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ENERGY EFFICIENCY: COMPLEMENTARY POLICIES 

FOR CLIMATE LEGISLATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

FEBRUARY 24, 2009 

Serial No. 111–4 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California 

Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

JANICE D. SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

(II) 

(III) 

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

EDWARD J. MARKEY, Massachusetts 

Chairman 

MIKE DOYLE, Pennsylvania 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

JOHN D. DINGELL, Michigan 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., NEW JERSEY

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

JANE HARMAN, California 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

JOHN BARROW, Georgia 

DENNIS HASTERT, Illinois 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

STEVE BUYER, Indiana 

GREG WALDEN, Oregon 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

MICHAEL C. BURGESS, Texas 

(V) 

C O N T E N T S 

Page 

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

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 2 

Hon. Jay Inslee, a Representative in Congress from the State of Washington, 

opening statement ................................................................................................ 4 

Hon. John Shimkus, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 4 

Hon. G.K. Buttefield, a Representative in Congress from the State of North 

Carolina, opening statement ............................................................................... 5 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

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

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 8 

Hon. Peter Welch, a Representative in Congress from the State of Vermont, 

opening statement ................................................................................................ 9 

Hon. Steve Scalise, a Representative in Congress from the State of Louisiana, 

opening statement ................................................................................................ 10 

Hon. Doris O. Matsui, a Representative in Congress from the State of California, opening statement .................................................................................... 11 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 11 

Hon. Lois Capps, a Representative in Congress from the State of California, 

opening statement ................................................................................................ 12 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 13 

Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ................................................................................... 14 

WITNESSES

Philip Giudice, Commissioner, Massachusetts Department of Energy Resources ................................................................................................................... 15 

Prepared statement .......................................................................................... 18 

Answers to submitted questions ...................................................................... 162 

Tom King, President, National Grid USA ............................................................. 29 

Prepared statement .......................................................................................... 31 

Answers to submitted questions ...................................................................... –1

Rich Wells, Vice President, Energy, The Dow Chemical Corporation ................. 38 

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

Answers to submitted questions ...................................................................... 2

Iain Campbell, Vice President and General Manager, Johnson Controls, Inc. .. 52 

Prepared statement .......................................................................................... 54 

Answers to submitted questions ...................................................................... 167 

John Anderson, President, Electricity Consumers Resource Council ................. 112 

Prepared statement .......................................................................................... 115 

Answers to submitted questions ...................................................................... 175 

Bryan Reichel, President and CEO, PureChoice, Inc. .......................................... 122 

Prepared statement .......................................................................................... 125 

Answers to submitted questions ...................................................................... 186 

Page

VI 

SUBMITTED MATERIAL

Letter of February 24, 2009, from Pilkington North America, Inc., to Hon. 

Fred Upton ........................................................................................................... 156 

Chart entitled ‘‘Total Electricity Use, per capita, 1960–2001 .............................. 159 

OnPoint transcript, February 23, 2009 .................................................................. 160 

1 Mr. King did not respond to submitted questions for the record. 2 Mr. Wells did not respond to submitted questions for the record. 

(1) 

ENERGY EFFICIENCY: COMPLEMENTARY 

POLICIES FOR CLIMATE LEGISLATION 

TUESDAY, FEBRUARY 24, 2009 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY AND AIR QUALITY, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 9:38 a.m., in room 

2322, Rayburn House Office Building, Hon. Edward J. Markey 

(chairman of the subcommittee) presiding. 

Present: Representatives Markey, Inslee, Butterfield, Matsui, 

Welch, Green, Capps, Gonzalez, Baldwin, Matheson, Barrow, Waxman, Upton, Hall, Stearns, Shimkus, Blunt, Pitts, Walden, Burgess, Scalise, Barton, and Blackburn. 

Staff Present: John Jimison, Melissa Bez, Joel Beauvais, Matt 

Weiner, Lindsay Vidal, Greg Dotson, Andrea Spring, Amanda 

Mertens Campbell, and Peter Kielty. 

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF MASSACHUSETTS 

Mr. MARKEY. Good morning. 

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

tend to focus on exciting, new technologies like high-powered wind 

turbines and thin-filmed solar cells or carbon capture and sequestration. Today’s hearing is about the less-eye-catching but equally 

important solutions that improve energy efficiency, better building 

and appliance standards, energy efficiency resource standards, demand side management programs and a host of other policies and 

technologies that enable us to use energy more intelligently. 

The Department of Energy estimates that U.S. electricity demand will grow by 30 percent by 2030. There are two ways to meet 

these rising demand, megawatts and negawatts. The first approach 

is familiar to us, simply building more power plants. The second 

uses efficiency measures to do more with less. It is based on the 

reality that the cheapest and cleanest power plant is the one we 

never have to build. Efficiency costs us as little as one-third per kilowatt hour of the cost of new electricity supply and emits no carbon. 

Energy efficiency will also play a critical role in avoiding an excessive dash to natural gas, which many fear could damage the 

competitiveness of U.S. manufacturing. A recent study by 

McKenzie & Company concluded that in 2030 efficiency measures 

2 

can cut U.S. global warming pollution by nearly 15 percent of current levels at a profit. 

The 10 northeastern States participating in the RGGI, Regional 

Greenhouse Gas Initiative, a cap and auction trade system, have 

found that by auctioning 100 percent of the pollution allowances 

and investing the proceeds in efficiency measures, they can achieve 

their climate goals at virtually no additional cost to consumers. 

Climate legislation can provide the resources to make efficiency 

policies work, while efficiency cuts pollution at the lowest possible 

costs. These solutions help us to work smarter and not harder. 

Investing in efficiency is not just a cost-effective energy and climate solution. It will also pay major dividends in new jobs and economic growth. America’s efficiency industry already produces close 

to a trillion dollars in annual revenues. By putting America in the 

vanguard of the efficiency revolution, we can create high-quality 

green jobs at home, while exporting high-quality green technology 

to the world. 

Unfortunately, increasing America’s energy efficiency is not as 

straightforward it as may seem. As we will hear from our witnesses, many efficiency improvements can already be achieved 

today at a profit but are not being implemented because of market 

barriers and market failures. For this reason, simply putting a 

price on carbon is not enough. Focused policies must be used to reward efficiency and to eliminate perverse incentives like those that 

shackle utilities’ profits with the amount of electricity they sell. 

Progressive States, along with innovative companies like Dow, 

Johnson Controls, and National Grid, have taken the lead in tackling these challenges. We are grateful to have representatives of 

these government and business leaders on our witness panel today. 

They can help show us the way forward. 

As Congress considers climate legislation it will be critical to include policies that make energy efficiency our first fuel. Efficiency 

provides a vast zero carbon energy supply that can be deployed 

right now with current technologies at a net savings. If we are to 

cut global warming pollution as quickly and as deeply as the 

science says it must, it is imperative that climate legislation must 

be designed to capture efficiency gains immediately. 

By making the potential of energy efficiency a reality, we can 

save the planet, while simultaneously saving consumers money, 

spurring job growth and meeting our Nation’s rising energy demand at the lowest possible cost. 

NBA coach Pat Riley once said, a particular shot, a way of moving the ball, can be a player’s personal signature, but efficiency of 

performance is what wins the game for the team. If we are going 

to beat this energy climate and economic challenge, aggressively increasing America’s energy efficiency may be at the center of our 

game plan. 

That completes the opening statement of the Chair. I now turn 

and recognize the ranking member, the gentleman from Michigan, 

Mr. Upton. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. 

3 

Our hearing today is an important one. The environmental and 

economic benefits of energy efficiency are truly significant. 

Before I begin, I would like to submit a letter from Pilkington 

North America for the record. 

[The information appears at the conclusion of the hearing.] 

Mr. UPTON. Pilkington is the leading U.S. manufacturer of glass, 

and they have a facility in my district. 

Pilkington makes some very interesting points about the nature 

of energy efficiency. For example, certain building products like 

windows that are most efficient in southern States are not nearly 

as efficient in northern States. In the warm weather States of the 

south, windows that block solar heat are the most energy efficient. 

However, in the cold weather States in the north, with more heating days than cooling days, such as Massachusetts and Michigan, 

windows with a higher solar heat gain are more efficient. The right 

type of window on a cold winter day in Boston or Detroit or Chicago can take in heat from the sun, thus reducing the utility bills 

and saving energy. 

With a tax provision in the stimulus bill that promotes windows 

that are designed primarily for warmer climates, the tax credit is 

only available for windows that block over 70 percent of solar heat. 

According to a Web site developed jointly by the Center for Sustainable Building Research, the Alliance to Save Energy, and Lawrence Berkeley National Lab, lower solar heat gains are best for 

southern climates. The site also recommends for northern States to 

reduce heating select the highest solar heat gain you can find so 

that winter solar gains can offset a portion of the heating energy 

need. 

Pilkington said this about the tax revisions that favor southern 

windows: ′′It will result in northern homes using glass that blocks 

70 percent of the sun’s free and renewable solar energy from entering the home. That in turn will result in unnecessary burning of 

additional fossil fuels to heat these homes.′′ 

That means higher utility bills in northern States and more 

greenhouse gas emissions. We must recognizes regional differences. 

When it comes to energy efficiency in buildings one size fits all 

doesn’t always work. In fact, as we see in the window example, it 

could actually have the opposite effect. 

I have long been an advocate in spurring efficient technologies 

into the marketplace. I was proud to work with my colleague, Ms. 

Harman, in passing legislation that improved efficiency standards 

of the light bulbs. Across the Nation, the environmental and economic benefits of more efficient bulbs will be, in fact, substantial. 

Our work on light bulbs wasn’t an arbitrary mandate. We didn’t 

just pick a standard out of the air and look for a catchy sounding 

standard like 25 by 2025, not based on science or feasible. Instead, 

we worked with the industry and environmental groups to come up 

with a standard that made sense and doable, a standard that can 

be met by bulbs manufactured in this country, a standard that will 

include bulbs without any hazardous ingredients such as mercury. 

If done correctly, increasing the energy efficiency standards can 

reduce energy costs for consumers, help the environment, and have 

a positive economic impact. These benefits can be gained without 

a cap and trade program. 

4 

The question is, what should the Federal Government’s role be? 

Well intentioned, it is possible for the government to get it wrong 

and push policies that will have a detrimental impact on the environment and pocketbook. 

I look forward to hearing from our witnesses today, and I yield 

back the balance of my time. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognized the gentleman from Washington State, Mr. 

Inslee. 

OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Mr. INSLEE. Thank you. 

I just want to make two points. One, we have started last week, 

last Tuesday, down the efficiency road when President Obama 

signed the economic recovery bill; and I think over the long term 

one of the most productive things in that bill will be the provisions 

that require governors to certify that they would move towards 

more efficient building standards of about 30 percent improvement 

and decoupling which will unleash great economic resources for the 

efficiency industry. It was a small, quiet thing that was little noted 

on but I think will unleash tremendous assets for the efficiency industry. 

Number two, I want to make the point that the efficiency industry is an industry. People think of avoiding waste as something of 

a void or vacuum. In fact, it is a tremendous profit and job creation 

center. 

I just want to note in my little neck of the woods up in Seattle 

some companies are doing that right now, just so that people know 

it is not a pipe dream. 

We have got the MagnaDrive company in Bellevue, Washington, 

manufacturing electrical transmission services that reduces the 

electrical needs of generators by about 30 percent; Seattle Steam 

that does cogent electrical, a heating that essentially almost doubles the efficiency of a heating plant; McKinstry, which is the 

world’s leading company to help corporations reduce their electrical 

usage, particularly on server forms; Boeing, which is making the 

world’s energy efficient jetliners 20 percent more energy efficient 

than any other competitive jetliner; the Verdean Company, which 

is selling software which significantly reduces a corporation’s use 

of energy in the computer industry. 

I point those out because one of the largest job creation engines 

we have in the United States is the efficiency industry, and we intend to continue to draft policies to help them grow. 

Thank you. 

Mr. MARKEY. Thank you. The gentleman’s time has expired. The 

Chair recognize the gentleman from Illinois, Mr. Shimkus. 

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

First, I want to thank my ranking member for bringing up that 

provision on windows. I am surprised I did not read it. 

5 

Oh, I did not have enough time to read the bill. But had I read 

the bill, I might have another window issue. 

Mr. UPTON. You will have an extra hour because of daylight savings in a couple of weeks. 

Mr. SHIMKUS. But let me thank the chairman on bringing up this 

issue on efficiencies, and excuse me if I don’t share in the enthusiasm. Because for many, many years we have been talking about 

efficiency gains in the generation of electricity; and we have a Federal policy that does just the opposite. It is one that we have debated here for 12 years, and it is the issue of new source review. 

And take a power generating plant—I don’t care if it is pulverized coal. I don’t care if it is gasification. Say that we want and 

have a new generator that can generate for the same amount of 

power output, double the amount of electricity. Now, I would say 

that many of us would say that that is an efficiency gain that 

should be noted, not punished, not penalized. But what occurs 

under new source review is the entire air permitting process has 

to revolve itself, which is a disincentive. If the boiler is the same, 

if the emissions is the same, if they are meeting air quality standards at the same time and there is no change, but you are going 

to double the amount of output, that is what we are talking about 

in efficiency gains. However, since I have been here for 12 years, 

we continue to provide a disincentive in the new source review debate. 

And you will hear the claim it promotes dirty air. Especially if 

it is in a generator debate, it does no such thing. 

So, Mr. Chairman, I hope you work with me in reforming the 

permitting process and streamlining the procedures by which, if we 

have the same emissions standards, whatever they are, and if we 

are going to have increased efficiency and electricity gains, that we 

change this capricious new source review program. 

I yield back my time. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from North Carolina, Mr. 

Butterfield. 

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

CAROLINA 

Mr. BUTTERFIELD. Thank you very much, Mr. Chairman, for convening this hearing today and thank the witnesses for coming forward with your testimonies. 

Mr. Chairman, you told us a few weeks ago that you were serious about moving this debate along; and you are absolutely right. 

Today is evidence that we are ready to move boldly with this initiative. 

With 40 percent of the U.S. Energy consumption coming from 

commercial and residential buildings, raising efficiency and greening of our buildings provides a clear path toward lowering our 

emissions in a relatively low cost yet highly scalable capacity. 

In the Southeast, where I am from, making strides in energy efficiency represents the most readily available means of cutting 

greenhouse gas emissions. North Carolina, my State, currently has 

a renewable energy standard which is helping to drive innovation 

6 

and deployment of new renewable technologies. However, we remain at a regional disadvantage for access to much of the existing 

renewable energy options. As such, it is incumbent upon us that we 

develop policies that place a value on the reduction of greenhouse 

gasses, regardless of the means of achieving that goal. This means 

focusing on a broader approach, including renewables as well as 

energy efficiency. 

I want to comment briefly on a project in my hometown of Wilson, North Carolina, that is saving energy and reducing emissions 

using effective design and engineering changes. Wilson Community 

College recently constructed a LEED building, which is a certified 

green building, as a student center on the campus. I spoke for the 

dedication, and what I saw exceeded my expectations. 

We must invest in more green buildings. Studies using DOE assistance indicate that this building will use 50 to 60 percent less 

energy than a normal new building of similar size, built to existing 

codes. The center’s efficiency improvements will pay for themselves 

10 times over in energy savings during the building’s lifetime. 

Energy efficiency is an issue, Mr. Chairman, that is and should 

be universally supported. 

Thank you, I yield back. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Oregon, Mr. Walden. 

OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. WALDEN. Thank you very much, Mr. Chairman. I appreciate 

the opportunity to participate in this hearing. 

We also have a communications hearing that is going to take 

place starting at 10:00, so I apologize to the witnesses ahead of 

time. I will be bouncing back and forth between the two. 

As I was reading through the testimony, I was struck by the 

Johnson Controls’ testimony on the part about how energy efficiency is good for consumers and business. I believe it is, and I 

come from a State that has pioneered energy efficiency and conservation. We believe in it strongly. 

In the testimony, Mr. Campbell says, energy prices are escalating 

and will continue to rise with the price on carbon. Energy efficiency 

will reduce the impact of climate policies on consumers’ energy 

bills. It will lower energy spending for American businesses large 

and small, enabling them to better compete in the global economy. 

Smarter, more efficient buildings not only have lower utility bills 

but also improve health, safety and comfort. 

I concur with all of that. Except that this committee just passed 

something that none of us—well, at least those on the Republican 

side—didn’t get a chance to see in advance, and that is this decoupling motion. Which, as I understand it, basically says the utilities 

will have the right to come in and make up their lost revenue that 

results from energy efficiency. And while some consumers maybe 

think that is a warm idea, mine are pretty hot about it. They are 

going to get hotter the more they find out about it. 

I would like to know, Mr. Chairman, who wrote these positions? 

