Federal support; Boston, the 

Evergreen Solar, $58 million in subsidies and tax breaks and it declared bankruptcy in August of this year. 

So Dr. Smith, you have looked at this in the numbers. And we 

have just got to be honest with each other and try to figure out 

what the right policy is. I certainly agree with the Chairman and 

Senator Boozman about conservation, effective techniques and machinery that will help us use less energy. I think that is a win-win 

when it can be paid for and it makes sense. 

So let me ask you, Dr. Smith, your studies show staggering levels 

of job losses due to the EPA’s projected slate of utility coal regulations. A review of your report indicates you actually make several 

conservative assumptions; that you tend to underestimate the actual losses that might occur. Your analysis, for example, did not 

take into account increased costs from reduced electricity reliability. 

Is it fair to say that the total cost in job losses from the four EPA 

rules analyzed in your report could actually be greater than you 

projected? 

Ms. SMITH. They could be greater. What I produced is an estimate of the average net loss. And within certain sectors, there is 

an increase. In other sectors, there is a very large decrease, but 

that is net within the sector as well. 

So if we have a very large decrease, as we do in the retail sector, 

a surprising place to find the job loss perhaps for some, there could 

62 

be even larger losses in there along with some positive increases 

in the retail sector that the analysis doesn’t pick up. 

So yes, the actual job losses could be larger. The actual net gains 

could be larger. I think the important point is that when you look 

at the balance between gains and losses across the whole economy, 

it always turns out to look negative, although not always in every 

sector. 

Senator SESSIONS. What kinds of jobs are most likely to be lost 

in your projections? 

Ms. SMITH. Well, the vast majority of the jobs lost, as I said, are 

in the retail sector and a great number of other sectors that support the economy and the supply chain generally. They all suffer 

as the reduction in economic activity occurs in their overall demand. 

So none of them are among the set that are directly affected by 

the rules. At the same time, it is true that the mining sector does 

face some negative losses. On the other hand, the gas sector goes 

positive because of the increased demand for gas. The sectors 

where we see the positive jobs are construction and machinery 

manufacturing, as you would expect from a large program of spending on environmental controls or building new powerplants. 

Senator SESSIONS. Which would be short term. 

Ms. SMITH. But the negatives are not in the energy sector entirely. The vast majority are across the whole economy. 

Senator SESSIONS. And what kind? Manufacturing? 

Ms. SMITH. Manufacturing, except for those parts of the manufacturing that are supplying the equipment to build the powerplants for the environmental controls. 

Senator SESSIONS. Because the energy costs can adversely affect 

manufacturing? 

Ms. SMITH. They certainly do. And we see actually a reduction 

in demand for electricity in the policy scenario, compared to not 

having those policies being implemented. And that is from the 

manufacturing being reduced overall across the economy. 

Senator SESSIONS. Mr. Rowlan, with regard to a steel company 

like Nucor, would you explain to us how energy prices can impact 

your viability, your growth, and your job and hiring policies? 

Mr. ROWLAN. Yes, well, that was in my testimony there. Just a 

simple one cent increase per kilowatt hour for us is a cost well in 

excess of $120 million a year. And really, if you sit and look at 

some of the things that have been said, that $120 million has to 

come from someplace because we can’t just increase the price of the 

commodity that we are selling because we are competing internationally. 

So the projects like the good Senator referenced, which is the 

Calstrip project which was energy efficient, which is research we 

put money into, there is $120-plus million a year, we can’t put 

money into that. We are happy to pursue energy efficiency projects. 

We pursue them, and that is how we have driven our numbers 

down and that is how we have become competitive. 

The irony in this is that we say raise prices and somehow we are 

going to create jobs, or raise taxes and we will create jobs. You 

know, you raise prices, people buy less. That is what happens. And 

63 

you don’t do that. It goes exactly the opposite direction. It flies in 

the face of reality. 

Senator SESSIONS. I know the Chairman and I agreed with your 

CEO’s views about the China currency, and you give our foreign 

competitors an additional advantage. You have wages. You have 

currency. Now with China a major steel producer, and then if you 

give an energy advantage, I think that you would agree that would 

be further damage to the competitiveness. 

Mr. ROWLAN. Yes, currency is a big issue. You know, these things 

manifest themselves in a lot of ways. I heard that the energy consumption in California, I think, was the lowest per capita. Well, if 

industry left and you were dividing all of that energy being gone 

now, you basically left the denominator where it was at. You are 

going to see that happen. If industry leaves, the energy consumption per capita in that State will go down significantly. That would 

be something I would expect to see predicted by Dr. Smith. 

Senator SESSIONS. Thank you, Mr. Chairman. 

We disagree on some things here, but the Chairman is sincerely 

committed to making us a healthy and more viable place, and I am, 

too. And let’s keep working. 

Senator SANDERS. Yes, we will. Thank you very much, Senator 

Sessions. 