Who was in the room when this was written in secret in this bill 

since we never had a hearing and only learned about it as we went 

7 

into markup? I would hope at some point we’d know who were the 

lobbyists in the room? Who were the legislators in the room? There 

sure seem to be a lot of folks who know about this and how those 

provisions came to be. But there sure was no public hearing on the 

legislation. 

And I would say, too, our area in Oregon is known for its wind 

energy. And yet I have also seen the hour-by-hour energy production data that indicates that without some sort of peaking power 

you cannot balance out that load. So gas does matter. Peaking 

power is going to be more important the more we go to non-firm 

power-based generators. 

Thank you, Mr. Chairman. I realize I have run out of time. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from California, the chairman of the full committee, Mr. Waxman. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

Today’s hearing will explore how energy efficiency can meet our 

power needs, save us money, create jobs and help slow global 

warming. Sometimes, the simple solutions are overlooked. Energy 

efficiency is both the most affordable and fastest source of energy, 

even though many people don’t think of it that way. 

As several of our witnesses point out in their written testimony, 

supplying a kilowatt through energy efficiency commonly costs half 

as much as buying a kilowatt from power generators; and because 

the cost of efficiency doesn’t depend on oil or natural gas prices, efficiency reduces energy costs across the board and their volatility. 

Businesses across the country find that when they focus on energy efficiency they can achieve significant cost savings, increasing 

profits to invest in expansion and new jobs. We will hear about 

some of those experiences today. 

Homeowners find that they can make their houses more comfortable, lower utility bills, recoup their costs in a few years, and 

then watch their savings grow. 

Energy efficiency can also be deployed quickly, compared to planning, siting, financing, permitting, and constructing a new power 

plant. And energy efficiency doesn’t require any new or existing 

transition capacity. That means efficiency can come on line without 

waiting for transmission upgrades. 

Energy efficiency is a job engine. Because efficiency gains come 

in so many forms, efficiency creates opportunities for small businesses and big businesses throughout the economy. These range 

from construction and engineering jobs, retrofitting buildings, manufacture of efficient products such as next generation windows and 

lighting. In building a strong energy efficient economy for America, 

we will help employ workers and give more jobs. 

For all these reasons, promoting energy efficiency must be a key 

element of climate legislation. We need substantial efficiency improvements to achieve large greenhouse gas emissions reductions 

at a reasonable cost. That is why the International Energy Agency 

concluded that more than half of the emissions reductions required 

8 

by 2050 globally must come from improvements in energy efficiency. 

And we know that the experiences—that the market by itself 

won’t deliver all the available low-cost efficiency savings. Homeowners, for example, may know that they can save money by buying a more efficient furnace, but many don’t have the capital to 

make up-front investments. A landlord has little incentive to 

weatherize an apartment when the tenant pays the utilities. 

Local, State and Federal policies have helped successfully address some of those and other barriers. Building codes and appliance standards are two types of policies that saved us huge 

amounts of energy and money in 1 year alone. For example, the 

savings from the efficient appliances and qualifier for an ENERGY 

STAR label save as much energy as required by 10 million American homes. 

You can see the results in a State such as California, which 

made energy efficiency a priority for decades. Since 1975, California’s energy efficiency standards for buildings and appliances have 

saved residences and businesses $56 billion in energy costs and 

avoided the need to build 24 major power plants. And today we will 

hear about Massachusetts’ instructive experience in promoting energy efficiency. 

I look forward to hearing from our witnesses and their recommendations on how we design climate change legislation to best 

take advantage of the great benefits that energy efficiency offers 

us. Thank you, Mr. Chairman. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Florida, Mr. Stearns. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Thank you, Mr. Chairman. I thank you and the 

ranking member for this hearing. 

My staff just was able to get a copy of the stimulus bill that we 

passed 11 days ago. So it is not humanly possible for us to read 

it. So we didn’t know of all the intricacies that were in the bill. 

But for those homeowners that are installing those programmable thermostats, choosing ENERGY STAR qualified appliances 

and things Mr. Waxman, the chairman, mentioned, additional attic 

installation, and replacing all windows and doors with more efficient ones are all cost-effective renovations. Homeowners will be 

very pleased with these renovations, hoping that will make their 

house more modernized but also more cost efficient. 

But because, my colleagues, of the decoupling provision that 

passed in the stimulus bill which was supported by the majority 

party, they will be surprised. Customers will be forced to pay more 

energy after they have done all these things I mentioned. 

The resulting high energy rates will be especially hard on those 

elderly people that spend their hard-earned dollars to fix up their 

homes. Because their incomes will be fixed; and these individuals 

will think, well, gee whiz, my costs are coming down. But, lo and 

behold, they will not be coming down. Because of the complex 

structure of the energy utility bills, you hope to attain achievable 

energy savings, but you will not see that. 

9 

So I think that that is a very important part of this hearing. We 

want to promote energy efficient technologies to reduce energy consumption, but, ultimately, I think the market has to play a spot 

here, and not Congress, in determining the preferred cost-effective 

technologies and effective and efficient building practices implemented. 

So I look forward to this hearing and thank you, Mr. Chairman. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Vermont, Mr. Welch. 

OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VERMONT 

Mr. WELCH. Thank you, Mr. Chairman. 

Global warming, as we all know, is real, and it is urgent, and 

it requires immediate action. We cannot simply solve this crisis 

without focusing, increasing our energy efficiency. For a Nation 

that consumes more than 25 percent of the world’s energy, we simply can not afford anything that is less. 

In Vermont, actually, we have shown that it can be done. We 

have an energy efficiency utility. It is the Nation’s first Statewide 

provider of energy efficiency services. And what this pioneering energy efficiency utility has demonstrated is really quite remarkable. 

First, efficiency works. Thanks to a commitment to investing in 

efficiency and the effectiveness of Efficiency Vermont, our Statewide energy requirements were reduced by 1.74 percent in 2007. 

That exceeded the projected rate of low growth, making us the first 

State to ever turn low growth negative. People said it couldn’t be 

done. Vermont has done it. 

Second, efficiency is cost effective. The cost of efficiency, as you 

pointed out, is about 2.6 cents per kilowatt hour, compared to 10.7 

cents per kilowatt hour for comparable energy; and Vermonters 

saved money. In 2007, this was an 88 percent increase savings over 

2006. 

Third, energy efficiency is the path to reducing our carbon emissions. For 2007, Efficiency Vermont’s efforts resulted in 661,000 

fewer tons of CO2, 562 fewer tons of nitrogen oxide, and 1,100 

fewer tons of sulfur dioxide entering the atmosphere. 

The goal of this committee is to reduce greenhouse gasses by 80 

percent by 2050. Many models suggest that energy efficiency can 

and must provide about 30 percent of that reduction, and to meet 

that target we must have to have as a goal about 3 percent reduction through efficiency each year. Now Vermont had 2 percent last 

year. We can and we must begin to build the on ramp towards a 

global warming solution. That on ramp, simply put, is through efficiency. 

I yield back. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Hall. 

Mr. HALL. Mr. Chairman, I pass on questions. I reserve my time. 

Mr. MARKEY. The Chair recognizes the gentleman from Louisiana, Mr. Scalise. 

10 

OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. SCALISE. Thank you, Mr. Chairman. I am looking forward to 

the hearing that we are going to have and the testimony from our 

panel. 

As we develop a comprehensive national energy policy, efficiency 

and conservation are definitely part of what needs to be a comprehensive plan that also needs to include the development of our 

own natural resources to reduce our dependence on foreign oil. But, 

also, it has got to include a provision that encourages the development of alternative sources of energy, the renewables like wind and 

solar which are not commercially viable enough today to replace 

the domestic energy that we have but ultimately we can use that 

domestic energy as a bridge to get there. 

But I think if you look at what people are doing in this country, 

they are conserving. When gas was at $4 a gallon, people were cutting back dramatically; and they haven’t changed their habits to a 

large degree, even though the price has dropped a significant 

amount. So I think we need to encourage that conservation and the 

efficiencies that they have been yielding. 

One concern that some of us have is that we looked at the stimulation bill and there was a provision, the decoupling provision, that, 

in essence, will penalize some people who go and do those things 

to make their homes more energy efficient. And I think we have 

to be very careful in this committee and in the Congress as a whole 

that we don’t penalize people who take those extra steps. If they 

want to spend what is a large capital outlay to put solar panels on 

the roof and to put insulation on the attic, they are not penalized 

by having to pay higher utility rates for doing those things. 

So we shouldn’t discourage good behavior by policy; and, unfortunately, that was a provision that got into the stimulus bill. Hopefully, as people across the country realize that and senior citizens 

realize they may be paying more for energy because they didn’t 

spend $40,000 to put those solar panels up, that is an issue we can 

revisit. Because we should avoid policies that discourage people 

from doing the right thing. 

So, hopefully, we will look at all of those and all parts of that 

three-legged stool, of a comprehensive policy, efficiency and conservation being one of those three. 

Thank you, and I yield back. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes Mr. Green. 

Mr. GREEN. Mr. Chairman, I waive opening statement for additional questioning time. 

Mr. MARKEY. The gentleman waives. 

The Chair recognizes the gentleman from Georgia, Mr. Barrow. 

Mr. BARROW. I thank the Chair. I will waive, also. 

Mr. MARKEY. The Chair recognizes the gentlelady from California, Ms. Matsui. 

11 

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. MATSUI. Thank you, Mr. Chairman. Thank you very much 

for calling this hearing today. 

I would also like to thank today’s panelists. We all appreciate 

your time and expertise on those matters. 

Buildings in our country are responsible for more greenhouse gas 

emissions than any other sector. Heating, cooling, lighting our 

buildings, as well as powering our appliances requires vast 

amounts of energy. But, thankfully, we currently possess the technology and knowledge needed to address a quarter of our Nation’s 

carbon emissions. 

Improved energy efficiency will be an essential element of any 

climate change solution. My district of Sacramento, California, has 

been a leader in adopting green building practices. We have the 

first LEED platinum certified office building in the country. We 

also have the second-most LEED certified square footage of any 

city. We are also home to the California Energy Commission and 

have been a leader in energy efficiency for over 30 years. 

Under the leadership of Art Rosenfeld, who is really the godfather of energy efficiency in this country, our State energy commission has kept California’s per capita energy consumption flat. 

Furthermore, Federal programs such as ENERGY STAR and 

Build America are expending technologies and giving us concrete 

ways to confront climate change. 

Last Congress, I introduced a measure to assist homeowners 

across the country with energy efficiency landscaping practices. 

Even changing something as simple as how our buildings get sunlight can make a big difference in how much energy they consume. 

I look forward to working with my colleagues on this committee 

to examine and promote energy efficiency, while helping our constituents to do the same. By saving people money and reducing our 

carbon emissions, energy efficiency is truly a win-win proposition. 

Once again, Mr. Chairman, thank you very much for highlighting 

this important issue; and I yield back the balance of my time. 

Mr. MARKEY. The gentlelady’s time has completed. 

The Chair recognizes the gentleman from Pennsylvania, Mr. 

Pitts. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. Thank you, Mr. Chairman. I want to thank you for 

convening this hearing today on such an important issue. 

Like all of us, I believe that sound energy efficiency measures 

will certainly help decrease the amount of greenhouse gas emission 

in our atmosphere. It will also encourage our country to strengthen 

our energy security and end our dependence on foreign energy resources. However, if energy efficiency matters are not implemented 

in a cost-effective manner, they will harm our economy. 

In the recently passed stimulus bill, as has been noted that we 

just were able to get a copy of, a potentially very harmful provision 

was included, decoupling. Decoupling, the separating of utility 

12 

rates from the amount of electricity or natural gas that utilities 

sell, will inevitably harm our already damaged economy and those 

least able to withstand more economic pressure, regular Americans 

who are struggling to make ends meet during this recession. 

Under the stimulus, if a State accepts Federal energy efficiency 

grants, they will have to guarantee that utilities recover their lost 

revenue when consumers don’t use as much electricity; and this 

forces the consumer, the rate payer, to keep utilities solvent, even 

if their own energy use decreases. 

With an anticipated decline in energy use in 2009, this policy 

will force customers to pay more money for less energy; and the 

government essentially will be punishing people for conserving energy. I believe we must instead create incentives for energy conservation and reward consumers when they save energy, not force 

them to pay artificially higher utility rates. 

Utilities have a legitimate concern that increased efficiency will 

cost revenue, but if we learned anything from the mortgage crunch 

it is this: Government policies that try to alter or ignore the fundamental laws of economics create more problems than they solve. 

Penalizing consumers for using less energy doesn’t seem like the 

right solution. I hope we can all work together and come up with 

a better alternative. 

I look forward to hearing the witness today and thank you and 

yield back. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentlelady from California, Mrs. Capps. 

OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mrs. CAPPS. Thank you, Mr. Chairman, for holding this very important hearing to explore the vital role energy efficiency will play 

on reducing greenhouse gases and achieving our climate change objectives. 

I remember so well the image of one of the CEOs of the big oil 

companies when the gasoline prices were skyrocketing being challenged, what are we going do about these high prices? He said, I 

have one word for you: efficiency. And it holds true in our topic 

here today as well. 

I thank our esteemed witness for their testimony on this very important matter. 

Energy efficiency is a win-win. By reducing consumption of energy, we save money and we also cut greenhouse gasses. The chairman of our full committee as well as my neighbor from Sacramento, Doris Matsui, have highlighted what has been achieved 

in California, my State as well, a long-time leader among other 

States in energy efficiency. We use less energy per capita than any 

other State in the Nation. As the chairman said, in 1995—since 

1975, rather, per capita energy consumption in California has held 

steady, while in the U.S. as a whole it has grown by 50 percent. 

Furthermore, by implementing green energy policies that lower 

consumption and cut greenhouse gasses, we have managed to 

spend less. On average, California families now spend $800 a year 

less on energy than they would have without the efficiency advancements of the last three decades. We have managed to cut also 

13 

per capita of carbon dioxide emissions by 30 percent over the last 

30 years. 

These successes have come as a result of strong standards combined with innovative regulations and innovative achievements. So 

I thank you, Mr. Chairman, for the leadership of this committee 

and of our administration for setting some high goals. 

As we move forward to craft climate legislation, consider the 

complementary policies necessary to reduce greenhouse gasses. I 

hope you will recognize groundbreaking work that is already occurring in California, Massachusetts, and other places and that will 

build smart policy on their achievements, on the achievements that 

have been already accomplished in local communities. 

Thank you very much, and I yield back. 

Mr. MARKEY. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Burgess. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank you for holding this hearing. I look forward to hearing from our panel of witnesses today. 

Energy efficiency is exactly the type of issue where we can work 

together on this committee despite our clear differences on carbon 

control regimes. Energy efficiency is the type of win-win scenario 

that people seek in public policy decisions before Congress. 

We need to ensure that the consumers of electricity receive the 

cost savings from energy efficiency and that this does not accrue 

to the electric utilities. The incentive to implement energy efficiency technology must provide direct benefits to the end users who 

ultimately pay the rates to families of small businesses and to 

manufacturers. 

Unfortunately, the revenue-decoupling portion of the economic 

stimulus bill redirected these benefits to the utilities so the consumers pay the same price no matter how much energy they consume or save. I hope that this committee can work together to correct this provision and redirect the benefits of energy efficiency 

back to rate payers. 

This is not just a hypothetical concern with me, Mr. Chairman. 

A few years ago my wife and I found ourselves building a new 

home, and the number of things that were available off the shelf 

for energy efficiency really made an impression upon me—we already heard from a member on the other side—things like siding 

your house correctly to take advantage of passive solar heating if 

you are in a climate where that will be of benefit; the ultra-highefficiency air conditioners that are available nowadays; foam insulation in the walls; Low-E glass; the tankless water heater; the Efficient Attic System. 

Our electric utility rates dropped one-half the summer we moved 

into this house which was the same square footage as the house 

we had occupied the previous summer. Our natural gas consumption similarly declined by about half, demonstrating the powerful 

effect of energy efficiency. 

This is an area where we can all agree improvements can be 

made. I want to be certain, though, that the decisions we make in 

this committee do not increase the cost of development and inVerDate Nov 24 2008 10:51 Jun 24, 2011 Jkt 037690 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 111\111-4 CHRIS
14 

crease the cost of manufacturing, because the economy right now 

cannot tolerate that type of convulsion. 

I yield back the balance of my time. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Gonzalez. 

Mr. GONZALEZ. I waive opening. 

Mr. MARKEY. The Chair recognizes the gentlelady from Wisconsin, Ms. Baldwin. 

OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN 

Ms. BALDWIN. Thank you, Mr. Chairman. 

Over the past 2 years, this subcommittee has heard about emerging technologies, necessary investments in research, and critical infrastructure that must be developed if we are to reduce our energy 

use and lower our greenhouse gas emissions. We have focused on 

carbon sequestration, cellulosic ethanol and plug-in hybrid vehicles 

as solutions to our energy and climate change crises. These are important discussions to have. 

In looking toward the future, we cannot lose sight of the significant energy savings that are currently available to us. Today, by 

having a thorough discussion of energy efficiency opportunities, we 

draw attention to low-cost strategies that can be used to reduce 

greenhouse gas emissions. 

I am particularly interested in how the industrial sector can optimize its energy use. In December, the Oak Ridge National Laboratory released a report saying that waste energy recovery is, ′′One 

of the most promising options in the U.S. energy efficiency portfolio.′′ I am pleased with a number of the provisions included in the 

Energy Independence and Security Act that encourage waste heat 

recovery, and I look forward to hearing about our opportunities 

that we may be able to make available. 

Finally, I want to welcome all of our witnesses here today. But 

one in particular, Mr. Iain Campbell, is here representing Johnson 

Controls, which is headquartered just outside of my district in Milwaukee, Wisconsin. Johnson Controls is a leader in innovation, 

building batteries for the next generation of plug-in hybrid vehicles 

and addressing efficiency in buildings to help manage energy costs, 

reduce environmental impacts and improve productivity and competitiveness. 

I would add that Johnson Controls doesn’t just talk the talk. 

Rather, they have taken significant steps to improve their own efficiencies and reduce their own carbon footprint; and through it all 

they have continued growing. 

I thank you for your company’s commitment to environmental 

stewardship and corporate responsibility and welcome your testimony as well as the testimony of the entire panel that we are very 

grateful to have before us today. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. MARKEY. The gentlelady’s time expired. 

The Chair recognizes the gentleman from Missouri, Mr. Blunt. 

Mr. BLUNT. I think, Mr. Chairman, I will submit a statement 

later for the record. 

15 

Mr. MARKEY. Then that completes all opening statements by the 

members, and we will now turn to our very distinguished panel 

and hear from our first witness. 

Our first witness is Phil Giudice, who is the Commissioner of the 

Massachusetts Department of Energy Resources. He has over 30 

years of experience in the energy industry and currently serves on 

the boards of the Regional Greenhouse Gas Initiative and the Massachusetts Renewable Energy Trust. 

We look forward to your testimony. Whenever you are ready, 

please begin. 

STATEMENT OF PHILIP GIUDICE, COMMISSIONER, 

MASSACHUSETTS DEPARTMENT OF ENERGY RESOURCES 

Mr. GIUDICE. Thank you, Chairman Markey and the committee, 

on behalf of Governor Patrick, Secretary Bowles, all of Massachusetts and all of the State energy offices. I thank you not only for 

your long-standing leadership on energy and climate matters but 

for your aggressive support of the recently passed stimulus package. 

Funding for the State energy program, the Weatherization Assistance Program, the energy efficiency conservation block grants 

and the appliance energy rebates, among many other program in 

the stimulus package, will be put to good use in Massachusetts and 

elsewhere around the country. 

In 1990, when the State Energy Efficiency Program Improvement Act was passed, you were the chief sponsor, Chairman Markey. This has allowed the SEP programs to serve as a ready-to-use 

vehicle across the country for distributing a significant portion of 

these stimulus dollars. Every year, you have led the effort in the 

House of Representatives to increase funding for SEP, weatherization and LIHEAP. These are important for Massachusetts and our 

country. Thank you. 

Further, we are proud to strongly support your recently filed 

Save American Energy Act; and we look forward to working with 

you, the committee, the Massachusetts delegation, Congress and 

the administration to advance boldly Federal energy and climate 

policies this session. 

If you take away only one thing from my comments today it is 

this: Energy efficiency is a proven, reliable and extremely valuable 

tool for building a greener energy future. It is also a tool that we 

can quickly deploy to reinvest in our homes, businesses, starting 

today, in ways that will begin to turn around our economy and in 

the longer term put the United States at the hub of a 21st century 

global clean energy economy. 

As Governor Patrick has said about Massachusetts, if we get 

clean energy right, the world will be our customer. And in the context of your consideration of Federal climate legislation it is also 

clear, based on our long experience in Massachusetts with the efficiency programs and our short-but-valuable experience with carbon 

caps through the Regional Greenhouse Gas Initiative, that energy 

efficiency is the best climate mitigation tool that we have and a 

powerful economic driver for our economies. 

I know you are well acquainted with our existing efficiency policies in Massachusetts, but I want to take this opportunity to share 

16 

for the record some of the lessons and provide a glimpse of the 

transformation that is under way in Massachusetts. 

Massachusetts has historically had some of the highest costs of 

energy in the country, but our innovative people have combined to 

establish us as a leader in efficiency. Our energy productivity of the 

State is the one of the highest in the Nation, with our economy 

generating $200 of gross State product for every million BTUs of 

energy consumed. The U.S. averages $116 for million BTUs consumed. 

The efficiency and economic growth can and do go hand in hand 

in Massachusetts. Massachusetts’s long and distinguished record 

investing in energy efficiency is delivering great results. We have 

continuously invested for over three decades. We collect about a 

quarter of a penny for every kilowatt hour. This is distributed by 

our regulated utilities in wide-ranging and far-reaching energy efficiency programs, totals about $125 million a year, which is about 

$20 per person in the State of Massachusetts. U.S. total through 

regulated utility programs are spending about $2.5 billion or about 

$8. So we are about 2.5 times the national average. 

These programs result in saving energy at a cost of about 3.6 

cents a kilowatt hour and contribute to an overall savings of 8 percent of the kilowatt hours that we would otherwise be consuming 

in Massachusetts. So this is a great deal, especially when the annual cost of power from generation in the wholesale market averages 8 or more cents a kilowatt hour. 

We are not resting on those accomplishments. In fact, we at this 

moment are in the process of transforming our energy efficiency infrastructure in our approaches; and this effort is producing remarkable results. 

The transformation began with Governor Patrick and our legislature’s leadership to fundamentally change the equation for investing in efficiency. Instead of investing a prescribed amount of the 

2.5 mills that they were collecting and getting as much energy efficiency as we could with this sum of money, we are now required 

by law to invest in all energy efficiency that is less expensive than 

supply sources. We expect this will double, triple or more our efficiency spending and the results that we will be getting from our 

efficiency programs. 

This transformation is largely being accelerated by investing the 

revenues from our participation in the Regional Greenhouse Gas 

Initiative. We have had two auctions, and we have generated almost $30 million that are going directly into these programs in 

Massachusetts and will be further turbocharged by the recently 

passed Federal stimulus. This will mean more G auditors, more 

contractors working on insulation in air, ceiling and homes and 

businesses and improving our building stock, more plumbers and 

HVAC control technicians to change out the inefficient equipment 

and put in much more efficient. 

All kinds of organizations are taking charge of becoming energy 

leaders. As you well know, Mr. Chairman, Massachusetts is proud 

of its professional sports teams; and, in addition to winning six 

championship banners in the last 7 years, each of our sports teams, 

the Red Sox and New England Patriots, are doing fantastic things 

from their energy consumption. 

17 

So I ask you at this moment to go much bolder than we will necessarily be comfortable for. Because, in the future, we will look 

back and wish we were taking bold steps at this time. Thank you. 

[The prepared statement of Mr. Giudice follows:] 

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Mr. MARKEY. Thank you very much. We appreciate it. 

Our next witness is Mr. Thomas King, who is the President of 

National Grid in the United States. Before joining National Grid, 

Mr. King spent 10 years with Pacific Gas and Electric Company 

where he was Chairman and CEO. 

Whenever you are ready, please begin. 

STATEMENT OF TOM KING, PRESIDENT, NATIONAL GRID USA 

Mr. KING. Mr. Chairman, Ranking Member Upton and members 

of the committee, I want to thank you for including National Grid 

in this very important hearing on energy efficiency. 

May I first congratulate you and your congressional colleagues 

for your focus and success with important initiatives on energy efficiency renewables, infrastructure such as smart grid, and other 

critical energy support in last week’s stimulus bill. 

Mr. Chairman, we are also pleased with the directional approach 

you have introduced with initiatives that address both Energy Efficiency Resource Standard and renewable energy. 

There is no single solution with the overall energy policy. We 

need more expansive, robust energy efficiency programs. We need 

new sources of renewable energy, wind, solar biomass, geothermal. 

We need a comprehensive strategy to address our transmission infrastructure, including policies that will enable us to bring renewable energy to load centers; and we need smart grid technology and 

smart meters to maximize the potential of current and future energy technologies through efficiency and automation. All of those 

actions play a critical role in an effective National energy policy. 

While the National energy strategy must be multifaceted, my 

comments today will focus on energy efficiency. Energy efficiency 

uniquely addresses many of our Nation’s core energy issues. It is 

more cost effective than building new power plants, has the potential to dramatically lower greenhouse gas emissions, and provides 

consumers with long-term savings on their energy bills. 

Let me begin with some simple facts on the cost effectiveness of 

energy efficiency. 

Energy efficiency can cost as little as $0.03 per kilowatt hours 

saved, while electricity costs $0.06 to $0.12 per kilowatt hour. As 

a country, we spend about $215 billion annually on production of 

electricity, but we only invest $2.6 billion on energy efficiency. For 

natural gas, efficiency costs range $1 to $2 per thousand cubic foot 

consumed, compared to a typical market cost ranging from $6 to 

$8 per Mcf. Yet we spend approximately $91 billion annually on 

natural gas and only $500 million on efficiency of natural gas. 

This country must take better advantage of this opportunity and 

prioritize energy efficiency. National Grid’s experience with energy 

efficiency programs in Massachusetts can be a model for the rest 

of the country. The successful programs include comprehensive 

whole house efficiency approaches, energy audits, high efficiency 

lighting, HVAC installation to ensure efficiency, energy efficiency 

services to low-income customers, business customer assistance to 

implement energy savings, and weatherization initiatives. 

On the gas side, the programs include high efficiency appliances; 

weatherization; and system controls, including automatic thermostats. 

30 

I congratulate Governor Deval Patrick and the Massachusetts 

Executive Office of Energy and Environmental Affairs for passing 

comprehensive energy legislation in Massachusetts, the 2008 Green 

Communities Act. This provision will allow National Grid to expand our efficiency programs by 300 to 400 percent over the next 

5 years. 

National Grid, in partnership with other leading energy companies such as PG&E, DT&E, environmental groups such as the Natural Resources Defense Council, and Environmental Defense, 

worked together with McKenzie & Company to look at energy efficiency. The landmark study found that the U.S. can make substantial emissions by 2030 without damaging the economy with the 

help of energy efficiency. 

The Electric Power and Research Institute recently introduced its 

own energy efficiency savings analysis. By analyzing the impacts of 

codes and standards as well as market-driven efficiency, the study 

shows measurable reductions in energy consumption. 

In addition to energy efficiency, we will need a national policy 

such as a mandatory cap and trade program. As consumers bear 

the cost of addressing climate change in the form of higher energy 

prices, climate change policies must be designed to mitigate that 

impact. One of the most effective and transparent ways to simultaneously address consumer costs and energy efficiency is to distribute allowances to local distribution companies with the mandate that the value be returned expeditiously to the customers to 

reduce their energy bills. 

Current State enforcement power and rigorous open reporting 

will ensure that all allowance values allocated to the LDCs do benefit the customers. LDCs are uniquely positioned to administer 

community based energy efficiency programs because they already 

have the necessary experience, communication channels, marketing 

expertise, funding and oversight processes and access in place in 

the market to move things quickly. 

National Grid already has efficiency programs in place that are 

saving customers in New England over $250 million a year. As a 

result of these programs, National Grid’s customers have saved 

more than $3.6 billion in energy costs. In 2007 alone, our gas program saved 4.6 million thermal units and avoided 27,000 tons of 

CO2; and our electricity program saved 380,000 megawatts, avoiding 218 tons of CO2. This is a total carbon emission equivalent of 

taking 48,000 cars off the road a year. Expansion of such programs, 

as a result, creates energy efficiency jobs. 

Energy efficiency should act as the foundation of our national energy policy; and, importantly, we need to move quickly. I commend 

your work and thank you. 

Mr. MARKEY. Thank you, Mr. King, very much. 

[The prepared statement of Mr. King follows:] 

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Mr. MARKEY. Our next witness is Rich Wells, who is the Vice 

President of Energy for the Dow Chemical Company. He is a member of the board of directors of the Alliance to Save Energy and in 

2008 was appointed to the Michigan Climate Change Action Council by Governor Jennifer Granholm. 

Thank you for being with us today. 

STATEMENT OF RICH WELLS, VICE PRESIDENT, ENERGY, THE 

DOW CHEMICAL CORPORATION 

Mr. WELLS. Chairman Markey, Representative Upton, and members of the committee, thank you for the opportunity to provide our 

views on energy efficiency and its role in the future energy and climate change policies in our country. 

First, I would like to address the role energy plays for Dow. As 

one of the largest chemicals and plastics producers, Dow uses the 

equivalent of 850,000 barrels of oil every day in its global operation. Of this total, approximately half is in the United States. Energy used by Dow is converted into a wide variety of products essential to our economy and our citizens’ quality of life. Those products serve as building blocks for everything from pharmaceuticals, 

insulation, electronic materials, infrastructure and much more. 

With energy being a key enabler for all of our products, it is no 

surprise that the volatility of energy prices over the last 6 years 

has had a dramatic impact on Dow. In 2002, our total annual energy and feedstock bill was $8 billion. In 2008, that number 

climbed to over $27 billion. 

Dow has an energy efficiency and conservation program which 

has been refined over the past two decades. This program, through 

its energy savings, has allowed us to sustain our operation despite 

these raising energy costs. Let me give you some examples of the 

impressive results from that program. 

We have saved over 1,600 trillion BTUs of energy since 1994, 

which is enough energy to power every home in California for 1 

year. We have saved $8.6 billion in energy costs over the past 14 

years, and these energy savings have prevented 86 million metric 

tons of CO2 from entering our atmosphere. 

Dow’s efforts in energy efficiency have been recognized by the 

EPA, who named our company an ENERGY STAR partner of the 

year in 2008. We have been involved in energy efficient outreach 

efforts both in the U.S. and internationally, including China. 

Despite being a very energy intensive company, Dow provides 

products that helps consumers save energy and reduce greenhouse 

gas emissions. In fact, the emissions avoided by use of Dow thermal insulation are seven times greater than our total corporate 

emissions. 

As you can see, Dow is committed to energy efficiency. It is the 

quickest, cheapest, cleanest way to extend our Nation’s energy supplies and reduce carbon emissions. That is why we recommend 

Congress implement the following complementary policies for energy efficiency: 

First, strengthen building energy codes by 30 percent starting in 

2012 and 50 percent by 2020. 

These building code improvements could save up to 6 billion metric tons of CO2 emissions by 2050. 

39 

Second, implement a Federal energy efficiency resource standard. 

Estimates show that by 2020 a Federal EERS could reduce peak 

electrical demand by 90,000 megawatts, cut CO2 emissions by 260 

million metric tons, and create 260,000 net jobs. 

Third, increase the payback periods on low-interest loans to industry for energy-efficiency projects. These projects would improve 

energy efficiency within the private sector, stimulate the economy, 

and lower greenhouse gas emissions. 

And finally, re-energize the DOE Industrial Technologies Program. Strengthen the program by placing greater emphasis on 

early-stage R&D, as well as expanding focus on cogeneration and 

recycled energy. 

Dow supports the prompt enactment of an environmentally effective and economically sustainable cap-and-trade program. As a 

member of USCAP, Dow supports an 80 percent reduction in CO2

emissions by the year 2050. However, we need to be thoughtful 

when designing climate policy. Too strong a price signal on carbon 

in the short term could accelerate fuel switching from coal to natural gas in the power generation sector. Such a movement could 

trigger a steep demand for natural gas, dramatically driving up 

prices and harming manufacturers, including Dow. Combined with 

other well-designed climate policy elements, complementary energy 

efficiency measures can lessen the impact of fuel switching under 

a cap-and-trade program. 

In conclusion, Congress should pass cap-and-trade legislation 

with complementary measures in order to drive energy efficiency 

through all phases of climate policy. If we fail to do so, we risk negative impacts and burdens on all sectors of our economy, including 

our manufacturing base. 

I thank you for the opportunity to speak with you today, and I 

will be happy to answer your questions when it is appropriate. 

Thank you. 

[The prepared statement of Mr. Wells follows:] 

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Mr. INSLEE. Thank you, Mr. Wells. And I know about your great 

work. There is an interesting book that has said really good things 

about Dow. I will tell you about that later. 

Mr. Campbell? 

STATEMENT OF IAIN CAMPBELL, VICE PRESIDENT AND 

GENERAL MANAGER, JOHNSON CONTROLS INC. 

Mr. CAMPBELL. Chairman Markey and members of the subcommittee, thank you for the opportunity to provide testimony on 

complementary policies for climate legislation. 