It appears that some members of the panel were coming from different directions than other members, maybe some confusion as to 

what the topic of discussion was today. I didn’t hear Dr. Smith or 

Mr. Rowlan talk about on-bill financing, which is in fact what the 

subject of this panel was today. 

But I would hope, Senator Sessions, and all members of the 

panel, that we pursue this issue of on-bill financing. I know you 

missed the first part of the meeting, Jeff, where we think we have 

real potential to provide capital to small businesses, municipalities, 

homeowners to help them make the innovations and the efficiencies 

that they need to substantially lower their energy bills and cut pollution and greenhouse gas emissions. 

And we have heard testimony that in some cases, the payback 

could be a year or two. And yet we are sitting on a situation where 

millions of homeowners don’t have that initial $10,000, $20,000 to 

make the changes. 

So I look forward to working with you to see how we can have 

the government play a positive role in working with utilities 

around the Country, small businesses, homeowners, to get that 

capital available, to expedite the process. 

So with that, yes? 

Senator SESSIONS. I recently had to replace an air conditioning 

unit and I found it difficult to, even with the requirements we have 

on energy efficiency, it was more difficult than I imagined to figure 

out what the best payback would be; what the best investment 

would be. And I felt like that if we are going to have regulations 

to do this, somehow it needs to be a little clearer still. 

Senator SANDERS. Well, I think that is exactly what Mr. White 

and others have been talking about. And my guess is that, Mr. 

White, you are helping businesses put in new heating and cooling 

systems. Yes? 

64 

Mr. WHITE. Yes, that is correct. So we are fortunate to have programs in four States up in the Northeast, and we help customers, 

both residential customers and commercial customers, and kind of 

walk them through the process so they can have the ability to 

make informed decisions, because it can get confusing. There is no 

doubt about that. 

Senator SESSIONS. I believe we can do better, and I thank you 

for raising that issue. I do believe that is a win-win. 

Senator SANDERS. Yes, it is. 

Senator SESSIONS. If you can make the changes in your heating 

and cooling and other energy uses that will likely pay for themselves over a period of years. It is a win-win for us, I think. 

Senator SANDERS. So let’s work on that together, and thank you. 

And I thank all the panelists for being here. 

Oh, Senator Whitehouse, didn’t see him. 

Senator Whitehouse. 

Senator WHITEHOUSE. I snuck back in. We had a Judiciary markup, but I did want to return, and I won’t hold the hearing long, but 

I would love to ask Mr. White what the forecast is for the on-bill 

financing and what specifically we can do to help National Grid 

and other companies who will be following your lead to take advantage of this mechanism. 

Is it access to capital? Is it notice to ratepayers? What are the 

hold-backs that have kept this from spreading further? And how 

are you going to work your way through them? And what do you 

think the ultimate reach of the program should be? 

Mr. WHITE. Yes, great question and thank you for that. 

And one of the things that I would like to say is Rhode Island 

specifically is increasing the amount of energy efficiency programs 

they are making available to customers, and very much competing 

with Vermont and California and Massachusetts and others. So I 

respectfully add that to the record, which is great. 

Senator WHITEHOUSE. Take that, Vermont. 

[Laughter.] 

Mr. WHITE. What excites me the most about the opportunity to 

work with enhancing some of the solutions on on-bill financing is 

the fact that in some States there is reluctance to move forward for 

a whole host of issues. So to the degree that we can actually come 

up with something both federally that complements the State programs, I think is going to be a win-win for everyone. 

I don’t know specifically what the mechanism will or should be. 

There are a lot smarter people out there that can figure that out 

with us all. But I think from a customer’s perspective, which was 

one of the questions I received earlier, on-bill repayment, on-bill financing is just another way. It is another tool to help enhance the 

use of these programs. And I look forward to working with the 

Committee and all those involved. 

Senator WHITEHOUSE. Are you using your own capital to fund it, 

as well as third-party capital? 

Mr. WHITE. Yes. It is a combination of both. So we actually have 

some requirements at some of our State programs to go out and 

find outside capital, which have proved to be a challenge during 

these economic times to get capital at the competitive rates that 

are needed. 

65 

So in some cases, we are using the system benefit charge moneys 

that we collect in offering the on-bill financing to those customers, 

and our default rates have been very low, which has been very encouraging. 

Senator WHITEHOUSE. As low as zero percent in certain customer 

classes. Correct? 

Mr. WHITE. Well, zero percent for the financing, but the default 

rate is also very low, 2 percent, 1 percent in some areas. So it has 

been a very useful tool, very useful mechanism. 

Senator WHITEHOUSE. Very good. 

Thank you, Chairman. It has been a great hearing. 

Senator SANDERS. OK. Thank you all very much for being here. 

I appreciate it. 

The meeting is now adjourned. 

[Whereupon, at 11:25 a.m., the subcommittee was adjourned.] 

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