Johnson Controls is a world leader in providing energy-efficiency 

products, technologies, and services for buildings, and we would 

like to share an on-the-ground view of the opportunities and barriers to energy efficiency. 

Some refer to energy efficiency as the fifth fuel, a new source of 

energy that we can tap to drive economic growth. We believe that 

energy efficiency should be considered the first fuel, as it saves consumers and businesses money through lower energy consumption 

and represents the lowest-cost source of energy using technologies 

widely available today. 

In the first of three key points that we wish to make, we believe 

that a variety of complementary policies are needed to drive energy 

efficiency. In addition to putting a price on carbon, we support 

time-of-use pricing and smart-grid investments to give energy users 

and their building management systems the information that they 

need to make smart decisions. 

We support energy-efficiency resource standards, such as the legislation Representative Markey has recently introduced. Such a 

standard would dramatically ramp up efficiency investments while 

providing a path for utilities to cost-effectively decrease their overall emissions. 

Building codes and equipment standards represent important 

policy levers. We support policies to provide incentives for the purchase of the highest-efficiency equipment to drive innovation and 

enable manufacturing scale. We also support the introduction of a 

system to label building performance to help better inform current 

and perspective building owners and ultimately increase demand 

for high-performance buildings. 

With approximately 1 billion square feet of annual new construction, establishing complementary policies to enhance energy efficiency in new buildings is an important step. But, to the second of 

our three key points, these opportunities are dwarfed by the prospects of enhancing energy efficiency in the approximately 72 billion 

square feet of existing nonresidential building stock. 

There are a range of barriers that prevent raising of energy-efficiency levels in existing buildings that have effectively been addressed in the public sector using an approach known as performance contracting. Performance contracting is a competitive, marketbased approach to delivering energy and operational savings that 

leverages public funding with private investment. This programmatic approach to retrofitting buildings can combine energy 

efficiency and renewable energy in a single, cost-effective project. 

The energy performance guarantees provided under these contracts 

53 

ensure transparency and accountability for project outcomes, a critical element of any successful energy and climate policy. 

Performance contracting has been successfully applied in the 

public sector for over 20 years. Examples include the University of 

Massachusetts in Amherst, where a $42 million investment, funded 

through public and private sources, delivered $56 million in guaranteed energy and operational savings as well as an improved 

learning environment for students and faculty alike. And Wyandotte Public Schools in Michigan implemented a combination of energy-efficiency retrofits, technology upgrades, and solar PV installation that delivered significant savings and helped the school district become the first in Michigan to be fully certified under the 

EPA’s ENERGY STAR program. 

While performance contracting has been successful in the public 

sector, there are barriers to the adoption of this model in the private sector: the mismatch of incentives between property owners 

and tenants, the frequency of turnover in building ownership, and 

the requirement to use building assets as collateral to secure loans. 

To address this, we recommend establishing a program that 

would encourage large-scale, deep retrofitting of privately owned, 

commercial buildings. The program should provide incentives for 

efficiency improvements, in the form of rebates provided to building 

owners or their agents in proportion to verified and sustained performance improvements, and loan guarantees to help attract capital from private sources to fund those improvements. 

A third and final point is that these complementary energy-efficiency policies have the potential to create a substantial wave of 

new green-collar jobs across the country. Developing this workforce 

will require a combination of public and private investment, along 

with the creation of certification programs to ensure that workers 

have the right skills and training to engineer, install, and maintain 

energy-efficiency projects. 

Finally, let me note that included in my written testimony are 

a number of consensus recommendations from a coalition of energyefficiency organizations, including Johnson Controls, entitled, 

′′Reducing the Cost of Addressing Climate Change Through Energy 

Efficiency.′′ 

In closing, Johnson Controls believes in the need to increase the 

Nation’s focus and investment in energy efficiency. Energy efficiency must be the first priority in addressing climate change as 

a way of containing the cost of climate protection and creating new 

jobs. It is imperative as a Nation that we focus on efficiency now. 

It has never been more important. 

On behalf of Johnson Controls, thank you again for the opportunity to testify. 

[The prepared statement of Mr. Campbell follows:] 

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Mr. INSLEE. Mr. Campbell, excuse my failure to introduce you to 

the group. 

Mr. Campbell, who just gave us a really interesting discussion, 

is vice president and general manager of the North America Service and Global WorkPlace Solutions for Johnson Controls. 

Thank you very much. 

The next witness is Dr. John Anderson, president and CEO of 

the Electricity Consumers Resource Council. His organization represents large industrial electricity consumers from virtually every 

sector of the manufacturing community. 

Thank you, Dr. Anderson. 

STATEMENT OF JOHN ANDERSON, PRESIDENT, ELECTRICITY 

CONSUMERS RESOURCE COUNCIL 

Mr. ANDERSON. Thank you very much, Mr. Chairman and Mr. 

Upton and members of the subcommittee, for the opportunity to be 

here today. 

I don’t have to tell the members of this subcommittee that we are 

in troubled times. And these times are especially troubling for 

manufacturers. Speaking personally, I don’t see a light at the end 

of this very dark tunnel in the near future. 

As this subcommittee and Congress debate energy policy, I urge 

you to think very carefully about what the proposed policies will do 

to the electricity cost for consumers, whether industrial consumers 

will be able to bear these costs, and if instead they will have to 

close additional manufacturing facilities and move to lower-cost locations. We want to avoid that situation. 

Which brings me to the subject of this hearing, energy efficiency. 

At the outset I emphasize that ELCON does not doubt that many 

opportunities exist to improve energy efficiency of manufacturing 

processes and that such improvements would help reduce greenhouse gases. However, most large industrial facilities are beyond 

the point where substantial savings can be achieved with plug-andplay measures, such as high-efficiency lightbulbs or insulation or 

motors. The next level of efficiency gains are achieved when entire 

industrial processes are retooled or rebuilt and options are explored, such as combined heating and power. These are big-ticket 

items requiring very large outlays of capital over long periods of 

time. 

Further complicating this problem is the current credit crunch. 

The core issue is, can utility financing of energy-efficiency investments compete with large industrial’s own ability to raise capital 

on its own in normal capital markets? A question we ask consistently, are utilities better banks than banks are? And that may be 

a difficult question to answer today, but we don’t think so. 

Again, I emphasize the industrial customers are strong advocates, even activists, of cost-effective energy efficiency. Such manufacturers are in a constant quest to reduce the operating cost to increase competitiveness. But, at the same time, large industrial customers have historically not supported legislative or regulatory 

mandates for utility-implemented energy efficiencies. Such programs are both costly and not designed in a manner that would 

achieve maximum efficiency gains. 

113 

I raise four other related issues that are often discussed in the 

context of achieving greater energy efficiency, and I address them 

in much more detail in my written statements. 

First is the energy-efficiency resource standards that has already 

been mentioned today. ELCON has not taken a formal position on 

the EERS. We certainly support measures that result in the implementation of cost-effective energy efficiency. However, there are 

some very basic questions that any EERS would raise, and those 

I touch on in my written comments. If an EERS is actually implemented, we strongly urge that industrial facilities be exempt, recognizing that they already have taken significant energy-efficiency 

steps and knowing that this is not the time to layer additional 

costs on manufacturers. 

The second issue I raise is revenue decoupling, which is one that 

has been mentioned several times here already. The debate over 

the stimulus bill demonstrated the great opposition to federally 

mandated revenue decoupling from both small and large customers 

alike. We disagree with the advocates of revenue coupling for several reasons. 

First, we believe that revenue decoupling disrupts and distorts 

the utility’s core business functions—to produce and deliver electricity in an efficient manner—and is not a particularly effective 

way of promoting energy efficiency. Moreover, there are better 

ways to deliver cost-effective energy efficiency, such as with a 

third-party entity rather than a utility. There is no basic conflict 

between implementation of energy efficiency through an independent third party and the loss of revenues for a utility. 

Second, several States have found decoupling to be a failure once 

policy recognizes that a cool summer or a warm winter or an economic downturn triggers increased revenues to the utility even if 

no efficiency gains are made. 

Third, we question why a regulated public utility that has been 

given a monopoly service territory by a State should be rewarded 

for implementing an efficiency program that is required by either 

Federal or State mandates. We believe they have an obligation to 

serve and should be given an opportunity to recover prudently incurred costs and earn a return that reflects risk they incur but no 

more. 

And, finally, many proponents of decoupling hold California up 

as a poster child for energy efficiency, at least partially because decoupling advocates assert that per-capita consumption of kilowatt 

hours in California was reduced. However, California also implemented an inverted rate structure that may have, in and of itself, 

brought about more energy efficiency than decoupling that was implemented and then taken away and then put back. And California’s very high electric rates have contributed to the tremendous 

loss of manufacturing in the State. It is not hard to reduce electricity consumption if you take away your manufacturing base and 

put people out of work. 

The third issue I raise is demand response. And I am not going 

to go into that in detail in my oral statements, but I urge to you 

look at it. We think it has a tremendous potential, and it ought to 

be considered along with energy-efficiency measures. 

114 

And the fourth issue is the utilization of combined heat and 

power, which was mentioned at least once. Manufacturing industries have been leaders in this effort. Unfortunately, companies 

planning to increase their CHP production have been disappointed 

by a recent rulemaking process at the Federal Energy Regulatory 

Commission, or FERC. 

Specifically, ELCON worked with members of this subcommittee, 

led by Representatives Barton, Boucher, and others, in drafting 

compromise language, the intent of which was to continue certain 

incentives for combined heat and power as provided for under 

PURPA until truly competitive markets were established. Unfortunately, things just didn’t work out as expected. FERC’s rule, in essence, discontinued those incentives for any facility operating in 

one of the FERC-approved RTOs or ISOs. 

This rule will clearly hinder CHP growth. We strongly urge Congress to either reconsider the language in EPACT 2005 to more accurately reflect congressional intent or address this issue in an 

oversight hearing. 

In conclusion, I return to where I started. Basic manufacturing 

in the U.S. is in terrible shape. Despite the well-intentioned stimulus package, I have seen no projections that manufacturing output 

will increase in the near future. Yet many in Congress and elsewhere seem intent on implementing several new and substantial 

energy initiatives. All have noble goals, but many will work to the 

detriment of industrial companies and their employees. 

I applaud the subcommittee for seeking to make our energy market more efficient, but I ask the subcommittee, when considering 

energy legislation, to examine the total impact of its proposals, including its impacts on the manufacturing sector. I urge you to consider several specific recommendations that are in my written testimony. 

I thank you again for the opportunity to be before you today and 

look forward to your questions. 

[The prepared statement of Mr. Anderson follows:] 

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Mr. INSLEE. Thank you. 

And our last witness is Mr. Bryan Reichel, who is president and 

CEO of PureChoice, Incorporated. PureChoice provides building 

performance reporting software and helps organizations with their 

energy efficiency. 

Thank you, Mr. Reichel. 

STATEMENT OF BRYAN REICHEL, PRESIDENT AND CEO, 

PURECHOICE, INC. 

Mr. REICHEL. Thank you, sir. 

I would like to thank Chairman Markey and Ranking Member 

Upton and the members of the subcommittee for inviting me here 

today. My name is Bryan Reichel. And I am president of 

PureChoice, Burnsville, Minnesota. We are an ENERGY STAR 

partner. 

I will summarize my testimony, but I ask that it be included in 

the record as submitted. But what I am going to do is tell you a 

little bit different story today. Instead of telling you what I think 

we can do, I am going to tell what you we are doing today as a 

small company in Minnesota. There has been talk about looking for 

shovel-ready projects, and we are about as shovel-ready as they go. 

The main reason for energy use in commercial buildings is to 

condition the space for human occupancy. There are approximately 

5 million existing commercial buildings in the U.S. today, totaling 

well over 70 billion square feet. Consider then that, according to 

the Department of Energy, about 33 percent of the energy used in 

those buildings is used specifically for heating, ventilation, and air 

conditioning. The average cost of that is about $1.23 a square foot, 

or about $86 billion annually. 

There has been talk of increasing the energy-efficient goals up to 

10, 20, 30, now I hear up to 50 percent. But I ask the question, 

without first measuring the building for the performance of the 

building, how do you know that that building can even attain better energy efficiency? We need to somehow measure the performance of the building. I can achieve 100 percent energy efficiency in 

this particular building. If somebody would show me to the breaker 

panel, I will shut all the switches off. However, we screw up the 

interior environment of this building. So there has to be a balance 

somehow between energy-efficiency goals and our indoor air quality 

goals, which is the reason a lot of these codes were put into place 

in the first place. 

PureChoice takes a bit of a different approach. We actually measure the interior performance of the building. We measure temperature and humidity and carbon dioxide and carbon monoxide and 

VOCs, which are basically odors and gases. 

I brought with me today one of our mechanical pieces; it is called 

′′The Nose.′′ The Nose houses all these particular sensors on a single platform, and it is delivered every 20 seconds back to our server 

in Minnesota that is on a secure site. We then put it out with our 

building performance software, which is called PureTrac. PureTrac 

is a Web-based data collection software that functions very much 

like a continuous energy audit. Essentially, we are continuously 

commissioning the building all the time. 

123 

Every building has an operating strategy. On a continuous basis, 

the software checks the overall performance of the building against 

that particular operating strategy. And, at the end of the month, 

we generate a report, and we tell you how efficient your building 

is to that particular operating strategy. 

I can tell you we have no customers that are 100 percent. We 

have some customers in the 15 to 20 percent range, and they had 

no idea. And, on a simple basis, if you are spending $10,000 a 

month on energy, and you are 50 percent efficient, that is $5,000 

that you have room to find. 

I will give you an example of what we have done. We recently 

partnered with the Federal Government at the Bishop Henry 

Whipple Building in Minneapolis. It is located at Fort Snelling. The 

GSA, the Department of Energy, and the Minnesota Department of 

Commerce were our partners on the project. We monitored the 

building for 1 year. The partners identified opportunities for energy 

savings, and we modified the operation strategy. We realized a savings in excess of 20 percent in 1 year without compromising indoor 

air quality and without purchasing any additional HVAC equipment. The energy saving opportunity was in excess of $144,000. 

The payback was less than 2.2 years, fully funded. 

Now, the GSA was so pleased with that study that—you may 

have seen this before—they have included it in their 

′′Sustainability Matters′′ document. I have submitted some of those 

for the subcommittee, and I have just an excerpt to show you. On 

page 94 to 99, it is the center of their bible going forward on how 

they achieve green and high-performance buildings. 

The President has placed a priority on this. Congress recently 

passed $4.5 billion in the stimulus for energy conservation. We can 

achieve that in a very simplistic format. And I will tell you, if the 

GSA just wanted to do all their Federal buildings, they would 

spend less than $40 million and save approximately $60 million a 

year. And that is the bottom line, just to give you how much of this 

is available. 

I will give you another example. We recently partnered with a 

big-box retailer in the city of Chicago. Chicago has got some of the 

strictest building codes in the country, as far as ventilation is required. The major retailer couldn’t meet their energy-efficiency 

goals and achieve their indoor air quality goals at the same time. 

They used our PureTrac data, and the city gave them a variance 

on the ventilation rate, and they were able to cut ventilation by 

over 54 percent. But because they were able to electronically prove 

that they matched the indoor air quality guidelines of the code, 

that 54 percent averaged into $2,500 a month per store in realtime 

savings. They didn’t disqualify the indoor air quality of the building, and they met all the requirements of the code. 

Currently, the technology is being used by Tulsa University. It 

is being taught in the engineering program at Stout University. We 

have partnered with Secretary Chu’s old company, Lawrence 

Berkeley Labs. We have done three school studies with them. Dr. 

Michael Aptee has been our project partner out there. The study 

that we did in the schools found that the worse the air quality was 

in schools, the higher the absenteeism. For every thousand parts 

124 

per million of carbon dioxide, absenteeism went up 10 to 20 percent. 

Minnesota Power and the Minnesota Department of Commerce 

had us do another program called SAMPLE2, School Air Monitoring Program for Learning and Energy Efficiency. We did three 

schools in Minnesota, and the findings averaged that we could save 

an average of 14 percent of energy conservation, which was approximately $30,000 per school. If we take that across what Senator Boxer has proposed, we would save in excess of $580 million 

annually, using 2003 energy numbers, on all the public schools in 

this country. 

This technology works. We are here today talking about how do 

we do energy efficiency. You need to measure the performance of 

the building, and we can turn everything else around. We have 

some suggestions. I look forward to your questions. Thank you for 

your time. 

[The prepared statement of Mr. Reichel follows:] 

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Mr. INSLEE. Thank you very much. 

We would like to go to Mr. Upton first, in recognition of his great 

work on lighting last year. 

Mr. UPTON. Thank you. Thank you, Mr. Vice Chairman. 

I would like to make a couple points. 

First of all, when we dealt with the energy title as part of the 

stimulus bill, that moved through this committee, and those provisions actually passed by voice. I don’t think there was any opposition to having incentives for improving on our energy efficiency in, 

really, any sector of our economy. 

However, there was one rather contentious item that we debated—and, Mr. Anderson, you touched on it—and that was the decoupling issue. And I want to just pass a chart out to my colleagues 

and members of the panel on both sides here. This was printed by 

the Department of Energy, and it appeared in CQ Today back last 

month, and it talked a little bit about decoupling. 

And, Mr. Wells, I have Western Michigan University in my district, and I want to think that every one of our rooms in the 50- 

some buildings on campus now have a Johnson Controls sensor, 

and it works. It savings the university hundreds of thousands of 

dollars every year in heating costs that we are able to see. We have 

schools in my district that have now achieved the ENERGY STAR 

rating. It is terrific, in terms of what we have. 

And, as you look at the strides that we have made on appliance 

standards, building standards, lightbulbs—one of the issues that 

this subcommittee worked on and was able to pass in the Congress—wind turbines—last week, in my district, again, we looked 

at both residential and some of the giant, 80-meter types that are 

there—we can save great amounts of energy. 

But if you impose this decoupling on States—and this chart illustrates that, again, from the Department of Energy—you don’t actually, at least my reading of it, you don’t actually see the savings, 

the incentives to purchase that additional equipment. At the end 

of the day, the utilities are able to add increases in that rate, and 

you don’t see the same savings. I mean, it would be like buying a 

hybrid automobile, and instead of paying the normal gas price, you 

just say, well, you drive a hybrid, so we are going to charge you 

another 25 cents a gallon at the pump to make up for what you 

are not giving the Exxon or BP or somebody else. 

And I would like each of you maybe to just comment. It is a fairly simple chart here that was printed by the Department of Energy. But, as you can see, it has the original billing for residents, 

office buildings, and industrial buildings. And then it has the decoupled buildings, where the high users pay a little bit less but the 

low users pay considerably more. And I just think that it takes 

away the incentive for folks, businesses or homeowners, to actually 

install the devices that are going to save energy and make us less 

energy-reliant on other sources. 

Mr. Reichel, if you would like to just start and make your comment based on this chart, and we will just go down the line in the 

time that I have remaining. 

Mr. REICHEL. Thank you, sir, but I don’t have any position on the 

decoupling. In fact, the last time I heard the word ′′decoupling′′ was 

at my dog breeder’s. So I can’t speak to that. 

131 

Mr. UPTON. OK. I am glad this isn’t in the big house downstairs, 

live on C-SPAN. 

Mr. Anderson? 

Mr. ANDERSON. Thank you, Mr. Upton. I have not seen this chart 

before, so I can’t really respond to it. 

Let me say a couple things about decoupling that I said a little 

more in my written statement. And we actually have a publication 

on it that I would like to ask if it can be inserted into this record. 

[The information appears at the conclusion of the hearing.] 

Mr. ANDERSON. Decoupling, as you said, it does increase rates. 

That is what it does. Now, the increased rates may bring about reduced consumption. And for some customers, there could be a reduced bill. But for other customers, there won’t be a reduced bill. 

Mr. UPTON. That is right. It rewards the folks that don’t do as 

much as the folks that may invest in energy conservation. 

Mr. ANDERSON. Precisely. Precisely. And that, to me, boils it 

down to—— 

Mr. UPTON. That is a good answer. 

Mr. Campbell? 

Mr. CAMPBELL. I am not sure I can comment deeply around the 

decoupling provisions. But what I can say is that, for energy efficiency to work, there has to be alignment of incentives so that 

when energy efficiency is being driven and achieved there has to 

be incentives appropriate to that. 

Mr. UPTON. I am running out of time, so we have to go fast. Mr. 

Wells? 

Mr. WELLS. I will echo what Mr. Campbell says. A lot of us have 

talked about the energy-efficiency improvements we have done at 

our companies. The question is, why hasn’t that happened in the 

public sector? It is because we have split incentives. We have to 

find a way to break that. 

Mr. UPTON. Mr. King? 

Mr. KING. Thank you. There are numerous issues associated with 

rate design. I think the incentive component is critical, as well as 

there is an ability, through the rate design, to mitigate some of the 

low-income, low-user impacts. That can be dealt with State by 

State as we deal with decoupling. 

Mr. UPTON. Mr. Giudice? 

Mr. GUIDICE. Yes, from my perspective, decoupling is neither the 

panacea or the cause of what ails us. It is just one of the tools that 

can be useful, done right, to help make sure we move forward. 

And the stimulus bill does not require decoupling, in my read. It 

requires Governors to assert that they are going to work towards 

minimizing disincentives for efficiency as well as move to better 

building codes. 

Mr. MARKEY [presiding]. Great. The gentleman’s time has expired. 

That is an important point that you made, Mr. Guidice, that it 

is not mandated. Just elaborate upon that for another 30 seconds, 

please. 

Mr. GUIDICE. Sure. The national State energy officials actually 

worked with committee members when looking at this issue, because decoupling is a third-rail, hot issue across the country. Lots 

of different States look at decoupling in different ways. MassachuVerDate Nov 24 2008 10:51 Jun 24, 2011 Jkt 037690 PO 00000 Frm 00137 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 111\111-4 CHRIS
132 

setts has recently, last year, chosen to move forward with decoupling, and we are going to be looking at our first utility rate cases 

in a long time. 

And the parameters of looking at those rate cases and how that 

decoupling is going to be done in Massachusetts, it is going to have 

all of the normal sort of processes to assure that extraordinary returns are not being generated by utilities. There are protections to 

make sure that rates are set appropriately. 

The stimulus bill recognizes all of the various ways that different 

States are dealing with this issue and allows for Governors to simply assert that they are going to work towards building codes and 

towards disincentives—take away disincentives to maximize efficiency. And there are lots of ways that we can make that happen 

across the country. 

Mr. MARKEY. Thank you. 

Mr. King, Mr. Anderson has raised some criticisms of utilitybased efficiency programs, such as those used in Massachusetts, arguing that they are bad for industrial consumers. Could you respond briefly to those criticisms? 

Mr. KING. We have had great success with our industrial energyefficiency programs. And a critical component is that we have the 

consistency and the targets that we set with our State, and then 

we execute accordingly within the various energy-efficiency programs. So it has proven to be an effective tool for us to achieve our 

energy-efficiency goals. 

Mr. MARKEY. OK. Thank you. 

Mr. Campbell, you testified that an energy-efficiency resource 

standard could create 260,000 new jobs. Can you talk about some 

of those job opportunities, how they would be created? 

Mr. CAMPBELL. We believe those job opportunities get created 

very quickly, as energy-efficiency projects and energy-efficiency activity starts to increase. Some of the numbers that we see is just 

for every million dollars’ worth of projects, we are probably looking 

at five to seven direct jobs associated with that activity. 

And these are well-paid jobs. I mean, these are things like energy engineers, controls engineers, software engineers, project managers, construction managers, construction crews, technicians, mechanics. These are good, solid, domestic jobs that get created with 

energy efficiency. 

Mr. MARKEY. OK. 

Mr. King, what is the average rate of return on each dollar you 

invest in energy-efficiency projects? 

Mr. KING. Our overall energy-efficiency projects are not the utility investment. It is programs that are funded through our various 

State programs. And it is the most efficient low-cost investment 

with other alternatives, because we do view it as a resource. So as 

you deal with energy efficiency, demand reductions, et cetera, those 

are the most effective investments from an overall return standpoint. 

Mr. MARKEY. OK. Thank you. 

Mr. Anderson, under my EERS bill, electric and natural gas distribution companies are required to meet certain energy savings 

targets each year. Under that bill, utilities could satisfy those targets in part by buying from members of your organization the enVerDate Nov 24 2008 10:51 Jun 24, 2011 Jkt 037690 PO 00000 Frm 00138 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 111\111-4 CHRIS
133 

ergy savings that your members achieve at their own facilities, for 

example, through combined heat and power, waste heat recovery, 

or other efficiency measures. 

In other words, this is a major opportunity for your members to 

profit through energy-saving projects. Isn’t that something that you 

could actively support? 

Mr. ANDERSON. Mr. Chairman, your bill has quite a few very 

good things in it. I mean, I compliment you. It goes beyond utilities 

into building codes. It uses cost-effectiveness throughout the bill. It 

talks about the need for measurement and verification. It talks 

about, you know, taking into account weather and the economy and 

oversight and CHP, as you mentioned. 

But the way we look at the bill is, it mandates energy efficiencies 

across the board. This is probably going to put a layer of cost 

across the board. Yes, there are some opportunities involved for 

some manufacturers who might be able to sell through a bilateral 

contract, which your bill does allow, but it also is going to affect 

other industrials in a different way. 

We think, at least, that industrials, through their competitive 

forces, have had to implement energy efficiency in a great amount. 

And we just think they ought to be exempt from the—— 

Mr. MARKEY. All right. Let me let Mr. Wells respond to that. 

What do you think about that? 

Mr. WELLS. Could you repeat the question, please? 

Mr. MARKEY. Just respond to Mr.—— 

Mr. WELLS. About the EERS? 

Mr. MARKEY. Yes, please. 

Mr. WELLS. We have reviewed the bill. We support the bill. 

When you look at the energy-efficiency opportunity, we look at our 

own company. It is in line with the performance that I talked 

about, and it is in line with the opportunities that we see going forward. 

Mr. MARKEY. OK. 

And I will give you the final word, Mr. Guidice. 

Mr. GUIDICE. I think that the bill will actually unleash all kinds 

of opportunities, in industrial facilities and commercial and governmental facilities. And I am quite excited about it. I think many 

folks across the country will be able to—— 

Mr. MARKEY. Do you agree with that, Mr. King? 

Mr. KING. Yes. Again, if you go back to some of my comments, 

our view is this is the foundation of a strong energy policy. And if 

we can build energy policy on the foundation of energy efficiency 

as one of the top resources, I think it is the right way to go. 

Mr. MARKEY. Thank you, Mr. King. 

The Chair recognizes the gentleman from Illinois, Mr. Shimkus. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Let me follow up on this. Would anyone who supports the EERS 

support it without decoupling? 

Mr. GUIDICE. Yes, I would support EERS—— 

Mr. SHIMKUS. Without decoupling? 

Mr. GUIDICE [continuing]. Without decoupling as a specified requirement, absolutely. But, to be clear, we would require different 

States dealing with the utility-by-utility issues for that one. 

Mr. SHIMKUS. Mr. King? 

134 

Mr. KING. We are operating in States that are moving on a progressive path towards sound energy policy, and decoupling is an 

issue that they are willing to tackle. So we are going forward without it being a part of the—— 

Mr. SHIMKUS. So you don’t need decoupling to support EERS? 

Mr. KING. Within the States we are operating in, the States are 

supportive of moving in the direction—— 

Mr. SHIMKUS. Anyone else want to add on to this debate? 

Let me follow up on this decoupling debate, because this is pretty 

telling. Major users were thrown out, but this chart by the Department of Energy that my colleague, Mr. Upton, brought out talks 

about the additional cost to low users. 

Now, I represent parts of 30 counties in southern Illinois. We 

wish we had more manufacturing. We wish we had big users. We 

are producers of electricity through coal and through coal-fired operations. I have talked about that last hearing, where a thousand 

jobs in my district were lost through the Clean Air Act. I can point 

to the specific mine, and I showed pictures of that mine in the last 

hearing. But this is talking about the effect to low users and residential small businesses of decoupling. So I would hope we didn’t 

just disregard this. 

And I would want to ask Mr. Guidice and Mr. King, The Boston 

Globe in an article, January 18, 2008—and this is the second paragraph: ′′Massachusetts manufacturers pay the highest electricity 

prices in the continental United States, and the gap between their 

costs and those of competitors in other States is widening, according to the Energy Department. In 2006, the most recent annual 

data available, industrial users in Massachusetts paid more than 

double the average U.S. rate, compared to 60 percent more in 2005. 

Only Hawaii has higher industrial rates.′′ 

And you are telling us that that is a standard that we should 

have? Higher industrial rates? 

Mr. GUIDICE. No. 

Mr. SHIMKUS. The Massachusetts model? 

Mr. GUIDICE. I am not saying that our rates are the model for 

the country. I would actually love to bring our rates down, and we 

are working hard to do that—and our spending down on energy. 

And I suspect that the efficiency initiatives that we are taking are 

the ones that are going to drive that down most dramatically. And, 

to be clear—— 

Mr. SHIMKUS. Let me add to this debate the international scope, 

because this is really an international debate, and we are competing internationally with countries around the world. 

If China and India do not fall into some climate change regime 

on cap and trade, can we ever compete with them in the manufacturing sector again? 

Mr. GUIDICE. In my view, the world needs to get involved in the 

carbon issues. 

Mr. SHIMKUS. No, that is not the question. The question is, if 

China and India does not—which I believe they will not, based 

upon discussions I have had with senior Chinese officials—if they 

do not, will we ever be competitive in major manufacturing in this 

country again? 

135 

Mr. GUIDICE. We will have gigantic problems if China and India 

do not get involved in carbon issues. 

Mr. SHIMKUS. Thank you. 

Let me follow up with—and I don’t believe they will, obviously. 

Let me go—Mr. Campbell, this is a great—in your testimony— 

and this is, again, on this decoupling. And you could have been 

stronger based upon your written testimony, because you say this: 

′′Improving efficiency is good for everyone. Efficiency improvements 

not only reduce emissions but also save consumers and businesses 

money. Energy prices are escalating and would continue to rise 

with a price on carbon.′′ This is what we say all the time: Energy 

prices are escalating and would continue to rise with a price on 

carbon. That is climate change—putting a price on carbon. ′′Energy efficiency will reduce that impact of climate policies on 

consumers’ energy bills. It would lower energy spending for American business large and small, enabling them to better compete in 

the global economy. Smarter, more efficient buildings not only have 

lower utility bills′′—and that is the one I want to highlight—′′but 

also improve health, safety, and comfort.′′ 

If consumers do not see lower utility bills by efficiencies, will 

they move to a new efficiency world? 

Mr. CAMPBELL. I would say that for consumers and businesses to 

take on those energy-efficiency improvement measures, they have 

to see the incentive. There has to be an incentive for that. 

Mr. SHIMKUS. And just for my Massachusetts friends at the 

panel, we debated decoupling here in the hearing. And you are correct that the stimulus bill strongly implies for the Governors to 

move their PUCs to a decoupling regime. And if you followed the 

debate here, there was no confusion that decoupling is a major 

issue. And, as we see, it is going to cost individual consumers, and 

it is not going to provide the incentives for the individual consumers. 

And I yield back. 

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Washington, Mr. Inslee. 

Mr. INSLEE. Thank you. 

Could the staff put up—we have a chart with California rates, 

or California usage. If you could put it up on the screen, please. 

I just want to make reference to that. 

It is a little difficult to see, but I think it does help visually to 

look at how stunningly different the per-capita usage is in California, which is the lower blue line, and the average per-capita 

usage of the American, the upper red line, and how they have diverged. And they have diverged in no small part because of some 

efforts in California to inspire efficiency. 

And I just want to note that the numbers are pretty stunning. 

As a result of that difference, together with the rate structures in 

California, that has saved Californians somewhere between—$4.1 

billion between 1997 and 2004. And basically it is the difference between a flat per-capita usage in California and about a 40 percent 

increase per capita in the United States. 

Now, as I understand what has happened in California, they 

have followed sort of a commonsense provision. Their measures 

they have adopted basically say that if a consumer’s energy needs 

136 

can be met with a 3-cent-per-kilowatt investment in energy efficiency, essentially California has required utilities to go in that direction, where, instead, a 10-cent-per-kilowatt investment in a new 

power plant would be an alternative way to go about that. 

Now, our efforts in the stimulus bill would essentially, in one 

way or another, ask utilities to adopt that same type of strategy, 

which, to me, seems a relatively commonsense provision. If you can 

achieve your consumers’ goals, which is a warm house, with a less 

expensive investment in efficiency rather than a more expensive investment in power generation, then we want you to go in that direction. 

Now, I think the language of the stimulus bill, in fact, meets that 

sort of goal. And that is why the president of the National Association of Regulatory Utility Commissioners just last week basically 

expressed acceptance of the language that we put in the stimulus 

bill. 

So I just want to ask Mr. Guidice, if I pronounced your name 

right, to comment. Is that a fair assessment of what we are doing 

in that bill? 

Mr. GUIDICE. Yes, that is a fair assessment. And I think it is a 

good case example of what is possible here for the whole country 

to move forward with. 

Mr. INSLEE. Do any of the panel disagree with that assessment? 

Mr. ANDERSON. I would like to add a couple of things to it. I happen to have been looking at the same chart that you have put up 

there, and just add a couple of things to it. 

The vertical line right there—it is hard to see—it was 1976. My 

understanding is that California decoupled in 1982. They got rid of 

decoupling in 1996. They instituted recoupling again in 2004. They 

implemented inversed rates—in other words, the more you consumed, the higher the cost per kilowatt hour—that I think, at 

least, went farther than anything else in bringing this about. And 

I conclude from this, if you have high rates, you are going to have 

lower consumption. 

Now, climate helps too. You know, when you are on the coast of 

California, you have a wonderful climate. It is truly God’s country, 

and you don’t need air conditioning a lot of the time, or heating. 

So there is a lot of other factors here besides it. 

But what my main point is is that business flight out of California has exceeded, I believe, just about any other State for a considerable length of time. And if we, as a society, like that as a 

model—high prices, flights of businesses away—then I think we 

can get into this. 

I don’t think this chart, though, tells us that decoupling is good 

or bad or whatever because it just is far more complicated than 

that. 

Mr. INSLEE. So do you have any assessment of—are you familiar 

with any studies that have tried to parse out the relative contributions to the California experience? 

Mr. ANDERSON. I don’t know of any particular ones, no. 

Mr. INSLEE. Very well. 

Let me ask in general, regarding Mr. Markey’s bill, do any of you 

have any suggestions on changes to the bill, other than what you 

137 

have already articulated? I just want to give you an opportunity if 

you have any suggestions for us in that regard. 

Mr. Markey, of course, thinks that this is a perfect Mona Lisa, 

which we would normally start with a presumption in that regard. 

But I just wanted to give anybody an opportunity. 

Mr. GUIDICE. I would look at even more aggressive targets in the 

EERS, both on the gas side and on the electric side. I think those 

are understandable as to those why those are the sets that we are 

starting with. But I think, as we think about the climate challenges that we are facing and the economic opportunities that we 

will unleash, that we could ramp those targets up more significantly and quicker. 

Mr. INSLEE. Anyone else? 

Mr. ANDERSON. We would like very much to see the bill have the 

ability for industrials to opt into it. Clearly, there are cases where 

there could be real advantages if an industrial was involved to sell 

some energy-efficiency savings. But we also think that one size 

does not fit all, and we think it would be very difficult. So we 

would prefer to see them excluded otherwise. 

Mr. INSLEE. Thank you. 

Mr. MARKEY. Great. The gentleman’s time has expired. The 

Chair recognizes the gentleman from Texas, Mr. Barton. 

Mr. BARTON. Thank you. Thank you, Mr. Chairman. We have go 

a hearing going on downstairs, too, so I have been running back 

and forth. 

I want to ask Mr. Inslee a question, although he is not on the 

panel. What is the retail cost of your constituents for electricity in 

Washington? 

Mr. INSLEE. Well, that violates the rule against embarrassing 

any of your colleagues. So I will decline to answer, both because 

it violates that rule and, secondly, I don’t know. 

Mr. BARTON. Oh. Well, I am not trying to embarrass you. I think 

it is around 7 cents a kilowatt hour. 

Mr. INSLEE. I honestly do not know the answer to that question. 

Mr. BARTON. OK. It is very low. You have some of the lowest 

utility—— 

Mr. INSLEE. That is correct. That is correct. 

Mr. BARTON. What is the average retail rate in California, Mr. 

Anderson or Mr. Reichel? They have some of the highest rates. 

Mr. ANDERSON. I am sorry, Mr. Barton, I don’t know the numbers. I know that it is very, very, substantially—— 

Mr. BARTON. Well, I know in San Francisco their highest rate is 

37 cents a kilowatt hour. 

Now, spare me the California model—you know, brownouts, 

haven’t built any new power plants in probably decades; this decoupling, which I am going to ask Mr. Anderson about. I want the Jay 

Inslee-Washington State model, Bonneville Power Administration 

generating clean hydropower because God blessed his region of the 

country with great hydro resources, and the Federal Government, 

during the New Deal, built some of the most efficient hydroelectric 

power dams in the world. So his constituents get power at probably 

the lowest rate in the country. That is a plus for them; it is not 

a negative. And I am not trying to embarrass Mr. Inslee at all, because that is just the way it is. 

138 

But, you know, this hearing on energy efficiency is a good hearing. I am for what Mr. Markey is trying to do. But don’t gag me 

by saying that we need to emulate the great State of California, 

who is almost single-handedly doing everything they can to destroy 

their economy on almost a daily basis and which has the largest 

State budget deficit in the history of the Nation, $42 billion this 

year alone. To put that in perspective, the entire budget of the 

State of Texas, on an annual basis, which is the second most populous State, is, I think, $75 billion. 

So, anyway, Mr. Anderson, what is your opinion of decoupling? 

I asked Mr. Anderson, but I will let Mr. Reichel answer it if he 

wants to. 

Mr. REICHEL. I yield to Mr. Anderson. 

Mr. ANDERSON. As I said very briefly in my oral remarks, and 

I have much more detail—— 

Mr. BARTON. Oh, I got the nametags wrong. I am sorry. Go 

ahead, Mr. Anderson. 

Mr. ANDERSON. We are very much opposed to revenue decoupling 

for a variety of reasons. 

First of all, we agree that there needs to be incentives for costeffective energy efficiency; there is no doubt about that. But trying 

to pay extra amounts to utilities to have them implemented just 

doesn’t make sense. The dollar that you give to a utility for energy 

efficiency—and, remember, utilities don’t spend their money; they 

spend customers’ money. So you give a dollar to a utility to implement energy efficiency, they take a sizable portion of that in overhead and whatever else, and then they give what is left back to 

some customers. This is an income redistribution. It probably 

doesn’t really reduce the disincentive of a utility anyway. Eighty, 

90 percent of the utility’s revenues are still going to come from generation, no matter what you do. 

So we have a whole variety of reasons why we are strongly opposed to revenue decoupling. 

I would also like to say that I was surprised to hear someone say 

that NARUC, the Natural Association of Regulatory Utility Commissioners, supported the provision in the stimulus bill. I was 

working very closely with NARUC throughout that debate, and I 

thought that they were opposed. I cannot speak for them, but I 

think we ought to find out where they stood on the final—— 

Mr. BARTON. Is there a better way to incent a utility to do these 

energy-efficiency programs than decoupling? 

Mr. ANDERSON. I think a far better way—if you are going to have 

a utility involved at all, I think a far better way is to have the utility be basically a tax collector; they collect money from customers 

however you specify that they are going to do it. And they turn the 

money over to a third party, whose sole objective is to implement 

energy efficiency. Their business model is to implement energy efficiency. 

I believe Vermont has one, North Carolina has one, New York 

has one. There is a variety of examples. And we think, at least, 

that they work a whole lot better than trying to have an interim 

conflict within a utility. One side wants to sell more power; another 

side wants to sell less power. And it is an internal conflict inside. 

Have a business model of a utility to produce and sell and disVerDate Nov 24 2008 10:51 Jun 24, 2011 Jkt 037690 PO 00000 Frm 00144 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 111\111-4 CHRIS
139 

tribute energy efficiently, and have a third party whose sole business it is to implement energy efficiency. 

Mr. BARTON. My time has expired. Thank you, Mr. Chairman. 

Mr. MARKEY. Great. The gentleman’s time has expired. 

Mr. INSLEE. Mr. Chair? 

Mr. MARKEY. The gentleman from Washington. 

Mr. INSLEE. Thank you. 

Mr. Anderson brought up an issue about the Chair of the National Association of Regulatory Utility Commissioners, and I had 

made a reference to, essentially, that they had said that they are 

comfortable with the final product. With your permission, I will put 

his statement in the record, and I think it will clarify that. They 

basically had concerns about the original product. He expressed 

comfort with the final product. 

[The information appears at the conclusion of the hearing.] 

Mr. MARKEY. If I may, I am going to ask the gentleman from 

Texas if he would mind having this clarification be part of a 1- 

minute extension that is granted to the gentleman from Texas. 

Mr. BARTON. Sure. Sure. 

Mr. MARKEY. Thank you. 

Mr. Anderson, if you want to respond? 

Mr. ANDERSON. Yes, I was at the meetings where they did this, 

and I didn’t understand the final, so I may be incorrect with it. But 

I know that there was tremendous concern that a public utility 

commission is supposed to be an independent body. And the way 

I read the language, the way they were reading the language was 

the Governor is supposed to be, in essence, trying to tell the independent commission what to do. And they thought this caused tremendous amounts of internal conflict, maybe ex parte kinds of concerns and that sort of thing. 

But if I am incorrect, I need to stand corrected. I apologize if I 

am. 

Mr. INSLEE. We will just put this in the record and let people 

draw their own conclusions. Thank you. 

Mr. MARKEY. I thank the gentleman. 

The Chair recognizes the gentleman from Vermont, Mr. Welch. 

Mr. WELCH. Thank you, Mr. Chairman. 

Mr. Anderson, I am from Vermont. We do have decoupling, and 

we do have a separate energy efficiency utility. And they both seem 

to be successful. The decoupling was a process that was widely debated with our utilities and worked out. And I want to get back to 

what we can do and not get just bogged down in whether this question of decoupling should get in the way of an aggressive frontal 

assault on efficiency. 

Mr. Guidice, as a State official, you obviously have some sense 

of the importance of State autonomy. And some are arguing that 

setting a Federal floor for building energy efficiency imposes a onesize-fits-all approach that interferes with autonomy at the State 

level. Yet you are arguing very aggressively for strong Federal 

building standards. And I want you to elaborate on that. 

Mr. GUIDICE. Thank you. 

Yes, it is clear that the market alone is not working on our efficiency around the country. There are market failures. There are 

market barriers. And so we need to stimulate the right decisions. 

140 

But it isn’t one size fits all. And what does work in the Southeast 

in terms of windows, as Mr. Upton was speaking of earlier, is different than what works in the Northeast. But that doesn’t mean 

that all of us don’t have an opportunity to go much, much more significantly towards energy efficiency. And I do think that this kind 

of approach, as laid out in the proposed act, will enable us to do 

that. 

Mr. WELCH. OK, thank you. 

Mr. Campbell, it is tremendous to hear about the success that 

you have had at Johnson Controls. And one of the big dilemmas 

that we face, and it is being argued here, I think, largely around 

this question of decoupling is, what is the dislocation that occurs 

when you go from one energy policy to a new one? 

And you have been successful, as I understand it, in achieving 

efficiency and also creating jobs. And I want you to elaborate on 

that, in your point of view about how aggressive we should be, 

using efficiency as a tool to create jobs. 

Mr. CAMPBELL. I mean, our view is that energy efficiency is the 

number-one opportunity for managing emissions, for managing 

some of the capacity issues that we have on the generation side. 

And, clearly, energy efficiency creates significant jobs. There is a 

significant industry behind that. But there are a mismatch of incentives that are out there today. 

So, as we look at this, we really do see significant value coming 

from a whole series of complementary measures that need to be introduced, both around building codes, equipment standards, and 

also the energy-efficiency resource standards that have been introduced. But, in addition to that, we believe that there does need to 

be a very clear alignment of incentives for people that are making 

energy-efficiency improvements on their buildings. 

Mr. WELCH. All right. What would you say would be the, say, two 

or three incentive alignments that would be the most helpful? 

Mr. CAMPBELL. Well, the first one has to be to save money. I 

mean, that is ultimately what you want to see with any efficiency 

improvement measures, that you have to have a return for undertaking that activity. And depending on the set scale of the return, 

which can be complemented with specific incentives, depends how 

deep you can go with an energy-efficiency project. 

So you can see energy-efficiency projects without incentives, especially in the private sector, that go very shallow, maybe look at 

lighting, maybe look at recommissioning, constant commissioning 

of a building. But to do the deep energy-efficiency improvement 

measures that go 30, 40 percent energy-efficiency improvement in 

a building, people have to either have a very long-term perspective 

on that building or there have to be incentives attached to taking 

those measures. 

Mr. WELCH. OK, thank you. 

You know, in Vermont, we spend about a billion dollars a year, 

which for our small State is a lot of money, on energy that is 

money that goes straight out of the State. A lot of interest in doing 

combined heat and power or other means of local generation of 

electricity, in order to keep that energy dollar recirculating as 

much as possible in Vermont. 

141 

Mr. Wells, what specific things could we do, as you see it, to encourage local generation of power, to keep those dollars at home? 

Mr. WELLS. When you talk specifically to combined heat and 

power or cogeneration, it is finding a means to utilize the waste 

heat that comes off power generation. Today’s power generation, 

pulverized coal efficiencies are in the high 30s, and some of the cogeneration units that we run are in the high 70s, if not approaching 80, because of our ability to capture that heat. We have a ready 

heatsink right there to use it. So, distributive heating, finding a 

way to take the heat off of a power plant and using it to heat 

homes in a neighborhood or in some sort of way, or finding an industry that needs that heat and coupling that up with a power 

plant. When electricity is sold on the grid, the heat is used. 

The problem is, heat can’t be transported like electricity can. So 

it has to be something local, it has to be something distributed 

right nearby. 

Mr. WELCH. And then, how do you deal with the impact that it 

has on the local utilities that would potentially lose customer base 

or lose revenues? And anybody on the panel can answer that. 

Mr. KING. Just to put a couple of things in perspective, first of 

all, when you look at the total energy bill, both the transmission 

and distribution costs and other key important programs are basically at inflation or below. The bigger problem is the energy costs. 

And what we need to do is focus on how can we most efficiently 

reduce consumption and help reduce those overall energy costs. 

That is the fundamental driver on why bills are the way they are. 

Mr. WELCH. Thank you. I think my time has expired. 

Thank you, Mr. Chairman. 

Mr. MARKEY. The gentleman’s time has expired. The Chair recognizes the gentleman from Oregon, Mr. Walden. 

Mr. WALDEN. Thank you very much, Mr. Chairman. 

Mr. Campbell, as you know, in my opening remarks I cited the 

comments in your testimony. And I apologize for having to leave 

to go to the Communications Subcommittee, so you may have addressed this. But it appears to me that you are arguing against decoupling in those comments, because you are saying that ′′energy 

prices are escalating and would continue to rise with a price on 

carbon. Energy efficiency will reduce the impact of climate policies 

on consumers’ energy bills. It will lower energy spending for American business.′′ 

You talk about doing all these controls to lower energy bills on 

consumers as a good thing, as an incentive, I would assume, to do 

energy conservation. I mean, you know, I think the average person 

in my district says, ′′Gee, I want to cut my costs. My budget is constrained right now. I am afraid of losing my job.′′ They are not 

going to be really excited if the State moves forward on decoupling 

and says, ′′Yeah, you do all that stuff. But, oh, by the way, you are 

going to pay the same amount.′′ 

Isn’t that really what happens under decoupling? 

Mr. CAMPBELL. Yeah, I mean, I am not arguing against decoupling, but I am arguing for energy efficiency and ensuring that 

there is aligned incentives associated with those energy-efficiency 

measures to drive energy efficiency so we bring true economics to 

the consumer or the business so they can make smart decisions. 

142 

Mr. WALDEN. All right. 

Mr. Anderson, let me go to you, because it seems to me, from 

your testimony, you would be arguing against decoupling. And I 

don’t know what the—it seems to me it is a really perverse incentive to tell businesses—and I was a small-business owner for 21 

years—that you use less, pay the same. I don’t know how that is 

going to help our economy. 

Tell me the stimulative effect on a small business by having 

them pay the same utility rates because they conserve their energy 

consumption. 

Mr. ANDERSON. As I have said earlier today also, I agree with 

you completely, and it is a disincentive. We also look at it for, why 

are the utilities guaranteed anything? I mean, my members right 

now would love to be decoupled from their customers. I assure you, 

my auto companies today would love to be making the same 

amount of money that they used to make. 

Mr. WALDEN. You know, I was in the radio business for 21 years, 

small-market radio stations. And I always thought it would be 

great for every time we didn’t sell an ad and had time to run it 

that, you know, maybe we should have gotten paid. That would be 

the ultimate form of decoupling. My sales people would have loved 

that, too, I suppose. But it is not the way it works. 

Mr. ANDERSON. Correct. 

Mr. WALDEN. It is not the way it works. 

Mr. King, I noticed in your testimony that you congratulated the 

Congress for passing the stimulus with $3.1 billion in State matching grants for energy efficiency and assistance for low-income consumers to weatherize their homes. 

Won’t low-income consumers be hurt, as well, if they do all this 

weatherization and the utility company comes back and gets to 

charge them the same amount? 

Mr. KING. The intent behind the low-income consumer program 

will be to ensure that we are doing what we can to reduce their 

overall energy bill. And all that goes into how overall rates are—— 

Mr. WALDEN. And who pays for that subsidy to the low-income 

energy consumers who have reduced their consumption because 

they have taken advantage of weatherization, of which I am a big 

advocate of, who subsidizes them? Where does that money come 

from? 

Mr. KING. All of those types of decisions are rolled into the overall rate design. And our customers, as a whole, as a community, 

support those kinds of programs. 

Mr. WALDEN. Now, ′′community′′ is a wonderful term to use. But, 

at the end of the day, it is everybody paying their power bill, right? 

Mr. KING. That is absolutely—— 

Mr. WALDEN. Do higher power rates affect the economy? 

Mr. KING. No, they don’t. That is a cost of living and doing business. 

Mr. WALDEN. Have you ever been in small business? 

Mr. KING. No, I have not. 

Mr. WALDEN. I have. And I have to tell you, in the radio business 

I did everything I could, as I could afford to, to replace old tubetype transmitters with solid-state ones so I could cut my energy 

143 

bill, be more efficient. That savings amounted to something in my 

bottom line. 

Mr. KING. I can understand that. And we have spent a tremendous amount of time with our customers trying to find ways to help 

them reduce it. 

Mr. WALDEN. But how can you say that the higher energy costs 

don’t affect the economy? I am struggling here. 

Mr. KING. I don’t think I said that. I think I said, yes, I understand how it impacts the economy. And it is part of living within 

a certain area and trying to help manage overall energy bills on a 

day-in, day-out basis. 

Mr. WALDEN. But don’t you think the best incentive is the good 

old marketplace that says, if I can cut the use of my power, I can 

save myself a little money and put it towards something else? 

Mr. KING. That is exactly what energy efficiency and demand reduction is about. 

Mr. WALDEN. It is, except when you add the decoupling to it that 

says the utility gets to charge me the same amount regardless of 

how much I save. 

Mr. KING. Decoupling doesn’t necessarily equate to that sentence. 

Mr. WALDEN. What does it equate to then? 

Mr. KING. The overall issue that we are trying to deal with from 

decoupling is to make sure that we understand the cost to deliver 

the energy and that we have the ability to recover those costs. That 

is it. 

Mr. WALDEN. Which is why the utilities love decoupling. 

Mr. KING. The overall issue with why we support decoupling is 

to make sure that, again, as you heard from the panel today, is the 

incentives are aligned and we are making sure that we are doing 

what we can to support the policy to reduce energy demand. 

Mr. WALDEN. I wish we would have had a single hearing on this 

issue as it was related to the language in the bill that everybody 

voted on and very few got a chance to read in advance. I am trying 

to figure out now what this language that is now law means in 

terms of assuring that the governors get assurance from their 

PUCs to implement it. 

I know my time has expired. Thank you. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Gonzalez. 

Mr. GONZALEZ. Thank you very much, Mr. Chairman. 

I guess I should start off with my own observation of Texas government and Texas budget as compared to California. I am not 

here to defend California, but, by the same token, I know how 

State governments can save a lot of money. 

Texas has been able to do it by simply not investing in infrastructure, on maintaining what they have and making no real investment in health care and education. You can save a lot of money 

that way. There is a greater price down the road, and I believe that 

my analysis would be supported by any study of what Texas has 

done in the past few years. 

As we go through this debate today, you would think that we 

have made some real progress. Because you think in terms of the 

first year of the Bush administration in 2001—and I know it is getting into the partisan, but let’s figure that we made some progress. 

144 

Because, in 2001, it was Vice President Cheney who commented 

on efficiency and conservation that conservation may be a sign of 

personal virtual, but it is not a sufficient basis for a sound, comprehensive energy policy. 

I think we all acknowledge today—even my colleagues on the 

other side of the aisle—that conservation efficiency does in fact 

have a place in the overall energy policy of this country. At least 

that is what I am hearing. I have heard it referred to as not necessarily the fifth fuel but the first fuel. I have heard it as being 

one of the legs of the three-legged stool and so on. But what I am 

really hearing here is that we acknowledge it is out there, its 

value, but it can’t be done, whether we say it is about decoupling 

or are talking about exemption for the industrial sector and so on. 

So, on one hand, I think we recognize certain things like, well, 

we recognize that global warming is real, but I am not real sure 

that we can do anything about it. But at least we have the acknowledgment. So I feel hopeful that we have finally acknowledged 

a fundamental fact, and we move forward. 

The question to the panel, and I am going to ask Mr. Anderson, 

during your testimony, I wasn’t real sure if I heard you correctly 

about an industrial sector exemption. Is that what you stated? 

Mr. ANDERSON. In Mr. Markey’s bill, that is what we were suggesting, yes. 

Mr. GONZALEZ. All right. And do you wish to elaborate at all? Because I am going to ask the other witnesses to comment on that 

proposal and what they believe might be the impact. 

Mr. ANDERSON. Our companies operate in worldwide competitive 

markets; and the tremendous competition requires them, we believe, to implement cost-effective energy efficiency already. And we 

are concerned that if another layer gets put on top of that, it adds 

another layer of cost while doing more on the energy efficiency is 

quite difficult. So we are asking that industrials have the option of 

opting in if they want to be but otherwise being left out of the Federal mandates. 

Mr. GONZALEZ. I think our industrial base does operate at a terrible disadvantage with other countries. India and China, of course, 

come to mind. The problem is we are not India and China, and 

much of our progress was based on some pretty bad experiences, 

and it doesn’t mean that we continue or revert back to practices 

that should have been unacceptable under any circumstances. 

I do not want to go too far back, but let’s go back to child labor 

and working conditions and such. That will give us a tremendous 

advantage. Maybe we will be able to compete with practices in 

other countries. I don’t think we do that. 

When it comes to global warming and practices, I think there is 

a certain responsibility not to sink our economy but to do the responsible thing. I am not you are sure if you say it is a moral imperative and all that. Look, this is the real world. My constituents 

want jobs and a quality of life, also. So it does not fall on deaf ears. 

But I am not sure if you are advancing an argument that simply 

says we just can’t do it under the present economic circumstances 

and we never will be able to do it. But let’s just talk about the exemption. Is that a viable choice? Is that something Mr. Markey 

should be considering? 

145 

And I will ask the other witnesses to make their remarks and 

to address that particular statement by Mr. Anderson. 

Mr. WELLS. I think when you look at competitive that is a very 

good point; and in my case the competition is not labor cost, it is 

energy cost. So we are competing with places like the Middle East, 

where they can get natural gas out of the wellhead for a dollar 

BTU. And as recently as last summer we were paying $14 for that 

same. 

For this reason, we have done sort of the efficiency improvements 

that I talked about, 1,600 trillion BTUs that Dow Chemical saved 

since 1994. And for this reason the opt-out may make some sense. 

Because we have done a lot of things that are out there, and for 

us to go the next step gets us out of what would be defined as cost 

effective and into much more costly. 

However, having said that, having looked at the bill and looked 

at the numbers, at least for our particular company, we feel the bill 

as introduced is something we can live with. 

Mr. CAMPBELL. Let me just add to that. With the targets within 

the bill I would concur. Personally, on behalf of the company, I believe we need to get serious about energy efficiency; and having exemptions is not getting serious about energy efficiency. I think the 

numbers are very attainable from all businesses, and I think that 

it really is a significant opportunity to drive competitiveness of our 

industrial base, to get more competitive in relation to energy efficiency and energy consumed. 

Mr. GIUDICE. I strongly support no opt-out for anyone. We are all 

in this together, and there is opportunities for all of us to do so 

much more. 

In Texas, the PUC there in the State energy offices recently 

looked at the efficiency potential in Texas and determined there is 

upwards of 20 plus percent of reduction of energy consumption possible and the economy would grow without any shrinkage. It would 

grow jobs in Texas by reducing energy consumption by upwards of 

20 percent. 

Mr. KING. Our industrial base is very interested in finding every 

way they could to reduce their energy consumption. We spend a 

great deal of time with them. We have had great success in reducing the overall energy consumption; and if we set goals and objectives in this bill, we need to find every way we can to achieve those 

goals and objectives. I would highly recommend that we stay with 

as large of a market impact that we can to ensure that we are 

achieving the efficiency goals. 

Mr. GONZALEZ. Mr. Reichel—is that correct? The pronunciation? 

Mr. REICHEL. Yes, sir. 

As my expertise here today is pretty much with energy, once it 

is inside the building I would support anything that we can do 

from the energy efficiency side on the outside of the building. 

Mr. GONZALEZ. Thank you very much. 

Yield back, Mr. Chairman. 

Mr. MARKEY. The Chair recognizes the gentleman from Louisiana, Mr. Scalise. 

Mr. SCALISE. Thank you, Mr. Chairman. 

Mr. King, in your testimony that you submitted, I think on the 

first page, you talked about the various strategies that you emVerDate Nov 24 2008 10:51 Jun 24, 2011 Jkt 037690 PO 00000 Frm 00151 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 111\111-4 CHRIS
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brace; and I think your comment was we need law. And I agree 

with that. I know a lot of us last year in the big energy debate we 

were having in Congress proposed an all-of-the-above strategy, 

which encompasses efficiency conservation but also production and 

natural resources as well as renewables. 

One of the things—and we had this debate on the stimulus bill— 

that we consider a renewable option is nuclear power; and there 

was an attempt to include nuclear power, which has no carbon 

emissions, in that renewable definition. Unfortunately, that was an 

unsuccessful attempt. 

Do you support including nuclear power in that we-need-it-all 

strategy that you envision in your testimony? 

Mr. KING. I think it is important that we look at all the alternatives. 

Mr. SCALISE. And consider that as one of the alternatives. 

Mr. KING. So it is important that we look at all the alternatives 

and make sure that we understand and have a comprehensive view 

of the national energy policy. 

Mr. SCALISE. Clearly, many other countries are already pursuing 

that in a very aggressive way; and our country seems to be lagging 

behind. Hopefully, that changes as the technologies advance. It is 

clearly working well for many who are using it. So I appreciate 

that. 

Mr. Wells, in some of your testimony as you talk about natural 

gas prices and the effects—and, obviously, we have some large facilities with your company and others in south Louisiana—as gas 

prices increased, it had a stifling affect on growth in the industry. 

As companies are trying to be more efficient—and, of course, the 

biggest incentive is the profit incentive, and there is a profit incentive to be more efficient. 

But as you squeeze efficiencies out and then you get to a point 

where decoupling and other things would potentially increase rates 

for those who have done all they can—in terms of job losses, every 

time you have a 1 percent increase in natural gas prices, for example, what does that mean in terms of your ability to continue keeping the people employed that you have employed, looking at moving 

more operations overseas? How many jobs are lost for every 1 percent increase in natural gas prices? 

Mr. WELLS. I don’t have the number for the 1 percent, but the 

chemical industry in the last 8 years we have lost over 100,000 jobs 

in this country in large part due to what has happened in natural 

gas pricing, where we were in an area where we paid a pretty constant price in this country and we built a large chemical infrastructure around that and became an export base for much of the world. 

When natural gas did what it did in the late ’90s and the early 

part of this decade, then we started looking for other, cheaper 

sources and found them. My own company, we are looking at building plants in Saudi Arabia, places like Libya, Egypt, because we 

can get that very cheap feedstock. 

It is important to know for the chemical industry natural gas is 

not just a source of energy. We don’t just burn it in a turbine and 

just combust it to make steam. We also use it to make our feedstocks. 

147 

I talked about in our company alone the bill last year was over $27 billion for our energy costs. Not only do they rise because of 

increasing demand and supply that is starting to fall off—we have 

seen some new discovery that has helped, but we think that just 

at best will delay the inevitable. But we also when we think about 

the climate change and what could happen with climate change 

and climate legislation, which we support, the easy answer is to go 

to natural gas for power generation and to combust natural gas 

over coal and lead to this dash to gas which could even further exasperate the situation. 

Mr. SCALISE. I just hope as we go forward we—a lot of us have 

concerns about exporting jobs overseas and job losses. You talk 

about 100,000 jobs lost, in a way, because of a failed energy policy. 

I just hope we are very cautious in how we proceed, that some of 

the things we do, where we all agree that efficiency is important, 

where we don’t have penalties on the other side that actually cost 

us more jobs. And your industry is a good example of there is a 

point of, if you exceed that level, your ability to continue employing 

the people you have is going to diminish. 

So, hopefully, we keep all of that in mind as we entertain legislation to address the concerns that I think a lot of us have. But how 

we get there, we have to be cautious that we don’t have those consequences which I don’t think would be unintended, because we are 

well aware, as you point out, that those have direct impacts on 

businesses’ ability to continue operating profitably here or looking 

at other options in other countries which have definitely been 

taken by companies over years and hopefully won’t in the future. 

And, hopefully, we won’t do anything in this Congress that encourages people to move those jobs overseas. 

Thank you. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

And it is interesting I follow our new colleague from Louisiana, 

because I have a district in Houston that—I have the petrochemical 

complexes there. When you talk about losing jobs because of the 

high price of natural gas, we have seen that in our district, and 

particularly in the recent with our own economy with what is happening. Because a lot of the things our chemical industry does actually goes into home buildings for weatherization and things like 

that. That is why this last bill was a success, I think, to try to do 

some of the things that we want to do. 

I want to follow up on that line of questioning, Mr. Wells. I know 

Dow Chemical is a member of the U.S. Climate Action Partnership. 

Like I said, your biggest plant in my area is in Freeport. It is not 

in our district. But I have Channelview, Houston and Pasadena, so 

I have a number of your facilities. 

In your testimony, you mentioned that one of the likeliest ways 

to meet short-term carbon emission reduction targets called for in 

climate changes that fuel switching from nat coal to natural gas. 

And, again, with my accent, you would think I would love natural 

gas. And that is not a problem. It is just that in the chemical industry it is not only a fuel but it is a feedstock, and that is what 

caused us to lose those jobs. 

148 

I can tell you 3 years ago Shell Chemical moved jobs from Deer 

Park, Texas, in my district to the Netherlands for two reasons. The 

price of natural gas in the North Sea was cheaper, but also the 

price of health care for the Netherlands was cheaper per employee 

than their plan in Deer Park. So our committee has jurisdiction 

over both of those; and, hopefully, we will make it a little more 

competitive. 

But the so-called dash to gas could be ruinous for the industries 

that are dependent on it, like the chemical industry. So I have significant concerns about any impact the climate change would have 

on affordable and reliable supplies of clean natural gas. 

I have to admit even in Washington we see Boone Pickens ads. 

If we all did what Boone Pickens wanted us to do, not only with 

wind and solar but natural gas, we might not be having this concern. 

Since I represent a great deal of the manufacturing facilities, Mr. 

Wells, do you believe that enacting energy efficiency measures 

would be enough to offset the job losses in particularly your manufacturing sector due to the increased demand for natural gas from 

the fuel switching? 

Mr. WELLS. No, there would not be enough. They are an important step. They are an important easy step, an important economical step, but we have to go further, and we have to look at increased supply, what we can do to get more supply in a situation. 

We have to manage both sides of the supply and demand equation. We have to manage demand by the efficiency measures and 

other complementary measures we talked about today. We also 

have to manage the demand side and make sure the country—we 

can get at the source of natural gas and oil that we have available. 

We are the only country in the world that is not allowed to look 

for our own resources right off our shores. 

Mr. GREEN. The last Congress made exceptions, and we took off 

the moratorium on Outer Continental Shelf drilling. There may be 

some adjustments to that, and we don’t want to drill in national 

parks and sanctuaries and things like that, but there are areas 

that we can get natural gas. 

Natural gas is site based. Dow put in an LNG facility in Freeport, but that is not the way to solve the problem. We really need 

to have it much closer. You can pipeline it closer, because the cost 

gets so extravagant. 

Mr. WELLS. We didn’t put it in. It is another company that put 

it next to ours, and we are a user to clear that up. 

Mr. GREEN. You probably wouldn’t be there without Dow in Freeport. In fact, in the 2005 energy bill, Congressman Terry and I 

both championed that we would import natural gas when possible. 

But that is not our solution, either. 

What design elements for a cap and trade program where there 

is reduction of targets and timetables or cost containment mechanisms or complementary policies would be most effective and lessen 

the impact of fuel switching? Does Dow have—— 

Mr. WELLS. Absolutely. As a member of U.S. CAP, they recently 

came out with their blueprint for legislative action. In there it talks 

about complementary measures for coal, complementary measures 

for transportation, things we would like to see. Certainly carbon 

149 

capture and storage. The ability to continue to use coal in a responsible way will would go long way to keeping the dash for gas. 

What will happen if we don’t do something like that, natural gas 

becomes the bridge as we invent the carbon free energy infrastructure. That will take time, and to bridge that time the easy choice 

is to go to natural gas. It creates half the amount of CO2 as coal 

does in a power generation situation, and our industry cannot afford for that to happen because of what I talked about. 

Mr. GREEN. Also, when you happen—and carbon capture and sequestration, that will help, particularly with coal. I know from your 

response to the earlier question about nuclear power, again, that 

is 15 years away, if we are lucky, maybe 12. 

Mr. WELLS. We certainly think nuclear is part of it, both the traditional light water reactors and next generation, the high temperature reactor. We see lots of potential—although technology has 

a long way to go, lots of potential for that also to come to bear. 

Mr. GREEN. Last year, the natural-gas-council produced a model 

that predicted demand for natural gas to increase by as much as 

10 trillion cubic feet per year under climate change legislation. 

The first question is, even with measures to increase energy efficiency, do you believe it is still necessary to increase environmentally responsible reduction of natural gas, domestic natural gas 

supplies in order to meet short-term carbon reduction targets called 

for in the climate change legislation and to keep those good-paying 

manufacturing jobs in the United States? 

Mr. WELLS. Yes, absolutely. 

Mr. GREEN. Could congressional efforts to hinder the domestic 

production of clean natural gas inhibit the U.S. from achieving the 

short-term carbon reduction targets while protecting our manufacturing base? 

Mr. WELLS. Yes. 

Mr. GREEN. So it is compatible as a member of both U.S. CAP 

to be a supporter of efforts to reduce carbon emissions as well as 

the increased domestic supplies of clean natural gas? 

Mr. WELLS. Yes. 

Mr. GREEN. Thank you. 

Dr. Anderson, you mentioned the importance of utilizing combined heat and power technologies and petroleum chemical industries expressed disappointment with FERC’s recent rulemaking regarding incentives for CHP as called for under the Energy Act of 

2005. Can you further elaborate on why you believe that rulemaking would discontinue CHP incentives in certain FERC-approved regional transmission organizations? 

Mr. ANDERSON. The FERC order rule that came out basically 

said that the PRPA incentives granted in 1978 for combined heat 

and power for cogeneration would go away in those markets that 

FERC has approved as being an RTO or an ISO. That is an independent system operator or a regional transmission system. So in 

those areas, which covers a significant portion of the country, the 

incentives that have been there since 1978 are going away. A utility can simply file with FERC and ask that they go away, and they 

are beginning to do that. 

We did not think that was the intent of the Act in 2005. In fact, 

we worked with Representatives Barton and Boucher and others 

150 

when that language went through. And so what we are asking is 

that you all take another look at that and see if this really was the 

intent. We at least believe, as manufacturers that do a lot of cogeneration, that it is a big detriment. 

Mr. GREEN. Thank you, Mr. Chairman. I know my time has expired. 

I appreciate that. I know that wasn’t the intent in 2005. 

Mr. ANDERSON. Thank you very much. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes Ms. Baldwin. 

Ms. BALDWIN. Thank you. 

Mr. Green’s questioning dovetails well with the direction I want 

to go in. 

In my opening remarks, I cited the December Oak Ridge Natural 

Laboratory report stating the manufacturing facilities and commercial buildings are sources of waste energy that can be captured and 

converted into useful electricity and steam productions. 

Further, it said that waste energy recovery is one of the most 

promising options in the U.S. energy efficiency portfolio and that 

if the U.S. adopted a high deployment strategy, combined heat and 

power development could generate $234 billion in new investments 

and create nearly 1 million new high-skilled technical jobs throughout the country. 

The report goes on to say that the U.S. could avoid 60 percent 

of potential growth in greenhouse gas emissions between now and 

the year 2030 if we increase the amount of electricity produced 

from distributed energy sources from 9 percent today to 20 percent 

by the year 2030. We have had some questioning about this, but 

I would like to, with this potential out there, sort of have a little 

bit more of a discussion about the various incentives and barriers, 

the regulatory environment, as we just talked about, the technological hurdles and cost. 

I guess I want to start in with cost. There was some testimony 

suggesting that this isn’t cost effective but cost prohibitive. I have 

certainly heard from many industrial waste experts, waste energy 

experts, who say that much of the technology is readily available 

without further R&D. Required heat exchangers, turbines, piping 

are all off the shelf, not requiring additional R&D. And that there 

are other things that create hesitation in making investments in 

the industry sector. 

I guess, to Mr. Wells and Mr. Anderson, if you might comment 

first on the cost barriers and additional incentives that we could 

be looking at. 

Mr. WELLS. I can only speak for the industrial sector and for our 

own, and we don’t see any cost barriers for the Dow Chemical Company. A vast majority of the power that we use is self generated, 

well over 70 percent; and of this power well over 90 percent comes 

from cogeneration. So in our application it makes a lot of sense, an 

awful lot of sense for us. We make maximum use of it. 

Mr. ANDERSON. First, I am not familiar with the studies. I apologize for that. But one of the big barriers to cogeneration is the ability to get backup maintenance and standby power. If your generator does go down, you have to buy in a non-discriminatory way. 

We are concerned that when the incentives of PRPA were taken 

151 

away that has taken those things away, and that is why we are 

asking that you look at those things again. 

I agree that there is a tremendous potential for combined heat 

and power. I am not as familiar with distributed generation. It is 

much smaller and applies to commercial and residential entities. 

But I understand that there is a potential there, also. 

Ms. BALDWIN. Let me follow up on that answer. 

In designing the Energy Independence and Security Act, I know 

that I worked with energy efficiency experts in my own district to 

craft the waste energy incentive grant program really to incentivize 

owners and operators of industry facilities to successfully produce 

electricity from recovered waste energy. Specifically, it provides a 

financial incentive of $10 per megawatt hour; and it is authorized 

at the $200 million level, although not yet appropriated. Is this in 

your mind sufficient financial incentive from manufacturers to invest in capturing waste energy and converting it to useful energy? 

Mr. ANDERSON. We are strong supporters of the program. I can’t 

say whether that is sufficient or not, but it is definitely a significant step in the right direction, and I hope the money does get appropriated. As you said, it has not been appropriated yet. We have 

been working with the Department of Energy as they are trying to 

implement this, and we think it is a great idea. 

Ms. BALDWIN. I recognize there is controversy over whether manufacturers should be able to convert waste heat to energy and then 

sell any excess back onto the grid. How essential is the ability to 

sell excess energy to the success of harnessing waste energy—industrial waste energy? 

Mr. ANDERSON. I think it varies significantly by application, by 

industry, even down to the individual plant. 

Mr. Wells just mentioned they consume most of the power that 

they consume, and that certainly is a model that many others use, 

but others have the opportunity to produce more power than they 

can consume. And you have to be able to sell it at a price that 

makes sense. 

Once again, it gets into the review of it, but that is an important 

area for many applications. 

Ms. BALDWIN. Mr. Wells. 

Mr. WELLS. When you look at how we use cogeneration, that is 

a very important thing for us. Because we balance on steam. We 

make all the steam we need; and then whatever power that comes 

along through the cogeneration process, if it is more than we need 

at a location, being able to sell on the grid is very helpful to us. 

If we don’t make enough, being able to buy off the grid is helpful 

to us. 

Mr. MARKEY. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Utah, Mr. Matheson. 

Mr. MATHESON. Thank you, Mr. Chairman. 

One observation before I ask questions. 

As I listened to the discussion on decoupling that was taking 

place, whether people think they are for it or against it, I detected 

a lack of understanding about it during this discussion. I heard 

people comparing decoupling issues relative to regulated utilities 

with how it applied to private-sector competitive businesses. I 

sense the discussion, quite frankly, diverted into a lot of extraneous 

152 

issues that weren’t relevant; and so it may be helpful for members 

of this committee to get a primer on decoupling and what it means 

and what it doesn’t mean. Because, as I said, as I listened to that 

discussion I think there was a lot of confusion, a lot of apples and 

oranges comparison that were not necessarily appropriate or productive to the conversation. 

Mr. MARKEY. I think that is a good idea. Thank you. 

Mr. MATHESON. I want to address the issue briefly of appliance 

standards in the Act that was developed between the House and 

the Senate. The House version in 2007 had some provisions that 

allowed multiple efficiency standards for a single appliance. During 

the conference negotiation in the Senate, some of the provisions 

were dropped. Anyone on the panel, I would like to ask what room 

you think there is for further improvement in energy efficient appliances regulations. 

Mr. GIUDICE. Gigantic room for improvement. We are consuming 

electricity in devices that are not producing any useful product for 

us. Our set top boxes, TVs that are on standby, plug power, vampire power in our homes is consuming 10 or 15 percent of the electricity that our residence is consuming for no useful output. There 

is technologies off the shelf that once we put them in place can go 

back down to 1 watt standbys on all those devices and still come 

alive at 4:00 in the morning when you want to record a show if 

need be. We just haven’t spent enough time on those matters 

across the board. 

As we look at it in Massachusetts, and we have seen similar 

studies across the country, just taking energy efficient devices off 

the shelf that exist today, ENERGY STAR and better, and putting 

them in across the Nation would save on the order of 20 or 25 percent in our residential electricity consumption. So tremendous opportunities. We haven’t unleashed all the potential from design and 

marketplace to really drive that. And I would call for very high 

standards. 

Mr. MATHESON. All right. 

Mr. KING. The other element I would add is we need to also 

think about the future as we deal with intelligence on the grid, 

smart meters, et cetera. If we could start developing the standards 

for appliances where we could automate demand reduction, energy 

efficiency, et cetera, it will have a significant impact when you 

have a broad-scale deployment of energy efficiency in those appliances. 

Mr. MATHESON. I think being forward looking makes some sense. 

Currently, the law does not allow for use of multiple standards 

for appliances like if you have a dual electric gas furnace. Are those 

changes Congress ought to be looking at try to create some of those 

multiple standards? 

Mr. GIUDICE. Yes. I think we have to look at all the standard setting very differently than we have to date. SEER rating standards 

on air conditioners are seasonal electricity consumption, not peak 

electricity consumption. Some of the air conditioners actually have 

a small compressor that when it gets really hot it is very inefficiently producing that cooling to kind of boost it. It looks like a 

good SEER rating, but it actually hits us the hardest on those peak 

days when we are trying to meet the electric load. So looking at 

153 

the standard setting and doing it on a very accelerated time path 

I think is very appropriate for national attention. 

Mr. MATHESON. The committee learned in 2007 the DOE process 

for appliance standards takes a long time. And other countries such 

as Japan use a top runner program where the standard is updated 

every 3 years based on the top technology at the time. That technology becomes a standard for the next 3-year period. My question 

is, is this type of model realistic for the United States and how do 

we address concerns that manufacturers may express about making that a challenging time frame for them to adopt new standards? Any thoughts on that? 

Mr. GIUDICE. I am a little familiar with the program in Japan, 

and I think it is a very interesting model. I think it stimulates innovation and creativity in their design, and I think it would do the 

same here. I think that we have been so comfortable in our absence 

of attention on this and our manufacturing folks have not spent 

sufficient attention to these matters that any kind of a change to 

a new regime is really hard, and so the initial reaction is to resist 

it. But I think working collaboratively, under very clear deadlines 

and very clear outcomes, that we could get to very similar models; 

and it would be beneficial to all of us. 

Mr. KING. Just to quickly add to that, the opportunity that the 

bill provides us is a Federal standard. So once we have absolutely 

set that target, then you’ll get a lot of expertise to jump in and help 

move to help not only from a State standpoint but over from a Federal policy. So that is a big opportunity you have as you debate the 

bill and support it. 

Mr. MATHESON. Thank you, Mr. Chairman. 

Mr. CAMPBELL. I would add a comment. I think aggressive standards drive innovation; and they also ultimately help with manufacturing scale, which gives us more cost-effective appliances going 

into the market. 

Mr. MATHESON. Thank you. I yield back. 

Mr. MARKEY. The gentleman’s time has expired. 

Here’s what we’re going to do. We will give each one of you one 

minute to tell us when you want us to remember from your testimony. What is your highlight? What is your takeaway message? 

What is it that you want us to be factoring into the development 

of energy and client change legislation this year in terms of efficiency? 

We will begin with you, Mr. Reichel. 

Mr. REICHEL. Thank you, Mr. Chairman. 

I don’t want you to remember me for my expertise on decoupling. 

Mr. MARKEY. It is the joke of the day. Though. Well done. 

Mr. REICHEL. Our technology that we have brought before the 

panel today and the committee works with every control system 

and every HVAC system in the country. I would encourage this 

committee to set up a performance efficiency standard. For every 

building has different controls and different HVAC systems, but 

they all have an operating strategy. Building performance software 

can help these buildings calibrate the buildings to actually achieve 

that energy efficiency goal. This was probably one of the last bastions of energy efficiency available in operation and maintenance. 

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154 

ing with the GSA, but I would encourage them, because private 

practice will follow what the Federal buildings do. 

I would also look at setting this for schools. There is $13 to 15 

billion of savings if we did this across the country. I think it is very 

important, and I commend you for your work here. 

Thank you. 

Mr. MARKEY. Thank you very much. 

Mr. Anderson. 

Mr. ANDERSON. I just hope that you will look very carefully at 

what the impacts of whatever you do will be on the manufacturing 

community. Nearly every one of these proposals will raise rates 

that we see. Some will bring about lowering consumption; and if 

the two offset, then that is great. But have a very realistic look at 

what it is going to do to the manufacturing community. Because 

many are right on the edge, and they are going to close the plant 

here. And they are not going to reopen it here but somewhere else. 

Mr. MARKEY. Mr. Campbell. 

Mr. CAMPBELL. We do believe that energy efficiency should be 

considered the first fuel, because it does save consumers and businesses money. And we do have the technology available, widely 

available today to deliver energy efficiency. We don’t believe there 

is a silver bullet to energy efficiency. We believe there is silver 

buckshot. There will be complementary measures like the ones we 

have been discussing this morning, and they are going to give us 

the opportunity to drive energy efficiency to the level that I think 

as a Nation we need to drive it. 

I think that energy efficiency is the most important thing that 

we can focus on when it comes to climate change. We need to make 

sure that there is alignment of incentives from the utilities to the 

users of energy. And I don’t think it has ever been more important. 

We have to focus on it now. 

Mr. MARKEY. Mr. Wells. 

Mr. WELLS. When we think about the triad of economic success 

and environment performance and energy security, energy efficiency hits the sweet spot of those three things. It is a win-win-win. 

So why aren’t we doing more of it? 

We talked about the barriers today. It is clear we need a nudge 

or a push of some sort. So the complementary policies that we 

talked about today can form this nudge, give us the push we need 

to do the right thing with respect to energy efficiency and to help 

our economy. 

Mr. MARKEY. Thank you. 

Mr. King. 

Mr. KING. I would start with energy efficiency is a resource, and 

it is a critical resource to meet America’s overall energy needs. Secondly, that it is one of the least expensive investments that we 

have as an alternative to us. So we should be aggressive both on 

the targets to achieve as well as the time lines to achieve them, 

and we stand ready to help deploy and deepen its impact. 

Mr. MARKEY. Mr. Giudice. 

Mr. GIUDICE. I encourage the committee and Congress and the 

administration to be very, very bold at this time. I cannot imagine 

but I suspect that decades in the future we will be looking back 

155 

and wishing we were bolder about what we will be accomplishing 

right now. And I thank you for your leadership on these matters. 

Mr. MARKEY. Thank you, Mr. Giudice; and we thank all of you. 

Just an excellent panel today. 

I just want to, in closing, say that there has been a lot of talk 

this morning about the stimulus bill and decoupling; and it was 

raised by Mr. Matheson as well. So I just thought I would read the 

language from the stimulus bill so that people can hear it and it 

is on the record. 

What it says is that, as enacted, the language requires the Governor of a State, as a condition for receiving the allocation for State 

energy program funds, to notify the Secretary of Energy, ′′in writing that the Governor has obtained necessary assurances that the 

applicable State regulatory authority will seek to implement in appropriate proceedings for each electric and gas utility with respect 

to which the State regulatory authority has rate making authority, 

a general policy that ensures that utility financial incentives are 

aligned with helping their customers use energy more efficiently 

and that provide timely cost recovery and a timely earnings opportunity for utilities associatedwith cost-effective, measurable and 

verifiable efficiency savings in a way that sustains or enhances 

utility consumers’ incentives to use energy more efficiently.′′ 

The language does not mandate decoupling. It simply asks States 

to pursue policies to align utilities’ initiatives with the pursuit of 

efficiency while insuring that consumers have incentives to pursue 

efficiency as well. NARUK does support the final language, and 

there are many ways to satisfy this requirement. It does not require decoupling and allows States to innovate in order to protect 

their own consumers. 

So I thank the panel very much for being here today. It is incredibly helpful. 

Unfortunately, historically, this subject and its discussion is only 

exceeded by watching grass grow in terms of the level of enthusiasm that it brings to a room. But, as you are all saying, it is the 

sweet spot. It is the first fuel. It is the whole key to how we can 

put a dent in climate change and energy industry issues and economic growth simultaneously. It is important for us to ensure that 

this year we put the laws on the books that telescope the time 

frame it will take for us to reach that day. 

We thank each of you for being here today. 

This hearing is adjourned. 

[Whereupon, at 12:16 p.m., the committee was adjourned.] 

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